Bronte Media

It is amazing that this has slipped largely under the radar: "Revenues at MSN slipped 5 per cent from a year before, as advertising income inched up 4 per cent."

FOUR PERCENT!

That hidden snippet did not make it into many stories about Microsoft’s recent quarterly earnings, but is significant to the world of online advertising. Microsoft’s other divisions and issues were strong enough to overshadow the pathetic performance of MSN.

Sure they have gone a long way to improving their search in recent times and the soon-to-be-launched MSN Adcenter is brilliant and forward thinking but FOUR PERCENT. Overall online display advertising is growing by 25% each year in the US at the moment and even more overseas. Search is growing stronger than online display advertising.

I can’t work out ways in which advertising could only grow by such a small amount. There are no legacy deals with advertisers that would suggest an overhang. Plain bizarre.

If anyone has any thoughts on how MSN’s online advertising revenue could only grow four percent, I’d love to hear them.

When Nate Elliott moved to London, this is the going away present we got him.

He doesn’t normally like things that Google do. Yesterday he tried to explain why the improvements in Google’s Adsense for Content network were bad.

His basic argument is that because contextual ads are worth less than search ads, they may as well give up.

I don’t disagree that ad networks are a bad business proposition, but company’s like Yahoo and Google, with significant sources of proprietary traffic, can use them to add some icing to the financial cake. Should Google or Yahoo have ad networks? Yes. Should anyone else? Unless you are in the top few sites for your category, then probably not.

But Nate did not disagree with ad networks, he disagreed with Google’s announcement.

The two important consequences of the announcement are:

1) Advertisers have more control. This lessens the "trust us, we’ll figure what you should pay with smart pricing" company line to date. Marketers can bid on the value of each individual property rather than make an average bid across the network. Will it be incredibly complex to execute without technology? Of course. But c’est la vie.

2) Publishers are rewarded (or punished) for their audience. Sites previously got compensated on the average quality of the network rather than their contribution to it. The announcement moves toward the goal of each site being rewarded on their own merits. Nate says that most big publishers wont accept CPM. Bullshit. They already do. Google pays the bigger guys on a guaranteed CPM. Pricing inventory on a per impression basis shifts more of the risk to the advertiser and away from the publisher. Given the choice of being paid on a CPM basis versus a CPC, all else being equal, every publisher will choose CPM.

Ironically, Nate’s last line "Low quality inventory, low quality clicks. Add it up for yourself." belies his very argument. Sure it is low quality, but it is not negative quality. However limited, there is an opportunity. For all the talks of cannibalization, there is still a glut of cheap remnant inventory. Direct sales forces are not that productive yet. So for at least the next few years, there is an opportunity. If Google continues to empower Marketers and Publishers with more transparency they have a chance of being the leader in this marginal opportunity.

One in twenty used cars in England are now sold on eBay.

In the ilk of the great Gary Stein, here’s an educated guess as to what Yahoo paid for Flickr. I have no idea what the real price is (this is a blog remember!).

Anyway, Yahoo acquired two major companies in Q1. Flickr, and TeRespondo, a Brazilian pay per click network akin to Overture.

Yahoo in its quarterly announcement said that it used $54m in cash for acquisitions. Given that they have been selectively buying back stock and adverse to issuing new stock, I assume both transactions would have had a small equity component. The variable is how well TeRespondo is doing and what multiples they had to pay, both of which I have no idea. But a brash assumption could peg Flickr at $20-30m.

That matches up fairly well with what John Battelle had to say back when the acquisition was announced.

Yahoo had another fantastic quarter [PDF]. No doubt about it. But an interesting sore point was their unwillingness to comment on the drivers of search, which was up a lot overall year over year and even sequentially, which is tough to do in any kind of advertising.

Yahoo preferred instead to talk about client budgets and search. That really means two things. 1) There are new (mainly international) advertisers coming on board who spend less. 2) Overall pricing is a metric that gets thrown around wildly depending on what categories of keywords are important in the quarter (i.e. Retail in Q4).

International advertisers are causing a surge in volume of paid search referrals but they tend to pay less because they don’t know how to value search leads as well as American search advertisers. They soon will as they get smarter about their spending.

If you look at Yahoo’s growth, its domestic business added $220m in revenue year over year and its international business added $196m over the same period. That means about half of Yahoo’s incremental growth is international and half in the US.

While this is a great thing (as international markets will invariably develop like the US and the pricing levels and sophistication will rise), it makes for a tough story to tell at the moment.

International revenues are currently so important to the rise of both Google and Yahoo that they are bringing down the pricing averages for search and indeed even the average amount spent per advertiser.

Let’s hope that "analysts" like Jordan Rohan can understand trends like these.  Sadly, he wasn’t able to in recent times.

Last week Rupert made the equivalent of Bill Gates’ infamous Pearl Harbor Internet speech in 1995. Back then, Bill said that people are using their computers differently and that the Internet was integral to most of the change. Nearly ten years later, Rupert said that consumers, especially younger ones, are consuming media completely differently and the Internet is integral to most of the change. Unlike a Procter and Gamble speech, Rupert’s tend to mean something, so forgive his common-sense conclusions.

Many may not like his media properties‘ point of view, but he is the most brilliant media executive in the industry. His best trait is exemplified throughout the speech. He can be completely wrong about something, admit that it is the case and then throw himself in the other direction without irony. Go and read the full transcript. His grasp of blogging and its role in integrating and deepening the print product are spot on. I don’t expect any News corp. online property to achieve anything close to his vision within 3-5 years. But heads will roll in getting there, and the organization will become a better one because of it.

Where there is irony, even for a Murdoch-blusher such as myself, is that the opportunity for innovation comes at a time when there are inevitable cost implications and business realities. Namely, the cost of paper, the primary expense of a newspaper, is rising dramatically by double digits and out of the control of every print publisher, and the dirty circulation tricks are being weeded out.

Circulation declines over the past year are not accelerating because of less people reading newspapers. That has been happening for fifty years at a fairly linear rate. Rather, the circulation tricks that used to artificially prop up numbers are being slowly peeled away.

Although the Internet does create an opportunity to enhance the overall media product when combined with print, I can’t get past the reality of paper prices. It is akin to what the price of oil is doing to the airline industry. In twenty years, publishers simply wont be able to afford to print on paper. Combined with less people reading the print product, and I think the environment is best summed up by the pithy conclusion of Knight Ridder CEO Tony Ridder: "We are not at the bottom believe me". 

And I am not talking about the choice to wear a tie-died tshirt or look like Johnny Damon.

The most important thing I am doing at the moment is hiring the person to lead our technology development. I am meeting many great people doing so. Now, I used to be a developer and my degree at University was meant to help make me a better one. But the truth is I wasn’t a very good one. I got great marks, but I don’t think I was a good developer. Instead, I was very lucky to meet an exceptional developer.

I can’t hire Mike because he is running a fast growing software company, so I thought about what made him a good developer versus a bad one. I don’t think that Mike is a good developer because he contributes to open source projects, but you can tell that he is one from his contributions.

And with that, it brings me back to the title of the post.  Open source developers care that people would use their products and that software problems get solved. That is a tremendous mindset for any employee.

Just like it says a lot about an executive whose profession depends on credibility to have a blog, it says a lot about a developer if they contribute to open source projects. Here are the most important things it says:

• They care enough to do something about a problem. He or she has invested time, most likely not in the hours of 9am to 5pm, to solve an "itch" in the software world. This means they have an above average level of passion for software development.
• They get things done. If they are a contributor, they have proactively ensured that the component they have contributed is accepted among a wide unstructured group of constituents, who have no financial incentive to see it accepted. This in itself is a fantastic indication of how productive they would be to work with.
• They care about customers. The community aspect of open source development is one of the most telling. Like Craig of Craigslist, open source contributors tend to have a passion for customer service. This is the single best thing to see. They care that people use their software and that their software works for those people. Also, open source projects tend to develop over time according to customer demand. That is a great product development mindset to follow: listen to your customers problems, prioritize them and then come up with innovative solutions that solves as many as possible in an as-generic-as-can-be way. They might say they do this because they are lazy, but in fact that is the essence of all great design.

All this adds up to the best kind of resume a prospective employer can see. In economics there is the concept of observed data versus self-reported data. Economists put a lot more weight in observed data. People can tell you they will buy a product but the most important thing to know is that they did buy it.

In essence, open source developers have observed resumes. The self-reported resumes that come as a consequence of Monster job ads are in comparison considerably less valuable. As open source software development gains greater pace, more developers will have observed resumes. That’s a pretty big deal.

And with that, if you are a developer reading this who cares about search technology and ways to intelligently crawl the web, I’d love to hire you. If you’re not, maybe you know somebody that is. Just drop me an email at niki.scevak at gmail dot com.

Randomly, I have found myself digging down deeper into the new raft of web-based bookmark managers and tagging. I find the area fascinating in a nostalgic kind of way. The BookmarkBox, a company I co-founded seven years ago attempted to solve similar problems that deli.cio.us, Furl, Simpy and Filangy are trying to solve today.

The way people share information is fascinating but I still struggle to see the advertising model that will help these firms become sustainable. The problem is that you are helping people search what they know, rather than helping them discover something they don’t. That is not very valuable to an advertiser.

If one of the firms gains widespread acceptance outside of the blogosphere eco-chamber though, they could be a very interesting input for a relevancy algorithm. I used to think that Google should have a browser and report back in some way around the success or failure of its SERPs for various keywords, but I am becoming more of the opinion that it is too freaky in a privacy sense. Instead bookmarks are an expressly disclosed action by the user that a page is useful. Further, the online bookmarking tools are asking if the bookmark can be public, negating any privacy fear.

The usefulness of this information is underscored by a recent patent filing by Google that describes a method to draw a relevancy input from the number of times a page has been bookmarked. The search engine watch forums have a good discussion underway about it.

Clearly the information is extremely valuable, the search engines just have to find a polite way for users to give it to them.

p.s. Even more nostagically, I came across the blog of Ari Paparo of Blink.com, the firm that ended up acquiring the BookmarkBox. After the investment bubble burst, Ari ended up buying the technology of the firm himself and still maintains Blinkpro.com. I’ve added his feed to my reading list.

Hello and welcome.

Today marks a rather important day for me and the beginning of hopefully something big. My decision to change what I had at Jupiter was tough. It is a company of wonderful people who get to meet even more wonderful people every day through the course of the job. But I think at some point you can keep giving advice or you can choose to follow it yourself. So that’s what I’ve decided to do.

Starting a company is exciting and frightening in equal parts. I truly believe, though, that today there exists a number of opportunities around better helping consumers make important purchase decisions through search and online media.

With that suitably vague introduction, comes this blog. If you liked my old one, you might like this one too. Not much will change, except with the additional perspective of startup life. You can even comment too.

I promise to tell you more about the actual firm, but want to wait until I have something to talk about. In the meantime, keep in touch by adding my feed to your reader, checking back here and commenting or through that antiquated communications called email (the best one to use is niki.scevak at gmail dot com).

Best.
Niki Scevak