I try not to concern myself too much with Alexa’s ranking. We all know its shortcomings, but it’s there, it’s free and many people look at it.
We’ve been really growing traffic, October saw growth of 70% and it’s paying off: today when Alexa updated we earned our highest 3-month moving average rank ever. That’s the number that appears in the toolbar. As measured by one-day traffic for the past 24 hours, we’ve already gone as high as 8,000th place, but moving the 3-month moving average takes a while.
To some extent, Alexa is like a stock price: you can’t really look at it day in and day out; you just have to make sure that [beware: violin music coming] you have right strategy, right people and execute.
Frankly, all we should concern ourselves with is:
- traffic
- content & technology
- sales & costs
- people.
The last one is always a wild card because people are not rational always, but that’s what makes this all fun.
Anyway, back to work.
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WatchMojo NewsletterInteresting to see Hitwise mention that Photobucket gets a lot of traffic from Myspace… also, can we please stop including Wikipedia in the lot here? What does Wikipedia really have in common with Myspace, Facebook and others?
This is wonderful news in more ways than one.
Rupert Murdoch’s News Corp. expects Fox Interactive, the unit that includes MySpace, IGN and other online properties, to break even during fiscal 2007, senior executives said late Wednesday during the company’s fiscal first-quarter conference call. During the latest three months, the division that includes Fox Interactive saw revenue climb 45% to $395 million, an increase driven by greater advertising sales and higher rates for key ad displays, said Fox Chief Operating Officer Peter Chernin.
Read more.
I own shares in MIVA. I wish I didn’t. MIVA was one of those stocks in a rapidly growing field that was trading at 1 time sales, when its Price to Sales ratio (P/S) fell to 0.75, I bought some shares. Its P/S now at 0.50.
One thing I liked about it was that it’s got a nice foothold in Europe and is one of those cheap stocks that could lead to an outright acquisition.
I became familiar with Findwhat in 2000 when I worked in the search engine space. Over time, MIVA - or as I knew them, Findwhat.com - cleaned up its traffic, image and rode the search wave to become a $400 million market capitalization firm.
The stock peaked at a price of $27.30 back in 2003. Back then, analysts began to see the monetization levels of search traffic and investors were piling in money into all search players. I knew Findwhat should not be a $400M market cap player, but there was a shortage of places to place your money in the industry, Google was not yet public after all.
In the years that ensued, the stock tumbled. Partially because once Google went public, it sucked a lot of money out of other search engine stocks and into Google. But also because Findwhat’s traffic was of low quality and it sought to clean its client list, doing so lumped off a lot of traffic and revenue.
Anyway, I am not writing to talk about how good or bad Findwhat/MIVA is, I am writing on the issue of issuing guidance and managing investor relations.
I fully encourage management to come out and warn investors and analysts if their upcoming results are not good. It will hurt a bit when they do, sometimes a lot; but it will hurt a lot more if they surprise the market when they announce bad results when they release quarterly reports.
MIVA took it upon themselves to “guide higher” back in Sept. 21, the stock rose $0.57 or 20% in one day to $3.40. The company basically said that revenue will be higher than the previously announced range of $38-40 million.
Great, good for you.
Today the stock market closed and MIVA ended the day at $3.18. Lower than what it closed at on September 21. Had they not issued guidance, would the stock have been higher? No, probably not. Would it be lower? Probably. How much lower? Well, the stock’s 52-week range has been $2.02 - 5.99, so I don’t know how much lower it could have gone.
But, when the market closed, it announced revenue of $43.3M. The stock is up some 5% after the market close, at $3.40. But it loss widened. So the market might only look at the widened loss, since the upside in revenue was expected.
Was it wise for them to say anything in September? Had they not, wouldn’t the stock be much higher today, giving them a nice end of year momentum?
Managing investor relations is an art far more than a science, but if you have some unexpected good news, aren’t you better off to keep the market guessing and really impress everyone when it’s time?
After all, when you’re competing with the likes of Google, MSN and Yahoo!, the best type of PR is smart IR.
Google will attempt to carve out a piece of the radio advertising business. It failed pretty miserably in magazines last year, and this week announced a foray in newspapers. I certainly give the brass at Mountain View a lot of credit for being creative and considering new media. After all, Google will have to keep the hits coming and since it has such a massive reach online, justifying and further boosting its stock price will take a foothold in other media.
I worked in radio for three years while I was also working on the Web. It’s a different ballpark altogether. I think it’s good that Google recognizes its limitations and is hiring radio people (and even paying 50% more than radio stations are) but it might be a bit premature to do so because at present time, Google has little or no radio inventory.
That is foolish. Of course, Google can gamble on this.
Radio is a $20 billion advertising industry. Clear Channel is about top go private, at about $40 a share, or $20 billion (it’s rumored that Google might invest in the consortium that will take it private).
Clear Channel is the clear market leader and holds a 10% grip on the industry in terms of sales.
So if 10% of radio ad sales - of $2B per year - translates to a $20 billion value (or 10 times revenue), and Google can get 1% of the radio ad market - or $200M - at the same multiples, this translates to an added $2B in market value for Google.
Considering the search giant boasts a $140B market value, does a potential $2B increase in market value justify all of this effort? Of course, it’s good to go against the grain when assets are undervalued and underappreciated… but unless Google can notch 10% of the radio ad market (which is not likely), add $20 billion in market value and create considerable value for shareholders, they’re almost better off focusing on the Web which is growing much, much faster (or, if you really want crazy talk, buy XM or Sirius)!
Get Google Maps to identify these countries and run an anti-spyware program, I’m sure they’ll be quarantined and lovers of the Web in no time.
Who are the 13 countries:
Read more.
In any M&A, money is set aside for reasonable things. When company A buys company B and company B has considerable accounts receivable, a portion of the money is left in escrow in the event that a higher portion of the A/R does not get collected. It’s just that simple. Once the A/R gets collected, the escrow amount gets released and the sellers get the money. I went through that when my old company was acquired. I recall us frantically working diligently to make sure every penny got collected.
In the YouTube case, it is unimaginable for Google not to have earmarked some cash for potential legal bills as well as settlement deals with the record labels and film studios.
I am certainly not saying that any money that gets spent on legal and paid out in settlements gets taken out of Chad Hurley and Steve Chen, Sequoia and other shareholders proceeds, I do not think for a second that YouTube and Sequoia would have accepted such a deal. But I am certain that what Mark Cuban posted on his blog makes a lot of sense.
So why is Eric Schmidt saying that this is not true? Because he would open a can of works and every single content owner would rush to Google’s HQ.
In fact, I could be wrong, but I think Mark Cuban posted that “rings true email” for some vindication after he said that only a moron would buy YouTube only to see Google “show up for casting.”
Interesting points, stats and quotes from a Business 2.0 article about whether or not we’re seeing a bubble.
1 - Few Companies Going Public
I think one major positive about this time around is that you are not seeing bad companies go public. It’s not like public investors are showing an appetite for bad companies with no track record. That removes a major driver in creating a bubble environment. In the 1995-2000 era, companies would get VC money and file to go public within a year, sometimes less, that created the bubble environment.
Very few companies have gone public, even solid companies like IGN (disclosure: I used to work there briefly) that filed to go public opted for a sale. Of course, IGN was not profitable, so maybe that is why.
2 - Acquired Companies Are Quality Companies
The outliers that get acquired at high prices really are the top performers who manage to either develop a superior technology or build up an audience (YouTube, MySpace). Usually it’s the latter. The former (technology) is relatively cheap to develop, with open source technology more prevalent than ever, it costs little to build and scale something. We built a search engine, and a good one at that at a fraction of the price that the giants spend on search. Of course, our products are not directly competitive to theirs, they’re complementary. So in many cases, companies do not even raise financing, they grow and eventually independently; this is another reason why it’s harder for a bubble to form.
The equivalent in real estate is cheap financing, easy mortgages and an excessive speculative environment (flippers). It’s not a coincidence that the bubble moved away from the stock market onto the real estate.
The best signal that we’re not in a bubble is that the VCs of even the most successful firms realize all of this and the exits they encourage help these companies become divisions, applications or features within a greater company. Think YouTube, Reddit, Myspace and many others.
Of course, that’s the exit.
3 - VC Activity Far Lower than 2000’s Levels
When it comes to entry points, sure, VCs are getting giddy. But giddiness alone on that front does not suggest a bubble. If the VCs have money to burn and see entrepreneurs they get excited about, why not place/accept the money if you’re a VC/entrepreneur.
I don’t like to say anything negative about others, but yesterday I read than Zvents, an events planning company, got $7 million in funding. At face value, that is absurd. Then again, there’s a lot under the hood that gets VCs excited:
- Ajax
- local search
- behavioral targeting
Ajax is a wonderful tool that is commonplace in many applications (Gmail being one). You see that local search is a $1B market, and total local advertising is a $100B market, so funding an “online event planning startup” - that can tap into local search for example - is not crazy per se. I personally think it’s still a lot of money for what they do.
VantagePoint Venture Partners led the round with previous investors Red Rock Ventures and NetService Ventures Group participating; David Carlick of VantagePoint Venture Partners and Laura Brege of Red Rock Ventures are joining the Zvents board. Again, these are experienced VCs, but you know the saying: “if everyone else jumps…”
What is a Bubble Pocket?
All to say, I think this article has great points but the bottom line is that there will probably be “bubble pockets” in segments.
Earlier this year, I saw a bubble pocket in video file sharing sites. Google buying YouTube popped (read corrected) that segment. If a VC wants to invest a video file sharing site right now, mark my words: they’re not demonstrating “smart” money traits. Again, they know something I don’t but Google + YouTube will make it hard for others to have any traction in the space. The other, existing players in video file sharing will have to adapt. So the market auto-corrected itself. Will there be more file sharing sites getting money? Of course. But less and less and less.
Right now, you are also seeing a bubble pocket in social networking as well. The analyst in the article below is 100% correct: social networking is a feature, not a company. There are more than enough social networking “companies” out there, there are even those who supply social networking applications, features and tools that any company can include on their site (though that does not mean they should).
4 - Emphasis on Cash Flow Profitability
But, these things correct themselves now because there is so much money online that economic determinism leads a company with the wrong business model to adapt and change to chase the deals to bring in money. In other words, just because a VC is on board does not mean that a company will push back profitability, if anything, they will have to become cash flow profitable sooner.
This, again, is another reason why we’re not in a full-blown bubble.
Enough pontificating, read on:
Venture firms have put a total of $455.5 million into 79 [Web 2.0 companies] during the first nine months of the year, according to a study released on Nov. 7 by market researcher VentureOne, which is part of Dow Jones & Co. That’s more than twice the amount of money that was invested in such companies during the same period in 2005.
(…)
Sequoia has been one of the most active investors in Web 2.0 companies. According to VentureOne, the firm has put money into 14 such deals between 2001 and this year. Only Draper Fisher Jurvetson and Benchmark Capital have had more, with 15 each.
(…)
“This is scarily like 1998 in some ways,” says David Card, a senior analyst with Jupiter Research. “There’s easy money out there, and there are some bad ideas getting funded.”
In particular, he points to the dozens of social-networking sites that are popping up, in imitation of MySpace. “I’m highly skeptical about social networking,” he says. “I think it’s a feature. It’s not a business.” MySpace, he points out, isn’t even that good as a social-networking site. Rather, “it’s building itself into a youth portal,” he says. “It’s a Yahoo! for youth.”
Some $19.5 billion was invested during the first nine months of this year, according to VentureOne, indicating that total investments for the year will come in at around $26 billion. That would be up slightly from the $24 billion last year. But it’s still a far cry from 2000, when the venture firms threw $95 billion into companies.
Read more.
A couple of weeks ago, Real Branding’s Cory Treffiletti wrote something about video content that made me want to send him a gift, it essentially validated and reinforced our business model at WatchMojo.com. To see what he wrote click here.
Today, he writes something on trends in 2007. It’s worth a read.
Read more.
See what we wrote on 2007 trends earlier this year here.
“This is why we believe Internet companies that enable and promote revenue generation from their content should be viewed as critical allies of, not necessarily competitors to, traditional media companies. (…) The faster traditional media firms work toward partnerships focused on making money from content, the sooner they will be able to reap the benefits.”
Standard & Poor’s analyst Scott Kessler, in Business Week.
