David Kaplan over at PaidContent dissects some interesting tidbits from a WSJ article that quotes an assortment of sources, from Borrell to Jupiter Media, that give newspapers a reason to worry but that offer web entrepreneurs a ray of light, so to speak.
First, the tidbits:
– Online ad spending for newspapers will likely fall to a percentage in the low 20s this year from 28 percent last year, Borrell Associates estimates, reflecting a broader trend, as EMarketer predicts the overall growth of U.S. online-ad revenue will slow to 18.9 percent this year from 30.8 percent last year. It predicts newspapers will do slightly better.
– Competition from TV stations’ and magazines’ websites represents a new challenge, with outlets in those categories stepping up their digital efforts, as PC reported last week. Other challenges are coming from sites like MySpace’s recently launched news feature. Also, advertisers are taking blogs and newsgroups more seriously, says one digital ad agency exec.
– The areas that have so far proved strongest for newspapers – banner ads, pop-ups and listings – are losing ground to forms like search marketing, which provide better targeting and measurement.
– Some publishers worry that entering into deals like the Yahoo Newspaper Consortium, which announced its expansion last week, will reduce their control over their newspaper advertising initiatives.
– Primarily, it seems that marketers need more convincing when it comes to moving their ad dollars online. A survey of 273 U.S. advertisers last year found that 67 percent of the companies with annual revenue of $500 million or more will dedicate less than $1 million to online ads, according to JupiterResearch.
First off, to better illustrate why newspapers are shooting themselves in the foot, look no further than this post, and who and how we’re quoting things.
I quote Paid Content, who skimmed and paraphrased the meat of the article from WSJ. Legally, Paid Content will archive this information, and marketers, consumers and everyone in between will be able to access it, for years to come. Good for PC. On the other hand, if you click on the WSJ article, what you get is the first two or three paragraphs. I link to them out of courtesy - and for copyright reasons - but WSJ offers little to readers and naturally will get little value by not leaving the content for free.
You would think that years after the free, ad-supported text content emerged victorious, newspaper (and print companies in general) would get it and adopt a free, ad-supported model. The WSJ is a fine institution, and one of the few to go for a hybrid model, but it would win long term if they simply unleashed their text content online for free. After all, as this blog proves, I can get the meat of their content for free elsewhere. In fact, the sources they mention, and Paid Content paraphrases are not even proprietary, meaning that WSJ is making their lives very hard.
Anyway, like with most of our posts, we took a detour to say that newspapers’ online revenues are stalling, and that is a great thing, for us.
Let me explain.
Most web startups tend to focus on products, services, features or applications - tech oriented things essentially. These are coveted by the likes of VCs, and most online giants like Yahoo!, Google and MSFT. While I have argued that content is the new software and sooner than later these tech players will begin to scoop up content shops (again in the case of MSFT - remember Slate?), the simple fact is that one reason why content poses a financing challenge is the lack of exit options and the difficulty in immediate scaling opportunities. Don’t get me wrong, once you create a lot of content, or build a decent sized audiences, content scales better than technology (been there, done that in text publishing; doing it again, in a different sector now: video; after all, only an uneducated peasant would think that text and video are one and the same).
After all, once you are big enough to generate a huge audience, the ad revenue will follow and investors will come rushing in. And by then, media companies will make you offers to buy. But until you get there, content is not a very obvious business to be in. Content is king but monarchies have always been messy, as I like to say.
Long story short, seeing newspapers online revenues slow down means that they will:
- look to partner with online content companies like ours truly who pose little threat (yes, we’re talking about Yahoo!, Google and company who are out to put the KO punch to newspapers);
- look to acquire rich media content companies like ours truly who have video and broadband programming in droves that they can monetize at higher rates than their existing content, and who pose a challenge to traditional TV stations who are caught in their own soul searching debates about what to do with the Web.
I have covered this in “Understating the TV Executives’ Angst and Envy” here and explained why news has an actual advantage to magazines in adopting video in “Video might indeed be the killer app, but not in a good way for all magazines” here.
Back to my point (I swear there is one, folks, I swear!), I’m not saying “selling out is an option” when you wake up in the morning, an entrepreneur should always seek to build a company to become a stand alone entity, but I am certainly saying that “having more potential would-be buyers” makes your company a lot more attractive to partners, clients, investors, advertisers, employees, etc.
Frankly, I think the greater issue is that newspapers are impotent to seize on their natural core competencies, which is a shame, because they have a lot to offer… but there is so much wrong with the decision making process at some newspaper companies that by the time they realize what is what, it’s too late. This happened to magazines in 2000-2005 and is happening now in newspapers at a fast rate.
I am doing some pontificating on whether these trends affect TV more or less than print, and you know what? The answer I am getting to more and more is shocking, and surprising…
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WatchMojo NewsletterApparently, they kiss and make up. Valleywag asks what kind of concessions did MySpace get from Photobucket. TechCrunch wants the lowdown. Mashable says this is surprising because the PR damage was done, though something tells me Murdoch et at. could care less about PR and are more concerned with the financials in the deal.
Hmm… I have no clue for sure, but if I were Rupert Murdoch and Peter Levinsohn, I’d ask for:
1- revenue share with a 3-6 month window, with the option but not the obligation to renew terms… since this is relatively small now. If the revenue is good, ask for more. If it’s bad, demand more or threaten to cut them off. Hey, that’s cutthroat, but I did say “if I were Murdoch…”
2- some kind of options/equity on the company, be it actual stock or some form of warrants. News Corp. got 5% warrants in Roo plus the option for another 5% in warrants just for using Roo.
Is that all? Perhaps, but I am sure that News Corp. might have even:
3- asked for some kind of option to buy the company in 12 months, which in of itself means little,
but then probably got:
4- some kind of first right of refusal to match any offer Photobucket gets.
While one argument is that the VCs or management [hopefully] balked at #3, the flip side of #4 is that if they did commit to this, it would create a false sense of competition for Photobucket, because News Corp. would consider matching it, meaning that any would-be buyer would try to bid high enough to make Murdoch blink… which, if you ask Sumner Redstone, is not a good option.
Disclaimer: used to work for News until they kicked me out, own shares in Roo.
Valleywag is reporting that Yahoo!’s Executive VP Jeff Weiner might be tapped to replace Terry Semel as CEO in line for the top role as Yahoo!’s “Audience” unit. I misread the Valleywag article entitled “Jeff Weiner to take top Yahoo! job” and thought Yahoo! was looking to choose Weiner as its CEO, which seemed surprising, given Yahoo!’s migration in choosing more old media folk for its most senior roles (can you tell I have a commentary piece coming up on this?).
Anyway, check out John Battelle’s interview with the man here.
Yahoo! is the largest - and oldest - holding in my portfolio (yeah, the meltdown last week erased my gains…), for how much longer, I don’t know. I’ve never met Mr. Weiner, and I have not made up my mind yet, but time is ticking, I am sure I don’t need to remind Weiner et al. of this little stat: but two years ago, Google and Yahoo! raked in the same amount of revenue, ’twas the day, and ’tis no longer the case:
“Except for one quarter in 2003, Google’s revenue lagged Yahoo’s. That changed after the first quarter of 2005, when Google posted $1.26 billion in revenue to Yahoo’s $1.17 billion. The gap has been growing ever since. Yahoo’s 2007 first-quarter revenue was $1.67 billion, less than half Google’s $3.66 billion. (…) Google’s share is rising at the expense of Yahoo and Microsoft. While Google’s share rose 6.1 percentage points last year, Yahoo’s fell 0.6 percentage points and Microsoft’s dropped 1.1 percentage point, ComScore numbers show.”
Graph below courtesy of Valleywag.
Will Weiner bring the Midas touch? Is it even a fait accompli, or is Valleywag jumping the gun.
Here’s what we outlined last week as some choices we’d like Yahoo! to consider, by the way.
Since 1994, we have seen many companies come out of nowhere, off the radar, only to grow into positions of leadership and dominate their sphere. Some go on and galvanize that leadership positions, others falter and let someone else pass by.The following is HipMojo.com’s list of Internet Company of the Year, based on growth, market leadership, traction, strength of management, prospects and overall accomplishments.
All right, time for the envelopes, and the winners are:
1994: AOL.com
The year 1994 marked the appearance of ISPs across the web landscape. By August 1994, AOL merged with Redgate (a multimedia publishing company specializing in CD-ROMs), and a couple of months later, in November, AOL declared war on Microsoft, betting the farm on an online strategy. This marks the beginning of the rise of the Web versus the desktop theme. AOL begins to mail out millions of CDs trying to win over the masses. It works. AOL becomes the fastest growing ISP ever, surpassed only by Japanese wireless service provider iMode a decade later.
1995: Netscape
Netscape was created by Mosaic Communicatyions Corporation on April 4, 1994 by Marc Andreessen and Jim Clark. On October 13 1994, Mosaic Netscape 0.9 was launched, and renamed Netscape Navigator shortly thereafter. But it was on August 9, 1995 that Netscape went public, offering shares at $14 and closing at $75. In doing so, it ushered in the first wave of the World Wide Web’s golden era.
1996: Altavista
AltaVista remains a poster boy for the “what could have been” lot. It was launched on December 15, 1995 by its parent company DEC, but given its pedigree, it was used primarily as a showcase for DEC’s computing power. In 1996 however, it became Yahoo!’s exclusive search provider, and by 1998 was sold to Compaq, who then began the even-more-misguided plan to remake the search engine into a portal. By then, of course, Google was rising amongst pure-play search engines. In March 2004, Yahoo! bought Overture, who had previously bought Altavista; Overture itself is the runner-up for the “what could have been” prize.
1997: eBay
The “Candy dispenser story” is created by eBay’s PR manager, which changes its name from AuctionWeb to eBay. In 1997, the company captures the imagination of the masses, the next year the stock goes public, like many dot com entrepreneurs, founder Pierre Omidyar becomes a billionaire. Unlike most, thanks to eBay’s 80% profit margins, Omidyar remains a billionaire to this day.
1998: Yahoo!
Yahoo! was founded in January 1994 and incorporated a year later on March 2, 1995. It grew reasonably quickly from the onset, and on April 12, 1996, the company’s IPO raised $33.8M for growth opportunities. The subsequent year, in 1997, it acquired Four11 and its Rocketmail service, which became Yahoo! Mail. The rest, as they say, is history: in 1998 the stock rose from a split-adjusted $4 to $40, cementing its spot as the future leader of web media. In October 1998, it made its first acquisition, that of Yoyodyne, by 1999 it was acquiriing larger firms, first Geocities (1999), then eGroups (2000). Yahoo! could have also been named 2003’s Internet Company of the Year, in all fairness, since that’s when it started its resurgence.
1999: Amazon.com
In December 1999, when Time Warner (still separate from AOL) published its end-of-year issue of Time magazine, it put Amazon.com CEO Jeff Bezos on its cover for Man of the Year. While cracks had began to appear in the Web facade, the fact was that no one, and we mean no one, saw the storm that was brewing around the corner. Amazon.com was still a money-losing enterprise, but one that was widely believed to be making a run to acquire venerable retailer Walmart. Yes, you read that correctly. Today Walmart is worth 10 times more than Amazon.com. But within weeks of that cover issue, publisher of Time magazine Time Warner merged with AOL, ushering in the beginning of the end.
2000: Lycos
Launched in 1995 by Bob Davis, Lycos grew to become the most visited portal in the world by 1999. It was sold to Terra in May 2000, for $12.5B. By 2004, South Korea’s Daum Communications paid $95.4 million - less than 1% of Terra’s buyout price. What could have been was, came and went and Lycos today is an asterix of the Web’s go-go days… but Davis legacy remains somewhat unscathed as the architect of one of the premier brands of the Web’s first era of prosperity. Today Davis is a VC, Lycos is Korean.
2001: Napster
Napster was built in 1999, it spread like wildfire in 2000, but it peaked in 2001. Shortly thereafter, it was forced into submission by the RIAA and the record labels, but the genie was out of the bag, paving the way for decentralized P2P file sharing sites like Kazaa, Limewire, iMesh and Bearshare. Napster was at the time the fastest growing consumer application, ever.
2002: Google
The year 2002 could be seen as an innocuous one for Google and in many ways, we’ll admit that we could have picked Google in any year. But since other companies had their standout years in specific years, we picked Google for 2002 for a few, well, innocuous reasons. After all, by 2002, the Web had just suffered its devastating crash, and while many dot com dreams had gone up in flames, one company emerged largely unscathed and perfectly positioned to benefit from it: hiring cheap and smart labor and investing in the super powerful computer it is today. That year Google’s revenue grew 409% from 2001, but 2002 was also the last year Google’s revenues were below $1B per year, coming in at $439M. Somewhat more interestingly, that year marked the last year Google’s ending headcount stood below 1,000, finishing 2002 with 682 Googlers, by the end of 2003, Google employed 1,682 people, and today it employs over 10,000. That year also saw the shift of Google from a “simple” search application to the search and advertising powerhouse it is today: the next year, it scooped up companies that added to its lethal search algorithm: first Applied Semantics in April 2003, then Sprinks in October 2003, right before it began to plan for an IPO, in August, 2004.
2003: Cisco
The network is the computer, and no company has benefited more from that than Cisco Systems, the stock that outperformed all others, and won our Top 10 Web / High Tech Stocks of Past, Present and Future (link below). In some ways, Cisco should not make this list, but since we’re looking at Internet company of the year, then it’s unfair not to give Cisco some credit, especially since they are the ones selling the shovels and hats to the many entrepreneurs and investors looking to succeed on the Web. In 2003, long after the bubble burst, Cisco’s stock rose from $13 to $24, nearly doubling and effectively ushering the return of the Web.
2004: Skype
Skype’s history can be traced back to 2002 when Draper Investment Company invested in the company, which was founded by the entrepreneurs behind Kazaa, Niklas Zennström and Janus Friis. The Skype domain names were only registered in April 2003, with the first beta version coming on the heels of that in August 2003. But by October 2005, eBay paid $4B for Skype. Oh, in between, Skype revolutionized communications and scaled to millions of concurrent users, after hitting 1M concurrent users in 2004, 2005 saw them hit 4M concurrent users.
2005: MySpace
MySpace was founded in July 2003 by Tom Anderson and Chris DeWolfe. As one of the leading and more visible players of the social networking landscape, it silenced all the critics many times over: first when it overtook Friendster as the largest social networking site, then when News Corp. paid $580M for MySpace parent Intermix in July 2005 and then when it went on to triple in size after Rupert Murdoch took over the asset and created Fox Interactive Media around it. Today, MySpace is the largest web property when measured by pageviews, with its 100 millionth user profile having been created in August 2006. We dubbed MySpace the greatest Web acquisitions ever after Google paid News Corp. $900M in an ad deal for rights to power its search engine and run contextual search ads.
2006: YouTube
YouTube went from 0 to $1.65B in eighteen months. Founded by three former Paypal employees and funded by members of Paypal who relocated to the Sequoia venture capital group, YouTube meshed user generated content with tagging to create the fastest growing startup, ever. The company secured $11.5 million from Sequoia and cashed out when Google made an all-stock bid for the company in Q4 2006.
2007: Facebook
Facebook opened its site up to the non-college crowd in September 2006, by springtime, when they announced their developer program, Facebook was clearly the “it” company of the year, despite being the second social networking site behind MySpace.com. Facebook’s growth spiraled rapidly as the 25-34 demographic connected with old friends via the site. Throughout the year, the paper valuation of the company spiraled from $2-4B, up to $6B, then $10B, ultimately settling at $15B with a $240M investment for 1.6% stake from Microsoft. Additional investors were Li Ka-shing - East Asia’s richest person - and then the Samwer brothers (in 2008). The company faced some turbulence with privacy woes, its Beacon advertising program was practically a disaster… but by year’s end, Facebook was breathing down MySpace’s neck and partnered with the world’s most valuable technology company.
Who’s your pick for 2008? Vote in the comments.
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Last year I ran into a former colleague of mine, and he asked me if I “had found work.”
The insinuation was that WatchMojo.com was a big, fat expensive hobby, not befitting the title of employment or work. I do not think that my colleague actually thought that, but his boss (and my former boss, in fact) had created that illusion in his web of lies and misrepresentations, as he was so prone to do.
Of course, as I did then and I do now, I was busting my derriere trying to build the Web’s best online TV station at WatchMojo.com. So it was not a comment made due to our lack of effort, but rather, their shortcomings. Knowing my former boss’ MO, I understood this was his way of knocking down my plans and discourage any one of his staffers to ever do their own thing; this was another one of his otherwise classy moments.
The point is, when you strike out on your own, understand that even people who have no bias towards you will not always get what you are doing, and if you are to be successful, it will have to be despite people, and not thanks to people.
It’s very sad, but awfully true: people don’t help you because you need it, they will help you because they need it. Much the same way, I presume, that banks lend you money when you don’t need it.
Today I came across a list of “Some very funny and untrue predictions of the past,” I could not help but laugh.
Most of the statements seem obviously false in hindsight, though at the time, it could have gone either way.
The lesson: even the most successful figures of our time (Steve Jobs of Apple, the Beatles, etc.) were dissed and ridiculed at one point or another, so if people do not have the vision or patience to get what you are doing, fear not, you are in good company.
Over the past months, I’d say full year, I have come full circle. Last year, people thought we were crazy to be building such a vast and exhaustive library of original video content for broadband platforms, because, user-generated content represented the holy grail.
It was clear to me then that it was not. It was a fad, arguably a trend, but a holy trail it was not. Those who competed in video had chosen technology in their attempt to win the brass ring, we had chosen content. We were crazy, F’d up, was the word on the street.
Today, it is the opposite. That’s all I will say, for now.
Enjoy the list, and like I say: never believe your biggest critic or your biggest cheerleader…
Came across “blank check corporations” on NYT via PaidContent.org.
Time was that former media executives were offered consulting contracts, partnerships at private equity firms or book deals. Now, they are being offered a blank check.
Over the past several months, new shell companies led by former senior executives of companies like Time Warner, ABC, RCN, DirecTV and VNU have raised hundreds of millions of dollars on the stock market in low-profile deals using an obscure but growing financing technique called “special purpose acquisition corporations,” or SPACs.
The rationale is dead-on: the experienced senior management types recognize value where they see it, and nestled in between fickle public shareholders and private investors who look for huge opportunities are many mid market deals they can pick and choose.
Actually, this is not all that different than the famous rollups many are trying to build in online media.
The difference:
- in offline media, it’s usually developed, mature businesses who throw out a lot of cash but have little growth opportunities…
- in online media, it’s under-developed, one or two man shops that need one of many things (investment, manpower, technology, stronger brand, etc) to take off.
Is one more prone to success than the other?
PLAY
