Monday, November 2, 2009

Web Curators

On October 19th, I attended a Baruch College's Lunch and Learn. The speaker was none other than Craig Newmark, founder of Craigslist. He has some very interesting perspectives about social media and is very passionate about "governance" as it relates to society and the internet.

One of the topics of his talk that I found most interesting is the subject of information "curators." This term appears to be the latest buzz word that mass media content developers use to describe their role in the webosphere. Analogous to an art museum curator whose job is to manage or oversee the collection of works owned or on exhibit. A web "curator" decides what is worthy of publishing to the masses, whether it is news, music, videos or any information. Traditionally, information curators are the news media, music labels, movie studios, etc. Now in a web 2.0/3.0 world we witnessing a dramatic shift where the roll of the curator is becoming obsolete. As more and more user generated content and eyeballs coexist on the web it will become more difficult for a news editor or music producer to act as gatekeepers of data. Therefore it is critical to embrace this change rather than resist. It seems music labels are record labels are slowly adapting to this trend. The big challenge is with news organizations. Whether it is newspapers, magazines or television, how do you justify your roll as a gatekeeper news if your audience often has better access to news information?

Monday, August 31, 2009

Gambling or Google Adsense?

Now that Google is a decade old, employs over 20,000 people worldwide, has a market capitalization of nearly $150 billion (USD), earns over $20 billion (USD) in annual revenue and produced at least three billionaires, we finally have a clear definition of what google is. Michael Arrington of TechCrunch interviewed Eric Schmidt, Google's CEO, and asked the simple question, What is Google? His reply was:

"I think of Google as a set of overlapping things. It’s a consumer platform, consumer phenomenon of which search is its fundamental activity, but there are many other things you can do than search…I think of Google as an advertising company who services the broader advertising industry in the ways that you know. And the first and the second are inter-related. The third is I think of us as a network of partners and infrastructure. I don’t know how many billions of dollars we hand to everybody. But by the time you look at the publishers, the use of AdSense and so forth, it’s literally billions of dollars going through Google and to other people which we hope fund additional software, additional web applications, additional content and so forth and we care a lot about that."

It is always food for thought when large corporations conveniently define themselves so generally that it leaves the door open for endless expansion (ie. Xerox- The Document Company). However, the statement referencing the billions of dollars that Google "hands to everybody" trough the AdSense program caught my attention. The percentage share of advertising revenue that Google AdSense publishers get from Google is always subject to open debate and speculation, as Google has never officially announced or revealed the revenue share it gives out and distributes to websites’ partners and publishers. In 2005, the New York Times estimated that the magic figure was around 79%. That means for every dollar that google makes in advertising dollars, 79 cents is paid to AdSense publishers and partners.

While it is nothing short of genius for Google strategist to create such a clever revenue stream it is eerily reminiscent of the casino business model. An average payout ratio for a casino is at least 95% (20% greater than the AdSense payout), which begs the question, is it better to gamble or subscribe to AdSense?

The answer to this question has probably been published in a doctoral dissertation. However, there is one mantra that absolutely applies to both the casino model and the AdSense model, "The house always wins."

Tuesday, July 7, 2009

June 2009: The Month Twitter Found a Niche

What do Michael Jackson and Mahmoud Ahmadinejad have in common? They both had a major role in the global news media taking note of Twitter last month. In the months leading up to June, Twitter had grown from 1.7 million unique visitors in May 2008 to over 19.7 million in May 2009. Then on June 15, 2009, the Iranian authorities blocked reports from international correspondents who were reporting about the ensuing protests against the contested Presidential election. Once the conventional reporters were silenced the news media turned to Iranian citizen journalists who used Twitter and other social networking media to give real time accounts of the rioting, protests and violence. The opposition party candidate, Mir Hossein Mousavi had accumulated over 100,000 supporters on Facebook. During the protest activities tweets were posted at rates as high as 221,000/hour. YouTube saw 3,000 Iranian videos uploaded and 2.2 million blog entries were posted.

Just 10 days (June 25, 2009) after the Twitter spike in Iran, Michael Jackson died. As the unexpected news shot across the globe several major websites crashed under the weight of the web traffic. Michael Jackson "tweets" were almost 30% of all "tweets" in the hours after the news was first reported. Messages were posted at a rate of 5,000/minute at its peak. News media outlets again turned to Twitter for immediate reactions from celebrities and citizen journalists. The true impact of Michael Jackson's death on Twitter is still unfolding as the world watches the coverage of the Michael Jackson Memorial.

It is unclear what the financial impact these events will have on Twitter but what is clear is that the news media is dramatically being impacted by Twitter. Traditionally, if a big news story breaks, the public would turn on their television. Now, they are just as likely to turn to Twitter or other social networking media first.

Wednesday, June 24, 2009

R.I.P. Web 2.0

Just when you thought you understood Web 2.0 enough to impress friends and associates at social events, Web 2.0 becomes more passe than Doc Marten shoes. Yes, it is true that the most well known internet buzz word is losing its relevance but the good news is Web 3.0 has arrived! Now we have a new buzz word to spend the next few years defining.

The interesting thing about these milestones is they appear to be only identifiable after they have arrived. It is almost like predicting a storm. We can see the clouds on the horizon but we don't know how destructive they will be until after it has passed. Similarly with the web we can see the implications of newer web innovations but it is difficult to predict whether they will create discontinuity in the marketplace until after they have arrived and been fully adopted.

What exactly is Web 3.0? It appears that the foundations of Web 3.0 are cloud-based data and services. With 23.8% of the worlds population online and 429 million broadband subscribers, applications are beginning to move into the internet cloud and away from individual devices. This is allowing media clients to become "thinner" as long as they can access the web. With the introduction of 'net books' and increased penetration of 'smartphones' the decade old vision of the network appliance is now a reality. Today Web 3.0 is the complete integration of computing into every part of our lives in a way that is seamless, ubiquitous and ideally, dead simple.

Where will Web 3.0 lead us? The answer isn't clear. If we take a closer look at how the web has evolved we can still see that data travels in one direction at a single point in time. For example, the ultimate Web 1.0 example is the flat webpage that acts as a brochure. With Web 1.0, the user enters the website and the website appears. There is an action and a reaction. Today, Twitter operates the same way. A member of twitter will post information and that information is read by all of the respective subscribers. Ultimately, the web is moving toward a model where data travels multi-directional at a single point in time. An example would be when all data that is relavant to a user is automatically accessible to individuals.

Imagine the scenario, your boss wants you to go to Houston for a meeting. The moment you accept a meeting request in your inbox all of your travel, hotel, ground transportation, etc. is instantly and automatically arranged at the times that are optimal for your needs. All you have to do is pack. We are not there yet but who knows, perhaps we will get there before Web 5.0.

Friday, March 6, 2009

Business Model Please!

These days predicting a downward business trend is about as clairvoyant as predicting that the North Pole will be cold! However, there is one trend that appears to surfacing that will likely have an significant impact on the Webosphere. The firms that provide the lifeblood for many web 2.0 companies are beginning to succumb to the pressures of a weak economy. The financial vehicles such as IPO's and Mergers & Acquisitions often used to "prop up" social networking companies that typically have no business models, have been significantly hampered by the declining equity markets. Two companies that come to mind are Facebook and Twitter. Both of these companies are immensely popular and growing exponentially but are lacking one thing; a business model. This fact was very well verbalized by the co-founder and CEO of Twitter, Evan Williams, during his interview with Charlie Rose last week. Below is a clip of the interview:

In 2007, Microsoft invested $240 million into Facebook which at the time was estimated by Microsoft to be a 1.6% stake. This valuation infamously placed Facebook worth $15 billion. In July 2008, Facebook valued itself at $3.75 billion. That means that Microsoft's $240 million investment is worth less than $60 million today. Twitter was valued at $250 million in January 2009. It was also reported that Facebook wanted to acquire Twitter in November 2008, for $500 million. Fortunately, for Evan Williams, he was able to profit before the meltdown by creating the blog application that this blog belongs to,

Despite advertising revenues that Facebook introduced in 2007, it was leaked on the Internet that Facebook had 2007 revenues of $150 million and was $150 million cash flow negative. Twitter on the other hand has absolutely no revenue model. At some point, investors are going to push for a return on their investment which will pressure both companies to move toward an acquisition. With social networking ad revenues expecting to decline in 2009, the prospects do not look good for ad revenues to be the salvation for these companies. The other obvious possibility is to charge a fee for membership. It is unclear what effect a fee would have on the number of users. The outraged over the Facebook policy-change blunder proved that Facebook members can be very fickle.

Both Facebook and Twitter could have been acquired for tons of money before the economy tanked, but if they are unable to create sustainable business models, they might be wishing they had agreed to be acquired when the bidding was high.

Thursday, January 15, 2009

2009 Outlook

2008 is finally over! Time for new ideas, hopes and beginnings. I don't think there has been such a potentially pivotal time period on this planet since World War 2! So many things are happening at one time that reading the news is a dizzying experience daily. Where do we start? First there is Obama, then the global capitalistic meltdown, potential collapse of OPEC, more conflict and tension in the Middle East and the almost weekly reports of wealthy individuals who decide that suicide is better than being broke! What does all of this mean for Internet Marketing in 2009? I'm not clairvoyant but here is my take on what to expect in the coming months:
  • Yahoo! will Fade Away - The stage is already being set for Microsoft to finally take over Yahoo! However, the economy is so bad that it may not be economical for Microsoft to make such a sizable investment unless Yahoo! becomes a total "fire sale." If Microsoft does not purchase Yahoo! it does not appear that it can survive the fight against Google. It isn't clear is if a Yahoo! acquisition by Microsoft is enough to eat away significant market share from Google. The outlook for both companies is not positive. Additionally, the landscape of search is changing so quickly that Yahoo!'s fate might already be sealed. At the present time more searches are conducted on YouTube than Yahoo! I'm certain that Facebook searches are rapidly approaching search engine levels.
  • Online Video will Monetize and Standardize - Over 80% of internet users are viewing video's online. Online video as an advertising medium is significantly more effective than other forms of interactive media. The CTR for online video can be as hight is 35%. History has proven that where there are masses of people then dollars will follow. Emarketer is forecasting that online video ad spending will increase to $4.6 billion in 2013, up from $587 million in 2008. In order for that to happen Online Video must standardize its advertising formats. At the present time, no two online video promotions are alike. In the past 2 years there have been a lot of video syndication companies appearing on the web which have helped to standardize the promotional format. I expect this trend to continue this year.
  • Government will Embrace Technology -For the first time in US history we have a President who is addicted to his Blackberry. Another first is witnessing Internet Marketing propel an individual into the White House. If anyone still questions the power of the Internet as a promotional medium then I have a bridge to sell them. I expect the Obama administration to continue to embrace the Internet as they settle into leading the free world. For the first time the US executive branch will have a Chief Technology Officer. There will be both positive and negative implications for having a tech savyy government. The positive: The internet will continue to stay "free." Additionally, barriers will be lowered for conducting business on the internet. The Obama team has already announced that they will inject billions of US dollars into communications related technology. The negative: State governments and Federal governments will likely work more closely together and the "big brother" phenomenon will slowly become more of a reality.
  • Touch Screen Trend will Phase Out Again - We can thank Apple introducing the iPhone and the iPod Touch for creating this Touch Screen craze. We've been down this road before with the Z80 Computer (1984) with its flat keyboard; the Palm Pilot (1997) with is touch screen UI; the Tablet PC (2001). When will people learn that a touch screen is a poor substitute for a keyboard that exists in 3 dimensions. I will admit that there are some applications where a touch screen is perfectly acceptable, but not where significant typing is required.
  • BtoC E-Commerce will Flourish - Everyday it is becoming increasingly clear for retail establishments that unless they add signicant value to the products and services they sell, it is very difficult to turn a profit with a bricks and mortar storfront. At the present time e-commerce is only 3.4% of total commerce but this number has more than doubled in the last 5 years. Since information is readily available on the web, all products have become essentially commodities. The only reason to go to a "store" are: 1. If you have an immediate need for a product (ie. grocery store, drug store). 2. To obtain a physical social experience (ie. movie theater, restaurant, coffee shop). 3. To save money (ie. walmart). Otherwise, it usually make sense to purchase online.
  • Social Networking Ad Revenue will be Flat - It is really facinating to me that the most popular forms of media seem to consistantly have relatively low advertising revenue. This is certainly true for Mobile Phones with over 2 billion users worldwide and only $2.7 billion (USD) in ad revenue. Facebook alone has over 150 million members but social network advertising was $1.2 billion (USD) in 2008. When you compare that to Television which has ad revenues on the order of $45 billion (USD) it is clear that the newer forms of media a miniscule in comparison. The big question is why. It is my opinion the passive nature of TV contributes to its effectiveness as an advertising medium. Interactivity doesn't always translate to effective advertising unless the product itself can become the promotion.
Regardless of what actually happens, 2009 will most certainly not be overlooked by history. Lets make it a great year!!