It’s odd how the presences we create in our lives via social media sites take on a bigger meaning sometimes. Here’s a tragic tale of two young men whose lives crossed paths… and whose families’ lives will never be the same.
Back in the day, companies spent money advertising in order to gain users and generate sales. Today, most startups don’t really advertise much, because they tend to deploy social media attributes and rely on viral marketing (word of mouth, viral growth, etc.)
These sites don’t even tend to raise much capital, so not only do they not advertise much, but they do not spend much on IT expenditures, rent, office space, etc. Let’s face it: the multiplier effect just isn’t what it used to be back in the day. Before, companies raised boatloads of cash, but they reinvested in the economy. Today, most companies don’t raise much; those who do are stingy with the proceeds.
While many of these sites tend to fizzle, a few do go on to experience strong growth in user acquisition and adoption.
Given the huge opportunity in online advertising, unlike their Web 1.0 brethren who sought to monetize their eyeballs via e-commerce, today’s crop of websites turn their backs and thumb their noses at e-commerce and instead adopt an online advertising strategy.
The problem is that as social media sites - either relying on user generated content of one form or another - advertisers shy away from spending money on these sites… despite the fact that they generate a lot of inventory, flooding the overall market with cheap, unsold inventory.
Meanwhile, these sites tend to turn to Google Ad Sense as a desperate stop gap measure to generate revenue. Many don’t… adding insult to injury, these sites tend to pummel the click through rates (CTR) that Google leverages to generate more revenue… so as its monetization rates fall, Wall Street grows worried and punishes Google’s stock accordingly.
Google, in turn, focuses more on revenues and profitable deals, and it shies away from giving these sites attractive minimums to lock up their inventory.
If you repeat this cycle (Myspace, Digg, etc) a few times, you see that net-net: the effect is actually quite negative:
- VC money flowed to such social media sites
- Most did not generate material revenues to deserve follow up investment
- Few attracted exits
- Rarely did any of them spend much in terms of online marketing
Maybe this is why we are seeing some hiccups in growth rates? After all, while online advertising growth rates remain buoyant relative to the morbid print, TV and radio rates… we are seeing a reduction in the velocity, no? Forget social networking revenues, those are headed straight down the drain.
I don’t mean to be alarmist or anything, but I see this exhibitionist UGC/social media nonsense as the Achilles Heel of the Web… you know, sort of like the answer to “what led to the decline of western civilization online media”?
Google’s main asset is not its technology… but its distribution and monetization - two things we’ve long pointed out.
Fortune has a good write up on this:
No, what Google has done is not to have created the world’s best tech company but to have created the world’s most powerful and profitable marketplace. The development of that marketplace flowed from having superior search technology in the company’s earlier days. But today Google is not unequivocally the best place to search for information.
Microsoft owns a site called Live.com that offers search results that in many cases are just as good as Google’s, and sometimes are better. But nobody knows Live.com exists, and there’s little likelihood that will change.
Microsoft knows it must create not comparable search but a comparable marketplace. Both in my most recent magazine opus on Microsoft and in an earlier story I wrote about online chief Kevin Johnson, I explained the Microsoft view - the more searches that take place on a site, the more advertisers who are likely to come there. And the more advertisers who are there, the more bidders there are in competition for slots adjacent to the searches. Thus, the larger a search company’s scale, the more money it can charge per search. Not only is Google larger, but it is more profitable per search.
Read more. It’s a shame YHOO was too stupid to take the $45B offer and become relevant in search. Instead, it will still lose independence to MSFT but not cash out the way it could have. Oh well…
For a few years, the newspaper industry put Craig Newmark in a category of people that included Pol Pot, Adolf Hitler, Benito Mussolini and Josef Stalin for having the audacity to encroach on their classifieds monopoly.
This year, having elevated Gawker Media as a likely candidate for company of 2008 as early as January, expect to see Nick Denton join Newmark in that category of people who are harming the venerable business of printing newspapers and magazines.
I think what Craig and Nick have done is genius - and I am not alone - mainly because they realized that print was carrying excess baggage and not delivering the goods in the areas that their clients were looking for.
I think more entrepreneurs should take a cue from Denton… he is his own boss and is laughing all the way to the bank without giving a you-know-what about what the publishing or investing establishment thinks.
- YouTube’s market share is growing, nearing 75%. It is the market.
- YouTube is sucking the wind out of the entire video space, meaning that while the theory of long tail economics seems great in theory, the kind of inventory and reach is way too immaterial to be meaningless in practice.
- The only time YouTube seems to generate any news, it’s when it is getting sued by big media, who have historically had the best rapport with big branded advertisers, the very same ones who we are counting on making online video advertising revenues take off.
- Meanwhile, VCs continue to fund hapless technology video plays - who end up selling for 5% of the amount they raise - hoping the answer to online video advertising revenues lies in technology… when any sane individual will tell you the problem is a lack of good, high-quality, professionally produced, non-pirated video content…
Call me crazy, but if this is what we have in store for online video… I think I’m grabbing by can of beans and heading for the bunker.
Yahoo! gets most of its impressions in Y! Mail… and mail is notoriously hard to monetize.
Yet Google - who is printing money thanks to their search domination - invested heavily to get into email with Gmail. Is that smart management or allocation of capital? Not sure.
Of course, email is the biggest social networking platform out there (more here)… but then again, social networking inventory is really not monetizable… so what gives?
More on social networking’s woes with monetization here:
It’s Independence Day, yet I can’t see much independence beneath the surface.
It’s becoming very hard to get any news from the main blogs regarding the Yahoo! deal. Here’s why:
- Tech Crunch is sponsored by MSFT, so that might explain its uber anti-Yahoo stance.
- Silicon Alley Insider’s Henry Blodget does a video show on Yahoo, called Tech Ticker.
- All Things D’s Kara Swisher’s pay stubs are proverbially signed by Rupert Murdoch, whose News Corp. is gunning for Yahoo!, too. You know if she gets out of line Rupert will dispatch her to cover the melting glaciers in the Arctic… and you know he will do it.
- Paid Content is too busy planning the EconYahoo conference.
- The NYT are just happy some other company is the target of activist shareholders…
Is it just me or is there no such thing as independent reporting anymore? And yes, before I step behind a glass wall, let me say, I wrote about YHOO for two years while holding shares, but lord knows some of the stuff I wrote was downright negative and critical enough to send the stock into a tail spin if more than eight people read this blog…
But the difference is, this is an executive’s blog…
Nothing represents the changing of the guard as much as how the Big Three Portals have fallen from grace. Don’t get me wrong: from an operational standpoint, Yahoo! is a fine property, but that company is a bit of a… how do you say, disaster.
MSN is there, trecking along, costing MSFT billions in losses over the years without really making a push for #1. Sort of like all other MSFT products not named Windows or Office, basically.
Meanwhile, AOL is drifting along, buying up more and more assets - some smart, some not - but now putting itself up for sale. While the company sold a 5% stake of itself to Google for a $1B sum - valuing itself for a tidy $20B - word is that they might be content with a $15B offer… which means either Yahoo!, MSFT, News Corp., Comcast would show an interest.
While some will be quick to say the portals lost to social networking sites such as Facebook and MySpace, make no mistake about it, they lost to search. Revenues matter, everything else is noise. Google has the web ecosystem by the balls, and considering that Google’s YouTube is more dominating in video than Google is in search - and that video is the next high growth opportunity after search’s decade - then you have to wonder how much more hurting Google can put on the Web.
When you consider how leadership is search helped Google propel itself to King of the Web, you sort of understand why MSFT just shelled out $100M for something that basically can be summed up as Wikipedia site search.
It’s way too premature… but if CBS/CNET take TV.com (one of the many URLs CBS inherits by way of its $1.8B acquisition of CNET) and delivers on 25% of its promise, considering all of these assets, then I think TV.com can become the next great online video property. This is extremely premature and assumes that traditional media (CBS) and big, new media (CNET) don’t drop the ball, make synergies happen, integrate wisely, blah-blah-blah… but again, at 25% of its potential… I do not see how TV.com cannot become something worth talking about… Just look at all of this, from the official press release:
Technology: CNET.com is the number one Web site in the computer and consumer electronics category, reaching more than 18 million people every month with daily premium content offerings. From the latest product reviews to breaking news from the digital world, as well as video and program downloads, CNET.com has become the leading destination for people looking to navigate today’s digital world.
Entertainment: Representing the third largest online entertainment group on the web, the collective reach of CBS Interactive’s entertainment portfolio will now exceed 24 million users each month, and include many of the leading brands on the web today, including: TV.com, CBS.com, The CBS Audience Network, theInsider.com, GameSpot.com, Last.fm, and CHOW.com, among others. These are among the most visited entertainment destinations on the web today, each with their own identity and audience profile, and they continue to grow in users and time spent visiting. This past year, for instance, CBS.com market share grew a category-leading 41 percent. Combined with the power of America’s most watched network – CBS Television – CBS Interactive offers unparalleled consumer reach online and offline.
Sports: CBS Interactive is a leader in athletic coverage, from sites devoted to professional sports to the largest collection of collegiate brands. Among its top destinations are CBSSports.com, CBSCollegeSports.com, NCAA.com, and MaxPreps.com, representing one of the digital world’s largest sports footprints. Working with its leading broadcast and radio properties, CBS offers the unique opportunity to reach a wide group of people who are passionate about sports across the internet, television and radio.
News: Two of the strongest news sites in their own right, CBSNews.com, a leader in world news, and CNET News.com, the leader in technology news, combine to create the sixth largest property in the Current Events/Global News category. From breaking news and international reports to coverage of business, politics and technology, the combination of these two destinations gives users a global perspective they cannot find anywhere else.
Business: Eighteen million users each month have come to rely on CBS Interactive’s business properties, which include BNET.com, the cornerstone of the business category, and leading sites like ZDNet and TechRepublic. Collectively, these assets are among the fastest growing destinations in the expanding business category and offer users the latest and most insightful business coverage, with unique perspectives on management and technology.
And given the $1B valuation bestowed on Hulu (given the 10% equity sale for $100M) and $1.65B that YouTube fetched… I cannot understand how TV.com should be anything less than a $1B business in 2 years. Why 2 years?
- YouTube went from “domain registration” to “liquidity event” in 2 years.
- Hulu went from an idea on a napkin to a $1B valuation in 2 years…
It won’t be easy… and despite CBS’ offline TV mojo and all of the video efforts of CNET, there’s plenty of work to be done, but it surely can be done.
Will it? I don’t know… I don’t anyone knows. Well…