Category Archives: search

$1,600,000,000 + 100,000,000 videos = lawsuit!

Posted on by
Reply

Mark Cuban must be snickering “I told you” even though he’s already posted a note suggesting the initial lawsuits will be against small video players to set precedent for an attack on Google.

However Time Warner  is already threatening to sue over videos at YouTube. Presumably Google knew all this was coming and I’m guessing they think they can sweeten the advertising revenue pot enough to keep all the copyright hounds at bay. As the best monetizer of online content I think Google will be able to buy their way out of almost all the lawsuits simply by offering to either 1) remove the offending videos, which are currently making nothing or 2) monetize the content and give the copyright holder 70% of the revenues. In most cases Google’s 70% is going to be more than 100% of what the producer could get with their own efforts.

That said, many producers are going to see this as a great legal way to shoot for Google’s deep, deep pockets. They’ll have no interest in small payouts per download or ads or anything related to their own content, though they’ll disguise that in the complaints.

I’d be very interested to know how the Google team factored this cost into the YouTube equation.

Prediction: Google will buy Facebook for about 1.1 billion

Posted on by
3

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”

Posted on by
6

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”

Posted on by
Reply

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.

Google may not be evil, but their advertisers often are. Facilitators of illegal ads should be held accountable

Posted on by
Reply

Although I think Google really tries to follow the “don’t be evil” mantra I think it now rings fairly hollow (ha – especially if it’s ringing up a ringtone ad scam at Google Adwords).

The problems are click fraud and downright illegal advertising which is running rampant all over the internet. This is a great set of PPC fraud advertising examples displayed at Google from a Harvard Law researcher, a proverbial drop in the online bucket of fraud.

Google, as the 800 pound gorilla, is the major beneficiary but this is an area that is simply ripe for legislation to prevent the plethora of PPC fraud schemes, ringtone scams, false advertising, and many, many more from polluting the online advertising space.

Why is this such fertile ground? It’s the new and fascinating combination of young users, young advertisers, young and old scammers, anonymity, global reach, and more that make this a complex and growing problem. Google et al are taking a “let the buyer beware” approach which is both evil and ignores the fact that many of the buyers are kids who wouldn’t know a scam from a treasure trove.

Ironically the solution to the scam ads is very simple. One new Law: If you run an advertisement you are responsible for any refunds in the event of a dispute with the advertiser. Make the publisher deal with their friend the advertiser who they are implicitly endorsing by showing the ad. This would clean it up very fast.

PPC fraud solution is not as easy, though I’d consider this:

1) Have teams of objective ombudsman researchers evaluate the fraud component at the different search engines.

2) Engines must refund to each account this average fraud component.

This incentifies the SE’s finding out and killing off the fraudulent clicks quickly, rather than the current lackluster efforts to root out the problems.

Got a few *billion* lying around? Buy an internet company!

Posted on by
1

Here’s a nice list of internet purchases over the past few years. I’m starting to come to grips with the fact that even if you create a great company the payout is not that spectacular unless it’s the one in a hundred deal like a YouTube, Skype, Broadcast.com, etc. As one of the VC’s down at Mashup Camp pointed out those are the exceptional exceptions to the normal rule of deals worth millions, not billions. Even in those deals only a handful of people make more than a few million.

In a 20 million deal once you’ve paid off the VCs and generously dealt with other key employees I wonder what the average “founder payout” would be?   The average VC funded buyout is about 47 million.   This sounds high, but there are many, many VC fundings that end up dying.    Thus the ‘average value’ of a VC funded company would be way below the average buyout price if I read that number correctly.
As my old pal Rick likes to say “A million dollars isn’t what it used to be!”

NYT summarizes the Google Youtube deal

Posted on by
Reply

Here’s a good summary of the Google YouTube deal from the New York Times.    They note that one analyst suggests this is not a spreadsheet valuation as much as a way to keep competitors away from all the juicy eyeballs at YouTube.

I still just don’t understand how any big player could not put the money to better use and grow their own.  I was under the impression that many used YouTube rather than Google Video because the latter took longer to post – presumably because they screened content more aggressively -I would have thought that Google Video would have tried the same configuration as YouTube before spending so much, but this also supports the idea that this was a way to keep MS and Yahoo (who is currently the video stream leader), from gaining the market share Youtube will now provide to the Google family of sites.

I don’t think this is a shark jump by Google, but I think this may go down as the most expensive “junk content” site aquisition in history.

Danny Sullivan says he does not have much to say about it over here at Search Engine Watch.  (Hey, I thought you left SEW Mr. King ‘o Search Optimization?!)

Mark Cuban to Google – you are crazy! JoeDuck to Google – just show me some money!

Posted on by
Reply

Mark Cuban, no stranger to online video having made about a billion in that field, challenges Google’s sanity in the YouTube deal here.

It seems to me Cuban’s been the most insightful of those reviewing this deal and my first reaction is “brilliant stuff from an insider”, but I also respect how clever Google is and will continue to be at re-railing the online train.

Big producers will do big deals with Google as they are right now.   The growing community of small time content producers (e.g me) is a lot more willing to share and forget about copyright encumbrances *as long as you cut me in on the action*.

If Google can monetize my stuff better or close to as much as I can then more power to Google.   I’m rooting for Yahoo! winning the monetizing battle though because …. I like them better and have stock.   But there’s room for both, and I think we’ll see in the coming years that the rising tide of online ads will lift most of the ships.

I’m confident I’m speaking for 80%, and probably 98%, of the long tail when I say that the long tail, especially in video, is going to attach to the entity that can best monetize their work be it professional full length movies or stupid cat trick clips.

Can the other 2% of content people sue them?  Sure, but not painfully enough to stop the online video train o’ progress, a train that’s sure to bring us the most garish, irrelevant, superficial, and poorly produced video yet seen on earth and then find a way to turn a few bucks on showing it off to people.    God bless America!

Google to buy Youtube for 1.6 billion

Posted on by
1

It’s now almost official that Google will buy Youtube for a whopping 1.6 billion. They’ll announce it after the close today.    Here’s the NYT take on things. I’d have listened to Mark Cuban because it seems to me he’s in a very unique position to analyze the prospects here, but they didn’t and soon Google will have a huge video footprint. Google Video has about 1/4 the traffic of Youtube. Combined I think they’ll dwarf the competition – at least initially, though this market, which should really be called “American’s stupidist and most mundane home videos” is still in it’s infancy.

It’s not clear to me that people will continue to spend hours and hours surfing and watching for the few gems in an ocean of crappy short clips but Google seems to think so, and it’s also true that there is an enormous amount of advertising money now spent on network TV that may flow to this venue. Google’s recent talk about NOT producing their own content and moving into offline advertising venues may relate to this decision – they want to become a key source to soak up as much of the dumb money now spent on extravagant, low ROI offline campaigns.

Google about to kill traditional advertising agencies. Good riddance!

Posted on by
2

Over at Battelle’s House ‘o Search info he’s summarized Google Zeitgeist conference, where Google’s big news appears to be “We will NOT do content” and “We WILL do offline media advertising”.

I don’t agree with John that this means the YouTube purchase is a good idea. In fact I think Google will see the light of the dimly flickering videos and realize that monetizing this type of content won’t be worth the trouble of publishing it. But I wouldn’t bet much on my prediction they’ll pass on the deal since the cost of publishing video is dropping very fast, and Google probably has a great idea of the bottom point in terms of these costs, they may see something I can’t. Also, so much is currently wasted on traditional TV campaigns that there is a lot of “dumb money” floating around. If even a fraction of this flows to YouTube it might make that company worth it to Google.

As those of us making a living online know well the money comes from optimal monetization of content rather than the creation of the content. Google, as usual and brilliantly, is working to keep themselves in the driver’s seat as the premier way to monetize content online and moving to offline optimization.

They have the technology to optimize ROI on offline spends that (hopefully and probably) will blow many agencies out of the water. Traditional media campaigns and traditional ad agencies are a garbage dump of bad decisions and no research fueled by the ignorance of math-illiterate clients. Google has the power to change that and I’m glad they are looking in that direction.