Bronte Media

Mark Josephson, a very smart guy, has a good editorial in mediapost that makes the case for how ad networks should sprout up.

He notes that ad networks in many cases are bigger, in aggregate, than the leader in categories. He cites ESPN.com as an example, which is smaller than ad.com’s sports category. He argues that ESPN, with a direct sales force, could better represent those smaller sites in ad.com’s sports category.

I love this strategy on a number of levels.

First, Google showed that the way to build an ad network was to establish category leadership and exert your competitive advantage against pure-play ad networks like Overture, Looksmart or Findwhat in signing syndication deals. All those three are essentially dead (with Overture being dismantled by the decision of MSN to establish AdCenter and others signing with Google). Google can squeeze out any of them.

The data. This is the oxygen of ad performance. ESPN could better target the ads by virtue of knowing what they do about advertisers on sports sites and living and breathing sports media. They also see what sites in the network perform the best and that basically becomes a data-driven approach to business development and corporate development.

I don’t like the business of pure-play ad networks but I do like the strategy of category leaders extending their reach through an ad network suplement.

Brian cites a rumor that Nextag may have sold a majority stake for $1bn to a private equity firm. Although Nextag is a strong comparison shopping play, it is also a powerhouse in mortgage lead generation.

There were a string of comparison shopping acquisitions for around $500m in 2005. Lowermybills, the leader in mortgage lead generation, was bought by Experian for $330m in 2005.

Those acquisitions looked like a bargain as they surged in the first half of 2006 but Google re-structured the paid search economy with quality score updates soon after, which has squeezed the edges of comparison shopping and lead generation.

Whoever is buying (if they are buying) the stake in Nextag is largely ignoring that recent development, which potentially could threaten the livelihood of the industry.

Still, an indication of the changing financing landscape - where private equity plays a larger role as a conduit of companies that are reticent to go public but want a liquidity event.

Building more on the what-is-success and what-is-failure thoughts that bounce back and forth in my head, comes this profile of Jonathan Abrams, founder of Friendster.

The lead in quotes: “Jonathan Abrams created the first online social network and enlisted Silicon Valleys best and brightest to run it. Yet Friendster flamed out spectacularly. What went wrong?”

In the body of the article are assertions like this:

“Friendster–a bold idea backed by experienced investors and the best managers money could buy–was destined for greatness. Instead, it failed spectacularly.”

and

“Indeed, Friendster now has the dubious honor of being the focus of a Harvard Business School case study on how not to manage a tech company.”

Which is bullshit. If you read the case study it is written as a ‘what would you do’ question that details the history of the company’s mistakes and then broaches the options of how to recover.

The trouble with saying Friendster is a ’spectacular failure’ is the niggling fact that the site has millions of users and is growing quite ‘’spectacularly” itself. Just not in the US and not in the same league as MySpace.

Frienster was a failure for Jonathan Abrams and the series of CEOs who played musical chairs. It was a failure for the angel investors and VCs who injected the initial round of $13m. But I am pretty sure it will be a nice winner for the VCs who injected more money into the company in the two follow on rounds (primarily, Kleiner Perkins and DAG). Kleiner Perkins (who led the ‘failed’ A round) will likely make a nice profit net-net if the company sells for $200-300m when Americans realize that having non-US users isn’t all that bad. They are not worth as much, but they are worth something.

Alexa graph:

Fight Spam, Digitize Knowledge. This is an idea that slightly tweaks Captcha technology to show two words, one like the normal captcha but the other a real word that will be translated from a scanned book.

To me, this is the ultimate play on Micropayments - users who want to comment on an article, doing a very small chunk of work. User-generated Mechanical Turk, if you will.

Business 2.0 has an excellent profile of Kevin Ham, one of the most prolific domainers with 300,000 names under management.

The two most interesting points in the article, to me, are:

Vancouver is a honeypot for the domainer industry. I have no idea why exactly. Both Ham and Yun Ye, who sold his firm Name Development to Marchex for $160m, reside in Vancouver. Domain valley?

He struck a deal with the prime minister of Cameroon to do a rev-share on .cm typo traffic. E.g. type in homethinking.cm, mortgage.cm etc. and it redirects to agoga.com with Yahoo ads.

Go read the article.

Just like Microsoft has bought a whole heap of web developers with Aquantive, anyone buying Valueclick maybe buying a whole lot of angry consumers complaining they didn’t get their free Ipods. The WSJ has a fascinating article on the FTC investigation, including a guy who signed up to Vonage and a Wine club in the hope of getting a ‘free’ laptop. He didn’t get the laptop in the end and has been complaining to Valueclick, the BBB and the FTC since.

If you don’t know what a ‘free ipod’ offer and its many incarnations are, go read this great post describing exactly how they work.

Of most interest in the article was this. The ‘free ipod’ segment of Valueclick is “a business that represents a third of ValueClick’s revenue and has been a source of financial strength recently could be squeezed, according to Jordan Rohan, an analyst at RBC Capital Markets.”

I couldn’t help but smile that Memphis and Boston, two teams that tanked games toward the end of the NBA season, won’t be getting Oden or Durant in the draft. Call it karma.

Then again, by the same token it’s amazing the Knicks pick slipped to ninth and Chicago won’t get yet more value from the Curry trade.

Meanwhile, the Pacific Northwest gets a lot stronger and the divide between the Eastern and Western tears open even more.

Congrats to Bill Muller of iProspect, who has turned from search marketing to TV star in this Sam Adams commercial (warning: Quicktime movie). He’s about half way through in the October Fest hat.

Bill is also a great beer connoisseur as any SES or search event attendee lucky enough to share one with him will know. Go Bill!

[Thanks to Zia who originally spotted him]

Long-time readers know that I don’t like the word arbitrage when used to describe made-for-adsense sites. Publishers take on risk (click-through rates vary from 10-50%, they have no certainty as to the price per click they will be paid etc.), which in my mind, defeats the definition.

One other characteristic of arbitrage is that the opportunity rarely lasts for long. That’s usually because a lot more people see the profit opportunity and whittle away the margin. Well that’s not quite the case here, but Google is effectively shutting off the oxygen of these types of made-for-adsense sites by closing down the publisher’s accounts.

Publishers could try to monetize with other ad networks although I doubt they will have much luck. It takes real balls what Google is doing. They do have a profit incentive in that they probably saw that advertisers were becoming more reticent to turn on content targeting because of the quality of traffic that comes through these types of sites but they still should be commended.

Justin Kitch, the CEO and founder of Homestead (and all-round good guy), has an excellent analogy for the value of ideas: tomato plants.

“You can get dozens of organic heirloom tomato seeds for $2.99. But if you want to get a single seedling of the same variety, you’ll pay the same price. Go to the farmers market down the block in August (where you can choose from dozens of heirloom varieties) and you might very well pay $2.99 for a single tomato!”

That in all likelihood mimicks the capital markets for growth firms. From seed stage to seedling (venture?) and then Farmer’s market (IPO/M&A).