Category: Online Economy

Widget Media

After a year of extensive development, Enclick has launched the following information services for social networks, blogs and individual web sites.

Keeping with the current vogue for the free price policy, all the web sites have free widget services. Needless to say the services have quickly found social traction with 100,000 webmasters taking a widget

Ad “receptivity” High for Online Video Advertising

Brand marketing has different metrics to online sales marketing. Brand recall and engagement measure the first, sales conversion rates measure the second. New web2.0 web sites, social networks and video sites, are notorious for low conversion rates. New surveys are, however, showing excellent brand marketing results.

A cross-media study, by Experian Research Services, found that viewers are 25% more engaged in the content of TV shows that they watch online than on a TV. John Fetto, product manager at Experian, said that TV ads online are especially effective at reaching consumers.


“Web sites that are extensions of properties that exist in other media channels have great potential to funnel audiences that are highly engaged in the first place,”
he said

The Simmons study was based on 74,996 interviews with U.S. adults about the TV programs, magazines and Web sites that they watch, read and visit. The survey was conducted online and via telephone between October 2006 and September 2007.

[Via Meadiapost Publications]

[Disclosure: Yes, we are invested in a video and a social networking site. My views may be biased.]

Correos Stand at Internet World 2007

correos

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

  1. Direct Mail: dispatch of volumee promotional mail into Spain; leaflets, catalogues magazines
  2. Quality databases both acquiring and cleaning the list
  3. Parcel services already used by the likes of Amazon when shipping into Spain
  4. 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.

Electronic Marketplaces Coming to Advertising

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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.

ebaymedia

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.

city open outcry trading

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

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

Electronic Buying and Selling Coming to Online Advertising

ADECN

Though long time in coming, electronic buying and selling enters the Online Advertising sector. Just as electronic trading revolutionized financial markets, eliminating middle-men and reducing the buy-sell spread, so electronic trading has finally entered the advertising market.

Google braved the way with its electronic bid based buy and selling of pay per click advertising. Now AdECN Exchange has introduced bid based buying and selling of straightforward advertising, page view based advertising.

Upto now the market for banner based advertising was illiquid and inefficient. Advertising agencies commandeered a large percentage of the fee, widening the buy-sell spread for publishers and advertisers. Worse, the bulk of the inventory beneath a publisher’s home page remained unsold. Now AdECN exchange brings visibility and efficiency into buying and selling page-view inventories; the buy-sell spread will come down from its current 30% to single digit percentages, just as in financial markets. Plus a much larger percentage of unsold inventory will be visible to advertisers. Good news for the markets, not so good for the advertising market intermediaries.

Sophisticated advertisers will embrace the new electronic market by adding analytic and technical capabilities to the buying team. Just as investment banks added quantitative and analytic trading PhDs to their investment teams. Electronic trading is already used to buy search based, pay-per-click advertising; extending electronic purchasing into pay-per-view (CPM) advertising should not be a stretch.

Google Acquires YouTube at $82 per Unique User

youtube google

Staggering price paid by Google, way over average current portal valuations. Youtube has 20 million unique users a month, so the acquisition price is $82 per unique users, which is high compared to most portals. Yahoo, a high value brand company, only achieves an $86 per unique user valuation.

At the $1650m the YouTube acquisition on its own will not provide Google with a Return On Investment. Though they declare they will keep the Youtube brand separate, extensive “synergies” will have to be found and exploited for the acquisition to create value for Google.

Brin, Schmidt and Page must have a specific monetisation strategy in mind to extract some positive ROI from this acquisition. Straight forward adsense has difficulty achieving high CPMs from the current YouTube design given the lack of effective context for Adsense to detect the right keyword phrases or traffic segmentation.

In spite of extolling the virtuous of internal innovation, Google has succumbed to buying a successful service. As ever, acquiring a successful business comes with a price tag; it is now up to Google to improve Youtube and generate value. This is not the first time Google has found ways to monetize a superior service though; Google Search had no superior business model, originally.

[Via Google Press Center: Press Release]

[Via John Battelle]

Tesco.com Online Retailer Increases Sales by Another 30%

The number one online supermarket has announced 28.7% growth for the first half of 2006. Having topped £1000m in turnover in 2005, growth is down slightly from 32% for the year ending 2005, but profits are now over 6% as economies of scale have a bigger impact. Likely sales for 2006 are £1300m (topping €2000m), only behind Amazon for the UK. With full company revenues being £22.7billion, online sales contribute 6% to overall sales.

Tesco has piloted specialized order fulfillment centers, which use state of the art Operational Research Software to optimize a order filler’s pick up route along specialized pallets and shelfs. In addition to advanced automation to manage shelf stock. Order filler staff follow instructions on a wrist worn PDA, to fill several orders at the same time, with a minimum of movement along ailes.

Tesco is rivalling shops like Argos and Ikea by offering home delivery in two-hour slots, instead of half-day ones, and also the option to collect directly from stores.

Tesco has increased the number of CDs and DVDs it offers online to 280,000. With an additional 8,000 products in the lucrative electronics and household appliances sectors. In fact, Tesco is the highest selling household appliances retailer on the Enclick price comparator site. With close to 300,000 products, Tesco has one of the most comprehensive product data feeds on offer among online merchants.

[Via Guardian Online]

[Disclosure: EUCAP is invested in Enclick Ltd]

Youtube: Waiting for Adsense for Videos

youtube

Youtube, the leading video clip sharing service, is creating a lot acquisition rumors with much of the debate centered round its valuation.

youtube

Looking at reach and page view alone, with 10,000m page views a month and double digit growth rate, a billion dollar valuation range, like MySpace’s, is not out of the question.

Fred Wilson offers a $150M estimate for revenues with $15 CPMs. But other opinions are much less optimistic.

The debate of Youtube revenues highlights problems with monetizing video clips.
Jason Calacanis touts a low value for the likely youtube revenues, with
only $20M from junk CPM advertising. Jason’s estimates a $2 CPM for Youtube contextual advertising, arguing that the “dorky” video clips with very little segmentation or keyword context will not earn the higher range $15 CPM’s for quality full context and full segmentation video content.

Similarly Mike Cuban predicts a a dramatic decline from major problems with copyright owners


Considering the RIAA will sue your grandma or a 12 year old at the drop of a hat, the fact that Youtube is building a traffic juggernaut around copyrighted audio and video without being sued is like…. well Napster at the beginning as the labels were trying to figure out what it meant to them

I think the biggest issue is the difficulty of using the Adsense advertising model on Videos. Given that Google’s algorithm works only on text, identifying keywords from video content is ineffective, and hence advertising no longer targets intention or demographics. Categorizing videos manually is not a viable solution, when you have tens of millions of video clips. The only way forward for YouTube is good user tagging.