Christine Peterson is engagement specialist and media supervisor at Carat Fusion. In her capacity, she has the power to shape a lot of the media bought on and off the Web. She writes for Mediapost and asks how to best manage online video in the marketing mix?
With all the hype about changing consumer behavior and continued media fragmentation, everyone wants a piece of the online video pie. Digital folks feel very comfortable planning and buying online video, but recognize the growth opportunities when they partner more with the TV groups. TV buyers want to expand their expertise and maintain their budgets within video, but face challenges when addressing execution and measurement. Additionally, if network groups are managing the buy, does this place the strategy in the hands of the traditional planners? These questions translate to the publishing industry as well. Agencies and vendors are currently addressing this in a myriad of ways, but most solutions still appear to be in beta format. Separation vs. integration, disconnected P&Ls, turf disputes, varying agendas; all of these are worthwhile concerns, but the advertiser only cares about one thing: What’s the best use of my media dollars? Read more here.
This is a great question and one that can impact the growth of online video. Note that online advertising (including display banner ads, search and online video) is a $15 billion industry, set to grow to $25 billion by 2011, or 9% of the total advertising market. Today search accounts for 40%, with a 43% growth rate until 2011. Display ads will grow 36% while rich media and video will grow 21-27%. These are all numbers by Jupiter Media.
But, online video is only poised to grow to a $1 billion industry in 2009. Not every online video company stands to make ad dollars, mind you. Online video firms can fall into the following categories:
1- content management platform technology companies (Brightcove)
2- advertising creation and management companies (Klipmart)
3- content aggregation and distribution (ROO)
4- video hosting and sharing (YouTube)
5- content producers (Our own WatchMojo.com)
What we know is that broadband penetration is rising rapidly, having grown 33% in 2005. Out of an Internet population of 211 million, there are now 50.2 million U.S. homes and businesses connecting online via broadband, according to a report released Wednesday by the Federal Communications Commission. Considering that there are more than a couple of Internet users per home, this translates to over 100 million people accessing the Web via broadband. Using a Nielsen//NetRatings’s report, which found that 72% of people have broadband, this translates to a whopping 150 million people who can watch video. But this does not mean that everyone watches video. After all, it’s hard to watch a video at work. That is why about 25% of people say they watch online video. So even if 100-150 million have broadband, “only” 50 million or so watch online video. This means that there is a lot of growth out there, but it also explains why video will only be a $1 billion industry by 2009. This past year some $235 million was spent on online video ads.
I think that is selling online video short. Of course, as producer of video clips on WatchMojo.com, I want the video industry to mushroom and be a $1 billion this year. Of course, that is not likely?
Why is that? The answer helps explain Ms. Peterson’s question.
Advertising agencies make 15% on every dollar advertisers entrust with them: 5% for strategy and planning, 5% for creating the ads, and 5% for buying. Of course this is not always the case, but it is the theory.
Guess how much advertisers spent on buying airtime on TV this past year? According to Jason Glickman’s article on Mediapost, the answer is a whopping $74 billion!
Let’s do some math: if advertisers spent $74 billion on TV airtime, they paid out 5% x 74 billion = $3.7 billion in buying fees alone. By that same formula above, they also paid some $3.7 billion for creatives, and an additional $3.7 billion in planning. Simply put, 15% of $74 billion is a massive $11.1 billion that agencies billed for their efforts. Of course the actual amount is probably less, but who knows?
Admittedly, it makes a lot of sense for TV advertisers to streamline online video buys into TV. But, the cost of making an ad for the Web is not the same as making an ad for TV. So while the advertisers might prefer spending money on online ads, and thus save money and spend it more effectively, I am not so sure there is an economic incentive for agencies to recommend this to companies.
This means that 15% x $235 million could be generated by agencies through online video, or $35.25 million; whereas TV buys generated $11.1 billion for agencies. If agencies have the influence on advertisers, where do you think the money will be spent, who do you think wants control of that? The TV side that commands the big budgets or the upstart web department who is experiencing torrid growth but on an absolute basis, is not generating as much revenue as the TV team?
Bottom line: Agencies do not have an incentive to separate online from offline, they might simply prefer to convert TV ads for online, that is unfair to clients but agencies are in the business of generating revenue, so who can blame them?
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WatchMojo NewsletterI decided to sell all of my holdings in Digital River (Nasdaq:DRIV), a provider of e-Commerce tools and applications to many clients. The company is based in Minnesota, far away from the hoopla surrounding online advertising, but plucking away in the field of online commerce. e-Commerce is relatively less sexy than online advertising, particularly now.
Under-promise, Over-deliver
I like the company a lot: it’s delivers substance with very little hype or flash. To the world of investing, that means it underpromises and overdelivers, which means it’s a nice stock to own.
Trades Within a Range
The thing is that - as the stock chart below demonstrates - the stock has traded from the mid 20s to the mid 40s over the past two years. I’ve bought in many times in the high 20s and sold many times in the low 40s. More importantly, the company’s market valuation has fluctuated between just under $1 billion all the way up to $1.75 billion.
I had sold half of my holdings in late May when the stock flirted with $45. The stock then fell to the $38 range. I hate to regret things, but I was telling myself: “why didn’t you sell it all? and get back in when the stock continued its $25-45 range? Of course, you can’t do that with the stock market, you would lose your mind if you did.
How Useful and Relevant are Analyst Price Targets?
Anyway, as much as I think that analysts do not have a clue as to what a stock price should be, and what a reasonable target should be (the reasons for that could make up a 100-page book, mind you, so we won’t get into it now), I do look at the relationship between a stock price and the 12-month target price. Frankly, 12 months is a long time to look into the future, but it’s nonetheless a good guage of whether a price is “ahead of itself” or not.
At the risk of over-simplifying my strategy:
- if the ratio is close to 1, it is a good time to sell (provided a lot of other factors encourage sell signs).
- if the ratio is low, I like to buy the stock (provided a lot of other factors appeal to me).
I probably should not give away me entire trading strategy, so I will stop at that.
When the company announced results this week, it posted a 30% spike in profits after the market close, despite this, the stock fell a couple of dollars after hours. I simply did not understand. I read the press releases, did I miss something?
Did the CEO disappear? Did he quit to join Greenpeace? Did the largest clients leave for the competition? Was Google entering the marketplace?
Nothing. But as the chart demonstrates, the stock has been misread by many and it has led to some selling and buying opportunities.
(more text after chart)
Of course, the next day, the stock was up 10%, to $44. Part of that spike was not only the 30% spike in profits, but the CEO’s hinting that MSFT was likely to become a client soon.
Buy on Facts, Sell on Rumors (or is it the other way around)?
All right, I love the company, and believe that the stock is well-positioned to rise over the next few years, but surely it will probably still dip on some days, as such, I decided to unload my holdings.
Why?
Well, the potential of a MSFT deal was now reflected in the price. Sure, I know the old time-tested trading adage: buy on rumors, sell on the facts. But, we think that applies more to M&A deals, not business deals.
In the three short years I have been trading, I’ve seen that in this market, it’s better to sell when a rumor comes out, cause after that, unless the rumor becomes true, the stock gets a bit deflated, even in M&A deals that do not materialize (Cisco’s CEO telling press he’d like to buy Nortel in 2003 led to the stock’s peaking at $4.99, the $4.99 price reflected the expectation of the premium Cisco would have paid for Nortel. Now, due to many reason, NT trades in the low $2 range).
Back to DRIV, it’s not much of a rumor that MSFT is seeking to embrace the Web and as such will view a deal with online e-commerce provider MSFT as a good thing. Call it a rumor, to me, it’s an extension of the trend MSFT is going.
The facts in this case? DRIV is flirting with the high-end of its range (the 52-week high is $48, mind you, but you should not be greedy).
But it’s summer time, volume is low, there will be more buying opportunities.
[Disclaimer: at the time of this writing, I do not own shares in DRIV, but of the companies mentioned, I do own shares of MSFT, Nortel]
Yahoo! gets 21% of its total domestic searches through toolbars versus Google’s 15%.
Source: Lehman Bros. report
Fool.com, arguably both a great source of information for investors and the biggest article-recylcer online, posted a nice little summary of articles on Fool.com pertaining to Google. For that, click here.
With that in mind, here are some of HipMojo.com’s own articles on Google, enjoy:
Google’s increasing difficulty to surpass investors’ expectations - read.
Yahoo’s Google Envy - read.
Google shouldn’t attacking Microsoft’s monopolistic ways - read.
How Google could compete in online audience measurement through its search data and Google Analytics - read.
eBay blocklisting Google checkout smacks of hypocricy - read.
Should Google buy Facebook? - read.
Google/Yahoo! merger/acquisition more likely than MSFT/Yahoo acquisition - read.
Adobe partners with Google in an anti-MSFT move - read.
Does Google dominance scare News Corp.’s FIM from launching search engine? - read.
Google’s incoming PR nightmare - closer than it might appear - read.
Will Google be the 21st century’s version of MSFT-esque monopoly? - read.
All right, that’s enough. Enjoy.
This past weekend, I spent a lot of time researching the domain park strategies employed by many companies, including but not limited to publicly traded Marchex, Google, Yahoo! Marchex was the company founded by Go2Net’s founder Russ Horowitz, who made a lot of money following the InfoSpace merger.
Anyway, a company asked me to explore options for a portfolio of domains it had. Not being a domain name aggregator, it did not know what to do. All to say, I got to know the market quite a bit. Today, I passed by GoDaddy and saw a list of URLs being auctioned, as well as a domain name aftermarket for expired and unwanted domains.
The Real Estate of the Web
Historically, people have seen domain names - or URLs - as the Web’s real estate. That is misleading because - forgive me for stating the obvious but - real estate’s value in the offline world is largely driven by its surroundings. Online, ’tis a non-linear world, so it is not the location per se, but rather, the letters or numbers that make up the domain name.
Subjective Value: The concept of Relevance Association
I realized that due to this reality, the value of domain names are both subjective and objective. In other words, clearly softdrinks.com is valuable to Coca Cola, Schweppes or PepsiCo but nearly useless to Citicorp; conversely, Invest.com is of great interest to Citigroup but not so the soft drink companies.
Wearing the analyst hat, I coined this phenomena “relevance association” value. It’s not the best term, but you get the idea. In hindsight, I could have simply called it Subjective Value.
Objective Value: The concept of income
Up to a few years ago, the value of a domain name was speculative and was a function largely (read only) of this subjective value, or relevance association value. But as the search engine advertising exploded, demand for real estate online soared with it. Google’s contextual ads took a cue from Sprinks, who had built an early lead in the space. Of course, Google bought and shut down Sprinks, and it became the leader in Contextual Advertising. Google’s mass market startegy with contextual advertising paved the way for Kontera, Kanoodle, Quigo and others.
As the model developed further, many companies with paid search results decided to open up their inventory and extend the real estate to domain parked url’s.
Cybersquatting vs. Domain Parking: Legal Risk
The original domain parkers were people who would register names like TomCruise.com or CocaCola.com, hoping to one day force the namesakes to sign big checks for the URLs. Of course, many of these incidents went to court, and the Courts sided with the corporations and celebrities.
With time, people realized that the risk of domain parking these names was considerable. We’ll call this risk legal. As a result, people began to buy up softdrinks.com instead of cocacola.com.
Lack of Liquidity: Financial Risk
The other risk component was financial: even if someone would buy URLs such as softdrinks.com (which does not violate any trademark laws), they would carry financial risk in the sense that they would only monetize their domain name if someone wanted to buy it. And, as the market burst, so did demand for URLs. Never again will we see a $7.5 million price tag for a Business.com. Of course, never say never.
What’s Value of Domain Name?
As the price of registering domains fell to $5-10 (on 1and1.com for the former, and GoDaddy.com on the latter), more and more people scooped up domain names, knowing that even a 4, 5, or 6-digit sale would justify buying up all of those domain names.
The Capital Gain Component
Like purchasing stock in high growth companies, the value proposition of the company / domain name lies in the capital gain: what you sell the asset less what you bought the asset for.
The Income Component
But with the booming paid search ads market, the relative lack of real estate and the overall giddiness and desire for companies like Google and Yahoo! to justify their stock prices… suddenly, these companies were willing to put their ads on domain parked URLs in addition to sites with actual content.
Suddenly, one need not wait for that proverbial home run (the capital gain component) to recoup their investment and monetize their real estate. Suddenly, they could generate an income.
It was a sign of the times: the high growth business of the Web was becoming a utility business and paying out a dividend. Well sort of…
To calculate what the dividend or income component of the domain name is, we can use many tools, widely available. But first, some assumptions and disclaimers.
Type-in Traffic
Before we move ahead, it is important to note that while searching is the second most common function online after email, many sites are not found via search engines, via a link in an email, via a link on a site, but rather, through type in traffic (this is why default search engines in a browser and operating system are so important, but that’s a separate issue, one I examined here).
It should also be noted that type-in traffic can go into a URL that exists or does not exist. These, if the URL is a good one, such as Queen.com, and there is no site up yet, it is most likely that the domain is parked and there are text ads.
Such is the case with Queen.com. But, no matter how great the URL, if the domain has no real content, then search engines penalize it and disregard the website in the organic results of the search engine.
[If you want an example, click here and you see that despite owning Queen.com, the site does not appear anywhere on the first results page.]
By organic, we mean the actual results in the core, generated by pure algorithm, and not the paid results that are generated by the database of advertisers who bid on the relevant keywords…
What this suggests is that unless a web operator has any content on a site, then the Income Value of a URL is equal to the Value of Type-in traffic, because the site will not get any search traffic. Of course, if there is content, the value of search goes up, but from the perspective of domain name portfolio holders, rarely do they have any content, they rely on type-in traffic and pay per click text ads.
So, what’s the value of a domain name:
1. We do not try to estimate the Subjective Value, or Relevance Association Value. This changes depending on the prospective buyer and does not affect the recurring income component of the value.
2. We assume that there is a linear relationship between the proportion between a) revenue from type in traffic and b) traffic from type-in traffic.
According to an article in the December 2005 issue of Business 2.0, type in traffic accounts for 15% of Yahoo!’s business. The same article quotes Marchex pegging the proportion of type-in traffic at 10% of the overall search business in the world. Both are considerable market makers so we will assume that either estimate is right, but given Yahoo!’s role as the #2 search engine (behind Google) and its Overture subsidiary being the #2 paid search player with 80% distribution online, I can safely bet that the number could be closer to 15% than 10% for the simple reason than Yahoo! is a better proxy of the overall market. Either way, for this basic analysis, we can use the median, 12.5%.
Value of domain name = Income or Objective Value + Capital Gain or Subjective Value
Objective or Income Value = # of times a keyword is queried in a given month x Revenue Per Click (or CPC for the advertiser) x Click-Through Rate (CTR) x Type in traffic % x Revenue Share Arrangement with PPC text ads provider
Where to get:
1) # of times a keyword is queried in a given month, use Overture (now Yahoo! search marketing’s keyword estimator):
http://inventory.overture.com/d/searchinventory/suggestion/
2) Revenue Per Click (or CPC for the advertiser)
http://www.overture.com
Search for a given word, and then click on View Advertisers’ Bid on the upper-right corner.
3) Type-in Traffic = Use 10% or 15%
4) Revenue Share Agreement Split = Low end is 50%, high end is 100%
5) The CTR ranges quite a bit. Many people realize what’s a real site and what is a domain parked URL with text ads. Click through on the top organic result can be anywhere from 25 to 75%, the top paid result can be anywhere from 1 to 25%, of course, for the sake of our analysis, assuming a domain parked site with paid ads, what is a reasonable click through rate? I’ll say 10%…
Mind you, Google paid Ask Jeeves 110% according to its SEC filing to go public, the rationale could have been to avoid Ask Jeeves working with Yahoo!, Google wanting to increase market share and revenues, and Google’s system being so automated that it does not really hurt margins and 10% “loss” is seen as a simple sales expense.
And there you have it. Of course, if you own a .org URL, you should not estimate that type-in traffic is 10-15%, since my guess is that 99.9% of type in traffic goes to a .com domain name.
For purposes of illustration, I see on GoDaddy that healthstate.com is for sale for $80.
Using our system, we see that health state in its pure form is search 418 times a month. We also see that there is a CPC of $0.28.
So, the income value of the domain name is
= 418 x 0.28 x 50% revenue share x 12.5% media estimate of type in traffic x 0.10 CTR
= $0.73
At a cost of $80, the investment will be recouped in 110 months! You better be a helluva salesman and find someone who puts a big subjective value on the URL…
[Technically, it’s more than that, since over 110 months, or roughly just over 9 years, you also have to pay for 10 years’ worth of renewals for the domain name… but this analysis helps you determine quickly how “in or out of the money” the Domain name is]
Of course, by only thinking of monetization via paid navigation, you are limiting the long term value of your domain.
If you would like to see the full report, email me at ash @ mojosupreme . com with no spaces.
[Disclaimer: of the companies mentioned I own shares in Infospace and Yahoo!, but that does not mean that you should too].
I wouldn’t want to be the person who finds himself on the other side of a conversation with Tacoda’s Dave Morgan. The man’s been around long enough and done plenty to know what he is talking about.
But today, I read his article about the end of pageviews. Apparently, pageviews are doomed.
Bold Predictions: History Repeats Itself
Haven’t we been in this position before, when new and not-so-new mediums pop up on the mainstream media’s radar calling for the end of everything? Where’s Jeff Dachis?
For example, blogs won’t put newspapers out of business, it simply becomes a tool that newspapers can use.
Of course, I’ll be the first one to say that pageviews are meaningless in many ways, it is one of many metrics that publishers can use to derive estimates for revenues. But, the same way that a search company might be more interested with clicks (and even more specifically, paid clicks) than searches, a publisher needs to indeed account for pageview growth, rate of monetization etc. but look out for growth of unique users.
Savvy publishers know that pageviews is not important, neither is ad impressions. Sometimes it is better to let inventory go unsold than sell it to a bad advertiser. After all, a publisher has to position itself in a certain way… and therein lies the reason why pageviews are not doomed.
It’s what a publisher does with pageview, impressions, etc., that counts most. More importantly, the pageview is not doomed because it is what gives context to an ad. The MySpace’s of this world have a hard time selling pageviews, ad impressions etc., because the context of their pageviews scares advertisers.
Context is King
Contextually, this is akin to a magazine’s ad placements: ads are sold not just based on where in the magazine the ad is placed, but also next to what will the ad go.
Mr. Morgan argues that with the advent of RSS (Real Simple Syndication) and video, the pageview is doomed. Not so, the key is finding out how RSS and video - and everything else - can coexist with video.
More importantly, it is hard to place an ad next to a video, in RSS, etc. We can, but users are not comfortable and void of context, so are advertisers. This is the same thing as billboard advertising, no one wants to advertise next to a crackhouse… well, that might not be true.
I’d like to tell you my two cents on what a (not the, since different things will work for different publishers) potential balance between video and pageviews is, but at least in the video side of things, if I divulge too much, I would be giving away some of the secret that has made our video publishing site WatchMojo.com one of the largest video producers in just six months.
The only thing that is, was and will remain fairly meaningless is “hits.” I hate hearing the word. But as the Web develops, “visitor” lives alongside “unique user”; “impression” coexists with “pageview” etc. Successful publishers are those who find the sweet spot in balancing pageviews with the right amount of impressions to offer advertisers a good ROI in terms of clicks etc.
In the same vein, pageviews - be it generating them, or using them to guage revenues etc. - will remain relevant. The only thing being that other tools and metrics will gain in importance…
Pageviews not only provide context to users and advertisers, but they are the eyes of the most important traffic drivers out there: search engines. To suggest that pageviews are doomed in the context of search engines is, with all of the respect in the world to Mr. Morgan, so koolaid drinking, sign of the times, Web 2.0 nonsense that I do wonder if we are back in 1999.
Did you forget search?
Search engines index and crawl the web’s content largely due to all of the bells and whistles that are on a page view. So, page views not only give context to users, advertisers, but also to search engines. And since the hyperlinking nature of the Web is what makes the web, the web; pageviews will always be important.
What we are actually doing now is seeing two forces at play: dynamic content through RSS, Ajax etc. and dynamic content on fixed pages. Both have pros and cons. But to suggest that one would destroy the other is not really right, for some forms of content, one makes more sense, for others, the other makes more sense.
But until search algorithms fully get video content, pageviews are what matter most.
What is the value of video?
Now, when it comes to using video and knowing how to compare video, one needs to exercise common sense.
What is the value of 1 video “unit” vis a vis 1 pageview?
Well, think about it:
- CPM rates for video are 10-20 times higher than they are for traditional, online advertising.
- Broadband users soared by 33%, with anywhere from 55-75% of homes now accessing the Web with broadband connections; this is key, for until homes are connected with high-speed, video will not flourish. After all, offices might have fat pipes already, but it might be all right to be reading articles from work, I am not sure if every office allows people to be watching videos, in their full audio and video glory.
All of this to say that it is fairly easily to reconcile what a video unit is worth vis a vis a pageview with text content.
But this does not mean that this small source of confusion means the end of any medium, media or measure.
Click here to read Mr. Morgan’s piece.
Burger King is promoting its new BK Stackers, burgers where you essentially stack as many beef patties onto a bun that you can handle… maybe they should have partnered up with FatAss.com instead?
BROADBAND ENTERTAINMENT NETWORK HEAVY HAS teamed up again with Burger King to create an offbeat online promotion for its new BK Stackers sandwiches on Heavy News, the news channel the site unveiled this week.
Heavy News extends the site’s irreverent programming with a series of satirical videos that feature a sock puppet anchor, and reports on everything from a female Palestinian shock jock to a call from former Enron chairman and CEO Ken Lay in Hell.
As launch sponsor of Heavy News for the first three months, Burger King is incorporating its new campaign for Stackers–cheeseburgers that have up to four layers of beef and cheese–directly into the channel’s video reports. Action figures of the mini construction workers featured in the ads serve as hand-held anchors on Heavy News sports segments.
Read the rest of the article here from MediaPost
This is great news for anyone involved in online video!!!
BY THE END OF LAST year, there were 50.2 million U.S. homes and businesses connecting online via broadband–marking a 33 percent increase from 2004, according to a report released Wednesday by the Federal Communications Commission.
Cable modems still accounted for the majority of broadband lines–about 51 percent, as of Dec. 31, 2005–while DSL lines accounted for about 41 percent. But the agency also reported that for the first time since it began collecting data, the growth of DSL lines outpaced that of cable modems. Other types of connections included optical carrier, satellite, wireless, and electric power lines.
The agency also reported that almost everyone has access to at least one broadband provider, and that 99 percent of the U.S. population lives in 99 percent of the ZIP codes that have one high-speed access provider. The FCC defines broadband as a speed greater than 200 kbps in at least one direction.
A study issued earlier this year by the Pew Internet & American Life Project also reported a surge in broadband use. Pew found that 84 million Americans connected at home via broadband in March–up 40 percent from 60 million one year ago.
Nielsen//NetRatings issued an even more bullish report last month. The research firm found that 72 percent of Web users now connect from high-speed lines–up from 57 percent one year ago.
Courtesy of MediaPost
More stats on growth of online advertising, from Mediapost.
JupiterResearch reports that search advertising dollars will outpace display advertising over the next decade. A new report by the research outfit also says that online ad spending will reach $25.9 billion by 2011, representing nearly 9 percent of the total U.S. ad market.
Over the next five years, search spending will see its share of online ad dollars increase to 43 percent in 2011. Search advertising currently represents about 40 percent of the overall online ad market, though many analysts see the growth cooling as online video advertising takes hold in the market.
Jupiter says spending on search advertising is being driven by brand advertisers eager to get in on the keyword action, and more experienced advertisers that are deploying increasingly sophisticated search advertising programs.
Jupiter says display advertising on the Web will claim 36 percent of total online ad spending in 2011, but that the rich media and online video segments of display advertising will take dollars from traditional banner advertising. Spending in the rich media and video segments is expected to increase by compound annual growth rates of 21 and 27 percent respectively over the next five years.
According to Jupiter, online video advertising’s best years are to come,–in 2009 and 2011, when video becomes a standard offering of online publishers.
Courtesy of MediaPost.com
Makes sense… The Razr was pretty much the coolest cell phone anyone had ever seen, so why not make two newer, cooler updated versions!
The phones are respectively, the CRZR (pronounced Crazer) and the RIZR. The former is said to feature a music player and be slightly slimmer than the original RAZR. The latter is said to be what people in the know call, a slider, where the face plate slides back to reveal the keypad and other buttons…
Both sound very cool and should be available in the coming months.
Check out the article here from Businessweek.com
PLAY
