AOL Pays Too Much for TACODA

Although not publicly disclosed, insiders close to the deal indicate AOL payed $275MM to purchase the behavioral targeting firm TACODA. That's a big sum of money for a 100 person company, and an unprofitable one at that. Apparently, AOL isn't confident they could build the technology in-house, which makes sense given their track record. Nonetheless, I still think it was a smart move by AOL, who is basically selling off their customer base to the Telcos/MSOs as they can no longer compete as an ISP, and is putting all their eggs in the Advertising basket. According to eMarketer, Advertisers will double their spend on targeted display advertising to $1 billion, and then nearly triple to $3.8 billion by 2011.


TACODA was financed by Union Square Ventures, and you can read their response to the acquisition here.

technorati tags: AOL, advertising,
TACODA

From Wireless to Print: Can Google Master All Platforms?

Google's Q2 earnings release was the least interesting of the three press releases they issued last week. Their first release announced the expansion of their online advertising platform, Google Print Ads™, for offline media buying. Google serves as a middleman between Advertisers/Agencies and traditional print publishers, connecting the former with the latter in an easy to use Web interface. This is an offline extension of Google's bread-and-butter programs Adwords and Adsense, with a key difference: pricing is not based on an auction system. Advertisers submit what they are willing to pay to publishers for the advertising space, and publishers either accept or reject the offer. Publishers benefit by tapping into the large audience of online Advertisers already working with Google, many of which have never purchased traditional media, and Advertisers benefit by improving the effectiveness of their overall marketing spend: Covad reported a 20% lift in their online impressions for their purchased keywords following their print advertising. "I am a big convert," said Simon McIver, Director of Marketing at Covad. The programs has grown from 50 participating newspapers to more than 225 newspapers representing 32 of the top 35 DMAs. Google rings the cash register again.

The third press release was well covered in the media and no need to recap the details here, but Google announced their intent to participate in the January 2008 government auction of the wireless spectrum in the 700 megahertz (MHz) band. That is, if the government is willing to adopt the four types of "open" platforms outlined by Google as part of the license conditions. Not happening, no way, no how, but at least this marketing stint was more effective and more professional than Sergey Brin's previous attempt to directly lobby lawmakers clad in jeans and sneakers, a rookie move if there ever was one.

technorati tags: google, advertising,
Sergey Brin

Happy New Year!

Wishing everyone a happy, healthy, and prosperous new year! My browsing habits have changed a lot in 2006. I discussed this with some friends and they said the same thing -- it seems the communal nature of the internet was unleashed this year. I hope 2007 continues with this trend. Email me some of your favorite sites that changed your internet experience in 2006 and I'll compile the list.

Google Announces Acquisition of YouTube for $1.65B

As predicted, Google announced acquisition of YouTube for $1.65 billion in an all-stock deal, making the transaction tax-free for YouTube shareholders. You can listen to the Webcast here. It would be difficult to exaggerate the impact this acquisition will have on the Internet landscape, especially the impact on Google's chief competitors' Yahoo! and Microsoft. The acquisition is expected to happen in Q4, and the number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition.

YouTube has a 45% marketshare of online videos, and the acquisition will dramatically improve Google's video-sharing service. Approximately 100 million videos are available on YouTube on any given day, with 65K new videos added every day. According to Nielsen Net Ratings, YouTube enjoys 20MM unique visitors per month.

The acquisition leaves Microsoft and Yahoo! in a more precarious position to compete with Google in the online space. It was rumored both were considering acquiring YouTube, but both passed in favor of starting their own video-sharing service. Microsoft launched their own video service called Soapbox in beta on September 16th, with little success. In reaction to today's announcement, Whitney Burke, a spokeswoman for the company stated:

"We are excited about the potential we are seeing in the beta of Soapbox on MSN and believe building our own solution is a more cost-effective way to compete in this new space."

It is good that Microsoft is excited about its own service: apparently no one else is. Microsoft has more cash in its war chest than Google, but emphasizes they are taking a "more cost effective way" to compete, but how well does this serve the company and shareholders when they are losing the war. Pathetic. But then again Microsoft has always been followers, and not innovators, and that may have worked in the past, but the disruptive nature of the Internet will ultimatetly prove that approach unsuccessful.

However, the scope of this acquisition goes beyond the Internet, and affects the media space in general. Tom Brokaw lamented tonight on "NBC Evening News" in response to the acquisition "They don't build media companies like they used to." No they don't Tom, so you might as well get used to your declining viewership. You may not get it, but your employer apparently does, as NBC folded in its request that YouTube pull its clips of "Saturday Night Live," and instead cut a deal with YouTube to allow users to post content from NBC programs.

One of the reasons I love working in the Internet industry is that it is so disruptive, and although Google is now benefiting from this, it could one day become the victim of it. What is good for the goose, is good for the gander, and I look forward to writing about the company that first disrupts Google. I'm not holding my breath.

technorati tags: google, youtube,
microsoft

Google in Talks to Aquire YouTube for $1.6B

WSJ reported on Friday that Google and YouTube are in early acquisition talks. The rumored price tag is $1.6B. Founded in February 2005, YouTube has experienced phenomenal growth: they are currently ranked in the top 20 trafficked sites in the U.S.: 15 months ago they were not even in the top 100K:



Here is an Alexa Chart comparing traffic trend of Google and YouTube:



Prediction: This deal will get inked, and sooner rather than later.

technorati tags: google, youtube

Internet Titans Take Different Approaches to Content Generation

I dislike the often repeated phrase "Content is king" when referring to the internet. It's a tautology that conveys no real meaning, kind of like saying oxygen is important for life. What is interesting is how the major internet companies approach content. The Internet titans are each taking a different approach to content generation, with Google stating last week that it is sticking to its mission statement to "organize" and "make accessible" information, not to create it.

"We don't really have a ton of serious conversations about creating content," said Tim Armstrong, vice president of advertising sales, said during a panel discussion at an Interactive Advertising Bureau event in New York. Instead, he said, Google would prefer to stick with "getting users where they want to go."

Yahoo! has a much bigger stake in content generation, and went through some internal in-fighting this year in regards to the best approach to take. Lloyd Braun, former chairman of ABC Entertainment Television Group whom Yahoo hired in November 2004 to head their Media and Entertainment division, wanted to take a traditional television model to the Internet: create a series of one-off hits to attract and sustain large audiences supported by advertisting. His original strategy was to create sit-coms, talk-shows and similar television-like content for the Internet. Other Yahoo! executives, in particular CEO Terry Semel, disagreed with this approach, and instead favored acquiring content through partnerships and licensing deal as well as through user-generated content. Mr. Braun lost the battle in typical corporate fashion: his budget was seriously cut. Rumors circulated that Mr. Braun was going to leave Yahoo! over the dispute, but he stated back in March that he had has seen the error of his ways:

"I didn't fully appreciate what success in this medium is really going to look like," he said. "This is not about creating one-off hits like in my old business. That is not going to create a sustainable competitive advantage over the long term."

However, another Internet titan is taking the opposite approach, and the one originally championed by Mr. Braun. Ironically, it is from a company that was one of the first to bring user-generated content to the internet in a large scale through customer written book reviews: Amazon.com. Amazon now seems intent in creating highly produced original content on a grand scale: Amazon has hosted a series of short films, video streamed its 10th anniversary concert featuring live performances by Nora Jones and Bob Dylan, and most recently, Fishbowl, the 12 episode talk-show hosted by Bill Maher. Amazon has publicly stated that Fishbowl is just the first of many 12-episode programs that it plans to air. Amazon has also purchased the rights to turn the best-selling novel "The Stolen Child" into a feature-length film.

I won't speculate as to which approach will be most effective, although Google is probably in the most enviable position by simply side-stepping the need to create original content and still make money in volumes that Yahoo! and Amazon can only hope to do so. I guess it really is good to be the king.

technorati tags: google, amazon, yahoo

Toolbars: Big Business

Search but you will not find toolbar adoption rates, but assuming just a few percentage points among internet users, and the numbers are huge. Toolbars are primary real estates for both advertisers and search companies: they are persistant across every Web site you visit: if you are a fortunate enough company to have a placement within a toolbar, you will receive hundreds, in some cases, billions, of impressions per year. In an effort to extend their market share, search companies not only release their own branded toolbars, but also negotiate co-branded deals with companies to be the default search engine for third-party toolbars.

Yahoo! announced today a deal with Hewlett Packard for a co-branded toolbar in which Yahoo will be "set as the default search engine in Microsoft's upcoming Internet Explorer 7 on HP consumer desktop and notebook PCs." Yahoo! will pay $$$ HP for the privilege of being the default search engine within the built-in toolbar that will come embedded within all HP computer units sold with I.E. Yahoo! makes money every time a users conducts a search using the toolbar and clicks on a sponsored link.

A big source of income for internet browsers and toolbars are from the money make by integrating third-party search services or advertisers into their browser bar. For example, Firefox users will notice the drop down menu in the search bar that includes companies such as Amazon and eBay. Every time a user does a search across Amazon or eBay and makes a purchase, Mozilla Corporation, a taxable company, makes money by sharing in the revenue generated. This is significant money considering the feature is built into every Mozilla browser.