View Reinout HM te Brake's profileFriday, January 11, 2008
Chinese internet portal leads USD11m funding in US games firm, Outspark
Tuesday, January 8, 2008
Online Publisher Geosign Splits Up; Investor Getting Cash Back: Report
The split up has created two companies: eMedia Interactive, which is run by founder Tim Nye, owns the domain names. The advertising business has gone to Moxy Media, which is owned by American Capital—with the deal, the company is getting a “substantial” chunk of its cash back. Moxy Media is now focusing on the lead gen space.
What’s not clear is how much of this crack up was due to something unique at Geosign or if there’s a broader warning for the other well-capitalized domain media plays.
Global media acquisition deals worth USD110bn in 2007
The research firm estimates that the number of deals increased 32% on 2006, and that the total amount involved in the transactions grew 79% on the year before. In the first half of the year , transactions worth USD75bn in total were announced. The research firm says there were fewer large deals in the second half of the year, due to the crisis in the credit markets. The online media market accounted for USD43bn worth of deals done in 2007.
There were 555 M&A deals involving online media or marketing companies during the year, with nearly all of the internet giants doing substantial deals. AOL, Google, Yahoo! and Microsoft all bought ad networks or ad delivery firms during the last year.
Microsoft bought aQuantive for USD5.7bn, while Google announced its acquisition of DoubleClick for USD3.1bn. AOL and Yahoo! did smaller deals with ad networks: AOL bought Tacoda for USD275m, and the US search giant acquired Blue Lithium for USD300m.
Monday, January 7, 2008
Page Views And CPMs Are Suppressing Online Advertising Growth and Innovation
Page view-driven advertising is a product of Internet 1.0 advertising, which was modeled after traditional media advertising. But its actually worse than that, because even traditional media values audience above all. Selling online ad impressions is a holdover from a time when online audiences were difficult to measure because people used different IP address and different computers — oh, wait! Online audiences are STILL difficult to measure, with rampant cookie deletion and the same problem of multiple access points for the same person. So instead of delivering advertising to people, we deliver it to pages. And when you charge by the page/impression, the more pages the better.
That’s why online advertising economics are so messed up. Actually, there are two online advertising economies.
There’s search advertising, which ingeniously targets ads to keywords, which are a direct reflection of what’s on someone’s mind. No demographics, cookies, or individual identifiers necessary. It doesn’t matter where I use the search box — the advertising always works. A search results page is microcosm of the larger search advertising economy — it’s profitable at any scale.
The page view/CPM advertising economy is a raw volume game — the Web is awash in page views, and since advertisers are buying page views in large volumes, that forces publishers to bulk up their share, even as the over-supply drives down the price. Behavioral targeting is addressing the problem of huge amounts of low value page views by targeting people rather than pages, based on their use of the high value pages. This is akin to targeting search keywords, but unlike pay-per-click text ads, behavioral targeting display ads are still caught up in the page view economy, which makes it an uphill battle.
As Larry Allen of newly acquired behavioral targeting pioneer TACODA pointed out in an interview with me, online ad spending is still relatively low (particularly as a percentage of all ad spending), so those ad dollars get spread thin across the ever-increasing page view inventory:
There is still a large gap between the volume of ad inventory on the Web, especially when you consider news and social media, and the amount of ad dollars being spent.
But the biggest problem with page views/CPMs is that there could not be a more blunt, less nuanced metric for valuing online media. The newspaper industry, as with so much else in the rapidly evolving media industry, brings this problem into sharp relief.
The Newspaper Association of America just released the results of a custom study done by Nielsen/NetRatings, which had findings that sound like great news:
An average of more than 59 million people (37.6 percent of all active Internet users) visited newspaper Web sites each month during the first quarter, a record number that represents a 5.3 percent increase over the same period a year ago, according to Nielsen//NetRatings NetView custom analysis. During the same time period, the overall Internet audience grew just 2.7 percent.
Even better than the increasing headcount, these people who visit newspaper websites have great attributes:
* Nearly 12 percent (11.9 percent) of those who have visited a newspaper Web site have annual household incomes in excess of $150,000 compared with less than one in 10 (9.3 percent) of the overall Internet audience.
* Nearly nine in 10 (88.1 percent) newspaper Web site visitors have made a purchase online in the last six months compared with 78.9 percent of the overall Internet audience. Four in 10 (41 percent) newspaper Web site visitors are employed in professional or managerial occupations compared with one in three (32.7 percent) of the overall Internet population.
* Nearly three in 10 (28.9 percent) newspaper Web site visitors have sought out or posted a product review online in the past month compared with 16.1 percent of the overall internet population.
So where’s the problem? The only way that advertisers have to value newspaper websites at this media category level is by page views (via MediaPost, since this data is oddly not in the NAA press release):
These same visitors generated nearly 2.7 billion page views per month throughout the second quarter, the NAA reported Monday. That compares to slightly more than 2.5 billion page views during the same period last year. It represents a decrease from 3.0 billion page views in the first quarter.
OK, so page views are down slightly this year, but still, 2.7 billion page views is A LOT — except that, in the page view/CPM economy, it’s not as much as you might think.
Let’s say newspaper websites have an average of 3 display ads per page, which would be 8.1 billion ad impressions. If you divide 8.1 billion by 1,000, you get 8,100,000 thousands of page views. If an advertisers paid (a generous) $30 CPM, that would be $30 x 8.1 million, which is $243 million per month or $2.9 billion a year.
OK, that’s a lot of money, so where exactly IS the problem? Well, that’s $2.9 billion in CPM-driven online media value for the ENTIRE NEWSPAPER INDUSTRY! An industry that NAA currently values at $59 billion.
But this is all just silly back-of-the-envelope math, right? Well, actually…
Advertising expenditures for newspaper Web sites increased by 22.3 percent to $750 million in the first quarter versus the same period a year ago, according to preliminary estimates from the Newspaper Association of America.
So, $750 million per quarter is…that’s right, $3 billion a year. Looks like newspapers are indeed monetizing their page views at an average rate of $30 per thousand ad impressions, or $90 per thousand page views, using my assumption of 3 ads per page. Not too shabby by online media standards. Of course, newspapers don’t sell anywhere near all of their online advertising on a CPM basis, but it sure puts all the numbers in perspective.
That said, here’s the real scary math:
On a CPM basis, to make $59 billion in online ad revenue, at a $30 CPM, you need 1,966,666,666,666 ad impressions. That’s right nearly 2 TRILLION impressions, or 655 BILLION page views at 3 ads per page, which is 24 TIMES as many page views as newspaper websites currently have.
I’m picking on newspapers here because they are at the nexus of the transformation of media, but the problem with the page view/CPM economy applies to every online media company, including every traditional media company website and every Web 2.0 startup.
Google was the first online media company to break out of the CPM/page view trap in a big way — no wonder they have $10 billion in ad revenue.
Search advertising, driven by a dynamic marketplace for keywords, was a BIG idea. Behavioral targeting might prove to be a another big idea. But it’s going to take a lot of big ideas for the online advertising economy to cast off the page view/CPM albatross.
Sunday, January 6, 2008
8 Reasons Why The TV Studios Will Die
My number one takeaway, a perception I did not have before, is that the studios are probably not going to make it. I always assumed and have always said that I believe the studios will make it through the transition on top but now I’m not so sure.
Why do I think this? The story is public, it just requires putting everything into perspective.
As a starting point, we now take for granted that the top few studios (ABC, NBC, CBS) have lost control of the future market and must make way for more studios that will appear. While they may seem well positioned to do that, my new hypothesis is that they are not well positioned at all. On the contrary, they are probably in just about the worst position any company could be in. More than likely, the studios will either fall apart or break up into small pieces, become engulfed by something much bigger (maybe even a 19-year old), morph into a sub-faction of the greater media industry or even some other industry, or maybe survive without much influence as just one of many.
While no doubt it is possible to make it through on top, pretty much ALL of the qualities that the major networks are good at are no longer needed. We don’t need them to identify talent for us. The promotion and distribution channels are now open and cheap or free for the clever. We can have share in the rights to our own work without them. The list goes on and on. The networks have shown a poor record in all of the qualities that will be needed to rise up as the new industry leaders.
TV is still an incredibly powerful medium. TV makes much bigger stars and commands much bigger audiences and way more money than anything online, moving image-wise. But obviously that is changing drastically at a rapid pace that is suddenly very surprising to even me, as brought on by the very important impact of the writers strike. The strike really is the astroid from outer space that is covering the planet with dust night now.
There is plenty more to say which I will leave for another day, lets jump right into the top 8 indications that the traditional TV industry is not well prepared for the upcoming change in business around a new media industry.
1. Audience Exodus. While the rest of the world is blooming online, TV has no new content to offer right now. Over the last several weeks (a very short period of time in the history of TV), some of the most important shows have lost a breathtaking number of audience members. The NYTimes just reported that The Daily Show with John Stewart audience numbers are down 38% since the strike began. The Colbert report is down 28%. When the last strike occurred almost 20 years ago, there was no where for the audience to go. They had to return back to whatever the stations decided to play at that time. That’s obviously not the case now, there are plenty of other places to go that are actually better and not dependent on time. The stations are instantly losing their best customers, the people who have a habit of showing up.
2. Expendable Middle-Person. TV is to advertising as America is to oil. That is to say, TV is entirely and completely dependent on the advertising industry and the ad dollar for its survival. The studios have never been able to own that business for themselves and have instead depended on selling to the ad buyers, usually once a year in a major upfront session. If you attended the 2007 ad buyers week where the TV studios rolled out the red carpet for the ad buying industry with the cheesiest shenanigan of a show and dance, playing the role of middle people who make the connections between things like Lost and Coke, thats what it all comes down to. The network simply manages that connection, themselves a middle person. When a business has an opportunity to grow and improve, this type of position is the first to go.
The advertising industry is changing on its own without the TV studios. 2007 saw the beginning of a wild flight by the ad buyers to shift their spending to online content, leaving the studios out of the loop in how the business of the future will be done. In the words of the TNS Media Intelligence news report, “The anemic growth rates in measured ad spending reflect a market that is under stress from cyclical business conditions and fundamental structural changes”.
What more, consider a few of the headlines just this year on the changing landscape of advertising companies: Microsoft buys aQantive for $6 Billion. Google buys Double Click for $3.1 Billion. Yahoo buys Right Media for $1/2 Billion. Not to mention all of the smaller startup ad networks, as well as content studios with their own ad networks that are rising up. Apparently Next New Networks has racked up 100 million complete views from You-Tube and that was done without ABC, NBC or CBS as part of the conversation. Perhaps the greatest threat of all is the possibility that the Writers Strike will drag on through January and February, causing the TV stations to have almost nothing in store to sell for fresh content at the 2008 upfront season.
3. Unsupportive. There is an old saying in Hollywood that 99% of all actors are out of work. This is still the saying today. While we don’t need to make any jokes about all of the actors out there without much talent that still find an audience online, it’s fair to say that more than a fraction of a single percent of the actors out there are very talented. If Hollywood can only support a fraction of a percent, then they are going to lose out on supporting the greater percentage of the talented actors out there. Extend this to the rest of the creative industry and it’s easy to see how a fraction of a percent without any control will become almost irrelevant.
4. Dependent on Exclusivity. Studios used to depended on their exclusive rights over show distribution in order to compete against the other networks. Soon, they will not be able to hold on to their exclusivity. Consider the possible fate of NBC: NBC, which has a handful of breakout hit shows like Heroes for instance, has started fresh with a new online strategy just this year after not being able to play with Apple. Their new project Hulu is dependent not on their own brand to drive traffic to the site but rather their exclusive deals with shows like Heroes which you can’t get anywhere else. So how many shows does NBC/Hulu have that will make it worth it to watch on Hulu? And more importantly, how many shows will NBC have in the future that can remain exclusive just with NBC? Heroes, which is now it’s own healthy business would certainly see a much greater profit margin if they could eventually break away and exclude NBC from such an enormous share of their revenue.
5. Rogue Reputation. Studios are meanies. With regards to the strike, only 14% of people polled favored the studio’s side of the argument. If the future of the media business is going to have anything to do with making honest deals and treating talent fairly, the TV studio networks do not have a solid reputation and might even be at odds with the kinds of deals that are much more lucrative from the sea of other budding and capable support systems out there.
6. Unplugged. Quarterlife. Need I say more? Perhaps the best experiment to date on what it would be like to take a traditional TV drama, shorten it down to 10 minute episodes in structure, pre record a whole season and throw it up online, shows that you can’t really do that. It really takes a long time to build something up that is a series and will strike a chord in a way that is truly social. Quarterlife missed the mark. Even more revealing are the comments left on the NewTeevee blog by one of the producers who seems to be having a difficult time interacting with the online world.
7. Ineffectual. Probably the number one best commentary I have seen on the effect of the writers strike, something that was otherwise moving along too slow, is the fact that the talent in Hollywood finally got a break and could look up to notice what is going on online and thus participate in the epiphany. Its ironic that the best talent in the world is the last to wake up and smell the roses, but that situation is being forced for the better. As touched on with this LA Times article, “the future belongs to a tantalizing new hyphenate: the writer-entrepreneur.
If could point to just one important point for any writers in Hollywood out there, it would be this one. “The stars became free agents long ago. In the last few years, with billions of private-equity dollars flooding the business, the studios have lost their lock on financing too.”
8. Luddites. The major networks have been virtually helpless on the tech side of things which will control the distribution channels in the future. They have failed again, and again and again to see it coming and to take adequate action.
All in all, this is not a shame for the studios, everyone is trying to figure it out. In context of my thesis however, the studios are in no better position than anyone else to figure it out. One might even argue that they are handicapped due to their current structures, unable to make big enough changes quick enough. While the studios themselves used to be bigger than the content they served, now its the content that is more the king.