Bronte Media

Techcrunch had the scoop on Yahoo’s proposed acquisition of Facebook. Specifically the internal forecast used to determine a $1.6bn bid.

Most have focused on the top line numbers but it gives incredible insight into what exactly Facebook is doing at the moment. And then as a follow up to that, the state of the online ad industry and the issues facing it.

Facebook did $5m in revenue last year and expected to increase it to $25m this year.

4-5% of their inventory is sold on a direct basis for around $5 CPM.

95-96% of their inventory is sold on a remnant basis for 9-17 cents CPM.

On a $ basis - and because of the discrepancy in CPM - direct sales generate about two thirds of the revenue and remnant one third.

Social networks are a more extreme example of publisher, because of the low quality and high quantity of inventory and secondly because most of them are very new, the monetization levels are tiny compared to more established sites. But the 95/5 does provide a counter-example to a 75/25 rule that I talked about before.

The remnant CPM numbers of 10-20 cents also highlight the economics of the mega deals that Google and MSN have done and Yahoo is trying to do with these hugely popular new properties like Facebook, MySpace and YouTube.

They hinge on the ability to take the current 10-20 cents and improve that to 50 cents or a dollar over time - something Google has proven exceptionally well at doing. Although the whole process doesn’t quite make for the same drama as glitzy TV upfront ad parties with drunken assistant media buyers passing out and crapping their pants.

Judy’s Book and Insider Pages more publicly woo’d reviews to their site in the early days by offering Starbucks gift cards and money for Gas. Yelp, apparently did as well, according to an interesting profile of the company from Businessweek. First at $1 a pop and then through a network of intern-like (not meant as a slant, I love interns and can’t wait for the summer again :)) at $15/hr.

But I bet their best users aren’t motivated so much by the $15/hr than from the Elite Squad status (a great idea whereby people have a differentiated profile, get a tshirt and get invited to parties). They could do a lot more, though.

If there is one thing that reality TV has taught us is that people want to be famous and not necessarily rich.

So make the best users of your site famous. Even if it’s on a smaller scale. Have a person who co-ordinates the thousands of restaurant PR folks and club promoters and get the best reviewers/cool kids the freebies/special service. Co-ordinate press opportunities with free newspapers who’d love to have columns/reviews from these folks in their weekly rags stuffed with band listings, nightclubs and sex worker ads. All the schwag that fashion brands want to seed with the ‘influencers’? Make it easy for the brands to find them through their Yelp status and help facilitate contact.

Help bring their personalities to the forefront through videos and try to get them on cable TV.

I think offering monetary incentives is a slippery slope to walk. Yelp realized early that it was more about status and personality (photos on profiles, friends etc.), but the key is to take the initial idea and create teenage Internet-born Bruni’s and Wintour’s.

That is what really drives people’s effort - the chance to win.

Or if that fails, lottery economics. Rather than paying 100 people $15/hr give away a prize that is the equivalent of $1,500 an hour and watch as 500 people work just as hard in chasing it.

Judy’s Book and Insider Pages more publicly woo’d reviews to their site in the early days by offering Starbucks gift cards and money for Gas. Yelp, apparently did as well, in an interesting profile of the company from Businessweek. First at $1 a pop and then through a network of intern-like (not meant as a slant, I love interns and can’t wait for the summer again :)) at $15/hr.

But I bet their best users aren’t motivated so much by the $15/hr than from the Elite Squad status (a great idea whereby people have a differentiated profile, get a tshirt and get invited to parties). They could do a lot more, though.

If there is one thing that reality TV has taught us is that people want to be famous and not necessarily rich.

So make the best users of your site famous. Have a person who co-ordinates the thousands of restaurant PR folks and club promoters and get the best reviewers/cool kids the freebies/special service. Co-ordinate press opportunities with free newspapers who’d love to have columns/reviews from these folks in their weekly rags stuffed with band listings, nightclubs and sex worker ads. All the schwag that fashion brands want to seed with the ‘influencers’ - make it easy for the brands to find them through their Yelp status and help facilitate it.

Help bring their personalities to the forefront through videos and try to get them on cable TV.

I think offering monetary incentives is a slippery slope to walk. Yelp realized early that it was more about status and personality (photos on profiles, friends etc.), but the key is to take the initial idea and create teenage Internet-born Bruni’s and Wintour’s.

That is what really drives people’s effort - the chance to win.

Or if that fails, lottery economics. Rather than paying 100 people $15/hr give away a prize that is the equivalent of $1,500 an hour and watch as 500 people work just as hard in chasing it.

I tend to think of search engine optimization now as digital public relations. Getting the attention of other people, and the gesture being measured in the form of a link.

It was interesting to see Jimmy Wales and Wikia announced free wiki hosting to any community that wanted to try and create one. They get to keep 100% of the advertising. So you would think it is free, right? Not quite:

“Wikia gives away the tools and the revenue to its users. It requires only that sites built with the company’s resources link to Wikia.com, which makes money through advertising.”

And thus, bandwidth and servers can be effectively allocated to the marketing line under ’seo’

In the spirit of Mr Stein, a momentous occasion was recently reached on this blog.

For a long time the most common keyword people used to find this blog was, not surprisingly, “Niki Scevak”. Then when I posted on the acquisition price of Flickr, from a bit of triangulation of their 10Q, that become the most popular phrase. Well, now, officially, “Soccer Porn” is.

In Google, a post I wrote is ranking number 2 for the term.

If I have to have a legacy from this blog, I would hope Soccer Porn would be it.

Online advertising is being driven more by sites improving their eCPM from 50 cents to $1 than P&G and the big auto companies deciding to reallocate large portions of their budgets. The latter makes for a good story in the media, the former a good quarter.

So I’d agree wholeheartedly with Pat McCarthy of Right Media when he says that more people will be talking about remnant inventory. Pat estimates that three quarters of inventory is remnant and a quarter is premium. On a dollar basis, it’s probably closer to 50/50. But if you go from 50 cents eCPM to a dollar in the next two years, and premium CPMs are relatively flat that would mean that remnant inventory would represent around 66% of the dollars, and so on.

People should be talking already. It is not as sexy to talk about tricking inducing 2 in 100 teens into a $10/mo ringtone affiliate offer via behavioral targeting but that’s more important right now than figuring out what % of online advertising should be relative to overall advertising.

Seriously, if I hear one more clown use the logic that the Internet accounts for 6% of advertising BUT 20-30% of media time THEREFORE online advertising will go up I will lob a tomato at them. Firstly, a huge chunk of Internet minutes are spent COMMUNICATING not ‘consuming media’. MySpace is communications not content. Yahoo mail and Hotmail are communications. AOL IM is communications. i.e. they all compete with cell phone/talking IRL. </end rant>

Back to remnant inventory. There are some interesting companies attacking the problem of what I call Wal-Mart Media: More efficiently showing low-value performance-based direct marketing offers across billions of impressions. But in the battle of the giants, Google has the mantra ingrained in its DNA far more than Yahoo and MSN (although with huge web mail properties, it’s not as if they haven’t had the chance in the last ten years).

You’ll know remnant media has made it when someone comes up with a more eloquent name for it.

In my little corner of the world, some major news hit the wires last night: Zillow, which previous had just offered home valuation guides, now allows agents and home owners to post listings and also post a dreamy dollar figure that would “Make them Move”.

The decision is a fairly obvious strategy but one where Zillow has gone about it the right way. Does the world really need one more free listings site? Probably not. But by first aggregating a large real estate related audience, brokers and agents will take note. Offering free listings wouldn’t have been enough of an incentive but offering a free listing that reaches millions of people will.

Still, they will face an uphill battle if they are only passive. Trulia, a site with the most to lose from folks like Yahoo Real Estate, Google Base and Zillow chasing the same problem (not to mention the fact that one competitor with zero product development, craigslist, is kicking everyones ass), goes out and crawls real estate listings, then establishes a relationship after proving it can drive quality traffic, brokerages can then switch over to a feed and they both can issue a press release. Google hits the streets and proactively courts brokerages to upload their listings to Google Base and is having some success. Google has about 1.6m homes for sale and Trulia has about a million. Zillow on day one has 167 listings according to its front page.

All of them face two central challenges: listings inherently hit them later than other sources like the MLS and they struggle for comprehensiveness in any market. That’s why I tend to think people like Yahoo Real Estate have the best chance of consumer success. Either way, good luck to Zillow; fantastic people, executing well, they will make it.

What was interesting to me, and reflecting the company’s smarts, was the respect they paid to passionate users of their product. Case in point: they briefed a well-known Phoenix Realtor and blogger and got his feedback on the roll out. He wrote up a fantastically detailed post from multiple perspectives (Realtor, industry, consumer). He posted it last night and had 10 comments from people through 3am last night.

Pat Kitano, another fantastic real estate blogger, posted the story to Realestatevoices at 12:30am PT (he lives in San Francisco).

Drew Meyers, an employee of Zillow, stayed up through the night acting effectively as a manual Technorati, tracking the launches coverage through 2am PT.

This isn’t about blogs vs mainstream media (Inman News had some fantastic coverage too), it is about something more simpler: tapping into a rich vein of passionate users. The more respect you treat them with the better results. Zillow is a fantastic example of that.

but here is one more anyway

First, as context I tend to agree with Greg - it feels a lot like MSN late last year, or even in 04. They need to stop the rot. Losing page views in categories like Finance and of course market share in search is a lot more important than not integrating Flickr into Yahoo Photos.

The monetization gap in search is unnacceptable and it is time to turn up the heat. Sign a deal with Google much as Ask and AOL have: 90% of 11 cents a search is better than 100% of 4 cents a search (and not even taking into account the overhead in the 4 cents a search).

Don’t give up yet though. Run Google ads in 20% of the search queries to Yahoo. Track everything about the implementation - the ads Google chooses to show on the search, which ads users click on, what those users do elsewhere on the Yahoo network etc. Learn everything you can and implement the conclusions into Panama.

Give the team 12 months to bridge the gap or to substantially bridge the gap. If they can’t (with all that information from Google’s ad selection and user behavior), consider giving up and just running Google ads next to Yahoo’s organic search.

Remember that you are only giving up on page one of search - i.e. the search results page. Instead look at selling chapters 2-10 of a search - inventory of that user who has searched for ‘mortgage refinance’ on other pages of Yahoo and other pages on Yahoo’s publisher network.

With the money, pour more resources into organic search and with the leftover sales people completely focus them on selling chapters 2-10 of a search - the inventory in Yahoo Mail and Answers of the people who searched for mortgage earlier in the day.

But all of this is for nothing if they can’t stop the rot in audience. The fact that the most important position in the company is not filled does not auger well. They need only look at MSN if they can think they can stay the course - an advertising center that advertisers and agencies love, except for the simple fact that there is not enough volume and the volume is declining by the day.

And just for some saucy gossip, Tom Foremski has some great back story on Dan Rosensweig allegedly being offered the Audience position (in effect a demotion) and turning it down. And the best Internet reporter, Kevin Delaney of the WSJ, getting the story first, trying to parlay that into an interview with Semel and ending up with Yahoo announcing the news earlier than planned.

Jason Calacanis realized early that you don’t mess with the talent, you support it.

The king of the small little world we inhabit, Danny Sullivan, is an example of that. Earlier this year, SES, the show and accompanying web-site searchenginewatch was sold by Jupitermedia to Incisive Media to help Alan Meckler gain greater scale in the images division, where the proceeds of the sale were used to buy more companies.

From there Incisive Media basically killed their golden goose by not upping Danny’s deal. If they had been to the shows that attract thousands of people, they would know that the reason people show up is because of Danny. Not only that but every speaker and sponsor’s loyalty is to Danny.

Now Danny is launching a web-site, a series of webinars on search marketing and a search conference.

Let’s take a tally:

Nearly every writer who wrote for searchenginewatch, now writes for searchengineland too.

Chris Sherman, who is a fantastic person, and used to run the webinars, now runs Danny’s webinars and plays Robin to Danny’s Batman once more (unfair categorization if you know Chris but I couldn’t think of them separated).

Chris Elwell, who used to be a publisher and senior exec with Meckler, including to help start the SES shows, is now working with Danny on the business side.

Claire Shoen, who used to sell advertising on the webinars, now - you guessed it - sells Danny’s search webinars.

They haven’t announced the agenda for the conference in Seattle next year yet, but it doesn’t take a rocket scientist to figure out who might be speaking and sponsoring.

They are aiming the conference at attendees with more advanced levels of knowledge. That’s smart because that audience is most loyal to Danny. And smart to minimize the apparent pain to Incisive because so many first time people attend the search engine strategies shows, it probably means there will be a market for more beginner style content in the short term. But only temporarily.

I don’t imagine SES to die a quick death, but it will no doubt will wilt and die eventually. Don’t mess with the talent.

Great experiment being run by Pat McCarthy and the folks over at Right Media (err Remix Media). The basic conundrum: they need to test feature roll outs of their yield management tool for publishers. But they need a decent slice of traffic to do so and don’t want to fuck up a publisher’s revenue for a day in the process. So they decided to create VoFiles, which basically points out the MySpace profiles of the hottest scantily clad college girls. And other weirdos at the opposite end of the spectrum. Hotornot meets social networking, if you like.

Cool idea that might generate a ton of traffic and minimal amounts of money and fulfill exactly the original intentions of the launch. They also used Pligg, which is a fantastic open-source project that includes all the features of Digg. We used it for realestatevoices.com.

And on top of it they do it out in the open which will garner more awareness for their platform and clearly illustrate the benefits: i.e. go from 50 cent CPM to $1 CPM. Fantastic stuff.