Yahoo! is the king of diplay ads.
Google is the king of search ads.
Craigslist is the king of classified ads.
Who will be the king of video ads? Time will tell.
Video is set to become a $3B market by 2010, at a time when total online ads will become a $60B market. That’s only 5%, but why the obsession?
Tech Crunch’s Nick Gonzales published a fantastic, albeit incomplete, post covering some of the major players.
Not to be outdone, Jeremiah Owyang also has a good post on some of the players competing for measurement.
Let me let you in on a little secret: when I’m not pontificating here, I’m producing content, lots of it. Yes, I’m biased, for sure, but the key ultimately is content. Last100.com’s Steve O’Hear today wrote up on MSFT’s joint venture in live streaming and concluded that like everything else, it will boil down to content. I believe his exact words were: “In the end, as ever, content will be king.”
My guess has been that traditional TV networks will remain shell-shocked and torn between a) moving online quickly and risking cannibalizing TV revenue vs. b) protecting their offline business against cannibalization and thus missing out on the growth online.
The companies creating platforms for video ads are plentiful and frankly, it’s an expensive endeavor, so these companies need to be patient. Of course, the problem is that there have been, in my humble opinion, way too many companies funded by VCs. VCs, let me let you in on another secret, are not historically known to be patient.
As such, I think most of these companies will end up dropping the really long term interesting techniques to monetize video content for quick payoff tactics, which in turn will hurt the user experience.
Related:
- Has the pocket bubble moved to video ad networks?
- Understanding TV executives angst and envy
- 2021: Will Web Ads Surpass TV Ads?
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WatchMojo NewsletterComVentures, who screwed over Filmloop recently, add Zantaz’ terminally ill founder to the list of people they’ve backed royally. If you’re keeping tabs, Zantaz sold for $375M, but its founder William Bankert walked away with $675,000, or a whopping 0.18%. That’s right, less than 1/5th of a percent!
From VentureBeat:
ComVentures’ partner Roland van der Meer is one of the many defendants in a lawsuit filed by early shareholders who got next to nothing while the VCs laughed their way to the bank:
Some early investors and shareholders are not at all happy about the sale, because their ownership stakes were significantly watered down by what they say were aggressive tactics led by ComVentures. The reportedly terminally ill founder, William Bankert, will end up with only $650,000 or so from the sale. Former lawyer for the company, Gerry Niesar, has been fighting since 2004, accusing the company’s board of directors, including ComVentures partner Roland van der Meer, of rigging a fifth round of funding in 2002 to dilute common stockholders (including Niesar). According to Niesar, the board waited to take additional funding until the company was nearly out of cash: This led to a lower valuation and dilution of early stockholders like himself when the round closed that August. In fact, Bankert sold some of his stake in 2001, based on his allegedly misled understanding of the company’s future.
As usual in these sorts of cases, the details are complex. For the curious, here are just a few of the documents.
1. Series E dilution from 2002 financials
2. Memo comparing early 2000 with early 2002
3. Gary’s notes
4. Memo to Zantaz litigation committee
5. Gerry’s declaration
6. Ralph Mele Email
7.Declaration given June 2005Comventures partner Roland van der Meer was named as one of the defendants. We’ve requested for comment from Van der Meer and will update accordingly. The issue has yet to be resolved in court, but Niesar now tells us he and others are considering filing a class action suit against the directors, now that the Autonomy purchase has gone through.
Class all the way. Read more here.
MIVA, aka Findwhat.com, has almost tripled from its 52-week low. I had bought this stock when it began its long descent as a European/M&A play, basically my version of gambling money, frankly.
The stock seemed to be stuck in a rut, and there was a lot of reason for that.
In late August 2006, for example, it was trading for $2.30, today, it’s over $7 and more importantly, there is a spike in volume: just before noon EST something popped.
Is there any news? Anyone got a clue?
Disclaimer: long MIVA
Facebook is leveraging yesterday’s report that its traffic grew 89% year-over-year with a not-so-coy post by Aditya Agarwal on its blog asking whether it should a) invent its own search engine, b) tap into open source ones or c) partner up.
If you read between the lines, option d) is sell to one of the players in search.
It published some interesting stats which suggest it would be a Top 20 search engine if it wanted to. Some highlights:
Naturally, while the bloggers are singing the praises of Facebook, cynics would suggest that history will be the judge of the wisdom of passing up offers reaching as high as $2.5B last year. After all, monetizing social networking sites is not obvious, as we’ve pointed out, but monetizing search is braindead easy.
People search is a different beast indeed, but given that we have a tendency to search quite a bit for others, you can assume this is a large segment that Facebook has a lead in as the Database of Connections. Last year we mentioned that MySpace was the directory of people but MySpace dropped the ball there (disclaimer: Myspace is part of News Corp., my former employer). Facebook does not hitherto allow Google to index it, so this gives Facebook as advantage over Google, one of the many parties looking to buy it.
Today’s post suggests that Facebook is once again willing to listen to offers, perhaps one last time, before it files to go public. Because once it goes public, its financials will be made public and trust me, I don’t think its long term sustainable revenues are a match for its traffic.
When you see how much Google is building market share and winning points from Yahoo!, MSN, Ask.com and AOL.com, you have to wonder how much publishing this post will encourage one of these players to add a premium to Facebook. Don’t forget one major fact: these interested parties are guessing about what Facebook’s revenue will be from advertising as a social networking site (oh I meant “social utility) but as a search engine, that is easy.
There are reasons why Facebook should invest in search:
I’ve long said that any new media company that relies 100% on a partner is foolish, because search is strategic. The first asset we invested in was MetaMojo.com, then we completed the spectrum by creating communities and properties around it. Of course, the bulk of the value in Mojo Supreme is now WatchMojo.com, and StreetMojo.com and BloggerMojo.com add value too, but having MetaMojo.com is strategic and adds value as well.
In Facebook’s case, it will be a distraction for sure, but it will add considerable IP value and make it a complete media company. Look at Yahoo! and how long it took to build and acquire search, it was by using Google that it created its headache.
There are reasons why Facebook should partner:
- It will save time and money
- It can tap into existing database of ads
- It can monetize search queries overnight, strengthen its revenue base and revisit investing in inventing.
That being said, Facebook is clearly seeing itself as a competitor to Google, even though MySpace remains bigger. Investor Peter Thiel has said he wants $8B for Facebook, and Jim Breyer has said “they’re not for sale”. Both men are being coy, of course.
The flip side is that Microsoft has an advertising deal in place with Facebook, while there is a rumored $10M breakup fee, I am pretty sure that this is one area Facebook will have to tread carefully because just because you add a search box does not mean you will generate revenue a la Google. Google’s text ads command anywhere from 1 to 30% click-through-rate, whereas Facebook ads will garner much, much less.
If I search for someone, say John Smith, and he happens to be in LA, I will probably click on his profile and not the ads. It could be argued that if I have to fly to meet him, I’ll click on an ad for a hotel or plane tickets… but lay off the koolaid and ask yourself how common this Alice in Wonderland scenario will be relative to the sheer percentage of people who search for one another in the same city!
All in all, this seems like Facebook revealing that it remains an M&A target despite our prediction that it’s on the IPO route some time in 2008.
Related:
- Facebook 100M users, a matter of when, not if.
- Facebook OS: Be careful what you ask for.
- Facebook: IPO vs. M&A.
- Facebook’s 2008 to do list: File for an IPO.
- Should MSFT Turn its Attention to Facebook?
- Peter Thiel: Facebook is Worth $8B.
- Murdoch: “MySpace worth $6B”, if so, then break up FIM!
- Facebook to be worth $2.35B by 2010.
The Business Online says it’s a done deal, and a formal announcement will come next week:
Rupert Murdoch has succeeded with his $5 billion bid for Dow Jones, owners of the Wall Street Journal, according to sources acting for the Dow Jones board. Negotiations have been completed and the board is confident the terms of the deal will be accepted by the Bancroft family, which controls a majority of voting shares in Dow Jones, over the next few days. A formal announcement is expected next week.
(…)
Under the terms of this agreement, News Corporation will have the ability to hire and fire the top editors and publishers (a matter on which Murdoch would not budge); but a nominally independent five-person committee will have the right of veto on these decisions.
Murdoch and Dow Jones will jointly agree the membership of this panel, which will have the power to choose its successors—a crucial concession to the Bancrofts who are sensitive to the claim that they are sacrificing the Journal’s editorial integrity by selling to Murdoch. The Bancrofts have received extensive legal advice in an attempt to satisfy themselves about the durability of the editorial safeguards.
The arrangement is a tougher version of the one put in place by the British government when Murdoch bought The Times and The Sunday Times in 1981. Murdoch will have less control over the independent directors at the Journal than he does at Times Newspapers, where they are regarded as weak and ineffectual. But one source, acting for the Bancrofts, admitted privately that the Dow independent panel was only a “fig leaf” to facilitate the sale and that over time Murdoch would get round it.
John Biffen, the Tory cabinet minister who signed off on 1981 deal to establish independent directors for Times Newspapers in London, has since conceded that the arrangement was also a “fig leaf” designed to allow the sale to proceed.
Of course, there are stories countering this claim, but laced with a 67% premium, this one had Sold written all over it. We’ll see what happens over the weekend…
On May 30th I commented that aQuantive was sitting at $5B, even though MSFT had agreed to pay $6B for the company.
Per share, MSFT agreed to pay $66.50 (an 85% premium) even though as recently as May 30th, the stock was only at $63.75.
Today - July 6th - marks the end of the anti-trust period where if anyone had an objection, they could raise it. The deal cleared that hurdle today. As a result, AQNT is up $1 because all that remains is a vote by AQNT’s board, and unless they suddenly grow an aversion to being stinking rich, they will approve.
The discrepancy of $1B in the market cap of AQNT after the deal was announced and when the deal will close was due to uncertainty about whether or not the feds would approve it. Sure, while DCLK/GOOG combines two advertising leaders, in this MSFT is buying something new in a business it’s not in. The antitrust issue is and was, somewhat moot.
That is why I did not think the market was pricing this correctly, of course, the market is usually right.
Regardless, most people knew that this one would not backfire and the feds would not object, as such, if anyone had money sitting around, they could have bought a bundle of shares and make an almost riskless profit (arbitrage) and I suspect many did. There is, after all, an entire subset of the investment community that partakes in merger arbitrage, and this was one of the more obvious, riskless opportunities.
If you would have spent $10M and bought roughly 150,000 shares, you could have made $415,000 in profit in a couple of months ($66.50-$63.75 x 150,000). That’s not bad at all.
Someone should really hand me a billion dollars to manage.
Disclaimer: I own shares in MSFT. This should not in any way be construed as investment advice, is for entertainment purposes only.
This morning, I covered Skinker/MSFT’s Livestation product, which strives to stream live video online. TechCrunch notes that: “While it is certainly an excellent demonstration of the flexibility of Silverlight, its not even close to being productized and launched. For now, consider it little more than a pretty video.”
Don Dodge, of MSFT, lists down the product benefits and specs:
It should be noted, or asked, even if the technology was ready to go, how many TV companies would jump on this? Sure, users might want to be able to watch things live (sports, news, etc) online via laptops, PCs etc., but the user experience is not the same. But say that’s moot, would the rights-holders really welcome this?
TV is a $75B ad market, the Web is a $17B market, and video online is less than $1B. It could be argued that such a product would accelerate the rush of ad dollars from TV to the Web, but reread that sentence and ask yourself once again if TV media firms would welcome that?
After all, on TV, the major networks command the lion’s share of ad dollars; online, not so. Not at all in fact.
Maybe the Web will shrink advertising on TV over time, and not just surpass it in 2021. Now you sort of understand the envy and angst if TV executives, don’t you?
Microsoft, already taking on Sony, Apple, Google, Yahoo! and Oracle just opened a new front in Web video, with Livestation. The company already has the Soapbox platform for video sharing and viewing online, but now it is taking on Joost with LiveStation, a product born out of a partnership with Skinker, who in turn used technology out of Cambridge. To clarify, it’s not in fact MSFT who is taking on anyone, it’s the team at Skinker, who has, as minority shareholder, MSFT.
Here is a demo:
I think live video is definitely something that has a lot of value for news organizations, sporting events etc., the idea to use P2P to stream live footage is intuitive, since after all you can use P2P technology to make phone calls (Skype, basically).
Of course, I think live video is still a bit off in terms of concept vs. reality, since non-live video watching is still something of a challenge, but indeed if anyone can solve that challenge, then they might in fact have a “everything-killer” in their hands.
The BBC - which has been doing radio since 1922 and TV since 1932 - never ceases to amaze me. I say this from an arm’s length and I don’t consume nearly enough of its content as I’d like, but listening to its key people, you sort of understand that it’s just a media company that knows what it’s doing and doesn’t hide it when it does something wrong or could do something better.
Bear in mind we produce a lot of video (approx. 4,000 clips, 100 hours) and have learned a lot. We’re also on the final steps of a complete redesign/relaunch. You’ve noticed the blogs and other areas, we have a few sections left, notably the 4,000 clips at WatchMojo.com. Point of the story: I totallu hear where the BBC is coming from and think their decisions make sense.
The head of BBC News Interactive wants the corporation to carry less online video and instead concentrate on improving the quality of its offering.Speaking at the Future of News Conference in London today, Pete Clifton told delegates that he wanted video that complemented stories, rather than repeating the offerings of streamed News 24 or the content of an accompanying text story.
“What I think we need do,” he later told Journalism.co.uk “Instead of putting up hundreds of pieces of video every week, is just to be more focused. We want to give them a higher profile so we can get to the point where we can embed them.
“Once we are doing that, I don’t think we can afford to disappoint the audience. That’s not to say that stuff is badly made, it may just not necessarily complement the text that we have written and it may not just suit the platform that it’s on.”
Video embedded into stories, he added, was proving to be popular with audiences in early experiments, as they tended to dispense with the traditional news format, instead just showing the footage necessary to enhance the text story sitting beneath the embedded player.
(…)
“With the embedded video, up to 40 per cent of people were watching it. In its normal format, when you watch it in a different place [in a standalone player], it’s about two per cent.
“How you present it will really transform this [popularity of web video]; broadband is a huge factor, but another one is the type of video that we put up.
“What irritates the hell out of people is if they click a story which says ‘Britain buys 100 new tanks for the war in Afghanistan’ they then click on the video and it’s just a bloke standing in Whitehall saying ‘they’re going to buy 100 new tanks for the war in Afghanistan’. The viewer could say ‘you’ve wasted my time’.
“We have done a lot of that. We have put up hundreds of pieces of video on the news site and too often they have replicated what the story has already said.
“We should think more about what that page does in the round and come up with a piece of video that absolutely complements the text… we should do less video but be much more focused on how it works and give it a higher profile where it can work alongside the story.”
Read more.
