Category Archives: myspace

Face it, Facebook isn’t even close to being worth what’s going to get paid for it

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Like many frothing at the mouth online analysts and social networking ravers, Pete Cashmore suggests that Zuckerberg is right to act like he’s in no rush to sell Facebook, but this is silly. Zuckerberg is playing high stakes poker and he has a LOT to lose – certainly hundreds of millions if Facebook hits any major snags or if some newer and hipper online community takes root. I suspect he knows this but is loving the game, and I certainly admire this young whippersnapper for that and for creating such a magnificent web community. Magnificent, but only “worth” a fraction of the 1+ billion Cashmore suggests Facebook is now worth as an independent business.

But then what do I know, I traded my Apple for WCOM back in the day.

I do think Google will now scarf them up as part of their “empty the lake of big fish” marketing strategy, and I predict they’ll pay about 1.1 billion, but this is the luck of timing by Zuckerman, not a market based assessment of the value of Facebook as an independent entity, which everybody seems to be wildly overestimating. YouTube’s the same situation, where it’s value is not in streaming 100,000,000 crappy videos per day, rather in the fact that it helps Google, now awash in high valued stock, consolidate their position as the key online advertising leader.

The funny thing is that the *same rationales* used in 1999 are rearing their silly heads again, and only a handful of investors are noticing this. Unlike 1999 there are now many *real companies* out there with moderately long and profitable online histories, but ironically they appear to be very undervalued compared to the more speculative plays.

Myspace to Facebook migration underway. Next Facebook to ?

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Washington Post piece suggests Myspace may be in trouble as teens migrate from there to Facebook, which until a month ago was a college socializing website but now covers the globe. I’m not sure Facebook will be the endpoint though. Seems to me that the ‘need’ for a social network separate from the internet network is a transitional thing. What we’ll see eventually are socializing applications/gadgets/routines that will collect information from everybody’s online activities and disperse the info in ways over which we will have a fair amount of control.
For example as I write this blog entry (or do anything online) I should be able to click a button and have all the content dump into all my other web “spaces”. (This actually happens at Facebook already and kudos to them for the blog import feature).

Seems that any writing I want to make public should be placed in any and all appropriate places and be completely searchable from many search engines within minutes. We are a long way from that but I see social networks as a transitional form, not a final form, of online socializing, content creation, and content distribution.

Complicating the commercial analysis of the migration is the fact that users of Myspace are getting older, and probably are less likely to shift once they have established themselves on a social network.

However, it would seem to me that the most profound aspect of social networking has not really surfaced yet and that’s the fact that people will become increasingly frustrated with the fact that their Myspace / Facebook web pages and web views are primarily and overwhelmingly benefiting those companies rather than the content producers.

Heavy online users often don’t even realize that simply surfing around online and composing new and original content is a key component of all those juicy ad dollars flowing to many in the food chain like Google and Myspace and Facebook, but not to the owner of a Facebook or Myspace page.

Measuring internet “engagement”

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Robert Scoble’s asking a great question today about how to measure “engagement” at a website as opposed to just a visit. This issue was recently addressed at some length in the big debate over Comscore metrics for Myspace that Danah Boyd challenged as questionable.

As I suggested in that debate and Scoble is saying now, there’s an important difference between a user who simply loads a page and leaves the site immediately vs a user who engages with the site.

Experiments are needed, since it may be as simple as taking a ratio of total unique visitors to total time online to get a sense of how engaged the visitors are.

Of course that does NOT necessarily translate into somebody who’ll buy from advertisers which is the type of metric that sponsors are most interested in. We wouldn’t see much Golf on network TV if traffic was the metric, but when you count the fact that golf watchers come from a great demographic for big ticket items it works out for the networks who can sell to a key group (e.g. sell Lexuses, Diamondses, and ringses …..my precious!…..)

Even more complications with metrics are here in the form of RSS syndication, extensive duplication of information (e.g. this blog is auto duplicated over at Facebook), and the new gadgetification of the desktop where mini applications are going to run wild all over the place, making a “page view” less relevant, or irrelevant, for many websites and advertisers and measurers.

Re-Ze-lated:
Funny – ZeFrank on “Rocketbooming” your metrics
RocketBoom says Zefrank is full of Zeerrors.

Zune song sharing can be summed up in two words. Brilliant, and Finally!

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Rumor has it that Zune will encourage song sharing with revenue share to the “user song promoter” who sends a song to friends to listen to free and then gets some money if they buy it. MS certainly would be wise to cut the users in on the profits.

As I recently noted it’s surprising how users still don’t demand more of a piece of the action, though not surprising how Google, YouTube, Myspace, Yahoo, MSN, and other user content collection points, the key beneficiaries of this arrangement, have not done much to innovate in that direction.

Good for MS to break that ice. Users, collectively, hold all the *future* revenue streams in their wallets. Therefore they could hold most of the power. It’s about time they used it.

More at CrunchGear

Online Sheep get the revenue shaft. Hey Google, when you gonna show *Average Joe’s* the money rather than Rupert Murdoch?

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Business week is fretting over how Google will monetize the YouTube content and whether they’ll share with Myspace owners News Corp. Myspace users have embedded tons of YouTube video content in their personal pages so this is potentially a big stream of cash for somebody. Poor Rupert Murdoch doesn’t have enough money as it is, so heaven forbid that the content producers or the users would be put first in line for a piece of the action that *they generate*.

Business Week:
Google could soon have the ability to stream ads to MySpace users who are viewing YouTube videos embedded onto their MySpace pages. The question is whether News Corp. will get a slice of that revenue, and if so, how much …

I think a more relevant question is how much of that revenue should go to those generating the content and the billion daily page views.

Sites (like Google) are doing a fine job of making it possible for Average Joe’s to find the web pages of other Average Joe’s over at Myspace who in turn does a fine job helping people build silly pages filled with videos and images from other infrastructure sites like Flickr and Youtube. They should be well compensated for this and I think 25% is a good number, with 75% of the total revenue generated going to the “users” who are generating all that content and all those page views.

“Professional” users like me already get a piece of the action from Google – about 60-70% of the ad revenue I generate at my websites comes back to me via Google Adsense payments, and I think that’s probably a fine relationship. At least until Yahoo or MSN wake up to the fact they can jump start their contextual advertising services with a temporary 100% revenue share with publishers. Then I, and a large chunk of the 43% of Google’s Adsense Revenue, will be jumping ship. Booking services only give me about 50% of the commissions I generate but that’ll trend upwards over time (ha – it used to be only 20% revenue sharing).

However it’s very intriguing how the big players in the mega money deals leave out the key people in the equation – the Average Joe user. Part of that is simply scale. An average myspace user is only generating nickels and dimes (literally) per month in ad revenue. Collectively it’s a truckload of money but individually not much and Myspace does provide a good service to the user. Win Win? Maybe, but I think the trend will be towards people valuing their own content and their eyeball time more selfishly than they do right now.

The problem with all this great people-generated content — clearly the heart and soul of the new internet — is that the people generating it are getting left in the revenue dust. There are exceptions who manage to turn a few bucks here and there from the crumbs dropped by the mega monetizers like Google, but the average Joe who blogs and posts pictures and has a Myspace page with his Youtube videos gets nothing but the use of the online tools. That searchability and infrastructure is worth something. Arguably it’s worth a lot and clearly Average Joe is happy so far getting sh** for all his content effort.

However, I think over time Average Joe will become more demanding, perhaps even having the audacity to suggest that the collective fruits of all that online labor should be shared not just among Google and friends, but shared with those who watch it all and who make it all worth watching.

Prediction: Google will buy Facebook for about 1.1 billion

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Irrational exuberance in the dot com shopping aisles?

No, it’s a chess game and Google’s winning….again.

I’m really starting to understand what seems like irrational exuberance on the part of Google and the major players. A Google aquisition of Facebook would be consistent with what Robert Scoble suggested is happening: Google is building a moat around it’s advertising business.

Steve Ballmer also suggested this notion in his recent BusinessWeek interview, ironically fretting that Google could monopolize the media business. Yikes, Steve would really run out of chairs then?

I can almost hear Ballmer to Schmidt:
“Hey Cowboy, there’s only enough room in this here internet for ONE monopoly you, you, you dirty monopolistic sonofabitch BASTARDS!”

Schmidt to Ballmer:
“HEY! DROP that chair and step AWAY from the Vista Browser!”

Google, with tons of cash to burn and a staggering market cap, has far less to lose in the high stakes internet poker game than Yahoo, Ebay, or even Microsoft. Microsoft is bigger than Google and theoretically richer, but unlike Google Microsoft has yet to figure out good ways to monetize their (improving) search services and (not improving) content services.

Ballmer’s juggling how to preserve his big ticket MS Office and Vista projects. Yahoo’s worried about plunging valuations and people leaving and the fact that a billion represents a lot more to them than it does to Google.   This is almost certainly complicating the Yahoo Facebook negotiations right now.  Ebay’s pretty fat and happy where they are. Meanwhile, Google can focus in laser-like fashion on keeping Google in the driver’s seat with it’s superb contextual advertising monetization.

The best defense is a good offense, so they are buying up properties to increase their control over the advertising space and keep those hundreds of millions of eyeballs out of the hands of MS and Yahoo.

Will this work? I say probably not for similar reasons it was stupid for Yahoo to buy Broadcast.com years ago. Video is junky and won’t monetize well. It’ll be more of an encumbrance to Google’s core competencies than an asset. But … things change, and in the meantime it’s fun to watch this high stakes game of chess unfold.

It’s a show you won’t see on YouTube.

Facebook worth more than YouTube? Don says “yes”

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Don Dodge over at Microsoft has a great little thumbnail analysis of the business prospects of YouTube and Facebook, and concludes both are way overpriced at current valuations and Facebook is more valuable at 700 million. He cites Scoble’s latest thinking on the topic as well though it seems to me Robert seems too supportive of buying anything that even smells like Web 2.0 and is still feeling a bit hostile toward his ex employer.   I don’t blame him for that since he was way ahead on the new web and blogging and Microsoft’s failure to “get it” must have been really frustrating.

He’s not doing an extensive analysis but this is the best actual math I’ve seen regarding these deals, which as Don indicates with his little summary, appear to be valued more like Granny’s china than businesses. Given the uncertainties I think he’s generous to go 20x expected earnings. The landscape is changing daily and it’s not clear people will stick to favorite sites the way they stick to favorite brands (I predict we the people will not show much in the way of online brand loyalty, and this will shake it all up a lot in the coming years).

Ballmer on YouTube Google “transferring the wealth out of the hands of rights holders into Google”

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This is a great interview by Business Week of Microsoft’s CEO Steve Ballmer on Web 2.0 valuations and the competitive landscape up at the top of the heap, where Ballmer suggests only companies like MS, Google, Yahoo, and EBAY can even afford to think about doing the billion dollar deals. It’s a key point often lost on those who like to see valuations based more on financials and profits. Ballmer is noting that the competitive landscape can change these values.

But most interesting is this assertion:

The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google. So media companies around the world are all threatened by Google. Why? Because basically Google is telling you how much of your ad revenue you get to keep.They better get some competition. Us. Yahoo!. Somebody better break through or you can short all media stocks right now. As long as there are two, you can hold onto media stocks. Google understands that. And that’s one reason why they’re willing to lose money up front.

Fascinating. He’s saying that Google’s trying to *monopolize* the media market. I certainly think there is some truth to this though we are way past the good old days where barriers to entry could let a big, rich, clever company – let’s say Microsoft – really do a good monopoly play on things everybody needed to use with computers. Part of the Google advantage he’s leaving out is that they really do intend to share most of the revenues with the producers and they have become so good at monetizing that, Google could argue reasonably, you’ll make more sharing revenues with Google than building your own advertising networks. My experiences comparing adsense returns to “roll your own ads” are fairly extensive and I can say that it’s very hard to beat adsense returns by creating your own advertising streams *even excluding the potentially huge cost of a sales staff*.

I think the main exception to Adsense as the best choice is what we see at super targeted niche sites like TechCrunch.com where they can charge about 10k monthly for a modest sized graphical advertisment.    Battelle’s Federated Media is hoping to bring this targeting advantage to a broader network of sites but I remain guarded in my optimism that Google’s highly automated and calibrated approaches won’t do a better job than humans do in most advertising spaces.

So, I think Ballmer’s right that competition will help publishers, but Yahoo and MSN sure better strap on the thinking caps and get their contextual advertising networks working much better than they currently work at providing revenue to all of us hard working internet small time publishing people out here.

Also, and this advice to MS and Yahoo is free and will knock Google out of the driver’s seat in a few months:  Launch your contextual ad networks with a 100% revenue share as an incentive for publishers to switch over.    At 43% of Google’s revenue Adsense is a huge factor at Google.

Myspace users are getting older according to Comscore. Danah doubts it.

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Myspace users are older than you think says a new comscore report. Yet Yahoo and Berkeley’s Danah Boyd, almost certainly the sharpest and most knowledgeable researcher in this space, is challenging Comscore’s finding.

It’s good to question methodology, but I think Comscore is “correct” here though Dana’s right that we need more slicing and dicing of data to assess the significance of this finding.

1) I’m pretty sure the methodology is very strong in terms of demographic specifics. I think they have a pool of people they interview or measure regularly and then mine this data from this controlled and “known”, but very large online population.

2) Users *are* visitors! They are using the term “users” in the normal metrics sense of “unique visitors to the site”. Dana is making a distinction between users and visitors as active vs passive participants.

We’d want to see more info about time spent at the site to generalize more about this but I don’t think this time issue would refute the “user demographic” they are talking about.

Of course, if young users spend 10x the time at the site as older ones it would make the Comscore finding less important. They don’t seem to suggest this is the case however, so until further notice I’m going to keep thinking “wow, Myspace is getting to be an olderspace!”

Update: Fred’s take on this seems to be that method is OK but this needs more elaboration in the press which he thinks is “conflating” the terms user and visitor. He agrees with Danah that “user” and “unique visitor” are not the same. I’ve never seen anybody make that distinction but perhaps we need a new term?

Seems to me that they have been working with *subscriber data* and thus are surprised by this user data. Subscribers are probably are younger than visitors and spend a lot more time at the site. Relevant, but does not dismiss the Comscore findings.

Update:  Mike Rubin at Comscore comments here.     Appears my analysis was correct – Comscore’s data is solid but reflects visitors and not registered users, and young people stay on longer.