Yahoo! can’t buy a break.
First off, 2006 sees its arch-nemesis Google trounce it in the grand ol’ derby we call the stock market. We’re talking trounce. Google scales to a market cap of $150 billion while Yahoo! waggles to a plateau of $40 billion.
Then, as the year goes by, it’s slow to launch Panama, which is set to cure improve its monetization rate and of course, cure polio.
As the year drags on, CEO and Chairman tries to calm the critics and naysayers by carving up the company into not two, but count ‘em three units, cleverly named Technology, Audience and Advertising. The market reacts coolly. He loses a barrage of executives, loyal and otherwise.
Soon afterwards, talk creeps up on the Web about a so-called trend labeled deportalization. Fact or fiction, it strikes a dagger at the core of Yahoo!’s business model.
The next week, Yahoo! finally announces the launch of its magical, mythical and monetizable Panama.
How does the market and critics react?
Well, on the same day, news gets out that News Corp.’s Fox Interactive Media, who bought popular social networking site MySpace for $580 million in 2005 is now the largest property when measured by pageviews.
News Corp.’s MySpace recorded 38.7 billion U.S. page views last month, compared with 38.1 billion for Yahoo Inc., according to comScore Media Metrix. MySpace’s growth was 2 percent over October and triple the 12.5 billion recorded in November 2005.
The shift focuses on that, and not Panama here. In our humble opinion, once again, the ones who best hit it on the head of the nail are the folks at Paid Content. Well, at least the ones who hit closest.
Forget the fact that a lot of smart people are talking about the Imminent Demise of the Page View (here) for a second. For the record, we don’t think the pageview is going anywhere. We don’t think it’s all that relevant in many ways, but it’s also an easy thing for advertisers to grab onto and make decisions off of. That’s very important.
Pageviews should not be the driver of a company’s market cap, nor should it really be seen as a gauge of one’s revenue, because advertisers don’t care about 100% of a publisher’s real estate, they care about the top, they skim a website’s real estate. But that’s a debate for another day. Actually, it’s not. That’s today’s debate.
Put in another way: I totally understand why Ross Levinsohn left or was asked to leave from FIM. Monetizing FIM - in particular Myspace which accounted for the lion’s share of the growth and inventory within FIM - is going to be nearly impossible.
You think Yahoo! has a monetization problem relative to Google, MySpace is going to be a headache that will - mark my words - cost the job of numerous talented executives at FIM because it will never fully able to turn a decent revenue per page, or user. Rupert Murdoch who has once again proven his Midas touch simply looks at the growth, user count and pageviews, then probably sees what some of his news websites and non user-generated content sites generates and estimates that MySpace should do this, and should do that.
As such, MySpace will prove to be the double edged sword at FIM. That’s why Mark Jung left (amongst other reasons) and that is why Ross Levinsohn left too. Levinsohn’s legacy was perfect: he helped land the toughest boss out there the most-sought after digital media asset for a song. He hedged himself by getting the largest concentration of men 18-34 boot, a non-user generated content site (IGN). After that, there was nothing he could do to outdo himself. He knew it, Rupert knew it.
Ask yourself this: has Murdoch sat down for more than ten minutes and sifted through MySpace’s pages? Nope. But he’s probably looked at the excel spreadsheets and salivated at the potential top and bottom line contributions. For these reasons, if Murdoch thought raising Lachlan was a challenge, MySpace will prove to be the toughest child to raise and love.
Disclosure: I own Yahoo! stock.
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