Bronte Media

And not in a good way. This from the Journal’s wrap of their quarterly results:

“In addition to the increased Xbox 360 costs, the quarter also showed strain of competition with Google Inc.: Revenue at the MSN online unit fell to $561 million from $581 million. The unit suffered an operating loss of $26 million, compared with a $102 million profit.”

But that includes the dial-up business which is falling gracefully while still deliving profits. So what about a fair indicator of progress on the advertising front?

This from the 10-Q:

“Advertising revenue increased $25 million or 7% in the third quarter and $125 million or 13% in the nine months ended March 31, 2006 due primarily to growth in display advertising for portals, channels, email, and messaging services, which was partially offset by a decline in both periods in search revenue due to the ramp up of adCenter. ”

A decline in search revenue. Now sure there is truth to the introduction of adCenter in putting some pressure on pricing but given that they have been operating in limited betas with a very small subset of advertisers and Yahoo’s revenue (who represented MSN over the last quarter) wasn’t impacted that dramatically (i.e. it still served a meaningful amount of ads on MSN), this smells fishy.

No wonder they have been re-shuffling the management chairs (and probably throwing a few as well).

Magazine publishers don’t need much help in mishandling the Internet as a strategic growth opportunity, having done so brilliantly themselves thus far. But the Boston Consulting Group, a managment consulting firm, are there to help them if they feel that they have not minimized the benefit of the Internet and opened a wide enough a door to new forms of competition.

Now I haven’t read the full report. BCG’s site makes no mention of it and the Magazine Publisher’s of America, who comissioned ‘the study’ releases it only to its members. So I am holding back (no really, I am).

But in a Mediapost write-up of the study, the basic crux of the report is that magazine publishers should get together, collude and not allow search engines to index their content. That’s because search engines make money from advertising and that they link to blogs.

How is this for classic consulting? They say that search reduces audience value (huh?) but that “search is also a valuable means of drawing readers to proprietary Web sites”. Ahh which is it guys? No overlapping circles here. It either provides value or it doesn’t.

And shame on them for not catching up on their buzzwords, recommending that “one solution might be for magazines to work on developing a “hybrid” model that leaves their content “searchable but not scrapable.” (does the author even know what that means?)

Search engines have always and only made a site searchable, then pointing people toward the full article. Maybe it’s time to go back to Stanford guys? Or maybe it is a sign that we are in an another bubble; that if the major consulting firms have lost so many Internet-savvy employees to Google and Yahoo that they are left with none that even understand the basic lexicon of the search industry.

p.s. Since when did BCG start doing ‘whitepapers’? Times must be tough.

Just a quick pointer to Brian Smith’s excellent cry for help on Shopping.com. You would think that any executive responsible for the integration of the company would have the sense to carry out the basic steps. They haven’t thus far. And so Shopping.com falls further behind Shopzilla and Scripps.

Also, in my love note to eBay a week or so ago, I did not realize that Shopping.com’s revenue is now being counted under eBay US Marketplace revenue and unfairly boosting their year over year growth. Thanks to Brian for noting that. My bad. You get what you pay for.

The New York Times had an excellent and thoughtful analysis of MySpace and social networks in general.

In the comical back and forth betweek Fox Interactive (the owners) and the founders of MySpace came this financial gem: “AT MySpace, the first challenge is to raise advertising rates. Because its supply of pages so greatly outstrips demand from advertisers, it has offered deep discounts. Indeed, the average rate paid for advertising is a bit over a dime for 1,000 impressions, Mr. Levinsohn said, far lower than rates at major competitors. “If we can raise that by 10 cents, think of the upside,” he said.”

In the article it also cites comScore numbers that say that MySpace generated 28.8 billion pages in March 2006.

Now 28.8 billion is 28,800,000,000 pages or 28,800,8000 blocks of 1000 pages. If you times 28,800,800 by 10 cents you get about $3m ($2.88m to be precise).

The estimate is agressive because it assumes MySpace is selling an ad on each of its pages, which the article highlights has been a challenge, even in a world with Google AdSense.

But the estimate is conservative because MySpace’s page views are certainly more than the comScore estimate, which is US only and not only that, tends to always be on the low side.

Anyway, net-net, let’s say $3m / mo. MySpace’s user growth has been absolutely amazing and nothing like the web has ever seen but still, I’d love to see the assumptions behind Richard Greenfield’s quote:
“The company will have revenue of about $200 million this year, estimated Richard Greenfield of Pali Capital, a brokerage firm in New York.”

Without a wide-spread monetization effort, and continuing astronomical usage growth $200m will be hard to hit. If they can double or triple their effective CPMs by year end, perhaps they will be able to.

Still a fascinating example of “supermarket media” low-cost, low-value inventory at scale.

Quick pointer to an excellent primer on online education lead generation from Jay Weintraub. In particular pricing metrics and their drivers:

“So, what does all of this mean if pressed for an average CPA? Typical schools pay out - $12 to $20 for a shared lead (similar to mortgage model); $30 to $40 for average exclusive leads, and $45 to $55 for higher quality leads (better student to enrollment rate). But, I strongly suggest and encourage being able to track not just leads but enrollments and as granularly as possible.”

I don’t have any money anymore, putting it into Homethinking.com instead, but when I did I liked to dabble in a few stocks, one of which was eBay. The stock has been beaten down from its Google-like Halycon days but still continues to impress me.

Take this for instance, in the latest quarter:

“EBay’s U.S. marketplace business totaled $527.2 million, up 30%. Its international marketplace business totaled $493 million, up 25%. Payments revenue was $335.1 million, a 44% rise.”

That is quite a feat: eBay’s US marketplace grew more strongly than Yahoo’s US Search business and is larger in absolute terms. It wont have grown more strongly than Google’s US Search business (we’ll find out more on that soon) but it will be a close second.

The street looks disappointed on the full year outlook. But eBay likes to play coy with investor expectations, always setting them very low.

The international revenue growth is probably the most disappointing. eBay has particularly missed the boat in Japan (second biggest online media market outside of US) and in China (will be the biggest in 10 years).

One interesting business challenge of eBay is that it is in effect stuck with static pricing (I mean the fees it charges to the merchants). Everytime it wants to raise fees it has to do it itself. This pisses off merchants. Compare this with the exquisite irony of Google, whom merchants pay more and more with each click delivered (and doubly when the price per click goes up).

eBay is caught up in a centrally managed pricing environment (Russia) while Google feeds on the dynamic pricing environment set by its customers a la pure capitalism (America).

Google has been able to raise its pricing a lot faster than eBay has but the latter has taken hits to its reputation and the former still lauded nearly universally.

That’s why eBay will be behind Google as the greatest Internet company, but not enough reason that it hasn’t taken over Yahoo as the second greatest Internet company.

Yahoo, on its earnings call, is giving out some interesting stats on its US Search revenue.

Basically queries in the US are up 15% and revenue per query is up about 5-10% year over year. That’s total growth of 20-25%, which may get News Corp or Time Warner wetting their pants but when compared to what Google will post is underwhelming.

Yahoo never gives out any hints on its search business so it is very interesting to see this “one time disclosure” as they describe it. I guess the expectation out there was their search business was as pathetic as MSN’s.

They have a left lot of money on the table simply by taking the click-through rate of ads into account as well as the willingness to pay, as Google has done for years. They will gain this over the next year. But what will be more interesting is to see how the 15% volume growth keeps on tracking.

I wasn’t the entrepreneur who asked Terry Gold about hiring sales people, but his advice is on hiring the first sales person in a small startup is excellent. Go read his post. In fact, I am going through exactly same decision process at the moment. I am trying to hire a Manager of Inside Sales at Homethinking.com. Here is the job ad.

The candidate I hope to meet hopefully has experience selling media and advertising to smaller clients. Even better on a performance-basis. Think a young, smart, enthusiastic achiever who has had a few years experience at say Looksmart, Findwhat or the ad networks, and who wants to help grow (what I obviously think is an) exciting new startup.

Someone who is not afraid to blaze the trail and then help, hire and train others to scale the business. If you are such a person, drop me an email at niki dot scevak at gmail com. Or if you know someone who might fit the bill from the job ad or from Terry’s post on the matter, please also email me. Any help is much appreciated.

Walk-Through, the real estate blog of the New York Times, nails Google Real Estate’s launch with the aforementioned description in the title of this post.

Still, as more real estate firms and individuals become comfortable in submitting feeds to Google Base, this will change (the number of pushpins that is). Rolling out the listings in the main search results will certainly go a long way to getting them to submit, with the offer of an ocean of free organic traffic.

If Froogle is anything to go by however, it wont be enough to get comprehensive listings coverage. Many merchants, despite seeing Froogle integrated into the main results, still don’t submit product feeds.

I don’t envy Trulia, who will have to endure (what I am guessing is) their most frequently asked question about their business “what do you do if Google does the same thing?” changing to a statement of “now that Google has entered your business you are fucked”. Even if they have a better product (which they do), it wont matter. That’s just what a lot of people will think, no matter what. The doubter’s original concern will have been proven correct. Even if Google’s product is ho-hum today it will be the best most perfect product sometime-in-the-future. They were right before, remember!

The Wall Street Journal ran an article yesterday about a few storied advertisers who had been caught unaware when ads placed through network buys turned up near scantily clad young girls on Myspace and elsewhere.

One of said storied advertisers was Monster, who “didn’t realize its spot was on a site that appeared to be offering unauthorized downloads of copyrighted music and videos. Once they found out, all yanked their ads .”

The claim was legitimate enough. As it turned out their buy cascaded down into other networks and affiliates. “Monster.com, for instance, bought ad space from ValueClick Inc., the second-largest ad network in terms of reach. But ValueClick ended up placing some of Monster.com’s order through a smaller network called ASN, owned by privately-held Broadspring Inc. ASN then ran the ads on Web site emp3s.com, which appears to be offering free downloads of copyrighted music and movie clips. Emp3s.com, which is registered to a Korean address, didn’t respond to an email request for comment.”

Hold those crocodile tears back, however. Monster weren’t exactly duped completely, as Eliot Spitzer’s latest spyware lawsuit shows. This time Spitzer has decided to shame advertisers who use spyware by naming them but not indicting them. This from mediapost’s wrap of the case: “In court papers, Spitzer’s office also identified several large advertisers that had used Direct Revenue, including Priceline, Cingular, Monster.com, JPMorgan Chase, and United Airlines. (Spitzer did not allege that those companies violated any laws.)” It is not clear whether large advertisers refers to the amount each spends in total on advertising or with Direct Revenue. (Side tangent: Direct Revenue has done a lot to clean up its act in recent times, which is why it is strange to see the lawsuit come about, but I guess what happened in the past still warrants consequence).

So the conclusion from Monster’s media buying decision makers was that spyware advertising is OK but being shown on dubious network sites (and agreed, illegal music sites are legitmately illegitimate) is not. The art of being less guilty.