Bronte Media

The Wall St Journal recently had an intriguing article on Prosper, the P-2-P lending marketplace. The article is excellent in its own right, but what I found most interesting is that a site, savagenumber.com, has taken the time to continuously monitor the marketplace of loans on Prosper. How well they perform, the interest and default rates for lenders, and so on. I absolutely love the fact that someone has done this, and is another trend towards greater transparency and at ever increasing granular levels. There are other great businesses built upon eBay’s market data too.

Using crawlable data is obviously a subject close to my heart but the article got me thinking about my second best idea. Chris Yeh recently ran an event whereby he solicited a group of second-best-ideas and the audience of the event duly voted on it. I wasn’t able to make the event but here’s my second-best-idea anyway:

The crux of the idea is basically a search industry analytics provider targeted at search marketers and perhaps also hedge funds/investors looking at stocks like Google and Yahoo.

The idea is to stich together a number of different data sources. The main one would be campaign data from large search marketers and search marketing agencies. They would participate in the inner circle and receive very granular analysis of keyword costs and trends, and over the longer haul as conversion events become more standardized, value creation.

No one would ever be able to break out the activity by advertise source, only compare against the industry average (as defined by a portfolio of keywords).

The second piece is user search behavior. The idea being that keyword history could somehow be reconciled through a service like Alexa and the APIs and Tools of Google and Yahoo. The adware guys would also be able to become an inner circle data partner for their keyword history (i.e. keyword per user, which would measure how often the average user searched for mortgage for instance).

The financial results of Google and to a lesser extent Yahoo are used as a continual quality assurance mechanism.

In the end you would be able to see at a 30,000 foot level that search is a $10 billion dollar industry but also to click down to the level of the keyword and examine for instance that digital camera was being searched 10% more and the cost of digital camera keywords rising by 5%, for instance.

It would also clean out the noisy metrics that are out there that are based on what people bid for keywords, which is very different to what they actually end up paying for the clicks.

Marketers could benchmark their spending and ultimately the service would aid them in discovering new profitable keyword activity, as the efficiency of the current campaigns comes under the attack of competition. The smarter people are already trying to do it.

Hitwise could possibly launch the service but their data seems too aggregated at a high level and just the first piece of the equation (i.e. raw searcher data without the cost and efficiency metrics built in).

The challenge is that the first 10-15 inner circle data relationships with advertisers/agencies are the key. Getting the first few to contribute without the others having contributed. But that’s chicken and egg and business.

The trend that is helping is that so many sophisticated developers and agencies are creating bidding platforms that abide by xml standards and so repurposing (i.e. stripping any sign of individual client or identifiable information) that data is relatively easy. I.e. the challenge is in the relationship not the technical possibility of making it happen (still a very tough challenge).

And so there you have it, my second best idea Thoughts?

I once read, on the about us page of an advertising agency, that the company “Had a number of offices around the world. That number is one.” In a similar vein, we recently moved our corporate headquarters down to Tribeca. We’ve been adding a few more people who aren’t developers-who-prefer-to-work-from-home and now have room for them (err capacity = 10 people).

For those simply interested in where these blog posts are authored from, friends who want to see a few photos of the new office space or are just Internet voyeurs, here they are without further ado:

My desk:

Half of loft from other side:

Second part of loft:

It usually takes a few echos in the blogosphere before I become annoyed enough to write a post. In this case, it’s the herd mentality that stemmed from the delay of Panama. So Yahoo is now worth 20% less (or more than $10billion) yesterday than it was on Tuesday before the results were announced, right? Err not.

The New York Times did a good job rounding up the displeasure yesterday.

Share prices do not reflect the present but rather future expectations of a company. So if Yahoo makes 40% less than Google per search, and changing the display of your ads so that they are ordered on yield (click-through x cost-per-click) instead of simlpy cost-per-click in the future will almost erase the gap (fuck the there-are-19-million-Phd’s-working-at-Google theory of monetization, 80% of the gap is due to that one simple fact), they can fix that in the future, right?

Now, let’s not be sympathetic towards Yahoo either. Even MSN has beaten them to the punch with AdCenter for search. Yes, MSN.

Safa, although quoted in the Times along with others, actually put out a report yesterday yelling at people that the unrefined oil, consumer usage of Yahoo, was still fundamentally fine. A little battered (Henry Blodget rightly pointed out the sequential flatness) but still fundamentally sound.

Spending from the big 200 advertisers on Yahoo was up 35-40% year over year on display. How can a stock be punished so harshly when the benefit (yield versus cpc on search) is still in the future, albeit a few months later? Unless you are using a discount rate of 19438350954%, the numbers on the valuation don’t add up. The stock market is crazy part XXXXVII.

But back to the title of my post and my conspiracy theory. Ben Edelman has been single handidly cleaning up the online advertising industry. Seriously, the guy is doing some of the most noble and consequential research today. He’s exposing networks of ad distributors and in many cases all roads lead to Yahoo. There was an excellent story on Direct Revenue in Business Week a little while ago that demonstrated what a sugar daddy to the spyware industry Yahoo was.

Yahoo doesn’t sign up Direct Revenue, but Yahoo’s distributor, who has a distributor, does. Kind of like the Kevin Bacon of text ads, sooner or later a Spyware service ends up showing Yahoo’s search ads.

But change is afoot and consolidation rife. 180 solutions acquired Hotbar in the quarter. Claria wants to sell the business altogether and everyone is ‘cleaning up their act’.

I just wonder if this was the quarter when Yahoo finally cut the chord with its chequered past (via Overture I might add). On the call, management said they had discontinued many ad relationships that they had deemed ineffective and low quality but refused to elaborate. That’s what first triggered the thought: Since MSN has all but cut off the ad distribution in the quarter, did they throw out all the bath water (read: Spyware) at the same time?

Just saying…

It is trendy to think that social networks are fleeting and like nightclubs that change with the seasons. I don’t think that is true. The services themselves have to do something to drive their stakeholders away.

Friendster did it with abmismally slow servers for a prolonged period of time that opened up a window for MySpace. Netscape did it by first allowing people to develop plugins for its browser and then about-facing and buying up certain plugins and then bundling them in with the browser, in effect removing the incentives of platform extenders and creating a bloated product.

A similar if slightly different micro-trend is emerging on MySpace. Small startups that extend MySpace functionality, from checking up on the dating status of friends to text messaging, have been shut down. Myspace also nearly shut down YouTube but then realized they were too big and back tracked. The developers are adding new features and then being shut down because of the MySpace terms of service.

Microsoft near invented the platform eco system, and MySpace is doing everything to discourage it, which presumably could open up an opportunity for a company to compete with this marketing strategy. Let’s see if they are smart enough to change their initial course of action…

Chris Yeh, nails the trend on whether the Internet will kill the old media star with the long tail of content. In short, it wont. But it will change the way media firms make their decisions away from corrupt bundled deals to more democratic, wisdom of the crowds, based approachs. That is, if you succeed online and prove yourself with a relatively small audience (< 100,000) then you will be given a chance in front of larger audience on Cable TV and then on larger broadcast networks. Which is a great thing.

The greatest gap of expectation despair though will be in those who think that the Internet will allow them to independently survive off of a small audience or make them famous. It most likely (99% probability) wont. Ad revenue will never grow to an amount where all but a few can survive off of online ad revenue.

But for budding filmakers or stand up comedians, the Internet will give them a chance to grab attention and place that chance in their self-controlled hands (rather than at the discretion of club owners or industry execs). But that will take nothing away from the landscape of competition, which will become even more brutal.

What else to make of this article from BusinessWeek about Newspapers in talks with Yahoo about a confused array of topics but likely starting with collaboration around recruitment ads.

The talks seem to be between Media News, Hearst Newspapers and Yahoo, and up until the Knight Ridder acquisition, Mclatchey. Now that they have the juicy Carreerbuilder stake and Classified Ventures stake (Homegain; Homescape; Cars.com etc.), they seem to have dropped off.

Poor Yahoo Hotjobs seems to be the connector. Once a viable third player in recruitment, it was rolled up into the whale of “Marketing and services” of Yahoo last year, while Monster soared and Careerbuilder defied gravity and did even better than Monster (such that it’s now fair to call it the leader in the recruitment space).

Why am I so cynical? Well consider these quotes from the article:

“Help-wanted is the quick cash,” says one executive involved in the discussions, “but news search is the long-term future.”

You couldn’t be talking about two different things.

“At least one newspaper executive involved in the discussions says he nurses hopes that Web surfers eventually will pay small fees — micropayments, in Web parlance — for some newspaper content.”

Keep dreaming, mate.

This from MediaNews Group Chairman and CEO W. Dean Singleton: “The industry needs to come together to find a search-engine model so that we begin to monetize news”.

Translation: Fuck the unions. Why are we paying these people to write when we could link to the amateurs?

But the real kicker: “The Yahoo talks began last October.”

That’s right, October. Nine months ago.

No doubt something will happen. But I’ll wager it will be an over-dressed announcement that involves the non-Careerbuilder Newspaper groups providing a Google-base-like feed to Yahoo so that they can search they jobs, cars and houses better. Which in itself is not a bad thing. Yahoo will probably announce a more generic structured feed for other classifieds providers along with it and look smart while the newspapers think they achieve something more strategic than they actually will.

Lost in the midst of the musical chairs of eBay management and bone-headed decisions like banning Google Checkout from eBay auctions, was that fact that one of the smartest Internet execs, Rajiv Dutta, was moved from Skype to Paypal.

Reading the tea leaves is hard on this one. Blodget seems to think that Dutta is saving the day at Paypal. But at Skype, he had the chance to create something great and be a true new media titan. Perhaps he is simply more comfortable in a financial services role, being a numbers guy.

If you follow the Paypal-is-troubled line of thinking (which I don’t buy at all) then Dutta might learn something from Dara Khosrowshahi, who is now the CEO of Expedia (after being the CFO/right-hand-man-to-Barry-Diller), and another earnings call favorite of mine. He probably has the most difficult job of all in the industry.

Just reading the Google Annual report and came across this interesting paragraph in the letter from the desk of Larry:

“We have been busy buying companies opportunistically. In 2005 we purchased 15 different companies for $85 million. That number will increase to $130 million if they meet certain milestones.”

Let’s be optimistic and say the acquisitions hit all the milestones. That’s $8.67m per company. Including Urchin, which presumably was the largest of the bunch.

Not exactly the kind of transaction flow that gets the boys from Goldman or minions that follow Mary around frothy at the mouth.

Just another data point to disprove the common conception that Google buys companies.