Publicis acquired Digitas… Trends and the like… December 22, 2006
Posted by Bill in Search Marketing, traditional advertising.add a comment
THE FACTS:
· The digital advertising world, including search marketing, has brought a more detailed financial view of making media accountable to marketing departments. Companies are embracing this.
· Overall advertising is growing 4-5% in the US next year, digital advertising is growing over 30% annually (some have it as high as 50%)… Digital marketing is stealing share.
· Clients are increasingly looking to integrate digital & offline advertising campaigns, and measure the interaction effects
· Publicis recognized the ongoing shift of dollars towards digital marketing, and like all leaders… shot their arrow ahead of the target.
THE MARKET RESPONSE/ AFTER-THOUGHTS:
· The Publicis acquisition will NOT fuel an onslaught of copycat acquisitions
· Other online advertising companies don’t measure up in terms of Digitas’ long-term relationships with large clients and synergies with a major traditional advertising group
· Everyone has been focused on aQuantive when they comment on the above, which seemingly makes sense since they are now the sole publicly-traded digital advertising agency.
MY OPINIONS:
· There is a reason why aQuantive is trading at a 43.9 P/E, where as the traditional ad agencies hover between 16 and 29 multiples. That reason is two-fold: their technology foundation and their focus on digital advertising.
· The focus on “Digitas’ long-term relationships with large clients and synergies with a major traditional advertising group” as an acquisition synergy for other acquisitions in the space is off. A sound and scalable technology foundation is imperative to managing digital marketing and search marketing campaigns profitably. The handful of major agency holding companies own the worldwide advertising spend and all the customer relationships. They don’t need to buy customer relationships… they have them and the trust of them. They need the digital assets to capitalize on the shift in spend.
· My opinion: the holding companies should not be focused on acquiring aQuantive or paying a premium for customer relationships, they need to be focused on acquiring smaller, privately-held companies that have build leading-edge technology platforms, have embraced a culture where the statistician is just as important as the creative director, and whom the large holding companies can bring their pre-existing customers to the digital upsell.
We’re Not a Technology Company Anymore, Toto December 14, 2006
Posted by Bill in Google, Search Marketing.add a comment
This morning’s Wall Street Journal had an article called “Google Tests New Ad Offerings–But Will Advertisers Follow?” by Kevin Delaney. It serves as a chronicle of Google’s past, present, and planned future forays into offline, traditional media. Will they work? And will advertisers go along with them? Not unless Google becomes a totally different company…
What Google does well, better than anyone in fact, is PPC search advertising. It is possible for a technology company to excel in PPC. In fact, that may be the only way to do it. PPC advertising is a numbers game; it’s more science than art. It’s possible for advertisers to use an automated API to buy their keywords, write their simple ad copy, and track their results on a more granular level than any advertising media in history. Granted, the tracking is not one hundred percent accurate, as searchers may click on ads multiple times from different computers before converting, or they may convert at a bricks and mortar store, but the tracking is accurate enough to allow advertisers to optimize their campaigns with minimal help from Google. When it comes to PPC, Google is therefore able to focus almost entirely on their technology, while the keywords more or less sell themselves. Google’s got the eyeballs, and it can guarantee advertisers that, if they’re smart, they will make money by buying keywords.
In contrast, offline media does not sell itself. It is sold via a personal relationship, with a big smile and lots of martinis, and often comes complete with plans that include useless remnant inventory. If advertisers want a spot on American Idol, they often have to buy a billboard in the middle of nowhere that will get them a poor ROI. Traditional ad networks can’t guarantee results the same way Google can in PPC, they can only offer rough estimates of reach, threaten demurrers with loss of market share to their competition, and, again, smile real big. Unlike PPC advertising, it is not possible for a technology company to do well in this space. You need to be a media company with a great sales team and lots of killer content. It’s far more art than science; an automated API simply won’t be able to cut the mustard.
One thing Google mentions in Delaney’s article is that they can “track” response to traditional ads simply by examining the resulting search traffic. That can theoretically enable advertisers to gauge the effectiveness of their ads, and thus optimize accordingly. However, although it is a well known fact that traditional ads drive search behavior, there are far too many gaps between a traditional ad and search traffic for this measurement to be sufficiently accurate to sell itself. Consumers may see the ad and go search on another search engine, or they may see another ad that the advertiser didn’t buy through Google and that ad may drive their search behavior. Or perhaps they saw the ad and forgot about it for months until the advertisers’ products or services could benefit them, and only then do they turn to a search engine. All the problems that exist in PPC but are too insignificant to tip the scales in the art/science balance are magnified in traditional media—magnified to the point where, even with tracking search behavior, art still trumps science.
So can Google become a media company? Certain signs indicate that they are moving in that direction. They now have a
New York office, a lot of lawyers, and are bulking up their sales team. They certainly have killer content, and, especially with the purchase of YouTube, a burdensome load of remnant inventory. Of course, right now, Google is so profitable that they don’t have to force advertisers to buy space on un-monetizable user-generated videos. However, when PPC advertising’s growth slows (as it inevitably will) and Google’s revenue starts to fluctuate along with the rest of the economy, they may be forced to sell some of their junk in order to stay afloat and meet Wall Street’s demanding expectations. So yes, Google can become a media company, but don’t expect it to revolutionize traditional media in the same way that it revolutionized online media. If Google is successful, it won’t be the Google we know and love. The new media baron will be the same as the old media baron.
The Genius of Yahoo’s Reorg December 11, 2006
Posted by Bill in Search Marketing, Yahoo Search Marketing, online marketing.add a comment
Last week’s announcement of a Yahoo reorganization wasn’t necessarily a surprise. Yahoo’s been hurting for a while now; and some kind of streamlining has appeared inevitable–especially after Senior Vice President of Communications Brad Garlinghouse came out with his “Peanut Butter Manifesto,” in which he complained that Yahoo is spreading itself thin, like peanut butter on toast. What’s surprising and delightful is just how smart Yahoo’s reorg actually is.
The basic idea of the new structure is that Yahoo, which even by insider accounts has become a sprawling, red-tape laden megastructure, will now become a sleeker, three-pronged business focused on Yahoo’s “three clients”: audience, advertisers, and publishers. The reorg is so smart because, far more than just shifting business units around, it tackles Yahoo’s most serious underlying problems of corporate culture.
Consider Yahoo’s troubles. On the surface, its chief source of pain seems to be that it’s gotten too big for its own good. One manifestation of that problem is product redundancy–which Garlinghouse discusses at length, pointing to overlaps like YME / Musicmatch, Flickr / Photos, YMG video / Yahoo Search video. A subtler version of the size problem is the oft-heard complaint that Yahoo does absolutely everything, but doesn’t really stand out anywhere. Businesweek’s Rob Hof sums up the problem nicely, complaining that Yahoo’s got “many services I want, even [those] I can’t really live without, but they rarely take them all the way to locking me in for good.” A third manifestation of Yahoo’s size is its burdensome bureaucracy.
But the fact that Yahoo’s grown too big is really just the symptom, not the cause. The cause of the problem goes to another problem that Garlinghouse points out: a lack of real vision. The reorg provides that vision for the company, and places it at the crux of the organizational structure. And Yahoo has correctly chosen the vision of a customer-focused business as its new guiding light.
Centering a business around customers might sound obvious; but at Yahoo, it’s a radical shift. Consider what CEO Terry Semel has told The New York Times about the restructuring: “Semel said,” the Times reports, “that when he joined the company five years ago, he focused on increasing the breadth of Yahoo products. Now, he said, the company is beginning a transformation to make itself ‘more customer-centric, not more product-centric.’”
Why has Yahoo been focusing on its own products over customers? Because Yahoo has become a business that’s focused on itself. Having more products means having a bigger, more powerful Yahoo, both in terms of offerings and in terms of market share. And a more powerful Yahoo is central to Yahoo’s core mission of becoming “the most essential global Internet service for consumers and businesses.” To understand how self-focused that mission is, compare it with Google’s vastly different one: “to organize the world’s information and make it universally accessible and useful.”
There’s nothing inherently wrong with a corporate goal of becoming “the most essential” player on the block. And that goal is what’s led Yahoo to ultimately become the most popular presence on the Web. But an excessive focus on personal power can also devolve into expanding the business for expansion’s sake–leading to spreading yourself too thin, product redundancy, and a large, unwieldy infrastructure. On a micro-level, a me-first/client second focus can also translate into infighting, turf wars, and a lack of loyalty towards the company–which are also manifestations of personal interest first, the client second (in this case, the client being the company itself). And as Garlinghouse describes in his memo, all of these problems describe Yahoo before the reorg.
Which is why the new reorg is a lot smarter than just a tightening of Yahoo’s current infrastructure. That could have been achieved by simply sharpening the focus on Yahoo’s already defined product categories like search, publisher, social media, and mobile. Instead, Yahoo’s shifted the entire business structure to become client-focused. Which is a real revolution, one that will gets to the core of Yahoo’s problem. A focus on customers fosters an emphasis on the usefulness of each product, and runs against the wasteful practice of creating an extra business unit just for the sake of having one; it calls for a focus on building quality products over amassing quantity; and it leads to an environment in which the entire business is focused on really getting things done–rather than on defending your turf or your piece of the bureaucracy.
Which is precisely what Yahoo needs now. And it’s why the current reorg is exactly what Yahoo needs to get back on track.
Why Yahoo Likes Newspapers November 28, 2006
Posted by Bill in Behaviorial Marketing, Search Marketing, Yahoo Search Marketing, online marketing, traditional advertising.add a comment
November ‘06 will go down as the month the search giants got serious about newspaper plays. Google has unveiled plans to enter ad management for newspaper classifieds across 50 papers; last week, Yahoo countered by entering strategic partnerships–starting with collaboration on job classifieds, but set to expand into Yahoo help with newspapers’ maps and search presences–for 176 newspapers’ online divisions.
When you think about it, the Yahoo move seems surprising. Newspaper moves make sense for Google, which has long expressed plans for expanding into traditional media; and which, besides, goes for over $500 a share and has money to burn on new initiatives. But Yahoo’s poor Q3 performance, probable eminent downsizing, and “Peanut Butter Manifesto” that looks to streamline Yahoo’s activities, rather than expand them, makes a sudden shift into newspapers seems odd. It’s especially odd in light of the tough times that newspapers currently face, making Yahoo’s move into newspapers a change of course right into an ailing industry.
So my question for this week is: What does a troubled Yahoo see in a beleaguered newspaper business? The answer to that question, of course, lies in local advertising.
It’s not surprising that Yahoo would feel itself lagging in local. From its roots, Yahoo has been a leader in the general online world, from search to e-mail to online content. But leadership in general online services is very different from leadership in the local markets. Consider search: while Google nearly doubles Yahoo’s share of overall search (Google has roughly 50% of all searches, to Yahoo’s 25%), Google leads Yahoo by only a slim lead in share of local searches (according to an e-Marketer study from earlier this year, Google holds about 29.8% of all local searches to Yahoo’s 29.2%).
That general search/local search split makes a good deal of sense, as broader channels operate in nearly opposite ways from local media. Most of the Internet–including search–is used to bring a wide, unknown world a little bit closer to you. That includes finding the Web site you don’t know about through search; it also includes letting you e-mail a friend you can’t speak to because you’re not in front of her. Services for the general Web focus on building better, smarter communication pathways to make a big world smaller.
Local advertising is something entirely different. Local channels focus on enhancing audiences’ participation in a corner of the world that’s already, quite literally, very close to home. Local media isn’t about making a big world small; it’s about entrenching people’s relationships with a world that already is very small. And so while winning in most Internet services relies on excelling at bridge-building across different locations and types of information, winning in local channels relies on becoming an extension of your particular locale. Google’s a powerhouse in global information-bridging, allowing it to take the lead in general search; but it’s Yahoo, which offers rich local information on its portal, that becomes a portion of users’ local experience, thereby reaping the rewards in share of online searches.
Yahoo understands this. And it also seems to understand that, at the end of the day, it’s newspapers that have the infrastructure to make themselves a part of the local scene in a way that globally-focused online players–including Yahoo itself–simply can’t. Newspapers have what Dean Singleton, CEO of MediaNews Group (which is partnering with Yahoo), refers to as “a huge sales force involving thousands of sales professionals”; they also have lots of local reporters creating enormous amounts of online locally-focused content. By tapping into those thousands of ad salespeople, Yahoo is able to capture local advertising markets it’s not built to capture on its own; meanwhile, by helping with the search presence of newspapers’ online content, it’s able to enhance the local results on Yahoo search (where that local content is now more likely to appear), without needing to create its own small army of local beat reporters.
In other words, Yahoo understands that it’s got two choices for expanding its local reach. It can either deliver more of its own local offerings–which will mean defying the Peanut Butter Manifesto by building a workforce to create more local content–or it can outsource its local workforce to the local experts (the newspapers), while doing what it does best as a global online service: serving as the network that takes information from the world’s many locations, and delivers that information to its users. By opting for the second choice, Yahoo’s managing to expand its local reach, while working less. Which is why Yahoo’s move into newspapers may look like it’s taking on more; but it’s actually a way to become more efficient by honing in on its core competencies. Far from being a dangerous expansion, that’s smart business.
Will E-Media Make It? November 20, 2006
Posted by Bill in Broadcast, Google, MSN Search, Online Auction Tips, Search Marketing, Yahoo Search Marketing, online marketing, traditional advertising.add a comment
Last week, advertisers got their first glimpse of the e-Media Exchange, the auction-based TV (and other traditional media) ad-buying exchange initiated by blue-chip advertisers like Wal-Mart, and powered by e-Bay. The Exchange is said to be ready to roll in Q2 ‘07; the advertisers involved got their first sneak preview last week. And as I’ve said many times before, the Exchange is a revolution whose time has clearly come.
But at the same time, it still isn’t clear whether the e-Media Exchange will actually thrive. That’a an open question; there are forces acting both against and in favor of the Exchange’s long-term survival.
Let’s start with the forces against. To begin with, the networks don’t like the Exchange very much; and if the networks themselves don’t go along, the Exchange won’t work (it’s the networks’ inventory that the Exchange is selling). The networks’ reaction isn’t surprising, as the Exchange was created out of advertiser suspicion of network double-dealing when it comes to ad pricing: auctions, the Exchange members feel, are a more accountable and transparent way to buy media. Meanwhile, something else the networks have a strong reason to dislike is the fact that an auction would wrest pricing controls out of the hands of the networks, placing it in the hands of advertisers.
Then there’s institutional culture. The Exchange is an attempt to replace the traditional networks’ culture of lavish upfronts and martini lunches during ad buys. But while martini lunches might not foster transparent pricing, they’re an important aspect of networks’ tradition and corporate culture–and old traditions die hard. That’s especially true amongst large corporations, and the traditional networks happen to be large corporations (or pieces of large corporations).
Of course, martini lunches really do serve a valuable purpose. Television advertisers are spending enormous sums of money; and there’s a strong argument that large purchases are best done face-to-face. Even in the search world, the engines have reps who handle ad spend for larger clients, despite the fact that the actual ad purchases are made via online auction. And if there’s a need for a human interaction in the online auction of search, there’s no reason the same wouldn’t be true of online TV ad buys.
Finally, those behind the Exchange may have made a tactical mistake in declaring that they’ll start the Exchange as a place to buy remnant inventory. That makes sense politically, as the networks would never have agreed to let the Exchange start out by managing anything bigger that remnant. But the move also ignores a basic principle of how auctions work, and that’s a problem. To paraphrase what I’ve said many times, auctions are competitions over specific items–and to create a viable arena for those competitions, you have to offer something that people are interested in fighting over. But remnant inventory is definitionally the inventory that nobody wants; that’s not the kind of stuff that creates bidding wars, and so it’s not the stuff that makes for viable auction marketplaces.
OK, now why should the e-Media Exchange work? Because the auction networks have a record of creating clear and fair pricing. That kind of environment for buying TV spots would be an attractive change for advertisers who crave greater transparency in their ad buys. And if the advertisers are willing to fight hard enough for it, there’s definitely a chance that the networks will go along with the advertisers’ wish.
Meanwhile, the Exchange has made a smart move in deciding to start the program on cable TV. Cable TV is subscriber-based, which means that cable networks have demographic, geographic, and/or psychographic information that the standard networks don’t. That kind of data creates opportunities for the networks to slice and dice ad inventory in ways that clearly showcase each slot’s value. That, in turn, allows networks to charge more for the given slot, which is good for them; and it will also be able to drive more bidding wars over any given slot, which is good for the longevity of the Exchange, which is good for the advertisers. And initial success in a cable TV run will make the Exchange an easier sell to the larger networks, too.
One final note here: There’s no reason to assume that the Exchange is a guaranteed home run, just because it provides auctioned ad buys. Google and Yahoo have clearly shown that auction-based advertising can be a highly viable ad model; but there are plenty of auction media outlets that you haven’t heard of, simply because they died along the way. And whether the Exchange will become TV’s Google, or the next cutting-edge idea that lost because it was too ahead of its time, remains to be seen.
Why Yahoo Won’t Face Google In Traditional Media November 13, 2006
Posted by Bill in Google, Search Marketing, Yahoo Search Marketing, traditional advertising.add a comment
With Google announcing that it’s launching both a newspaper advertising program and contextual radio ads, I’m left wondering if Yahoo will ever follow suit, rolling out a traditional media arm of its own.
For now, obviously, Yahoo in traditional media is out of the question. Yahoo’s facing tough times after poor Q3 performance, and it’s not in a position to extend its reach as dramatically as Google has. But that doesn’t mean traditional will be out of the question forever, and it’s a worthwhile question to ask.
I’ll save you the anticipation and get to the answer right away: the answer is no, absolutely not, Yahoo will never enter the traditional advertising space. I’ll explain why that’s so, but I’ll need to take a detour through the very non-traditional channel of the mobile Internet.
Along with Google’s new traditional ventures, recently both Google and Yahoo made advancements in mobile. Through Gmail Mobile, Google launched its e-mail service into the mobilesphere. Google also joined forces with Samsung and wireless provider Helio; together, the three now provide a satellite-powered Google Maps that helps you locate people. Meanwhile, Yahoo was pushing mobile ahead in a different direction: you can now deliver display advertisements via Yahoo Mobile.
These are very different paths to making mobile better. Yahoo’s mobile display ads will help mobile directly, immediately making it more valuable for advertisers and for Yahoo itself. Google’s mobile advancements, on the other hand, are more indirect; they’re focused on using mobile to get more value out of other channels-specifically, e-mail and social networking technology.
That distinction is consistent with the overall Google and Yahoo mobile strategies. A visit to google.mobile.com shows that Google Mobile services are essentially Google’s core online offerings (Google Search, Gmail, Google SMS, Google News and Google Maps) served up to your mobile device. That’s very different from mobile.yahoo.com, through which Yahoo Mobile provides online standards like e-mail and search, but also offers very mobile-specific items like mobile screensavers and ringtones. Again, Google’s using the mobile medium to get more use out of preexisting non-mobile channels; Yahoo, meanwhile, is embracing the mobile channel directly.
That’s a difference that reaches far beyond mobile. Actually, it’s a difference that runs as deep as each company’s mission statements. Google says it exists to “organize the world’s information and make it universally accessible and useful.” What that means in practice becomes clear when you look to Google’s oldest and most popular product: Google Search. Search organizes information and makes it accessible; more important, though, it creates that accessibility and organization by using a new channel (search) to improve the accessibility of an older one (the Internet). Which is the same strategy that we see Google using in Google Mobile.
Yahoo’s stated goal is different from Google’s. Yahoo aims “to be the most essential global Internet service for consumers and businesses”; it’s looking to be the world’s most powerful new-media empire. That goal makes each new media channel valuable in its own right, as it’s one more potential piece of the empire that Yahoo is trying to build. That emphasis on the channel itself is why Yahoo’s mobile strategy focuses directly on the mobile sphere by offering ringtones, and why Yahoo has built its own enormous publisher network–while Google’s publisher-related activities are limited to searching publisher sites and advertising on them.
And it’s this difference in goals that explains why Google’s a natural fit for the newspaper business, and why Yahoo isn’t. Running newspaper ads might be a divergence from Google’s stated goals of organizing information, but Google-managed print media is very much in keeping with using newer media models to enhance older ones. There’s really not much of a leap from using search engines to make the Internet work better, to using search thinking to make traditional advertising work better. Both tactics are about using one channel to improve the next.
But Yahoo isn’t interested in improving older media. Yahoo is focused on dominating in newer media. Which is why Yahoo would really have no interest in traditional advertising, even if the option were open to it. And it’s why Yahoo won’t enter the traditional space, even after it gets its house back in order. And finally, it’s why the underlying differences between Yahoo and Google are starting to cause the old online rivals to drift further and further apart–and why Google and Yahoo might not be rivals anymore in Web 3.0.
How Microhoo Could Beat Google November 7, 2006
Posted by Bill in Google, MSN Search, Online Advertising, Search Marketing, Yahoo Search Marketing.add a comment
LAST WEEK, MERRILL LYNCH ANALYST Justin Post revived a suggestion that he had first brought up in June: Microsoft, Post argued, ought to buy Yahoo. Post pointed to reasons why Yahoo might be worth more than its current so-so earnings suggest; he also observed that a Yahoo purchase would let Microsoft gain serious search revenue, even before MSN AdCenter gets up to speed in growing its advertiser base. Obviously, the proposed Microhoo would be a threat to Google. Part of the reason is the major share of search that the new entity would gobble up. According to comScore numbers released in May, MSN and Yahoo hold a combined 41% of all search traffic, which is just shy of Google’s 43%. But the threat from Microhoo would only partially come from search. The real threat to Google would be in Microhoo’s ability to adapt to a continuously-converging media world–a world that MSN and Yahoo are ready for, but that Google still might not be as ready for as it needs to be. All of this goes back to each business’s core focus. For Google, everything is search; Yahoo and MSN, by contrast, work in many channels at once and look to integrate them. And because MSN and Yahoo are already thinking about integration now, they’ll be far better prepared when integration really get underway.
You can see that philosophical divergence in the way each entity picks up search traffic. Google’s name is synonymous with search, and it’s the search engine itself that drives the bulk of Google’s search traffic base. Yahoo also gets plenty of direct-to-search visitors; but an awful lot of Yahoo search traffic arrives off of search bars on Yahoo’s enormous publisher network. The same is true for MSN and its publisher network-and MSN searchers even arrive via help buttons on Microsoft software. Google is popular for search in its own right; Yahoo and MSN Search owe much of their popularity to the way each business draws users from its enormous, diverse universe of user interfaces.
The different philosophies also come out in how each business applies search thinking to non-search channels. To take one example, consider search-influenced solutions for content/publisher sites. Google’s big accomplishment here is AdSense, which syndicates actual search ads onto content pages. Yahoo’s Publisher Network isn’t so different from AdSense; but Yahoo has also bought into the Right Media Exchange–which will let the Yahoo publisher network sell display ads by auction, just as Yahoo already does for search ads. Meanwhile, MSN’s publisher network is beginning to offer targeting on a level that’s clearly inspired by the thinking behind AdCenter, MSN’s super-targeted search platform.
These are very different approaches to how search might help publishers and content sites. Google’s AdSense effectively recreates the world in the image of search. MSN and Yahoo, by contrast, truly integrate very different models, combining elements of text-based search advertising with image-based publisher advertising to make something new.
Which approach–Google’s search-centric approach or MSN/Yahoo’s integrative one–is better? A snapshot of today’s online market would give a resounding win to Google, which pulls in roughly 25% of all online ad revenue, the vast majority of which comes from search. Google’s win is strengthened by Yahoo’s poor Q3 performance, especially given the fact that analysts agree that it’s Yahoo publisher network, not its search network, that’s giving Yahoo trouble.
But a present-day snapshot is misleading. That’s because the information world of today is siloed in a way that tomorrow’s world won’t be. Full-length TV content that lives online, and iTunes for your cell phone, are just the beginning of the new convergence–and as channels continue to converge, the ability to work in many universes at once will be increasingly critical. Which is why the multichannel model, and not the search-only model, might just be the long-term winner.
There’s even some indication that the tide’s already turning. That indication comes from online video, which is effectively the merger of the Internet and TV. Just two days after the YouTube acquisition, an Oct. 11 Businessweek article ranked Google Video as the fifth-most popular video destination on the Web–with MSN Video as No. 4, and Yahoo Video at No. 1. Online video is the merger of different media models, and it’s the integrators, not the dominators in search, who took the lead.
Of course, Google may have solved its video problems by purchasing YouTube. But if Google’s video problems come from too narrow a focus on search, then one needs to wonder how many billion-dollar fixes Google can buy just to stay on top as the landscape shifts. Which is why if Google can’t develop a more convergence-minded view of the world, it could face real trouble from a new Microhoo that’s convergence-minded enough, and large enough, to win in Web 3.0.
Yahoo’s “Right” Decision October 23, 2006
Posted by Bill in Online Advertising, Search Marketing, Yahoo Search Marketing.1 comment so far
A few weeks back, I discussed Yahoo’s disappointing earnings release, and suggested that the solution to Yahoo’s troubles lies in a better integration of its approaches to search within its media arm. Yahoo, after all, is the #2 search engine and the #1 portal; combining the successful components of each would leave Yahoo a nearly unstoppable force in Internet media. And last week, with its 20% purchase of Right Media, Yahoo took a major first step towards making that integration a reality.
As I said already, Yahoo has the second-largest search engine; that engine is funded almost entirely by auction-based advertising. Yahoo is also the Internet’s largest portal, and therefore one of the world’s largest publisher networks. But until now, the two sides of the business lived very different lives: the successful search side monetizes through auction-based advertising, while the publisher side has monetized through far more traditional models for network buys. With its purchase of Right Media, Yahoo can now bring its publisher monetization in line with its search business for all of Yahoo’s remnant space—and that’s key to effective yield management to complement online brand buys. That’s so because Right Media’s primary offering, the Right Media Exchange, enables publishers to offer auction-based purchases of display ad inventory. Yahoo plans to apply the Right Media Exchange technology to sell Yahoo’s own remnant graphical display inventory—within its own publisher network—in an auction.
That’s good news for Yahoo, because advertisers are steadily seeking more opportunities for auction-based advertising beyond search. The auction model means increased transparency; and, because each unit goes for a unique price, it fosters an environment that allows for better metrics. A promising—if anecdotal—sign that auction media may be particularly useful for Yahoo is Lexus’s quickness to join the e-Media Exchange, an online auction marketplace for traditional ad spots, that was initiated by advertisers disgruntled with the non-transparency of traditional ad networks. Yahoo blamed its below Q3 expectations on troubles from the automotive sector; perhaps auction-based display ads can help Yahoo woo Lexus and its fellow automotive advertisers back into the fold in a more material way.
But the value of the Right Media investment is more than just a way to fix the Yahoo portal’s monetization model. It’s an opportunity for Yahoo to capitalize on its strengths and come into its own in the online world, and out from beneath Google’s long shadow. And it manages to do all this while delivering a wonderful strategic counter to GoogTube, which will undeniably expand Google’s reach well beyond search, and far into content.
After all, despite Yahoo’s Q3 disappointment, Yahoo’s publisher side is still both enormous and hugely popular. Google is the #1 search engine; but Yahoo is the #1 online destination overall—due largely to the popularity of its publisher network. Yahoo clearly knows something about the world of online visuals, as well, whether you’re talking about the display ads and image and video content it offers on its portal; Yahoo video search, which predates Google Video by roughly two years; or its farsighted purchase of photosharing site Flickr, which Yahoo bought when YouTube was only a few weeks old. Yahoo clearly understands the worlds of content and online graphical display, and the investment in Right Media and the placement of the auction media model within the Yahoo portal means that Yahoo can now unlock a huge potential that it’s been sitting on for a long time, and truly begin to monetize its greatest strengths. By making that move on the heels of GoogTube, Yahoo has been able to show the world that Yahoo is still the leader in media in the content/publisher model; and that now it’s able to monetize—and help advertisers monetize—in a way that Google currently isn’t able to.
That’s a lot to offer—with or without GoogTube in the picture. And that’s why I predict a new online world order, coming soon. Yahoo, funded by the monetization through auction-based display ads and its large display network, will be able to solidify its lead in both content and graphical ads. It will become for content and graphical display what Google is for search and text links. How crucial will this change be in online history? Mike Walrath, CEO of Right Media, said it perfectly in an e-mail he sent me while I was working on this article; so I’ll leave the final word to him:
“Search has been the center of attention in our industry over the last few years. It’s a huge piece of the online marketing puzzle, but it’s not the entire puzzle; and Google is still behind when it comes to display and branded advertising. Yahoo and others have a substantial lead, and that’s going to be important as it becomes clearer that what’s happening isn’t a competition for dominance in search, but all of interactive advertising.”
Google’s YouTube Blunder October 16, 2006
Posted by Bill in Google, Search Marketing.add a comment
YOUTUBE IS A 65-EMPLOYEE STARTUP that hasn’t yet turned a profit, that’s in an unproven industry, and that faces enormous legal problems. Which is why last week’s Google purchase of the video-sharing sitefor $1.6 billion–was a huge mistake.
Let’s go through the facts, and you’ll see what I mean.
Problem #1: YouTube is young, the market is young. YouTube hasn’t made a profit yet. It certainly gets a lot of traffic, and it’s got advertising; but it’s still deeply enmeshed within the “let’s just get more eyeballs and wait” stage of the business. What will happen next is still unclear.
YouTube might hit on the magic formula of turning eyeballs into money–as Google has done for itself; and as Google is looking to help YouTube do, by supporting it with advertising. But there are definitely Google ad ventures that don’t work out (think Google print); and it’s entirely possible that, even with all of Google’s help, YouTube still might not live up to its $1.6B expectations.
After all, a lot can happen in online video over the next few years. Microsoft is beginning its own video sharing site, Soapbox. Meanwhile, MySpace still ranks higher than YouTube–at the time of this writing Alexa ranks MySpace as #6 on the web; and YouTube as #10and MySpace offers video. It’s even possible that the traditional television networks, which are starting to expand online (ABC.com now delivers complete episodes of “Desperate Housewives” and “Lost”), will also enter ithis newest medium of user-generated video. Think about it: reality TV and televised talent shows aren’t all that different from the 15-seconds-of-fame world that YouTube has created on the Internet.
And keep in mind that great empires certainly do fall. MySpace has clearly trumped Friendster in the social networking space, and Google itself pulled ahead of Yahoo, its elder rival. Both Google and Yahoo joined forces to crush Lycos.
And there’s always the possibility of something entirely new jumping out of nowhere that changes everything, rendering YouTube passé. YouTube didn’t even exist two years ago; who knows what the next two years will bring.
Problem #2: YouTube has 65 Employees. YouTube is still a small business. Google has about 8,000 employees; MySpace, which NewsCorp bought for $580 million, has a workforce of 300. So paying $1.6B for YouTube is placing an awful lot of faith in only 65 people.
Of course, YouTube will need to hire more people if they’re to fulfill their new parent company’s huge expectations. That shouldn’t be hard to do–a job at YouTube probably looks pretty good around now–and Google is certainly waiting in the wings to help out (or to take over) if organizational issues become a problem. But whatever step the YouTube organization takes next, it will certainly need to become a different animal than it has been until now. YouTube has achieved fairytale success as a grassroots-driven startup; but it remains to be seen how it will fare as a billion-dollar player and subsidiary of a Fortune 500 firm.
There are bound to be serious changes in how business gets done, and there might even be changes in the way the youth market reacts to a cool indie site that’s gone corporate. Only time will tell whether those changes will be positive or negative.
Problem #3: The legal issues. At the time of this writing, a YouTube search for Billboard-topping artist Justin Timberlake yields 3,084 results. A YouTube search for Kelis, number 50 on the Billboard Pop 100, returns 789 results. There’s clearly copyright infringement going on, and YouTube makes it possible. That could mean real legal headaches for both YouTube and Google.
Thus far, Google and YouTube have kept the lawsuits at bay by creating ad-revenue sharing deals with Warner Music Group, CBS, and Sony BMG. Google will also offer technologies that help YouTube prevent illegal filesharing. But either of those acts of appeasement could go sour, especially if the entertainment world feels that Google’s anti-piracy technology doesn’t go far enough. If the entertainment world’s relationship with the two online kings does fizzle, the breakup might not be so friendly.
There’s no doubt that YouTube’s a valuable company. And Google is certainly on to something in pricing out the competition in a valuable market–which most analysts think is Google’s strategy in overpaying for YouTube. But the high price is a huge gamble, and there’s a lot of reasons to say that it won’t pay off. If the relationship doesn’t pan out, it could very well go down as the greatest blunder in Google history.
Your Customers Want More Than Just Keyword Bids October 12, 2006
Posted by Bill in Online Advertising, Search Marketing.add a comment
LAST WEEK ALLURENT, A rich media provider for e-commerce, came out with a study finding that 83 percent of Web users would purchase more online, if online retailers just “added more interactive and interesting ways to display and purchase products.” In other words, it’s not enough to just drive customers to your site. If you want them to buy, you have to give customers the right experience once they’ve arrived, and to continue providing that excellent experience all the way to the point of conversion. And in a separate news item last week, a Harris Interactive study, conducted for mobile marketing firm Enpocket, found that 78 percent of mobile users would be “happy to receive” targeted mobile advertising. Sixty-four percent of those interested in targeted ads, the study continues, would volunteer personal information to enable that targeting.
Now put the two points together, and you come to a very powerful picture of today’s new-media customer. These are people who are seeking the perfect, perfectly targeted marketing; and the perfect, perfectly targeted customer experience. And they want to achieve those things from beginning to end of the buy-cycle.
That’s great news for search, because search is uniquely positioned to fulfill the demands of new-media customers. Search, after all, has unparalleled targeting, and it enables you to make use of that targeting at a very wide array of touchpoints. Keywords tell you a customer’s intent. Higher-level analytics tell you where your searchers are located, the time of day your best search prospects are out there, the browsers they’re using, and a lot more. And because of that level of targeting, you can know which keywords to buy, when to deliver ads, what ads to deliver, and what landing page experiences you need to create for each customer. Meanwhile, behavioral retargeting lets you use search data to pinpoint your best customers, and to follow them across the Internet with targeted display ads–which means that search targeting can make your multichannel efforts more powerful, too.
Given that search enables such a powerful end-to-end customer experience–the very kind of experience that customers want–I’m left with a very basic question about a common decision in marketing departments. My question is this: Why, I’d like to know, are so many marketers fixated on keyword bid management?
I’m referring to the wide array of search methodologies, ranging from the very simple to the complex, that view search as a process of building the right keywords list, and then managing bids on those keywords to meet a budget. That’s certainly an absolutely crucial part of winning in search, but it doesn’t provide the targeting and touchpoint management that, as I’ve already argued, is also absolutely crucial to winning.
To be fair, some marketers are fixated on keyword bid management because it’s all that they can only afford, because it’s what the simpler search management tools and less sophisticated search management agencies have to offer. But that doesn’t explain why many otherwise savvy marketers from blue-chip organizations are stuck on keyword bid management, too.
For those otherwise-savvy marketers, my only explanation is that they’re either unaware of the full array of what search has to offer; or that they don’t realize the degree to which customers are seeking far more than just a well-positioned search ad. And because of that lack of awareness, they’re stuck in a search methodology that’s years behind the times. And so some very major organizations are leaving a lot on the table in search.
That’s a huge potential loss for those organizations, and a gain for their competitors. Meanwhile, the customers have clearly spoken; and the behind-the-times marketers will have to start listening to customers more carefully, and targeting to customers more carefully, if they’re to pull ahead.
