Just when you thought the MSFT saga was over, in steps Carl Icahn.

You’ve got to be kidding me!

For the record, Icahn is not clueless about the web.  He invested in How Stuff Works right before HSW sold for $250M to Discovery Networks.  He’s also a savvy-enough media investor…

Read more.

Pubmatic helps publishers eke out extra revenue - allegedly - by better managing the use of ad networks.

Right there, Pubmatic plays at the bottom of the barrel, which is ironic, because the ad network market has topped off.

Proof that the market topped off comes in two ways:

- look at the barrage of me-too deals in the space: Blue Lithium, Right Media, Doubleclick etc. etc. etc.

- look at the herd mentality at media companies: Forbes, Viacom, Martha Stewart have all launched ad networks.

Anyway, I’ve commented on the follies here before, but the craziest part of all of this is that coming up with systematic and market-based conclusions based on ad networks is just a sign that we’re getting stupid and lazy.

Marketers spend 15% of their budgets on ad networks because they like to experiment and some like to maximize reach etc.  But using that 15% of after-thought spending to make a point about the general online ad market is as ridiculous as using the top 1% of real estate online to make a point.

They spend more and more time being entertained and communicating online.  Their kids are watching less and less TV.  They see ratings are falling and advertisers fleeing online.  But they are caught between a rock and a hard place.

They would love to start to put their content online, but with a lack of a revenue plan - let alone profitable business in sight - they cannot risk to accelerate the cannibalization they face.

Exasperating matters: content creators who have been used to television’s generous ways are not ready to move online, either.

I never really watched Law & Order, I don’t have the attention span to watch a 60 minute storyline.  But that is nothing compared to the next generation who won’t even know what L&O is (see below the quote why I say that), thanks to comments like this:

A less-than enthusiastic approach to the Web from “Law & Order” mogul Dick Wolf. As part of its upfront presentation to advertisers on Monday, NBC announced new Web series debuting his summer from the creators of “The Office” and “Heroes.” We asked Dick Wolf if he plans any Web-only programming. His response: “Not until they start paying some money.”

That’s why I love waking up every day: each day, there are more opportunities for WatchMojo.com while TV companies brace for a future like print’s past.

Informal, non-scientific sample from a quick office poll:

- Of the employees here that are 27 and over, we all knew Law & Order but don’t watch it anymore.

- Of the employees here that are 22-26 and over, most knew what Law & Order was but didn’t or don’t watch it.

- Of the few interns and employees that are below 21, no one had a clue what Law & Order was.

‘Nuff said.

I think this is even stronger online.

Like it or not, you will seeing more and more product placement and integration in online video content where there is even more resistance to ad placements.

At WatchMojo.com, we’ve been exploring this with more and more advertisers and ad agencies; so long as it’s done tastefully and neither party is trying to mislead users, our results show that indeed users prefer that to ads, pre-roll etc.

I expect to see more and more of this, but few will be able to pull it off programming and distribution-wise, those who can will have the advantage over those who can’t.

Of course, there are other considerations, like being able to create low-cost programming until online ad sales really scale and take over TV revenues… but this is starting to be a no-brainer: performance and engagement-style ads are doomed to fail; pre-rolls will probably go the way of pop-ups (with post-rolls being as effective and welcome by advertisers as pop-unders) and by sheer market force, product placement and integration will have to be addressed, fine-tuned and mastered.

This is where tact and grace will come in play… admittedly.

Here is what I penned back in 2006:

So in 2010, Google’s current historical growth rate projects a revenue figure of $34 billion, with 25% profit margin of $8.2 billion, and with a P/E of 35, could technically command an enterprise value of $287 billion.  It currently boasts some $10 billion, so at these levels, it would carry enough cash to push up its market cap northwards of $300 billion.

Today, MSFT has a market cap of $284 billion, and that includes a wallop of cash.

Tale of the tape: Google $287 billion; MSFT $284 billion…

There you have it.  Told you it’s not a bubble, we’re actually talking revenues, profits and P/E.

Read it all here.

I have a funny tendency: I go to bed thinking I can take over the world, but then when I wake up in the morning, I always wonder how I could have even conjured up such ambitious thoughts.  But then at some point, I just snap out of bed and go on to my do what I need to do.

I once woke up at 4:20am on a Wednesday morning and by the next Tuesday had penned a 100-page book on Alexander the Great.  Granted, it was something I had been planning for a few weeks beforehand, but once I decided to get cracking, I would only stop once the task was complete.  Of course, in between writing the book, I ran sales for Askmen, my former employer.  That month (July 2004) I set a record for monthly sales.

Back when I was 19 and completing my studies, I would wake up at 6am to start working at 7:30am.  It was cold, it was dark, oftentimes it was raining or snowing, but regardless, I just had to get up.  I had a job to do.

This time, I had a job to do, too: to crush my opponents come Monday morning at the Superior Court.

But this was different: I was not in control, or so I thought.  My fate was in the hands of some judge and my faith in the legal system was slipping through my fingers as it was becoming clear that I was walking into a double-edged sword.

That Friday night, I ended up leaving the injunction lawyer’s house with mixed feelings: I could win the battle on Monday, but learning about how injunctions went, I would have to fight a long and expensive war.  So unlike most nights: I went to bed pretty depressed.

For whatever reason, Saturday morning I woke up and decided to fight back.  Maybe it helped that Saturday was a dreary and wet day.  Maybe it’s because I just don’t like to lose.

Whatever the reason, I decided to go with my gut and try to go nuclear on Monday when I would step into court trying to defend the motion for a provisional injunction accusing me of violating my non-compete agreement.

Focus on the Debate at Hand

As we’ve stated, the violation of the non-compete was a question we were to answer at the third stage of this harrowing process. Monday morning, at the first stage, the petitioners - led by the President of the Bar Association - were trying to pass four tests in order to shut me down temporarily.

As we examined further in Part 6, those four tests were:

- Urgency: there must be an urgent need to shut me down until the trial.

- Clear Right: At face value, there is an actual matter here which is not frivolous.

- Balance of Inconvenience: Who suffers more from the Judge’s decision if one is granted / not granted.

- Irreparable Harm: The loss to the Petitioners is irreparable and unmeasurable.

At the risk of sounding over-confident in hindsight, the truth is I had very little doubts about shattering their arguments at this level.  This was not a “best-of-4 exercise” where they could pass 2 or 3 tests only and walk away victorious; they had to nail all four tests.
If I could defend against urgency, I would live to see the Interlocutory round.

If I could somehow break urgency and one more test, I would give them a disincentive to continue, I naively thought, because the Interlocutory injunction requires that you pass the a) Clear Right, b) Balance of Inconvenience and c) Irreparable Harm tests.

Truth is, the judge could have said that they failed all four and another judge could come to a different conclusion at the next phase.  Moreover, my interpretation of the civil code of procedure was limited at best.

When there is no playbook to refer to, the fact that I speak with such conviction and confidence is a plus.  In this case, I could go in thinking that the sky was blue, if the big fat book said the sky was red, I would be out of luck.

Keep Your Mind Focused on the Bigger Issue, Too

That Saturday morning and afternoon, I would rotate between covering the more mundane aspects of using the evidence on the face of the record (basically limited myself to their seven affidavits) to defend against the motion to shut me down.

This was a rather mundane and boring exercise where I would have to identify weaknesses in both what they were saying and how they were saying it.  This part requires a 1,000-word post in itself, I might one day dive into the actual seven affidavits and highlight what I did.  But for the sake of this series, I will just say that this was not the fun part.

The funner part was the strategy around the non-competition matter.

I had to choose between asserting that:

1- the non-competition was not valid

OR

2- the businesses were not competitive.

Frankly, this was a somewhat moot point because I could not introduce new evidence.

More importantly, I think a lawyer would have gone for the first assertion; I decided to plant a seed of doubt around the first item but stress on the second.

I don’t know if this was the wisest move.  It was the honest, honorable and right thing to do.  I did not care if the non-competition was valid or not, in my head and in my heart, I was not competing with them and felt that if I spend too much time debating the first issue, I’d come across as insincere and a douchebag in the Judge’s eyes.

But I wanted to go nuclear, so not only would I put up an honorable resistance against the four tests, I was going to go ballistic and both:

a) destroy their arguments for an injunction
b) suggest that the non-compete was vague and excessive, but not claim that it was not valid
c) maintain that I wasn’t violating my non-compete, even if it were valid,
d) and plant the seed that I was in fact a victim of constructive dismissal (something we will cover tomorrow).

Technically, on Monday, I would have to focus on the four tests alone.  But God willing, I would take every opportunity I was bestowed to open a new front and eat away at their overall case.This was a very risky move; arguably a tactical mistake.

For one, the Judge could have cut me off each time because it would be potentially off-topic, and more importantly, I was technically exposing vulnerabilities in my eventual defense.  I don’t think I had any weaknesses, but then again, neither did they.

I’m big on history and one thing I try to avoid is hubris.  Yes, I am confident, but I’m not stupid.  I talk too much and in legal affairs, loose ships sink lips.

Of course, I was not planning (read: could not afford a sustained defense anyway) to make it to the merits stage anyway: I was going to annihilate their forces on Day 1 to reduce their desire - and arguments - to fight on.

This was in fact borrowing a page from what Israel did in the Six-Day War when its preliminary air attack destroyed the Egyptian Air Force and subsequently gave the Israelis aerial supremacy.  That changed everything.

As they say: the best defense is an overwhelming offense.

In fact, I was so naive that I was hoping that their lawyers would be so impressed with my defense that they would counsel their clients into settling the matter amicably… Yeah, right: because lawyers have a tendency to not take clients’ money.

All About Non Competition Agreements

Non-competition agreements outline three variables: 1. Scope of Business, 2. Territory and 3. Term.

1. Scope of Business

Realistically, no employer can forbid you to gain an income. But sometimes a court will uphold a concise, clear, fair and valid non-competition agreement.

The key is that it cannot be so vague that there is room for interpretation and debate. If a court finds one to be unclear, they will not strive to clarify it, they will simply strike it down.But, if you are a key employee who has a reasonable, valid and enforcable non-competition clause, then non-solicitation clauses might indeed be upheld if the courts feel that you can earn an income in a way that does not violate your contract.

2. Territory

In offline settings, territory is usually limited to a city, state or country, even a continent. No one can forbid to work in a competitive business around the world. If you are an employer seeking a global Territory, good luck. Of course, if you operate online, it is reasonable, in all fairness, to ask for a worldwide clause for territory, but then to avoid the courts striking it down, you need to have a very specific Scope of Business or short Duration. If an employer is greedy, the court will decide that they are being unreasonable and strike down the non-compete. This is risky for employers and as such, an employer better not be greedy with regards to one.

3. Term/Duration

The length of time that an employer forbids you to work in a given industry, or for a given competitor needs to be reasonable. You cannot, for example, expect a judge to agree that ”forever” is reasonable. This depends on the industry, sometimes 2 years is valid, sometimes 1 year is not. It is not a black and white matter. In one case affecting Earthlink, a judge decided that even six months was too long due to the rapid changes in the online industry!

A little side note: non-competition agreements are never upheld in California.  Where the big F*** You Gods where laughing at me with the one-finger salute was that while IGN was based in California, we were based in Montreal, so they had made the contract respect the laws of… Toronto, Ontario.  Damn them.  Damn them all.

This was a bonehead move of me, but I was one tiny shareholder so I had no real pull in these details.

Initially, I worried that I’d need not go to Toronto to fight this battle… but Montreal posed a bigger issue.  As much as the Province of Quebec is a French-speaking territory, Montreal is a perfectly bilingual city.  But, there was a good chance that my speaking English would ruffle some feathers.

I am perfectly bilingual but if I were to unleash hell and rain fire on my adversaries, I’d want to do that in English, not French.  I gave this issue some thought and despite the Judge’s French name I decided to go in in English, but more on this this Thursday.

As if it weren’t enough, I was also flying solo without a lawyer and had decided to address both defending the four tests of the injunction and do my best to maintain that the non-competition agreement was not valid.

Rest Time

By supper time I took a break to go out for a bite with my wife.  It was a cold and miserable evening.  We sat in a Mexican restaurant near our home and wondered why IGN was coming after us, what we would do after the case and whether they would come after me no matter what I did afterwards.  We managed to laugh about it… but jovial a mood it was not.

It was bleak.  I was hoping that tomorrow was Monday, but I had one more day before my date with destiny.

I had to fall asleep first, and this night would be filled with anxiety once again.

Upcoming posts:

Wednesday: Flashback Part 8 - May 14th 2006: Constructive Dismissal

Thursday: Flashback Part 9 - May 15th 2006: The Trial

Friday: Flashback Part 10 - May 16th 2006: Verdict and Subsequent Turn of Events

MySpace, Facebook and their ilk are trying many things, but none of them are working when it comes to scaling revenues, according to USAToday.

This year:

- YouTube will make $100 million in revenues.
- MySpace will make $700 million to $800 million, with FIM (which includes IGN) making $900M in all.
- Facebook will make $300 million.

How does this stack up against the index? Well US online ads are about $25B and global sales twice that much at $50B.  The precise stats:

ZenithOptimedia estimates online ad spending worldwide will soar 26.5% this year, to $47.7 billion. Total ad spending worldwide, by comparison, is expected to grow 4.6%, to $653.9 billion this year, says Universal McCann.

Here’s the problem: social media advertising is a stretch for online media executives to swallow; for marketing execs from all walks of life (ie. offline) who will be seeing offline dollars flow online, at best it’s a joke… at worst, it’s borderline blasphemy.

Even within the online advertising segment, 40% of it is going to search; Google pulled in $17B in revenues in 2007. Do the math.  Google owns 60% market share.  Why did you think MSFT was willing to pay $45B for Yahoo!?

The opportunity, if you ask me, is neither in social media ads nor is it in search.  The former is game over; the latter is too small relative to video.

After all, video is only going to do $1.25B in the US this year but will grow to $7.1B by 2012 and about $10-15B worldwide. By then, of course, global online advertising sales will be way north of $100B, I think video can be more because video ads stand to gain the most of TV ads; the one with the most to lose to online.

If I were Facebook, Bebo or MySpace, I would be focusing on using the social media bells and whistles to become a modern day video empire.  Oh wait, YouTube is trying to do that.  The problem?  YouTube’s overlord Eric Schmidt, CEO of Google has pretty much admitted that he does not know how to make money off YouTube… that’s a problem.  I see YouTube as a $1B-in-annual-revenues-property, the problem is, no one listens to me.

Wow, I didn’t know what to italicize, so I emphasized both parts.  He’s right.  I mean, in all fairness, as an entrepreneur I (and others like me) pontificate uselessly as well, don’t get me wrong.  But we don’t do that for a living, we only pontificate uselessly when know-it-all VCs (not all, just some) ask us useless questions showing their lack of understanding of advertising-based business models.

Hey, just being honest.

Source, via Valleywag.

Last week we did an office pool to guess the score of a hockey game and I was taken aback by the fact that we were now 11 people on staff. Eleven employees is not a lot, mind you, but that’s more than we had at my old company. I don’t even know how we got to 11, mind you, but we’ve worked with well over 100 people in numerous capacities as freelancers and interns. The advantage there has been that I’ve been able to gauge people’s mojo without risking bringing on people that did not fit it or did not have their heart into it. It surely has been an indirect benefit of bootstrapping. Some times when companies get a massive injection of cash, they rush the hiring process and end up with bad apples that quickly become cancerous.

I won’t names, ok, I will. You’ve heard how this has happened at LinkedIn (which actually remains on the few companies out there with a real business model and potential). But the point is, hire slow and fire fast is a helluva good HR mantra. Better than Don’t Be Evil, just kidding, I think.

Anyway, here’s the video, from Paid Content’s latest shindig, lots of good tidbits, listen to it in the rearview as you work through your day:

What Procter & Gamble is doing is 1-part about a slowing economy and 2-parts about the Web being more efficient in helping the consumer goods giant reach consumers and sell products.

SAI’s Michael Learmonth asks: will TV dollars move online in a 1-to-1 ratio?

Hmm… nope! Did print dollars move to the Web in a 1-to-1 ratio? Nope. Combined the TV, print, radio dollars that move online will prove to become considerable - as we are seeing now - but the absolute dollars lost from each media will be far greater than what is gained by the Web. Why?

It’s simple, the Web shrinks the media business. To Web companies, that is a very good thing because cost structures permit us to operate in a leaner world. Moreover the pricing advantage allows us to undercut and overdeliver relative to the traditional media companies.

For more on this on HipMojo.com, check all of these search results.