Yahoo! WAKE UP!

Posted on November 28, 2007 by JoeDuck

It’s very frustrating being a Yahoo shareholder.

Not because Yahoo isn’t a good company, in fact Yahoo is a *great* company.

Not because Yahoo doesn’t seem to “get it”, Yahoo arguably “gets it” better than almost all other companies in terms of Web 2.0, the social networking space, and in terms of the importance of open architectures and developer support.

Not because Yahoo doesn’t have any of the lucrative search market share. They are the clear 2nd place in search with huge search activity and over 20% of global internet search traffic.

It’s frustrating because despite all the advantages, Yahoo just can’t seem to capitalize on all these advantagesto turn a good buck, monetize the site to full potential, and increase my share price. Google, with total traffic levels about the same as Yahoo, has a stock capitalization some *FIVE TIMES* that of the company with arguably very similar potential for profits.

Little internet companies and even many very big ones have a good excuse for failing in profitability – online biz is a cold and cruel world and for all the but the huge players everything can turn on a dime. Yahoo, on the other hand, has no good excuse for failing. They are a market maker in terms of online search, global internet reach, online video, and …. this just in for me …. they are HUGE in the Social Networking space. Yes, that would be the social networking space everybody is so excited about. What do I mean by HUGE? Let’s review this graph from Compete.com via TechCrunch.

First we need to note that Compete.com is not even remotely a perfect measure, and also adding “unique visitors” in this fashion is counting some folks twice. Also, they are listing sites like Geocities that are arguably not social sites, though I’d argue they could be “open socialed” quickly with an effort in that direction. Since the overlap at these traffic levels is probably not a very big deal, and also assuming they spend time as if the Yahoo properties are separate sites their ad potential may be the same as if they were different folks, these numbers are important and relevant.

So, the big players first:

Myspace: 72 million unique visits in October

Facebook: 33 million

Yahoo: 38 million …..

What? Yahoo has more social traffic than Facebook?! Yes they do if you add Flickr and Geocities and Yahoo Groups.

Aside from the fact that Caterina and Stuart and the Flickr gang are probably thinking they sold out a bit too cheap at only 20 million, Flickr is an astounding success with some 14 million users and growing. Personally, I’d rather hang out at Flickr than Facebook anyway.

So, where does this huge number of users in the Yahoo social networking juggernaut leave us?

Frustrated baby, frustrated……

Brightcove darkens. More companies to follow.

Posted on November 27, 2007 by JoeDuck

Update: Here’s the word from Brightcove

Brightcove, a formerly “promising” video distribution startup has given up it’s lackluster battle to compete with YouTube in consumer video, though *it will remain open as a distribution point for high quality video. (High quality video? Isn’t that an oxymoron in modern media parlance?).

ReadWriteWeb has an unsatisfactory summary of this event, failing to note that the key challenge for anything related to online video is this: Video-related advertising doesn’t work. More importantly it’s not clear it will *ever* work. I’ve always been skeptical of how video would monetize, and still think YouTube may never justify it’s capitalization except as one more brick in Google’s massive wall of online dominance.

In fact it’s time to consider this interesting possibility – pay per click advertising may be a “one hit wonder”. I’m not prepared to make this case yet but it’s not really clear that online advertising techniques outside of PPC are working well for advertisers, and even PPC is showing signs of reaching some cost limits in term of advertiser ROI. Success for advertising agencies (Google is number one, with half the online ad take) should not be confused with success of the advertising itself. Clearly PPC is working for many, but part of what is happening is that offline advertising is finally recognized for what it is, which is an “emperor without any clothes”. I’d argue that as a general rule (ie more than 50% of the time) offline advertising campaigns have negative ROI. Watching in the Travel industry how negative ROI is spun by ad salesfolks as positive ROI and how failure is analyzed as “success” has been a real eye opener, and I think these mathematical misperceptions are pervasive in the industry.

Another powerful force is the impact of “free” social network marketing. Word of mouth has always trumped paid advertising, and social networking is ushering in a new era where consumers not only control what they buy, they are working to control the ads they are exposed to and are talking a lot about products independently and without advertising intervention. Facebook’s recent “beacon” fiasco tried to spin this backwards and has had very questionable results.

Pay per click has brought much better ROI measurement to mom and pops as well as large companies whose agencies are having increasing difficulty spinning failed “branding” campaigns as a big success.

Brightcove is not an exception: look for more failures in the video space and elsewhere as the 2.0 bubble slowly deflates into a balance with rational business practices.

Elf Yourself

Posted on November 23, 2007 by JoeDuck

This just in from the “Seasonality matters” department: My Elf Yourself post of about 11 months ago has risen to the top of the list of viewed posts even though it’s old and not particularly insightful.

Elf Yourself is Office Max’s very clever (or very annoying, depending on your mood) animation routine that lets you upload a picuture of your face and paste it on an elf which dances around.

Seybold on wireless = early senility?

Posted on November 21, 2007 by JoeDuck

Update: Andrew Seybold’s reply: http://www.andrewseybold.com/blog.asp?ID=132

Tonight PBS covered the smart phone market, and asked for input from Andrew Seybold. He should have been a great choice and clearly has an insider view, so how could he say something this transparently absurd?

ANDREW SEYBOLD: As much as I respect Google, the wireless industry can’t be an extension of the Internet because wireless bandwidth is finite. It’s a fixed resource, and it is shared bandwidth. The more people who use it in a given area, the less data speed they have.

Andrew, with all due respect – and considerable respect is due, I think you’ve missed something profound here. Sure, wireless capacity must increase to accommodate all the data, and it certainly will. There are already technologies like WIMAX and EVDO that will scale up to meet demand, and it’s likely that improvements and new technologies will emerge very fast in response to this cash rich, market. In any case, it is now *crystal clear* that all players in this space are moving to converge the phone experience with the internet experience. It is not clear exactly how that will shake out and eventually become seamless, but you are suggesting this is not even the *direction* in which things are moving.

ERIC SCHMIDT: I completely disagree with the characterization that somehow the wireless network is going to be any different than the wired network, because there’s enormous spectrum becoming available through licensing programs, better radio design, faster computers, and so forth.

Thank you Eric, you are absolutely right. In fact I expect you already have several plans in place to make the higher speed and broader bands available to prospective gPhones and Google Phones and Android equipped phones.

Blodget: Microsoft implying they may be poised to buy Yahoo

Posted on November 16, 2007 by JoeDuck

Henry Blodget’s got an interesting take on the recent UBS talk by Microsoft where they suggested a plan to capture “30-40%” of the search market over the next several years. Although the literal reading of this does not seem to suggest a Yahoo buyout, Blodget is correct that it is simply absurd, even given the normal Microsoft bluster factor, for Microsoft to think they can capture this much of the market in a short time …. unless they buy Yahoo, which as Blodget points out gives them all this, and more, instantly.

Given Yahoo’s modest capitalization of some 30 billion, and Yahoo’s huge online prospects (they have similar traffic to Google but with far poorer monetization of traffic), it would not be prohibitive for Microsoft to nab them.

I’ve noted before this would be an excellent move for Microsoft. It still is.

Disclaimer: I’ve got some Yahoo shares. Not that they are doing me much good right now. But they’d probably jump in value if Microsoft bought them. Did this influence me writing about this? I don’t think so, but since money is the root of all evil you can’t really trust me on Yahoo analyses, disclaimers or not. Also important is that nobody can predict the market swings with any forward looking reliability. So there.

Google Phone is coming, the gPhone is coming!

Posted on November 16, 2007 by JoeDuck

The Wall Street Journal has (ummm – just figured out?) that Google’s phone ambitions are substantial. It’s not yet clear if they’ll become their own huge phone company, but I’m guessing they will and that they will do a good job solving some of the nagging problems that have been experienced by .. lets see now … 99.9% of all cell users? I do not think this necessarily bodes well for Google financially though, and release of hardware and a national cellular network may be part of their “jumping the shark” moment. Google has thrived as a company that could ramp up as profits rolled in. Not so with mobile, where they will have to anticipate a lot of profit and incur huge capitalization costs in a “bet” that they can capture enough of this market to turn a big buck. Clearly Google is already going to influence this market quite a bit by spearheading the open handset alliance and other open architecture initiatives, but it’s not clear their bottom line would have a huge positive impact even when you anticipate the revenue from advertising (currently small but sure to grow) and revenue from subscribers (currently huge but capital and labor intensive).

I’m torn between thinking Google clearly will fix many technical challenges with the hardware (I see even cheap phones as iPhone clones with great mapping and data and more), but Google has done a simpy *terrible* job of basic customer service over the years, feeling that if a problem solving thing can’t scale up then they won’t put much energy into that problem. Typically this has related to advertiser problems with adwords and webmaster problems with websites. Google has made some improvements as they hired legions of people to deal with customer service, but I cannot see Google handling millions of calls along the lines of “now, which button do I press to dial my sister in Toledo?”. Google culture is not compatible and will become impatient with the slow, labor and capital intensive mobile landscape. Maybe they’ll change it into something better. Maybe they won’t.

In any case they’ll bring some great phone online and as I’ve noted before I’m very excited about that.

Androids bearing gifts

Posted on November 12, 2007 by JoeDuck

The Android SDK is out. This would be geek speak for saying “let the cell phone games begin”, and perhaps market speak for “Palm’s Dead and Symbian is probably screwed”.

The Androids haven’t just landed though, they are bearing suitcases stuffed with cash for developers who bring neat applications to market. This is more of the normal Google cleverness at work. Don’t just make it free, *pay* people to make it, and make it better than anything that has come before. Brilliant!

Unselfish of Google? Hardly. With their lock-grip on online advertising don’t forget who will be the big winner in a world saturated with mobile users surfing around a lot more stumbling upon super relevant geo-targeted pay per click advertising. For those of you in the back of the class, that winner would be …. Google.

Over at Om’s blog somebody in the comments suggested that Open Handset seemed like a solution looking for a problem, which seemed very ill informed to me. It solves two big problems – crappy phones that will soon be like iPhones, but much cheaper, and it will bring more organization and convergence to our harried digital lifestyle by blending mobile and online worlds more effectively than the current players have managed to do.

Maybe I’m missing something but I agree with those who see the Open Handset Alliance approach as a profound sea change in mobile, and something that will shake things up quickly (though not necessarily the prize money because $10,000,000 is a drop in the bucket of cash at stake here – over a trillion dollars in the coming decade. )

I’m *already* anxious to get rid of my nasty Palm Treo software (and maybe the whole phone) given that it won’t even synch anymore without me losing all my data. I envision a mobile future where my phone, PC, GIS, picture, and online needs all merge *seamlessly*, are accessible from all my devices easily and without any extra steps, and where I pay *nothing* for services in exchange for viewing ads or pay something if I want to get rid of the ads.

Open Handset is going to make that happen fast, and I wish them well.

Fred’s Facebook Ad test

Posted on November 11, 2007 by JoeDuck

Venture Capitalist Fred Wilson is always up to something interesting, and his current Facebook test is no exception to that rule. He’s making a modest buy on a 1000 ads / $10 per day mostly just to see how the new Facebook targeting works for his Union Square Partners advertising.

Unfortunately a VC firm is not likely to get much “business” from Facebook, so maybe I should fork over the pizza per day price for a test on something like motel bookings or air travel?

However I’m pretty confident the money would be wasted. As I’ve suggested before Social Network advertising, targeted or not, is nothing like Google SERPS advertising and it’s become hard enough to leverage that to any advantage in the travel space.

News Corp Advertising Network. Under the Radar?

Posted on November 10, 2007 by JoeDuck

Facebook’s targeted advertising was criticized heavily last week by bloggers despite Facebook promises to create a better user experience through better targeting of the ads. I’m guessing users will hardly notice the change, and advertisers will continue to be underwhelmed with the performance of social network advertising although these ads will play an increasingly important role as social networking explodes and the number of page views on social networking sites like Myspace exceeds pageviews on any other site.

I think Myspace now has the top global pageview count which is why the new ad network from News Corp (Myspace’s parent company) is an important development. It appears they will sneak in under the radar and avoid the heavy criticism levied against Facebook even though presumably they’ll also be working hard to target the ads to the specific Myspace user profiles.

Joe Duck

Have Blog. Will Travel. Vaccinate!

Category Archives: advertising