The Grinch Who Stole Q1
Tech Crunch has been making the rounds and the projections for Q1 2009 online advertising are bleak:
Display advertising revenue is going to fall of a cliff in January according to a number of content sites I’ve spoken with who rely on advertising for revenue. “Sales through December were mostly strong as advertisers used up their marketing budgets,” said one sales exec. But, he added, “there are few buyers for this next fiscal quarter, and those few that are buying are looking for steep discounts.”
Just how bad will it be? I’ve heard estimates of 30%-80% revenue drops over the next three months from companies that serve a variety of content (games sites, tech news, celebrity news, political news, etc.). The median pessimism point is around 50%. The people I’ve spoken with work at large public companies and small one-person blog shops. Absolutely no one I spoke with said they expect an up quarter.
Negativity Begets Negativity
At some point (and we’ve passed that point, folks), the bad news becomes a multiplier effect for more bad news:
- a media buyer sees this kind of article, uses it to lowball a publisher,
- the publisher sees little bright news, so they give in,
- the rates fall downwards, the bookings become rarer and rarer,
- next thing you know, indeed, we’re in a down quarter.
D stands for Deflation…
The web economy and online advertising sectors represent tiny pieces of the bigger picture. The buzz word in 2009 will go from subprime to deflation… so if we operate in a climate (or think that we do) of falling prices, then I wonder why we’re shocked to realize that ad rates and overall ad revenue might fall. I think at the macro level (all marketing) this might - and will - happen. From AdAge, via MediaMemo:
… and Display Advertising!
But as we outlined in our 2009: The Year in Online Advertising, yes, display will be weak, but I think publishers are buying into the glass-is-half-empty outlook because of bearish reporting. The truth is, my gut says things will go down a bit differently:
- marketers will push for video ads (and rich media ads in general) in display advertising real estate,
- the definition for video advertising will move away from purely instream ads (pre-rolls or overlays, for example) to include in-banner video ads,
and by mid-year, the actual display advertising figures will be fine (when you include the video / rich media units).
I do agree that traditional display ads will be weak… mainly due to a horrible Q1.
Let’s be honest: CPA and CPC are for suckers
While many are using the downturn to suggest that performance-based advertising units will see a boom, I’d like to point out a truth that most publishers fear admitting: CPA and CPC ads don’t really work for publishers, so even in horrible CPM times, I don’t think you will see a boom in performance priced ads in a downturn. For more on the entire CPC, CPA and CPM and other online ad terms, click here.
CPA and CPC revenue does not pay the bills, and quality publishers generally reject giving up prime real estate to CPC and CPA inventory.
But don’t take this from me, just follow the market: why else do you think Doubleclick, Blue Lithium, aQuantive and Right Media all got bought out (they all pay out largely in CPM terms even if on the back end they arbitrage inventory on a performance basis) whereas Valueclick remains standing, with no one to partner up with. At its peak, Valueclick was worth $3B with talks that it could fetch more. Even before the market meltdown, it was trading at $1B. Today, in the post media meltdown market, it is trading at $562M in market cap, with an enterprise value of $460M. The point being: in my experience dealing with of all the ad networks, from the publisher’s perspective, Valueclick was the most exposed to CPC and CPA and thus, most expendable.
Now this is all just my gut, but my gut has been right before: here’s one example of CBS buying CNET.
All Things Are Relative: At Least We’re Not in Radio, TV or Print!
If online advertising sentiment is this bad, even if the outcome is half as bad, then imagine what the radio, TV or print outlook is right now. Can you really imagine a media buyer paying $1M - let alone $50M, as Dell balked at - to be in print? What about radio or TV, which represent a black box in advertising where you don’t get to even track or target anything?
Newspapers like NYT and Tribune are - or are at risk to - defaulting right and left. TV companies like CBS are seeing declines in revenues. Radio companies are not faring better.
The point I am making is: there is a bull market somewhere at all times - even these times - and that market is online. It’s time to balance the reporting, too. I find it appalling (alright, strong word) that a site like Tech Crunch inflated the bubble on the way up, and is now ringing the bells of doom in the downturn… but that is publishing… and Tech Crunch does it well.
Who does the doomsday scenario thing best? Henry Blodget. Reading his Alley Insider, you’d think he and his talented staff of writers were typing on a ledge somewhere, choosing between the Publish button and jumping out of the window. For a great piece on his comeback, read this Wired piece. Mind you, in all honesty, I am technically guilty of this as well, the title of this piece should be “Will Online Ads Fall by 50%”, and not “What Happens if Online Ad Revenue Falls by 50% in Q1?” - but when I started writing it, I was thinking more of the impact on print… but then I started to ask myself, can this even really happen?
Well, maybe. At the end of the day, we just saw a major evaporation of wealth throughout 2008 in the housing, financial and automotive sector, to think that online advertising will go on unscathed is foolish, but to alternatively expect a 50% decline in what is the only bright spot in all of marketing is equally foolish.
The following is a perpetual-work-in-progress. Once you start to compile a list of mergers and acquisitions, you realize why it’s nearly impossible to have a complete list. We are quite confident that the following is a very good, comprehensive list of the largest, more notable deals… but it is not - and no list will be - fully complete because there are too many countries around the world and too many industries to report (it is highly possible that the Wall Street Journal or Financial Post, for example, has such a list… but it would be thick and unwieldy).
We have included:
- many industries
- have not adjusted for inflation
- mergers (be it all cash, cash/stock, or all stock)
- acquisitions (we have excluded partial acquisitions)
- private equity deals.
It is certainly not complete, send me any ones you think I am missing or industries you want us to add next to ash@mojosupreme.com or leave in the comments.
Trivia:
- In 1981, when DuPont acquired Conoco for $7.8B, it was the biggest deal of all time. But adjusted for inflation, that remains a $20B deal by 2008 standards.
- KKR’s private equity deal for KKR remains the biggest buyout when adjusted for inflation, but in actual dollars it has been long surpassed.
Related on HipMojo.com:
Editor’s note: I knew we were speaking too soon. One more deal to add to the list: Time Warner to buy Quigo. Added to the bottom of the list, under ad networks.
According to The Jordan Edmiston Group Inc.’s October 2007 Client Briefing report, the number of deals through the first three quarters of 2007 exceeded full year 2006 figures: 637 transactions with $95B in value thus far. Do the math and that is $150M per deal, quite rich.
As such, publishing our list in November 2007 is a bold and potentially premature thing to do. Regardless, why wait?
What started off as a Top 10 list turned into a Top 27 list: then it got out of hand because we were comparing apples with oranges. We’re at over 30 M&A deals in web-oriented sectors that stood out.
The deals are not listed by size or order of magnitude, just a combination of value, strategic fits and long term potential. Others made the list due to the storylines, frankly, or because they took a while and garnered the media’s attention.
At least one, you’ll see which one, has yet to be finalized, but we expect that it will.
Enjoy, feel free to add, criticize, re-order etc. Surely we’re missing some major ones… some time in December, using emails, comments, suggestions and votes I’ll probably publish a top 10 list of 2007 acquisitions…
ONLINE/OFFLINE PRODUCTIVITY SUITES & COLLABORATION TOOLS
- Yahoo! acquires Zimbra for $350M
Yahoo!’s email service remains the most popular in the world, but when it comes to online meets offline office suites, it was sorely lacking, in particular due to Google’s encroachment onto Microsoft’s terrain against the backdrop of Yahoo!’s dead silence on the front. But, in one move, Yahoo! staked its claim to the party.
- Google acquires Postini for $625M
Google is trying to dethrone Microsoft’s grip on productivity suites while Microsoft is trying to encroach on online advertising. Google has bought Writely, launched a spreadsheet program and while these initiatives and acquisitions have gotten the vocal minority excited, they have failed to win the hearts and minds of corporate IT decision makers.
While we doubt one decision alone will make a change, the acquisition of Postini - makers of corporate email security tools and anti-spam software - could technically make a difference over time. Let’s face it, Gmail is indeed pretty cool, but corporations won’t be caught dead using it. Maybe by meshing Postini with Gmail, offices worldwide will stand up and take notice.
- Facebook acquires Parakey
In 2007, Facebook grew synonymous with hype. Anything the company touched, or sought to touch, quickly turned to gold. Mind you, the company’s torrid growth rate was nothing short of breath taking. But when Facebook announced that it had acq-hired Parakey, a yet-to-launch web operating system developed by Firefox co-founders Blake Ross and Joe Hewitt for an undisclosed price, people noticed because this meant that Facebook had MSFT in its cross hairs. Over time, MSFT made a $240M investment in Facebook, creating an alliance between the two firms, and suggesting that Google, and not Microsoft, was Facebook’s true nemesis.
See HipMojo.com’s post on the deal here.
- Cisco buys Webex for $3.2B
Webex was the first stock I bought, and the reason was simple: companies spend so much money on travel and phone calls are not always easy. Webex was a simple way to bridge the gap between people who needed to at least be on the same page when it came to sales calls and phone meetings etc. Webex who for the large part of the 21st centuy traded slightly above $1B in market cap ended up fetching quite a premium from Webex, selling for a whopping $3.2B.
See HipMojo.com’s post on the deal here.
PUBLISHING
- Answers.com acquires Lexico for $100M
Answers.com, whose parent GuruNet Corporation paid $57,000 for the URL moniker, turned around and paid $100M for the parent corporation of Dictionary.com and Thesarus.com, fitting for a company who bills its Answers.com site as the world’s largest Encyclodictionalmanacapedia.
Of course, Answers.com got far more than two sexy URLs, Lexico did decent revenue and earnings, too. But any way you dice it, the deal was rich, translating to:
- 35 times earnings
- 15 times revenues
- $9 per unique
See HipMojo.com’s post on the deal here.
- Discovery Holdings acquires How Stuff Works for $250M
How Stuff Works has been around for what seems to be forever. It raised $50M for expansion this year and many expected the company to be the one signing the checks, but by year’s end, the company’s interest in all things video led to its sale to Discovery Holdings for a whopping $250M.
See HipMojo.com’s post on the deal here and here.
- CBS acquires Wallstrip
On the one hand, as a fellow video producer at WatchMojo.com myself, I was happy to see Howard Lindzon’s Wallstrip exit successfully to CBS: it showed that one can create something of value in video content and, in all honesty, it created a floor price and a comparable… But, by the same token, I think Wallstrip sold too soon and for too little (nothing against CBS).
Ultimately, in the year when marketers spoke loudly against user generated content, it created a first example that professional made video could represent a valuable business if done right. If I dare say so, we’re now going to show just how much a video content creation and syndication business can scale and grow if you stick to your guns… but that’s for a separate post.
- Hearst acquires UGO for $100M
Men don’t read magazines. They’re watching less and less TV. Where are they? Apparently, online and playing video games. If that hypothesis and premise is true, then Hearst made a much needed investment to get into a video game publishing network targeting men, that of UGO. Incidentally, when Viacom and News Corp. vied for IGN Entertainment [disclaimer: my one-time employer after it bought the company where I was a partner], Hearst balked at the price tag, which hit $650M. But two years after that deal, the trend lines were clear: Hearst needed to get serious about reaching men online and the $100M acquisition of UGO was to serve as the spring board. UGO had raised $90M since its inception.
See HipMojo.com’s post on the deal here.
- CBS acquires Max Preps for $43M
High school athletics is a hot sector. High school sports are a key part of local content and local advertising has always been a huge market, and one that is up for grabs, particularly as newspapers see ad dollars flow to the Web. More importantly, high schoolers don’t spend as much time watching TV (not suggesting that all high school sports fans are actually high schoolers, of course). Combine these trends and you see why CBS’ acquisition of Max Preps was a smart one. After the deal, Max Preps was rolled into CBS’ College Sports Television (CSTV) and its network of websites. It’s always very important to hook consumers early on, and there ain’t a better time frankly than before the college years.
- Yahoo! acquires Rivals.com for $100M
$100M for a sports site geared towards college sports seems like a lot, for sure, especially when the previous year, News Corp. bought Scout for $60M and CBS bought Max Preps for $43M.
But when you consider that said company has raised $75M in venture funding and run by CEO Shannon Terry who made the list of SBJ’s Top 20 in Online Sports, you know the deal’s final price will get high.
Ultimately, by making the deal, Yahoo! leveraged its massive audience to become a main player in sports, rivaling FOXSports.com, SI.com and ESPN.com. Mainly, by holding out and seeing CBS and News Corp. buy Max Preps and Scout respectively, Yahoo! not only saw a floor being created for Rivals.com but also had to pay a premium to ensure that the company not fall in another media company’s hands.
See HipMojo.com’s post on the deal here.
- News Corp. acquires Dow Jones for $5B
I know what you’re thinking, did he fire six shots or only five, “Dow Jones is not online. I mean, it’s flagship product, the Wall Street Journal is not even free!”
My friends, Wall Street Journal has the single most successful subscription business and gets 10m unique users per month. For decades, lest centuries, media moguls and tycoons have pushed the mantra of synergies. Rupert Murdoch in one single transaction:
- acquires one of the two assets he’s always fancied (WSJ, other being the Financial Times),
- he gets the best springboard for his new Fox Business Channel,
- acquires 10M uniques on WSJ.com, or 17M in all if you include Marketwatch and Barron’s,
- has the right, but not the obligation, to open up WSJ.com and make it into the most valuable place advertisers can reach the world’s wealthiest and most influential readers.
If you consider all of the variables, that’s one helluva deal.
SOCIAL MEDIA
- American Greetings acquires Webshots for $45M
Forget the fact that Webshots remains a strong brand that just a few years ago was bought by CNET for $70M, but Webshots is actually very complementary with American Greetings’ business. Photosharing has become a huge market, and while in CNET’s hands Webshots needed to be a leader in its space, under a company like American Greetings, it need not be. Moreover, while in the hands of CNET Webshots needed to generate sizable ad revenues (given how many pageviews it generates), in American Greetings’ hands, it need not. In other words, American Greetings is buying a large online property that is very strategic to its core business at a discount. That’s a great deal.
- CBS acquires Last.fm for $280M
Extra! Extra! Read all about it: CBS’ (and traditional media in general) core businesses are shrinking. CBS is the world’s largest TV company in terms of ratings, the largest outdoor company and second largest radio company. But like TV (and print), traditional radio is shrinking, so CBS made the prescient move to buy Last.fm. Similar to Pandora, Last.fm allows users to find new music based on their tastes and the overall community’s listening patterns. Was Last.fm the absolute best and biggest site out there? Probably not, but when you are CBS, you cannot pull a Bertelsmann and invest in a Napster-esque company that has burned more bridges than [won’t go there but insert anything you wish here].
See HipMojo.com’s post on the deal here.
- Cisco acquires Tribe
Cisco is no stranger to acquisitions, of course, but it usually acq-hires teams of engineers or technology. But by buying Tribe, one of the earlier social networking sites, did Cisco signal a shift away from Sun Microsystems’ mantra that “the network is the computer” to social networking is the Web? Perhaps, time will tell.
Ultimately, it’s a tacit admission that the web will become central to, well, everything.
See HipMojo.com’s post on the deal here.
- Nokia acquires Twango for $96.8M
Twango combines online storage with social networking, allowing users to organize and share photos, videos and other personal media.
Twango was founded in 2004 by former Microsoft employees and has around 10 employees. The deal is estimated to be just under $100 million, $96.8 to be precise. That’s right, it weighed in at $10M/employee. Twango is a small step in the seamless transferring of files from handsets to PCs. The fact that Nokia made the acquisition suggests that Finland’s most valuable company should not be seen as a telecommunications hardware company alone.
- News Corp.’s Fox Interactive Media/MySpace acquires Photobucket for $250M
Photobucket’s acquisition by MySpace makes the list mainly because the storyline behind it was pretty soap opera-ish. Photobucket builds business - according to MySpace and FIM executives - a la YouTube by leveraging MySpace’s audience and community, then adds insult to injury by trying to run ads in their slides.
Then Photobucket’s M&A advisors Lehman Bros. whisper their asking price: $300-400M. A lot of people scratch their heads. Of course, fearing a repeat of YouTube, where a company grew thanks to MySpace but sold to someone else, News Corp. blows a gasket and its MySpace site blocks Photobucket.
Suddenly, value of widget-driven businesses and Photobucket in particular plummets. Back channel diplomacy ensues, coup de theatre follows in the shape, form and fashion of a $250M buyout by News Corp.
In fact, the rumor of an impending deal broke out in early May, and the deal was formally announced on May 30th.
See HipMojo.com’s post on the deal here.
- Hi-Media acquires Fotolog for $90M
When European online marketing juggernaut Hi-Media announced its acquisition of Fotolog, eyebrows were raised. On the WTF? side of the argument were those who said: “using Fotolog’s forecasted 2007 revenue of$2.3M, a net-of-transaction fee sale of $90M implies a pretty rich 39 prices-to-earnings ratio. That’s rich. But, the counter-argument was that Hi-Media was acquiring a community of image-crazed users for 1/3 of what News Corp. paid for Photobucket; yes, call it the reverse fool theory. With $15M in financing, a $90M payout was part of the lure, turned out that the institutional shareholders of Fotolog decided to hold on to their stock holdings of Hi-Media. It should be noted, that just before the acquisition, Fotolog had signed a $75M advertising deal with Google, over 36 months, or roughly $2M per month.
See HipMojo.com’s post on the deal here.
- MSNBC.com buys NewsVine
What does this mean for Digg? We don’t know, but last year, the leader in social bookmarking and news, Digg, supposedly asked for $150M from News Corp. Rupert Murdoch balked, launched MySpace News. I’m not sure how well MySpace News is doing, I suspect Digg is doing quite well, but the fact remains, I doubt Digg will get $150M (then again, a sucker is born every second) because Stumble Upon’s $75M price tag and NewsVine’s price tag imply a lower value for Digg.
Of course, this is a post on NewsVine, not Digg. I can’t understand really the logic and prevailing wisdom to sell NewsVine, a company who had raised less than $2M in financing and who was riding high as America is about to enter an election season and NewsVine’s core focus seems to be political… but, I digress. On MSNBC.com’s part, this marked the NBC/MSFT joint venture’s first acquisition, ever.
E-COMMERCE
- Hearst acquires Kaboodle for $40M
Hearst bought a handful of companies this year: UGO for $100M, which was pricey but not very expensive for a company that raised $90M of funding since inception. But given Hearst’s traditional business focus in magazine, the deal for Kaboodle is intriguing because it allows fashion and retail advertisers - two of Hearst’s main clients - to tippy-toe online and connect branding with purchasing. If Hearst can pull this off, the combination can become powerful, and valuable. Will they? Big old media doesn’t have the best track record, admittedly, so time will tell.
See HipMojo.com’s post on the deal here.
- eBay acquires Stubhub for $310M
eBay = auctions, Stubhub = scalping. It didn’t take the MBAs very long to see fits. Speaking of graduate degrees, founders Jeff Fluhr and Eric Baker owned roughly 35% of the company and with $15M in funding over the years, they managed to build a controversial but successful company that did $100M in sales and $10M in EBITDA. The company’s backers included Allen & Co, Blue Water Capital, Pequot Ventures and Staenberg Venture Partners.
SEARCH, NAVIGATION & DIRECTORIES
- R.H. Donnelly acquires Business.com for $345M
When word got out that Business.com might be selling for over $300M, the natural reaction was to think “the bubble is back”. After all, just a few years ago, founders Sky Dayton and Jake Winebaum acquired the URL for $7.5M from Marc Ostrovsky. At the time, even I thought “will they ever generate $7.5M in revenues off the site, over the course of its lifetime”? Of course, when Dayton and Winebaum bought the URL, Google had yet to create the keyword ecosystem that today underwrites much of online advertising. While critics maintained that by 2007, Business.com was little more than a directory of resold Google text ads, R.H. Donnelly saw salvation for their shrinking print directories and agreed to acquire the firm for $345M.
See HipMojo.com’s posts on the deal before it happened here and afterwards here.
- eBay acquires Stumble Upon for $75M
Stumble Upon’s 2.3 million users and 5 million daily recommendations caught the attention of AOL, Google and eBay, and ultimately, after valuations ranged from $40-75M for a few months, eBay walked away the winner. When the rumor popped up and few understood the logic, though technically, like eBay’s Skype acquisition, the prevailing wisdom of the leading auction community to acquire a leader in “stumbling navigation” makes sense. Of course, that’s what was said about Skype too, and this year eBay wrote down a chunk of that acquisition, even though the fit was even stronger there. Stumble Upon raised less than $2M, which means that founders Garrett Camp, Geoff Smith, Justin LaFrance and Eric Boyd walked away with a nice payday each. Lesson for entrepreneurs: success did not come over night, the site was founded in 2000!
See HipMojo.com’s post on the deal here and here.
- Microsoft acquires Medstory
For all of the talk about vertical search engines being the next great thing, very few case studies proved to be profitable exits. Then came along Medstory and the battle for health information, which led Microsoft to acquire vertical search player Medstory as Google, Yahoo! and Microsoft all vied for search market share and to become the gateway to users’ health information online.
COMMUNICATIONS, WIRELESS VOICE SERVICES
- Google acquires Grand Central for $45M
Let’s face it, financially, Google remains a on-trick pony with 99.9% of its revenues coming from paid search ads and the two related products: Ad Sense and Ad Words. But Google’s product assortment has grown very attractive, from GMail, to Maps, Google Earth, YouTube and soon Doubleclick, Google is certainly laying down the foundation to become a diversified new media and technology company. In that vein, the acquisition of Grand Central to arm users with one number on any platform is consistent with Google’s global and multi-platform ambitions. In fact, at $45M, the deal was cheap and provided good value to Mountain View.
- Microsoft acquires TellMe for $800M
TellMe is “a leading provider of voice services for everyday life, including nationwide directory assistance, enterprise customer service and voice-enabled mobile search.” If the price tag weren’t so darn high, it would surely be higher on this list. Regardless, this catapults MSFT into voice services and voice-enabled mobile search, which a few short years from now will actually help it quite a bit against the #1 and #2 in search, Google and Yahoo!, respectively. While $800M is a large price, if it can execute on that alone, the deal can be a enormous coup for Redmond.
MOBILE AD NETWORKS
- AOL acquires Third Screen Media
Indeed, to quote the Wall Street Journal’s Kara Swisher, new CEO Randy Falco has been busy torching AOL’s Dulles, Virginia’s HQ, but while he’s been doing that, he’s also been making some bets on the next growth area: wireless. In 2007, AOL bought Third Screen Media, a mobile advertising network and ad-serving management platform provider. Will this be a repeat of Advertising.com’s $435M which today drives most of AOL’s top line? Who knows. I doubt it, wireless is way too embryonic, today. But one day, when cars fly and everyone has a pony, wireless entertainment and mobile advertising shall inherit the earth. Time will tell if Randy Falco will be ruling the fiefdom when that happens.
- Nokia acquires Enpocket
In the emerging mobile content and advertising market, Nokia hopes to expand its footprint beyond hardware. To achieve its goal the handset manufacturer agreed to acquire Enpocket to build its advertising platform.
Though Nokia has a content and advertising presence in Europe, its wanted to expand there and elsewhere, including the U.S., through internal development and acquisition. The Enpocket acquisition follows Nokia’s buy of social media sharing service Twango, as well as internal moves toward content publishing.
Enpocket has customers in the US, Asia, and Europe, including Vodafone, Telefonica, British Telecom, and Sprint. It delivers advertising across a variety of mobile formats, including SMS, MMS, mobile Internet, and video. Its customers include both carriers and the companies with which they do business, most notably Pepsico.
In some ways, this deal was in the same vein as Microsoft’s acquisition of European mobile ad firm ScreenTonic with the intention of integrating its capabilities into adCenter: “We want to deliver a platform that helps advertisers buy across all digital mediums,” said Joe Doran, GM of Microsoft’s digital advertising solutions. “As we build out the breadth of our platform, we are continuing to invest against that vision.”
- Nokia acquires Navteq for $8.1 Billion
Nokia is the world’s largest manufacturer of cell phones. Nokia owns this market, basically, and any acquisition it makes is bound to have ripple effects. NAVTEQ is a leading provider of comprehensive digital map information for automotive navigation systems, mobile navigation devices, Internet-based mapping applications, and government and business solutions. NAVTEQ also owns Traffic.com, a web and interactive service that provides traffic information and content to consumers. The Chicago-based company was founded in 1985, generated 2006 revenues of $582 million and has approximately 3,000 employees located in 168 offices in 30 countries. Incidentally, “Internet and wireless” make up only 5% of Navteq’s revenues, compared with 25% from mobile devices and a whopping 62% from in-dash navigation systems.
Translation? Lots of upside in Web and mobile revenues and the creation of a very powerful wireless and local ad network, perhaps?
AD NETWORKS
- AOL acquires Tacoda for $275M
One of the bigger and hyped phenomenon (fairly or unfairly) of web advertising remains is behavioral targeting (BT). Rightfully, to better optimize inventory and users, and to make the promise of web advertising a reality, BT has a role to play. But AOL’s acquisition of BT also demonstrated BT’s inherent limitations: few sites want to partner with BT firms, they want to own the data and underlying IP. Will it be an Advertising.com type of payoff? Time will tell, but Tacoda within AOL is worth far more than outside, in that sense, this deal made sense…
See HipMojo.com’s post on the deal here.
- Google acquires Feedburner for $100M
Google paid $100M for a company with $10M in revenue. Regardless of the financial merits of the deal, the fact is that had Google sought to emulate Feedburner (even had Feedburner not existed), the media companies that partner with Feedburner would not have allowed Google to access such private and valuable data. In other words, Google bought something that was worth many times more to Mountain View as in a year where it had become more and more enemy than friend.
See HipMojo.com’s post on the deal here, Google Buys Feedburner and Encroaches on Organic Ad Results.
- Yahoo! acquires Blue Lithium for $300M
Blue Lithium’s focus on introducing large, sexy brands to the virtues of advertising networks is legendary. Before more and more larg, Fortune 500-type marketers embraced running online ads - let alone using ad networks - Blue Lithium stood out of the clutter with a product and service that appealed to both sides of the online advertising ecosystem. Once upon a time, Blue Lithium’s management even talked of its advantages and strengths over online ad champion Google, but then lo and behold, Yahoo! acquires Blue Lithium for $300M to maximize the monetization of its ad inventory and to bolster its online advertising network both outside Yahoo!’s burgeoning media properties.
Given that the next wave of growth in online advertising will be display / banner ads (after video) and that will come from Fortune 500 marketers, this is a move that can pay off considerable dividends to Yahoo!
See HipMojo.com’s post on the deal here and here.
- Google acquires Doubleclick for $3.1B
Technically, this deal has yet to go through. But we added it onto this list because it shows that Google is completing its arsenal of web tools. Starting off with search, then video (YouTube), then email/newsletter (Feedburner) and now display/banners (Doubleclick), Google has the potential to circle the loop of online advertising.
We’ve covered this deal ad nauseum, so we’ll simply link back and leave you with this quote from one of our posts:
“When a lot of people said Google just hit a home run in online advertising by buying DCLK, they were wrong because saying DCLK is an online advertising play is akin to saying MSFT is strong with ad agencies because ad agencies use powerpoint in their client pitches. DCLK sold all of its media assets to L90/MaxOnline when ad rates were low and no one really paid CPM rates, and got into software only”
But, that notwithstanding, Google buying Doubleclick is a key deal because it bolsters Google’s online advertising software suite, which in itself helps it attack MSFT on many more fronts.
See HipMojo.com’s post on the deal here:
- Google Buys Doubleclick for $3.1 Billion; Blocks MSFT Acquisition
- Questions in Wake of DCLK/GOOG Deal; MSFT/YHOO Repercussions?
- Two Variables in DCLK/GOOG Deal: Dart for Publishers/Advertisers; All Cash Deal
- Why GOOG’s DCLK Makes Little Sense (To Me)
- DCLK Winners: Hellman & Friedman; Losers? DCLK’s Shareholders?
- aQuantive Under Spotlight
- Yahoo! acquires Right Media for $750M
Technically, Yahoo! paid $45M for 20% of Right Media first, then less than a year later, it paid $680M for the 80% it did not own. Right Media was unique in that it worked with other ad networks to allow publishers to create an auction process for a publisher’s long tail inventory. On a property like Yahoo! alone, with billions upon billions of remnant, unsold ad inventory, such a platform can be worth billions each year.
And, as Yahoo! develops its network online (away from Yahoo!-owned sites), Yahoo! liked what it saw enough to justify pushing up the price of the asset four times in less than a year.
See HipMojo.com’s post on the deal here.
- WPP acquires 24/7 Realmedia for $649M
WPP is one of the largest agencies in the world, a marketing behemoth with huge ambitions in digital advertising. It got one step closer to that when it bought 24/7 Realmedia, getting an advertising network, an email newsletter business, search marketing tools and much more. With its extensive advertiser relationships, WPP is sure to get enough bang out of its $649M bucks.
See HipMojo.com’s post on the deal here.
- Microsoft acquires aQuantive for $6 Billion
Microsoft generates very little from advertising. In the future, all advertising will be planned, bought and managed on digital platforms. And digital advertising will be larger than all offline advertising. Furthermore, targeted/tracked (web) advertising will command a considerable premium to non-targeted and untracked advertising. As such, for MSFT to win aQuantive - the crown jewel in the sector - it had to pay a commanding premium.
Like it or not, the market determines how much an asset is worth, which in turn is a function of demand and supply. aQuantive had a range of suitors, and the company that wanted it most ended up paying for it. MSFT’s acquisition of aQuantive can be a game-changer for MSFT if it does not botch it up.
See HipMojo.com’s post on the deal here.
- Time Warner acquires Quigo for $340M
Quigo, which signed a deal with Time Warner’s magazine division, Time Inc, and has more than 500 publisher relationships, is an Internet ad-targeting company that lets advertisers buy sponsored listings, much like Google’s AdSense, based on keywords or subjects.
AOL in September restructured its advertising business, consolidating ad network Advertising.com; Tacoda, which targets users based on their habits; wireless ad network Third Screen Media; video ads company Lightningcast; and ADTECH, a global ad-serving company, into one division.
What did you think of the list? Corrections, suggestions, comments etc., add to comments or email me at ash@mojosupreme.com.
I’ve been extremely harsh on Yahoo! As a shareholder, I sometimes wonder what I was thinking when I did not sell my holdings and short the stock when the last merger rumor with MSFT sent the stock soaring to $33 (valuing the company as a whole at over $40B, whereas it’s now back to $30B).
Today Yahoo! bought one of the favorite online ad networks: Blue Lithium. I could get all technical and outline all of the wonderful things that Blue Lithium does well, but the simple way to put it is Blue Lithium has some interesting click-stream targeting capabilities and its inventory of advertisers doesn’t suck ass. I wish there was a kinder, nicer way to put it, but while many ad networks make oodles of money running “Press the Fart Button” ads and “Punch the monkey” banners, Blue Lithium has built up a business - today valued at $300M by Yahoo! - by connecting audiences with marquee advertisers.
You might notice that on WatchMojo.com, we don’t run any ad networks. We run our advertisers’ ads and to fill the inventory, we run house ads. In the past, before we opened the site up to advertisers, we ran Blue Lithium, albeit briefly.
Today Yahoo! extended their reach on the Web by adding Blue Lithium, the fifth largest ad network, but one of the more distinct ones. According to their blog: Yahoo!’s reach now includes inventory on Yahoo!’s owned and operated properties, its affiliate network (partnerships with eBay, Comcast, and the consortium of nearly 400 newspapers), the Yahoo Publisher Network, and the Right Media Exchange.
Yahoo! got a bargain, too, not so much economically as it did technically. For one, an earlier Business 2.0 article from pegged 2007 revenues at $100M. I discounted a 2006 revenue figure to be $70M.
I have no idea if it hit its 2006 or will hit its 2007 figure, but when I ran the numbers previously, I estimated Blue Lithium to be worth $427M (scroll down to the last part, or read the following excerpt):
According to a Business 2.0 story, BlueLithium has been profitable since its third month of operation and is on track to hit $100 million in revenue by the end of next year, 2007.
I am just guesstimating the following numbers:
If the 2007 $100M revenue figure is right, assuming a 40% growth rate then 2006 revenues for Blue Lithium are probably in the $70M range.
[note: using that 8 billion impressions / month figure in the same Business 2.0 article, and assuming the company makes $1.50 CPM gross, that equals to a monthly revenue of $12M, or $144M in revenue already this year, which is 44% higher than what CEO Gurbaksh Chahal says the company will make next year! So, is something off? No, the article says that Blue Lithium serves 8 billion impressions per month but Blue Lithium serves both CPM and CPC impressions, so not all of those impressions are sold on an impression basis. This is the only rational explanation we can think of to reconcile the numbers.]
Project a profit margin of 20% (it seems to be growing rapidly - thus hiring a lot - and has a higher than average R&D cost compared to its peers), then its earnings are $15M. Valueclick’s margins were 18% and 13% in 2004 and 2005 respectively, according to Google Finance, but since Valueclick is publicly traded and undertaken many acquisitions, I project them to have endured a lot of administrative costs that privately held Blue Lithium had not had to.
Valueclick boats a P/E of 38 (according to Yahoo! Finance), Blue Lithium grows faster but is privately held, so assume a 25% liquidity discount - thus a P/E of 75% x 38 = 28.5 times profits… and:
Blue Lithium right now could be worth $427M.
Blue Lithium’s sale for $300M is a bargain when you consider that:
- Doubleclick sold to Google for $3.1B
- MSFT bought aQuantive for $6B
- WPP bought 24/7 RealMedia for $680M
- Yahoo! bought the 80% of Right Media it did not own for a valuation upwards of $800M
- AOL bought Tacoda for $250-300M
Bottom Line: Google is the Loser, Here
The thing is though, this highlights, more than ever, the dynamics of demand and supply and the art of matchmaking in mergers and acquisitions. Sure, Blue Lithium was a catch, but there remain hundreds of online ad networks, with Tribal Fusion now creeping up as [probably] the most sought after private ad network around. Valleywag would suggest Ad Brite is worthy of that claim…
Regardless, as DCLK, AQNT, Right Media and Tacoda (this one is different as a behavioral targeting network) were taken off the market, what happened is that the number of takers was reduced drastically, meaning that there were less dance partners. In other words, clearly, the winner of this dance was aQuantive, who leveraged Google’s rich - and somewhat confused - acquisition of DCLK to strike rich (disclaimer: I owned shares in aQuantive). The irony, frankly, is that Yahoo! gets a bigger laugh, from day 1, Blue Lithium has represented the best fit for Google. Let’s go back in history in my first post on the dynamics of the online ad network industry:
Of course, with a CEO as ambitious as founder Gurbaksh Chahal, Blue Lithium’s future is bright. How many CEOs in online advertising do you know who openly mock Google?
“They’ve miserably failed in the last year with display ads,” he notes, “because they look at the world through text advertising.”
Indeed, Google should have bought Blue Lithium, not Doubleclick, and ultimately, the anti-trust feds might block that deal, too… meaning that Yahoo! and Microsoft have somewhat inadvertently managed to derail Google’s plans for world domination in this game of musical chairs.
The Winner? No doubt, Yahoo!
In one transaction, Yahoo!
- massively extends its reach by adding 145M unique users (sure, there is duplication, but in what acquisition made by Yahoo! will there not be duplication?)
- eliminates a competitor. Yahoo! after all had become a network with the deals with eBay, Comcast etc., not to mention the Right Media deal. While Right Media provides a fantastic auction platform to spike CPMs for Yahoo!’s long tail ad inventory, Blue Lithium connects marquee branded advertisers for whom an additional $0.10, $0.20, or $0.50 CPM is immaterial. That might not mean much, but over billions and billions of ad inventory that Yahoo! has and does not sell, you will start to see an accretive impact shortly.
I think this deal reflects Google’s need to develop a softer image. It has decided to compete with everybody, all the time, everywhere, and sooner or later, a group of very able competitors will band together and counter Mountain View with something potent.
Mind you, Venture Beat has a good point, the real winner, clearly, are Blue Lithium’s CEO and its financial backers, who only invested $11.5M:
This was a very fast ride for BlueLithium, only three years old. Venture firms WaldenVC and 3i are believed to have done particularly well from their early investment in the company in February 2005. They invested $11.5 million.
Can Google Be Check Mate in Display / Banner Ads?
Right now, Sergey Brin, Larry Page, Omid Kordestani, Eric Schmidt and company and finding themselves nearly checkmate in the display business: there is no guarantee that they will be able to buy Doubleclick, and they cannot move to buy another ad network. Sure, in online video they are well positioned to destroy the market, but despite all of the hoopla surrounding online video, display/banner advertising is something that Google needs to harness and master to keep investors happy, and right now, I reiterate: I am much more comfortable being long in Yahoo! at $30B with its online reach, diversified product line and revenue streams than being long in Google at $160B with 99.9% of its revenues coming from AdSense.
Related: Missing Piece of Puzzle in Google’s Quest for World Domination?
It’s time to call time out, folks, and call a penalty on the play. Someone’s got to.
Yesterday, MySpace issued a report pushing social networking’s benefits to advertisers. It was, as Rafat Ali of Paid Content stated, “a study about MySpace, touting MySpace as an AdSpace…so take it with a grain of salt.” The findings were interesting, no doubt, but seeing MySpace push its agenda in conjunction with Isobar and Carat USA is somewhat eyebrow-raising. MySpace is a great company, and advertisers can yield a lot of benefit by working with it, but come on, today mainstream and new media sources are running with this story without questioning the evident bias in the study of, hmm… 3,000 US Internet Users.
Don’t get me wrong, MySpace is so large, and demand for its inventory relatively small, that basic algebra suggests that indeed, the ROI could be high, if you can overlook the headache-inducing layouts, occasional child predator and what not.
That, apparently, is the theme behind today’s latest “study,” this time conducted by another company I respect, Blue Lithium, that states that “User-Generated Content Delivers More Bang for Your Online Marketing Buck According to Study From BlueLithium Labs.”
All righty then. Again, I am sure this is all true, because social networking generates more pages online than porn and offers much more supply of real estate than demand thereof (implying low costs and potentially higher ROI).
But, what is nonsense about this and MySpace’s study is the evident bias: Blue Lithium is an ad network that
a) probably sells advertising on a lot of these social networking pages and would like to stoke advertisers’ demand for such content and
b) just launched Mingle Now, a social network, that it pushes via its network using house ads, making it a double no-no, in my humble opinion.
It would not be such a big deal, if at least Blue Lithium disclosed how much exposure its core network business has to social networks, or that it now launches its own social network. After all, everyone knows and recognizes MySpace’s bias…
Are advertisers that gullible?
Or do folks at Blue Lithium and MySpace - powerful and fantastic businesses that don’t need to rely on such smoke and mirror tactics to generate business - think that marketers are so gullible that they won’t notice this evident and flagrant conflict of interest?
Folks, just a bit of disclosure goes a long way, the story is interesting, but the delivery thereof could be a tad less biased, no?
When you span the ad network landscape, something about Blue Lithium stands out. Their CEO Gurbaksh Chahal publicly (and rightfully) denigrated Google’s lack of traction in display advertising. But beneath the bravado is a bevy of things that make analysts excited about the company’s prospects as things heat up in online advertising once again. When Doubleclick hints at filing to go public once again, or selling out to MSFT, Google or AOL, naturally many look at publicly traded ad networks like Valueclick and 24/7 Realmedia as likely takeover candidates, but a few also keep tabs on Tribal Fusion and Blue Lithium, two of the largest privately held ad networks.
Of the two companies, each has taken an interesting approach to maximize their potential. In the case of Blue Lithium, I have always been impressed with their progressive and proactive approach to trying out new things. A few years ago, one of my contacts there reached out to me to help them promote a new online education web property. It was interesting to see a network diving into the world of publishing, but it was a natural one, particularly for Blue Lithium, who studies click streams to better understand the intention of users on the Web.
Identity Crisis?
Of course, the notion that an ad network would double up as a publisher is a thorny one. How so? Well, for purposes of illustration, it could be argued that there should be a line drawn - a Chinese wall of sorts - between a network and a publisher. When Blue Lithium approaches a publisher, it does so with the intent of representing (albeit blindly) the publisher’s unsold ad inventory. BL - or any network for that matter - would try to find advertisers to absorp the unsold, remnant traffic. Some sites are sold out and find themselves in the luxurious situation of not having to work with ad networks. These are the exception. Even the most sought after properties have excess inventory. The largest ones have unsold inventory by way of their sheer size. Yahoo!, for example, bought 20% of Right Media in order to raise its eCPM, the rate it charges advertisers for its inventory.
How Ad Networks Work?
Under general conditions, an ad network has a pretty obvious incentive to get more inventory from a publisher and sell it to advertisers. Unlike premium advertisers who pay high CPMs, an ad network will make a little bit of money per unit but offer scale. Tribal Fusion, for example, boasts about serving 18 billion impressions per month. Say it sells ad impressions for $1 CPM to marketers, that means 18,000,000,000 x $1 CPM / 1000 = $18M per month. Say it pays 33% in commissions, ad serving, administration etc., and pays out $0.33 to publishers, it is left with $0.33 eCPM as profit. Over 18 billion impressions per month, that’s $6M in monthly profit, or $72M per year. I doubt these numbers are 100% accurate, but they should illustrate the nature of the beast.
Of course, anyone who has worked with or for ad networks will tell you that it’s hard for ad networks to sell out all the inventory, as such, much inventory goes unsold. Ad networks use some of that unsold inventory for public service announcements (PSAs). But even then, there is so much inventory online, that the lure of doing something with that inventory is obvious.
Especially, if your underlying technology allows you to optimize every single banner to target users effectively. In other words, an ad network can, and technically should, manage every single banner impression so that they can optimize the revenue they make for publishers with the value they can create for themselves.
What Would Lucifer Think?
Of course, a devil’s advocate would raise some issues. Enter yours truly.
Allow me to say right off the bat that I do not think the following is unethical. I just think that online, players wear different hats and the market is evolving so quickly, that some things make us go “hmm?”
Previously to launching WatchMojo.com (display, video, listings ads) and MetaMojo.com (search ads), I served as VP of ad sales for a mid-sized online publisher with 5M uniques and 250M ad imps per month. We were fortunate to sell some $250K per month in ad sales, with about 30% coming from large clients, 60% from small clients, and 10% from ad networks. Of course, in terms of contribution by inventory, ad networks had as much as 20% of our unsold, remnant traffic. The point here was we were fully aware that ad networks would not pay the bills, but it was a way to optimize our eCPM and avoid having unsold inventory.
To connect the dots: when I launched WatchMojo.com, my preference was to avoid running ad networks because, well, not only do they not pay the bills, but seeing ads of the “press the fart button” variety actually hurt your brand quite a bit (file under shocking).
But as a site grows in audience, naturally, small, medium and large-sized advertisers approach you with inquiries. As a publisher, you are caught facing a double-edged sword: if you have absolutely no ads, something seems off to a would-be client. If alternatively there are only “press the fart button” banners, then they do not want their brands alongside that.
For that reason, I chose to accept network ads from Blue Lithium. Blue Lithium, I have found, seem to stick to high quality advertisers that want reach but would not work with small sites. I have no qualms admitting to all of this, not because it helps me directly as a publisher at WatchMojo.com, but because it’s good advice (I hope) that new publishers need to know and can use. All to say, when you see a MSFT ad on the site, for example, it’s most probably a network buy. We as a site make very little off that ad, in the $0.75 range. I say range because on some ads we make $0.50 on others we’ll make $5. Clearly, depending on 1001 variables, you average out invariably to something in a low range.
For more on how networks work and how you can juggle a bunch to optimize your eCPM, click here for our analysis on what YouTube could have been making in the pre-Google days with its traffic.
A Social Butterfly Amongst Social Networking Sites?
We’re getting off track now, so getting back on it. This past week we saw ads for a new social network, Mingle Now. Let me say that running ad networks is also good because it tends to be a lead generator. Sure, sometimes an advertiser might not want to advertise on your site because they get on your site by way of the back door, but any serious advertiser will want a direct relationship with a publisher because that can lead to better placement, integrated features etc.
Mingle Now also caught my attention, because unlike a MSFT, it was specifically the kind of advertiser who would, should and could be a direct advertiser. I did some digging, and realized that Mingle Now was actually, lo and behold, a Blue Lithium product.
As an analyst, this is savvy marketing and salesmanship. Blue Lithium has access to millions of users, it is also running millions of sold and unsold banner impressions, it can effectively both serve its publishing clients (in this case WatchMojo.com), its actual advertising clients (the MSFT’s, for example) as well as itself, by way of creating value through new products.
What is Mingle Now, Anyway?
Mingle Now is a social network. Much like how there are 200 YouTube clones, there are hundreds of social networks. Not all will succeed, but many will. MySpace’s parent Intermix was acquired for $580M by News Corp.’s Fox Interactive Media unit. We considered it the best web M&A of all time. Since the acquisition, it has gone on to triple in size.
In other words, while Blue Lithium is working hard to build its core unit into the best darn ad network out there, it has a keen interest in making Mingle Now the best darn social network out there.
The Legend of MySpace
It should be noted, here and now, that MySpace blew Friendster away for two reasons. Friendster indeed had a head start, and had the A-list board/backers. But what Friendster did not have was the support of independent music artists, AND a network to leverage. MySpace was spawned out of eUniverse, aka Intermix. In other words, MySpace could eventually explode on the wider world wide web, but initially it was marketed to users in the eUniverse/Intermix ecosystem, giving it a shot in the arm.
Of course, eUniverse/Intermix was not an ad network per se. When it wanted to expand its reach, it would have to go out and acquire traffic. In Blue Lithium’s case, by virtue of being an ad network, it has an unfair advantage in the sense that it gets through publishers’ walls at a discount, and then it can selectively pick out which user it wants to target and which one it does not want to target.
So, what’s the big deal?
Many would argue, and a big part of me is in this group, that Blue Lithium is free to do what it pleases to do. Certainly, its lawyers have included somewhere deep in the Terms of Service that it can do just that. Of course, this would indeed be no big deal if Blue Lithium actually paid for the ad inventory it was using to promote Mingle Now.
When I asked Blue Lithium to yank off the Mingle Now ads, I found out that in fact, Blue Lithium was using default, house ads to promote the service.
Sacre Bleu!
At this point, something was off. Clearly, there is a conflict of interest. Is there?
I fired off an email to my contacts at Blue Lithium, because while I think what they are doing is clever, I could see it looking unethical, and not wanting to give that impression, the very least I could do was give them the chance to address it before going to print.
What’s it? Well, “it” is two things:
1 - Does Blue Lithium cross any lines by being both an ad network and a publisher/marketer?
2 - Is it ethical for Blue Lithium to use default tags to promote its own service/product?
Dakota Sullivan, Blue Lithium’s CMO, a gent with whom I’ve exchanged numerous thoughts with in the past, was kind enough to get back to me promptly: “The largest ad network in the world—Advertising.com—is owned by AOL, one of the largest publishers on the planet. There are other ad networks that own sites and other sites that own ad networks. In this area we are by no means unique.”
In that capacity, Mr. Sullivan is certainly right. Be it in offline or online media, the line between an ad network and a publisher - or producer - is blurry. Of course, one wonders if Advertising.com would have won as much business over its initial years as a unit of AOL.com as it did as an independent company, but that is not really all that interesting in this discussion in that a network will only succeed if they deliver, regardless of whether or not they are independent or part of a greater company.
Regarding defaults, “You can provide us with your own house ad and we will run that as a default for your site instead of MingleNow. All publishers on our network have the right and some pursue it. Defaults are a red flag with publishers, so we do our very best to limit the number of defaults to an absolute minimum. When we run a default it’s only because we’ve gone through every single paying ad we have and don’t have one that will work. With defaults we need to run something that works globally. Thus, MingleNow ads serve as our house ad.”
Hmm, methought. That sounds fair, but you know what’s a greater red flag than house ads? Unsold ads, and a low eCPM… so I had to ask:
“When you reach out to a publisher, the mandate is to sell ads. But if Mingle Now is ‘one of the fastest growing niche social networks’ and you run those in house ads, then does that not put you in a conflict of interest? In other words, on the one hand you want to sell ads for the publisher but on the flip side you have a desire to build a lucrative social network. I’d have less problem if you did so by paying for inventory, but by using house ads, you simply have a vested interest NOT to sell out a publisher’s inventory, no?”
Blue Lithium’s Answer?
“You raise a good point. The fact is, our ad network and the publisher relationships that underlie it are priority one for BlueLithium. If we were able to reduce defaults to zero, we would do so. MingleNow’s growth is not tied to advertising but to local market club photography in 20 cities around the country, co-marketing with partners and viral marketing.”
Again, this reassures me, but then again, I ran an analysis - using very limited public numbers - pegging Blue Lithium’s value as somewhere in the $250M to $400M range (the fluctuation is due mainly to variations in the prices of publicly held ad networks, such as 24/7 Realmedia).
Yet, we have seen MySpace go from $0 to $580M in a few years, with the value tripling (News Corp. boss Rupert Murdoch boasted that MySpace was worth $6B, suggesting that the parts within his empire are worth more separately than they are together). In other words, while the PR angle that “the fact is, our ad network and the publisher relationships that underlie it are priority one for BlueLithium” sounds great in theory, in practice, I am not sure I would feel that way if I were Blue Lithium’s management team. I would say: “why content ourselves with a tiny fraction of the pie when we could use our reach and technology and go for the jugular?”
What might make this even more questionable, frankly, is that Mingle Now has managed to sign up marquee advertisers like Anheuser Busch, something that one would presume they should be doing on behalf of their publisher clients, no?
What does this all say or suggest?
For one, once again, as a publisher, you should never count on ad networks to make you money. Ad networks make ad networks money.
Second, as I wrote earlier in Google Running Porn Ads in AdSense - Again, publishers are suckers.
The ad meltdown of 2001-02 freaked publishers and made us into small minded, low expectation you know what’s. Shellshocked, we threw in the towel and let the trojan horses (ad networks, including but not limited to Google Ad Sense, Blue Lithium, Tribal Fusion, etc.) enter our websites and we now wonder why they boast rich valuations while publishers look for ways to generate sustainable revenues. Furthermore, ad networks have turned to a technology-only approach to optimize everything, meaning that relationships between marketers and publishers are at the risk of being commoditized.
That’s not good or bad, it is what it is.
But I’ll tell you what, we at WatchMojo.com are on the verge of relaunching our entire site with a new redesign and on a new CMS. And trust me, when that day comes in the next month, nary an ad network - including those peddlers of porn, Google’s AdSense - will you see on the site. Of course, we’re fortunate that we are finally starting to sign advertisers, slowly but surely… but the simple fact of the matter is that regardless of that, ad networks do not really add all that much to a site’s bottom line, but they sure do take a lot away.
As I said, as an analyst and investor, Blue Lithium is priming to be one helluva company. But as a publisher, I think that all ad networks - and ad rep firms - leave a lot to be desired.
PLAY
