Correos Stand at Internet World 2007

I was surprised to come across the Spain Post Office (Correos) stand at London Internet World 2007 yesterday. Apparently, cross-border trading in Europe is catching on quicker than I thought; “we reach any place in Spain” is their message.

Correos is offering standard Direct Marketing services for Spain

Direct Mail: dispatch of volumee promotional mail into Spain; leaflets, catalogues magazines
Quality databases both acquiring and cleaning the list
Parcel services already used by the likes of Amazon when shipping into Spain
Registered post an alternative to the UK Post Office service for Spain

I applaud the move on behalf of Correos to open up cross-border online market further. I just hope businesses in Spain are taking note and planning to export into northern Europe in return. Certainly good news for Spanish online publishers since northern Europe merchants exploit online advertising fully in their ad mix.

Worst case scenario is that southern Europe becomes a consumer nation for value-added services and technology.

Online Shopping To Dominate in the Future

Impressive statistics forecast by the IMRG for the online retail in the next five years. UK shopping has come on in leaps and bounds, the trend continues with the forecast for 2007:

€63billion will be spent online by UK shoppers
860 million parcels will be shipped to the UK’s 26 million internet shoppers, 33 each on average
Online shoppers will each spend €2400 on average
10% of all retail now online, rising to 20% in three years time

Online retail will grow in quality too, becoming an integral part of mainstream consumer’s habits

Inclusivity people of all abilities will use online shopping
Normalisation online shopping will become integral to normal everyday life
Diversification online shopping will extend to a wider range of products and services
Shophistication online shopping services to become easier, quicker, safer and more valuable
Exclusivity a rise in specialist boutiques, offering more niche and exclusive products

Cross-border Shopping

Cross border retail is gaining traction, as shoppers look for and find better deals across borders. Shoppers in Europe have forever shopped across borders, specially when located in towns near frontiers. With online shopping and international postal delivery, cross border shopping for better deals is about to take off.

Already, Spanish book purchasing relies heavily on Amazon UK deliveries, as no strong contender exists in Spain. Amazon UK has in the past purchased advertising from hispavista.com, our parent company. Bargain hunting is about to extend across borders; and the bargains are considerable, even in spite of delivery cost across Europe.

Panda Software Company Sold Cheap

Panda software, one of top antivirus software companies in the world, has been purchased by a Venture Capital Syndicate. Panda software founders have sold 75% of the company at a reported €133m valuation. Oddly, Panda has not issued an official press release. The valuation is a sales multiple of less than times one last reported revenues. An inexplicably low sale price for a world player in the antivirus market.

Local hero, Mikel Urizarbarrena, has always been a reference to EUCAP partners in northern Spain. Mr. Urizarbarrena has created a world leading software security company, while retaining 100% of founder equity. A staggering entrepreneurial feat.

As recently as 2005, Panda was ranked number four in market share, as shown in the table below.

Worldwide 2005 Total Antivirus Software Revenue for All Software Segment Types
(Millions of Dollars)

Company	2005	2005 Market Share (%)	2004	2004 Market Share (%)	2004-2005 Growth (%)
Symantec	2,150.4	53.6	1,915.3	54.2	12.3
McAfee	753.9	18.8	666.5	18.9	13.1
Trend Micro	555.7	13.8	509.3	14.4	9.1
Panda Software	128.6	3.2	103.9	2.9	23.8
CA	86.5	2.2	75.3	2.1	14.9
Other Vendors	340.2	8.5	263.0	7.5	29.4
Total	4,015.4	100.0	3,533.2	100.0	13.6

Source: Gartner Dataquest (June 2006)

Currently, Symantec has a market cap of €12b, and McAfee €4b. F-Secure, a recent European entrant to the top 5 antivirus products, has a €380m market cap on the Helsinki stock exchange.

On these 2005 sales multiples, Panda should have been valued in the €700m range.

The speculation is that recent Panda revenues have come under pressure from smaller entrants like Sophos, F-Secure and Bitdefender (SOFTWIN), in the race for new hardware platforms like mobile, and the lucrative corporate market.

As the market consolidates further, it is clear capital is the key to funding the marketing and sales drive required to maintain market share. One can speculate that Panda was under-capitalized during 2006, as the founders were reluctant to accept new shareholders.

Hopefully, the supposed €100m injected in the company will provide the impetus to consolidate its market share, and see Mr Urizarbarrena through to a successful public offering at a billion € valuation.

[Via Investindustrial y Gala Capital compran Panda Software – CincoDias.com]

A press release has been issued

Google Aiming for the Radio Advertising Marketplace

Google’s pursuit of the advertising marketplace continuous relentless. Though radio advertising is unrelated to organizing the world’s information, their Audio Adwords is looking to impact the advertising agency sector hugely.

More businesses are trying Google radio Ads in their Adwords account. The reviews from testers seem generally positive.

The air time available has now been extended to a supposed 675 radio stations. Though, like for Adwords, Google will not reveal its media list. Given what Adwords and Adsense have done for online media publishing, Google’s Audio Adwords could revolutionize radio station economics, be it traditional air-wave or podcast radios.

I am impressed by Google’s solution to the problem of creating the audio spot. Composing an audio spot is harder than making an Adwords text box. Writing, composing and recording requires experience, training and a technical setup. Google provides a crowdsourcing marketplace tool, where you can invite audio industry professionals to bid for the design and recording project. The electronic job board allows up to five professionals to bid on your audio project.

The tariff rate for airing the radio spot is the same as Adwords; CPM, cost per thousand listeners. Plus, testing is easy and cheap. You can try different stations, zip codes, demographics, airing times and find the slots that best work for you. Split testing becomes feasible for small merchants.

The possibilities for the new radio ads marketplace are dizzying. Just like Adwords catalyzed a whole online publisher industry, the potential for economic growth in complemeting sectors are great investment areas.

The only stakeholders loosing out are the creative advertising agencies who currently hold a near-monopoly on mediating between advertisers and radio stations. The creative added value provided will be crowdsourced out; brand design and innovation will be the only added value left to them.

[Via Nick Piggott]

Google’s New Personalized Maps a Threat to Map Mashup Startups

Startup companies where Google’s services are central live dangerously. Today Google launched customisable maps, with an aggregation and social filtering. Companies like

which offer maps of interesting places submitted and reviewed by their community observe with apprehension. Google has only introduced a simple sharing function for the maps; social aggregation and filtering or tagging are, so far, absent.

Google should offer assurances to companies collaborating and cooperating through Google’s web services and APIs. Google should signal it will refrain from entering their space, otherwise Google’s open commons community, and crowdsourcing ecosystem will vanish.

Google Enters Affiliate Marketing

Google has finally unveiled its Cost Per Action tariff model for its Adsense network. What was the exclusive domain of affiliate marketing networks is disrupted by Google’s huge publisher and merchant base, and its superior system. In one move, Google becomes the biggest affiliate network in the sector.

The impact on the online advertising ecosystem will be considerable. Not only to affiliate networks, but also to the community of market makers – affiliates, which have thrived on arbitrage opportunities around CPM, CPC and CPA advertising. CPM (Costs per Thousand banner impressions), CPC (cost per click) and CPA (cost per action). The different tariff models provided enough market inefficiency for price imbalances to arise.

Over the last few years entrepreneurial affiliates have been acquiring traffic from Google’s adsense at the minimum 0.01 per click, and driving it directly to an affiliate network merchant’s site under the CPA tariff model, and got paid when and if the customer converted. The arbitrage actually resulted in positive margins. And many other similar arbitrage moves.

Google’s offer of the CPA tariff model to advertisers adds new price transparency, as clients can now work out the ROI of all three tariff models on one simple user interface. The arbitrage opportunities will invariably dissappear.

Clear winners are advertisers; CPA tariff model pushes the onus of conversion onto the publisher. The advertising merchant only pays if the clickthrough actually makes a purchase. CPA is the solution for advertisers with click-fraud problems.

[Official Inside AdWords: Pay-per-action beta test]

Structuring and Regulating Advertising Market Places

On the subject of electronic market places, one of the key issues in the new marketplace is how much the products can be structured, and how much the buying/selling needs to be regulated.

In eBay’s media marketplace, buyers will be able to submit Web forms akin to requests for proposals specifying what dates they want to run ads, what their budget is, target demographics they seek in the audience and other information. They then invite networks to review their proposal. Sellers also will have the option to initiate auctions, following the eBay model, where they specify the ad space they have available to sell and choose the highest bidder. The same model as ebay’s main buying and selling model.

A model similar to the unregulated over-the-counter marketplaces in banking.

The AAAA has contracted Arbinet to structure the marketplace more. Using the financial regulated exchanges model, the AAAA is creating a registry of buyers and sellers and their respective needs to structure the marketplace with formats and standards. A standardised market allows easier and confident trading, which leads to much higher volumes, higher liquidity and market makers.

Electronic Marketplaces Coming to Advertising

The American Association of Advertising Agencies (AAAA) is creating an electronic platform for trading ads across media. The Association is bowing to the inevitable and modernizing ad space buying and selling.

Advertising agencies have historically leveraged their personal relationships, privileged access to clients and media, and poor price and inventory information to generate large buy-sell margins. The practice of end of year kick-backs from media publishers to ad wholesalers to ensure continued patronage is still rampant.

Incumbent agencies and institutions will fight to retain their place and margin in the value chain, in spite of the dis-intermediation alternatives.

“The world is changing faster than we can keep up with it,” said Ray Warren, president of ad agency Carat Media Group Americas.

“Phones will still work….It’s just a way to communicate electronically.” said Peggy Green of ad agency Zenith Media USA.

Electronic trading is the natural solution for such inefficient markets. AdECN, an independent trading exchange platform for advertising is already online. Google and eBay are deploying the private marketplace platforms into adverting media buy and selling. Google is introducing radio ads onto its Adwords platform, in addition to ads in magazines, and ads in newspapers.

eBay, in turn, has its private marketplaces; eBay Media Marketplace is to go live in a few weeks. While marketers like Lexus, Hewlett-Packard, Microsoft and Home Depot are participating in eBay Media marketplace, no cable networks have signed on yet.

As ever, volume on these trading exchanges is an all or nothing proposition; community of buyers and sellers tip from one market platform to another en mass. Similar migration of buy/sell volumes have been occurring between trading exchanges in the financial market since the first electronic exchanges appeared in the 1990s.

I lived through just such a loss of trading volume while at the London Financial Futures and Options Exchange during the mid-1990s; 30% of our trading volume deserted from our trading pits onto Frankfurt’s electronic trading platform. The automated platform fees were 10% of our trading fees and the buy/sell spread margins were narrower. Our response was to close the open-outcry trading pits with their 3000 colourful pit traders, and launch a competing electronic exchange, CONNECT (TM).

The only alternative left to media agencies is to own and host the new electronic marketplace.

Lycos Europe: Still Trying to Find Traction

Lycos is one of the leading European based general portals, with 31m unique internet users a month; a “European yahoo” whose American arm was sold to Asian premier portal www.daum.net. Lycos has released 2006 results, which are sobering when compared to Lycos’ american counterparts. Christopher Mohn, Lycos CEO, is eager to emphasize his first net profit ever, EUR 1.7 million. Unfortunately, this pales against Yahoo’s EUR 577m and Google’s EUR 2,366 million.

More worrying is Lycos Europe’s inability to stem its cash drain. Lycos was Europe’s most successful IPO in 1999, raising EUR 1.6 billion in cash. The cash reserves are now under EUR 100m, in spite of the sale of Lycos-America and the Swedish Spray network.

The market versus book value ratio for Lycos-Europe has hovered around 1.3 for four years now. Though market valuation of the company is now above its liquidation value (market/book ratio of less than one), the market still signals skepticism as to Lycos’ future.

Lycos’ board keeps the faith though, not stepping back into an exclusively cost reduction strategy. Spend on research and business development has remained strong over the last four years, in spite of their effect on cash reserves.

Company management can easily fall into an exclusively cost reduction strategy, specially when the innovation drive and talent is gone. I think of it as leaning back when skiing an excessively fast downhill – lethal. Keep a balanced lean, and repeat the mantra it is never too late, it is never too late.

Fortunately for Lycos shareholders, the board has retained some of the original founders who have domain knowledge enough to be creative, and innovate new defensible revenue streams. Lycos’ new revenue streams includes its shopping channel notably, Pangora, which they have white branded across Europe.

Lycos annual report

Massive OpenID Adoption

Simon Willison, openID ~~founder~~ evangelist, gave an exciting presentation at the Future of Web Apps yesterday. OpenID is an open source login standard that is getting viral adoption. Simon expressed surprise at the number of services taking openID in the last three weeks; AOL, Symantec and Microsoft. That is a hundred million subscribers just there. Bill Gates’ endorsement must be any viral marketers dream influencer. Specially with Bill Gates’ strong pro-identity (senderID) work in the anti-spam community.

I find the openID whitelisting for spam elimination the most exciting. Finally, a viable mechanism to eliminate email and comment spam. OpenID finally adds one of the key pieces to the online reputation
mechanism. This in turn fills a big hole in building communities online.

There remains Google’s endorsement