IT was just a matter of time. Online retailers have begun capitalizing on the YouTube craze, offering a video platform for product demonstrations, rants and raves, sentimental messages and just plain bizarre behavior.
At this point there is little question that the videos, on sites like 1-800-Flowers.com, Buy.com, Blendtec.com and many others soon to come, have novelty value. Whether they will help build customer traffic and sales over the long term, though, remains an open question.
“The scary thing is that we don’t know the financial implications of this,” said Jim McCann, the chief executive of 1-800-Flowers, which recently began two initiatives to post user-generated videos on the site. “Does it have any benefit for sales? I can’t answer that. We’re just going on a leap here.”
Mr. McCann said the company would announce today its “Video Valentine” service (at 1-800-Flowers.com/videovalentine), where users go to the site and upload photos, write messages and choose musical themes and graphics. The site then meshes the various elements into a 60-second clip that, while not strictly video, includes enough motion and sound to approximate the experience.
The site allows users to send the valentines for free, and, after employees review them for inappropriate content, they may post the valentines on the site for others to view and rate.
Users will be able to integrate full video files in the coming months, said Mr. McCann, who caught the video bug after a conversation last year with Chad Hurley, one of YouTube’s founders. In the meantime, the site is relying on YouTube to broadcast other video clips from customers, through its Reconnections initiative.
With that, 1-800-Flowers asks users to film testimonials about instances when a gift from the site has caused or highlighted a reunion in the customer’s life. One video the site is considering posting in the future features a man who had lost touch with his high school sweetheart after the Korean War. Through the Web site, the man sent the woman a replica of the prom corsage he gave her 50 years before. The happy ending: 1-800-Flowers supplied the bouquets for their wedding. The Reconnections clips, which carry the company’s logo and links, are carried on YouTube, but links to the videos will also appear on the 1-800-Flowers site. Mr. McCann said he would feature the most popular videos in television ads, and has begun training employees in video production techniques to help customers refine some of the more promising testimonials.
The effort, he said, falls in line with the company’s increased focus on soliciting customer involvement on the site — whether through suggested gift card phrases, or less formal interactions with customer service representatives, where the site’s employees solicit feedback from consumers on product variations they might like to see.
“The irony is that we’re using technology to be much more personal with our customers, and recreate the relationship I had 30 years ago, where I knew all the customers that came into my shop on First Avenue,” Mr. McCann said.
The business itself is on the upswing. Late last month 1-800-Flowers announced record revenues of $330 million for the most recent quarter, an increase of nearly 19 percent from the same period in 2005. The company’s stock jumped by more than 10 percent last month to top $7, after dropping below $4.50 in August.
For at least one company, user-generated videos have led to a measurable boom in business. Blendtec, a manufacturer and seller of blenders based in Orem, Utah, started late last year posting videos of the company’s chief executive, Tom Dixon, blending random objects, including wood, marbles and Mr. Dixon’s iPod.
The company posted the videos on its own site, WillItBlend.com, as well as on YouTube, and promoted them on various message boards and blogs. The marble video, which can be seen at youtube.com/watch?v=3OmpnfL5PCw quickly rose to prominence on YouTube’s entertainment section, and since then, according to Blendtec’s marketing director, George Wright, the company’s 30 videos have been viewed more than 11 million times.
“We’ve seen wonderful improvements in sales,” Mr. Wright said. “Online, we’ve absolutely eclipsed our records, and it just continues to grow and grow.”
Still, the runaway success of the program has included some potentially troubling side effects. Users have taken to posting their own “extreme blending” videos, with about 600 such clips last week featured on YouTube.
Other sites, like the golf and tennis retailer Golfsmith.com, are employing user videos for reviews. According to Matthew Corey, the company’s vice president of marketing, Golfsmith.com will soon allow users to post clips talking about products for sale on the site.
Mr. Corey said this year’s new golf clubs include even bigger drivers than before, some with square heads. “It’s going to take people some time to understand the features of these,” he said. “What better way to do that than with videos?”
•
Sites may need to offer incentives to entice users to post videos, according to some executives, because users are less willing to do the extra work to post videos than photos or text reviews. Mr. Corey said Golfsmith is considering rewarding users who create popular videos.
Videos also help increase Internet traffic. The more Golfsmith offers videos and reviews of its products, Mr. Corey said, the better the chances Google and other search engines will point users to Golfsmith when they type a product name into a search box.
Mr. Corey will still have to brace himself for the possibility of users posting mock video reviews on YouTube showing, say, the destructive capabilities of a club. But on Golfsmith.com, all reviews will be screened by BazaarVoice, an Austin-based technology vendor that helps Web sites post user reviews and screen them for offensive or inappropriate content.
Brett Hurt, the chief executive of BazaarVoice, said his company would start helping three of its 60 clients solicit, review and post video reviews.
“I’d expect a majority of our customers to adopt this,” Mr. Hurt said. “It’s just a matter of time before it becomes the norm online.”
NYTimes.com
Monday, February 5, 2007
Friday, February 2, 2007
Consumer Mags Online: Real Strategy or Band-Aid?
When Emap announced last December that it would shutter the U.S. version of FHM due to a perceived lack of future ad growth, it also said it would retain its Web presence, replacing companion Web site fhmus.com with fhmonline.com. “I think they’re seeing a lot of migration of ad revenue to online markets,” a source close to the company told Folio: at the time. “In this sector, those ad dollars are at a premium and they’re going elsewhere.”The source said the FHM Web site has nearly double the number of users as the magazine does subscribers (1.25 million print subscribers as of June 2006, according to the publisher’s statement with the Audit Bureau of Circulations).More consumer publishers are closing their magazines in favor of Web sites—from the teen category to men’s magazines and possibly newsweeklies next—but just how committed are they to an Internet strategy? According to a 2006 Folio: survey of consumer magazine CEOs, 77 percent of those with revenue under $10 million and 57 percent of those with revenue over $10 million expected new print advertisers to be their fastest growing revenue stream. “We folded a couple new magazines and we’re not embracing technology as fast as we could,” said one executive. While some b-to-b publishers are starting to see online revenue gains exceed print losses, consumer publishers may have a steeper hill to climb.Small Fish in a Big PondPart of the problem is that magazine publishers need to cope with the new experience of being a small fish in a big pond. Sites such as TeenPeople.com and ElleGirl.com post impressive traffic relative to print circulations but lag far behind other sites that cater to their audience, such as MySpace. Sports Illustrated is the dominant print sports brand and SI.com is an extremely successful Web entity, yet it is about the fifth largest sports Web site by traffic.A recent study from The Bivings Report, called “Analyzing the Presence of Magazines on the Internet” (www.bivingsreport.com/2006/the-presence-of-magazines-on-the-Internet/), finds that some of the most popular print magazines continue to lag behind the adoption of cutting-edge features (RSS feeds, RSS feeds that include ads, tags, mobile versions, video, podcasts, reporter blogs, reporter blog comments, blogrolls, comments on articles, registration required, book marking, message boards, and RSS feeds for different sections). Only three magazines—Newsweek, Popular Science and Time—used more than half of the features the study highlighted. The largest magazine according to the study’s definition—Reader’s Digest—possessed only podcasts, message boards and RSS feeds, while 10 of the magazine sites surveyed possessed none of the features. To be fair, the study assumes that all these features are a benefit to the magazines’ audiences—one of the challenges of Web 2.0 is not falling into the trap of doing something just because you can, rather than because it makes business sense.Taking the First StepLast April, Hachette Filipacchi shuttered ElleGirl in favor of ElleGirl.com. In December, the publisher folded French import Shock but plans to bolster the U.S. edition of the Web site. ElleGirl.com has enjoyed a 300 percent increase in traffic with very limited marketing and is setting the tone for the rest of the publisher’s online products. “What’s happened with ElleGirl.com has made us very confident about our brands having life beyond the magazine,” says vice president of digital media Marta Wohrle.The French version of Shock is undergoing its own repositioning by shifting to weekly and becoming more news-focused, and that could influence the U.S. Web site. “We’ll have to see whether that strategy will pan out,” says Wohrle. “In the next couple of months we’ll decide on what that strategy will be—do we do something like the French version or something more unique for American audiences?”As Hachette moves to a ratio where its Web sites feature 80 percent unique online content and 20 percent print content, ElleGirl.com is starting to influence some of the more mature brands as well. In the next few months, Hachette Filipacchi will redesign the Woman’s Day site (womansday.com) with blogs written by the magazine’s “name brand” writers as the centerpiece of the home page. “A year ago, if I had suggested that, the ad department would have walked out,” says Wohrle. “They would have said ‘we can’t sell this’—now they want to sell it.”But they’ll have to adjust their expectations. In 2005, ElleGirl generated $33 million in revenue, according to PIB. “ElleGirl.com will make money this year,” says Wohrle. “When you compare that to how long it takes a magazine to be profitable, especially in the teen market, we’re very happy. We’ve done five-year plans for every brand online and we think we can get 20 percent of our income from online/mobile company-wide. In terms of profitability, the proportions should be much higher, possibly 40 to 60 percent. Overall it’s going to be a smaller business but the margins overall may continue to be much, much higher.”
Video Gaming Industry Adapting to Internet Age
In the future, video games will be shorter in length. They will be easier to comprehend, and they will appeal to a wider audience. They will lack hefty instruction manuals and lengthy tutorials. Many will be downloadable. Some will contain advertisements.
These were some of the ideas tossed around Tuesday evening at a panel discussion on the booming video game business at New York University's Stern School.
With broadband Internet becoming more accessible, everyone wanted to talk about the future of digital distribution of video games. Online gaming sites are popular as ever, and all of the new consoles — Microsoft's XBox 360, Sony 's Playstation 3, and the Nintendo Wii — offer their own online marketplaces for downloading smaller games. The panelists, who included the Vice President of Business Development for Atari, Robert Stevenson, and an interactive entertainment analyst for Bear Stearns, Edward Urban, each had their own strategies and reasons for tapping in to the online market.
"It's kind of a tricky thing for publishers, because your bread and butter is the retail business," Mr. Stevenson said. "So you want to do the digital distribution, but you don't want to bypass or avoid Wal-Mart and Best Buy because it's still a valid business." Mr. Stevenson pointed out that online sales of the game Neverwinter Nights made up 5% of total sales. Although Atari was pleased with that figure, it obviously didn't compare to sales in stores. Still, Mr. Stevenson suggested that the online would strengthen over time.
The chief executive officer of the online game company Kuma Reality Games, Keith Halper, said digital distribution is more analogous to television than to Wal-Mart. His company offers free games over the Internet, distributed in small bursts, or "episodes," and forces players to watch advertisements. "As a startup, you don't want to find yourself competing against the likes of Atari or Vivendi," he said, adding that smaller companies need to find less traditional business models.
The vice president of Sierra Online Latin America, Esteban Sosnik, said there would be a change in the way video games are made as the Internet's role increases. He said that his company's awardwinning game, Assault Heroes, wouldn't have been possible without Live Arcade, Xbox 360's downloadable game service. He also implied that micro-transactions — the purchase of add-ons or upgrades through the Internet — would become more prominent.
Panelists agreed that shorterlength video games would be popular with consumers.
"I think it's happening because of a change in demographics," the coordinator of the New York City chapter of the International Game Developers Association, which helped organize the panel, Wade Tinney, said after the discussion. There are still kids who can play for hours on end, he said, but there are also older people, like himself, who grew up on games and don't have that kind of time anymore. "And I'm the one with the credit card and the income," he said.
"I personally don't think our players have any interest in the 40-hour experience," he said.
Mr. Halper found that his customers, many of whom are new to gaming, were unsatisfied with the company's longer offerings and preferred games to last an hour or less. "There's something about the mass market coming in that makes a difference in the kind of games you create," he said.
After the panel, Mr. Stevenson said that his business model isn't going to change much, but that the games Atari distributes probably will. In his words, video games in the future will simply be more "digestible."
The New York Sun
These were some of the ideas tossed around Tuesday evening at a panel discussion on the booming video game business at New York University's Stern School.
With broadband Internet becoming more accessible, everyone wanted to talk about the future of digital distribution of video games. Online gaming sites are popular as ever, and all of the new consoles — Microsoft's XBox 360, Sony 's Playstation 3, and the Nintendo Wii — offer their own online marketplaces for downloading smaller games. The panelists, who included the Vice President of Business Development for Atari, Robert Stevenson, and an interactive entertainment analyst for Bear Stearns, Edward Urban, each had their own strategies and reasons for tapping in to the online market.
"It's kind of a tricky thing for publishers, because your bread and butter is the retail business," Mr. Stevenson said. "So you want to do the digital distribution, but you don't want to bypass or avoid Wal-Mart and Best Buy because it's still a valid business." Mr. Stevenson pointed out that online sales of the game Neverwinter Nights made up 5% of total sales. Although Atari was pleased with that figure, it obviously didn't compare to sales in stores. Still, Mr. Stevenson suggested that the online would strengthen over time.
The chief executive officer of the online game company Kuma Reality Games, Keith Halper, said digital distribution is more analogous to television than to Wal-Mart. His company offers free games over the Internet, distributed in small bursts, or "episodes," and forces players to watch advertisements. "As a startup, you don't want to find yourself competing against the likes of Atari or Vivendi," he said, adding that smaller companies need to find less traditional business models.
The vice president of Sierra Online Latin America, Esteban Sosnik, said there would be a change in the way video games are made as the Internet's role increases. He said that his company's awardwinning game, Assault Heroes, wouldn't have been possible without Live Arcade, Xbox 360's downloadable game service. He also implied that micro-transactions — the purchase of add-ons or upgrades through the Internet — would become more prominent.
Panelists agreed that shorterlength video games would be popular with consumers.
"I think it's happening because of a change in demographics," the coordinator of the New York City chapter of the International Game Developers Association, which helped organize the panel, Wade Tinney, said after the discussion. There are still kids who can play for hours on end, he said, but there are also older people, like himself, who grew up on games and don't have that kind of time anymore. "And I'm the one with the credit card and the income," he said.
"I personally don't think our players have any interest in the 40-hour experience," he said.
Mr. Halper found that his customers, many of whom are new to gaming, were unsatisfied with the company's longer offerings and preferred games to last an hour or less. "There's something about the mass market coming in that makes a difference in the kind of games you create," he said.
After the panel, Mr. Stevenson said that his business model isn't going to change much, but that the games Atari distributes probably will. In his words, video games in the future will simply be more "digestible."
The New York Sun
Disney sells 1.3m films on iTunes
Downloads of Walt Disney films on the iTunes platform have risen sharply to more than 1.3m after only three months on sale, putting pressure on other Hollywood studios to join Apple’s digital service.
Disney began selling its new movies on iTunes in October. But other studios have resisted its lead, partly because of fears that they will upset retailers such as Wal-Mart and Target, which are responsible for most DVD sales in the US.
Target has expressed concerns about the effect of downloading on DVD sales and pricing. But in an exclusive video interview on FT.com, Bob Iger, Disney’s chief executive, said digital distribution was “creating more consumption of media”. He added: “The message that we deliver to our traditional [retail] partners is that the pie is getting bigger.”
Video
Bob Iger talks to US Managing Editor Chrystia Freeland in an exclusive video interview
He dismissed fears that digital downloads would cannibalise DVD sales, pointing to record sales of Cars, a Disney animated movie, and of Pirates of the Caribbean: Dead Man’s Chest, which is on course to be the biggest selling DVD ever.
Mr Iger said retailers’ concerns were to be expected but Disney had to sell content on digital channels. “If we don’t put our content on these platforms, which the consumer has obviously embraced, other entities will create content and fill that void.”
The launch of Pirates of the Caribbean and Cars on iTunes helped push Disney download sales through the 1m barrier, with the total number of Disney downloads sold on iTunes doubling over the Christmas period.
Disney also put its TV programming on iTunes a year ago and has sold more than 20m downloads.
The company’s buoyant DVD sales come as the media industry braces itself for a DVD slowdown. After several years of growth, the market is maturing.
Pali Capital, a research firm, expects 2007 to be the first year that spending on DVDs in the US declines.
ft.com
Disney began selling its new movies on iTunes in October. But other studios have resisted its lead, partly because of fears that they will upset retailers such as Wal-Mart and Target, which are responsible for most DVD sales in the US.
Target has expressed concerns about the effect of downloading on DVD sales and pricing. But in an exclusive video interview on FT.com, Bob Iger, Disney’s chief executive, said digital distribution was “creating more consumption of media”. He added: “The message that we deliver to our traditional [retail] partners is that the pie is getting bigger.”
Video
Bob Iger talks to US Managing Editor Chrystia Freeland in an exclusive video interview
He dismissed fears that digital downloads would cannibalise DVD sales, pointing to record sales of Cars, a Disney animated movie, and of Pirates of the Caribbean: Dead Man’s Chest, which is on course to be the biggest selling DVD ever.
Mr Iger said retailers’ concerns were to be expected but Disney had to sell content on digital channels. “If we don’t put our content on these platforms, which the consumer has obviously embraced, other entities will create content and fill that void.”
The launch of Pirates of the Caribbean and Cars on iTunes helped push Disney download sales through the 1m barrier, with the total number of Disney downloads sold on iTunes doubling over the Christmas period.
Disney also put its TV programming on iTunes a year ago and has sold more than 20m downloads.
The company’s buoyant DVD sales come as the media industry braces itself for a DVD slowdown. After several years of growth, the market is maturing.
Pali Capital, a research firm, expects 2007 to be the first year that spending on DVDs in the US declines.
ft.com
Thursday, February 1, 2007
AOL Grows Annual Ad Revenue 41%
AD REVENUE AT TIME WARNER'S AOL increased by $548 million last year, marking a 41% surge from 2005, the company reported Wednesday.
"Advertising revenues reflected strong growth in display advertising, advertising run on third-party Web sites generated by Advertising.com and paid-search advertising," the company stated in its SEC filing.
Despite the ad surge, overall revenue at AOL fell to $7.9 billion last year--marking a 5% drop, which the company said was largely due to a $971 million loss of subscription revenue. AOL last August dropped subscriber fees for people connecting via broadband as part of a plan to increase ad dollars by drawing more visitors and keeping them on the site as long as possible, in order to serve more ad impressions.
At the time the company dropped its fees, 6.2 million U.S. subscribers with broadband connections paid $15 a month for their AOL e-mail addresses and other services. In the fourth quarter, the company lost 2 million subscribers, bringing the total number of AOL paid U.S. members to 13.2 million.
Fourth-quarter defections, however, came in lower than some estimates. Merrill Lynch had anticipated at least 2.25 million fourth-quarter subscriber departures, the brokerage house said in a report Wednesday.
MediaPost.com
"Advertising revenues reflected strong growth in display advertising, advertising run on third-party Web sites generated by Advertising.com and paid-search advertising," the company stated in its SEC filing.
Despite the ad surge, overall revenue at AOL fell to $7.9 billion last year--marking a 5% drop, which the company said was largely due to a $971 million loss of subscription revenue. AOL last August dropped subscriber fees for people connecting via broadband as part of a plan to increase ad dollars by drawing more visitors and keeping them on the site as long as possible, in order to serve more ad impressions.
At the time the company dropped its fees, 6.2 million U.S. subscribers with broadband connections paid $15 a month for their AOL e-mail addresses and other services. In the fourth quarter, the company lost 2 million subscribers, bringing the total number of AOL paid U.S. members to 13.2 million.
Fourth-quarter defections, however, came in lower than some estimates. Merrill Lynch had anticipated at least 2.25 million fourth-quarter subscriber departures, the brokerage house said in a report Wednesday.
MediaPost.com
NBC: Viewers Catch Up Online
MOST WEB USERS WHO HAVE streamed prime-time shows on NBC.com did so after missing the episode on its original air date, but a large proportion also went online to watch a show a second time. Those are among the findings of a report issued Wednesday by NBC Universal.
Seventy-eight percent of the users of NBC Rewind--the network's full-length online video player--said they have streamed a program because they missed it when originally broadcast. But 26% said they have streamed an episode they already saw on the air, and 34% have watched a program they had never seen before.
Starting last October, NBC made full episodes of "Heroes," "30 Rock," "Friday Night Lights," "Las Vegas," "Studio 60" and "My Name Is Earl" available on NBC.com for streaming. Joining the roster this year are "Grease: You're The One That I Want" and "The Apprentice."
NBC also reported that more than 60% of users stream full episodes on the site. To date, 6.9 million users have streamed almost 42 million videos on the site, according to NBC.
For the report, research company Insight Express surveyed 1,520 visitors to the site between Nov. 14 and Dec. 18.
MediaPost.com
Seventy-eight percent of the users of NBC Rewind--the network's full-length online video player--said they have streamed a program because they missed it when originally broadcast. But 26% said they have streamed an episode they already saw on the air, and 34% have watched a program they had never seen before.
Starting last October, NBC made full episodes of "Heroes," "30 Rock," "Friday Night Lights," "Las Vegas," "Studio 60" and "My Name Is Earl" available on NBC.com for streaming. Joining the roster this year are "Grease: You're The One That I Want" and "The Apprentice."
NBC also reported that more than 60% of users stream full episodes on the site. To date, 6.9 million users have streamed almost 42 million videos on the site, according to NBC.
For the report, research company Insight Express surveyed 1,520 visitors to the site between Nov. 14 and Dec. 18.
MediaPost.com
Times Exec Questions Online Subscription Model
HIDING THE NEW YORK TIMES' premium content behind a paid wall could potentially scare off new generations of readers, Nicholas Ascheim, the company's director of entertainment, video and audio products, said Wednesday at the Software & Information Industry Association's Information Industry Summit in New York.
"New generations will never get exposed," Ascheim said during a panel discussion on Web monetization with moderator and MarketWatch columnist Jon Friedman. Although he said TimesSelect had been successful so far, he added that the company still needs "more time to experiment."
Randy Kilgore, fellow panelist and chief revenue officer at video ad network Tremor Media, added that many online publishers struggle to find the right revenue model.
"We see a lot of confusion in the marketplace," he remarked. "We're working with thousands of sites with tons of video, but without a clear strategy of how to monetize."
The afternoon panel--which took place the same day that the Times Co. released fourth-quarter earnings--was titled "Multimedia Monetization: Business Models in a Broadband World." Yet according to Ascheim, the Times' top priority at the moment is not money, but cultivating readers. "The strategy is to build an audience."
"I think we're only 5% down the road," said Ascheim, speaking generally about the growth potential of "content and the audience around it."
For the time being, at least, things seem to be moving in that direction. For the fourth quarter, the Times Co.'s online revenue grew 42% to $84.8 million from $59.7 million in the fourth quarter of 2005. For the full-year 2006, Internet revenues rose 41.2% to $273.9 million from $193.9 million in 2005. (Excluding an additional week in the quarter, Internet revenues grew 35.3% in the fourth quarter and 39.2% for the full year.)
In total, the Times Co.'s Internet businesses accounted for 9.1% of all revenues in the fourth quarter, versus 6.7% in the fourth quarter of 2005. For the year, Internet revenues accounted for 8.3% of total revenues compared with 6% in 2005.
The Times' Internet businesses include its digital archives, NYTimes.com, Boston.com, and About.com, along with Web sites of other newspaper properties.
Late last year, the Times reported that TimesSelect had brought in roughly $6 million in revenue since its launch in late 2005, and attracted 198,690 online subscribers. Those nearly 200,000 consumers represent 37% of the total TimesSelect audience--the majority made up of paying print subscribers.
As for this year, the Times said it expected revenues from Internet-related businesses to grow approximately 30%, or $350 million--mainly from organic growth.
In addition, Times readers will get the opportunity to contribute their own content to NYTimes.com in the very near future, said Ascheim, noting the benefit of user-generated media to the bottom line. "Using consumer content is interesting, because it allows you to increase content without cost," he said.
MediaPost.com
"New generations will never get exposed," Ascheim said during a panel discussion on Web monetization with moderator and MarketWatch columnist Jon Friedman. Although he said TimesSelect had been successful so far, he added that the company still needs "more time to experiment."
Randy Kilgore, fellow panelist and chief revenue officer at video ad network Tremor Media, added that many online publishers struggle to find the right revenue model.
"We see a lot of confusion in the marketplace," he remarked. "We're working with thousands of sites with tons of video, but without a clear strategy of how to monetize."
The afternoon panel--which took place the same day that the Times Co. released fourth-quarter earnings--was titled "Multimedia Monetization: Business Models in a Broadband World." Yet according to Ascheim, the Times' top priority at the moment is not money, but cultivating readers. "The strategy is to build an audience."
"I think we're only 5% down the road," said Ascheim, speaking generally about the growth potential of "content and the audience around it."
For the time being, at least, things seem to be moving in that direction. For the fourth quarter, the Times Co.'s online revenue grew 42% to $84.8 million from $59.7 million in the fourth quarter of 2005. For the full-year 2006, Internet revenues rose 41.2% to $273.9 million from $193.9 million in 2005. (Excluding an additional week in the quarter, Internet revenues grew 35.3% in the fourth quarter and 39.2% for the full year.)
In total, the Times Co.'s Internet businesses accounted for 9.1% of all revenues in the fourth quarter, versus 6.7% in the fourth quarter of 2005. For the year, Internet revenues accounted for 8.3% of total revenues compared with 6% in 2005.
The Times' Internet businesses include its digital archives, NYTimes.com, Boston.com, and About.com, along with Web sites of other newspaper properties.
Late last year, the Times reported that TimesSelect had brought in roughly $6 million in revenue since its launch in late 2005, and attracted 198,690 online subscribers. Those nearly 200,000 consumers represent 37% of the total TimesSelect audience--the majority made up of paying print subscribers.
As for this year, the Times said it expected revenues from Internet-related businesses to grow approximately 30%, or $350 million--mainly from organic growth.
In addition, Times readers will get the opportunity to contribute their own content to NYTimes.com in the very near future, said Ascheim, noting the benefit of user-generated media to the bottom line. "Using consumer content is interesting, because it allows you to increase content without cost," he said.
MediaPost.com
Michael Dell Heads Back To The CEO Chair
MICHAEL DELL HAS TAKEN BACK the day-to-day running of the company he founded, and is replacing Kevin Rollins as CEO, Dell Computer announced yesterday.
"The Board believes that Michael's vision and leadership are critical to building Dell's leadership in the technology industry for the long term," said Samuel A. Nunn, presiding director of Dell's Board. "There is no better person in the world to run Dell at this time than the man who created the Direct Model and who has built this company over the last 23 years."
Dell founded the company in 1984 with $1,000 and an unprecedented idea--to bypass the middleman and sell computer systems directly to the customer. He has served as the company's Chairman of the Board since its founding, and served as CEO until 2004.
"Dell has tremendous opportunities ahead of it," said Dell. "I am enthusiastic about Dell 2.0, which includes our plan to provide the best customer experience, build a strong global services business and ensure our products deliver the best long-term customer value."
The company also said that it expects its fourth-quarter Fiscal Year 2007 results to be below the average of First Call estimates for both revenue and earnings per share.
MarketingDaily.com
"The Board believes that Michael's vision and leadership are critical to building Dell's leadership in the technology industry for the long term," said Samuel A. Nunn, presiding director of Dell's Board. "There is no better person in the world to run Dell at this time than the man who created the Direct Model and who has built this company over the last 23 years."
Dell founded the company in 1984 with $1,000 and an unprecedented idea--to bypass the middleman and sell computer systems directly to the customer. He has served as the company's Chairman of the Board since its founding, and served as CEO until 2004.
"Dell has tremendous opportunities ahead of it," said Dell. "I am enthusiastic about Dell 2.0, which includes our plan to provide the best customer experience, build a strong global services business and ensure our products deliver the best long-term customer value."
The company also said that it expects its fourth-quarter Fiscal Year 2007 results to be below the average of First Call estimates for both revenue and earnings per share.
MarketingDaily.com
Are Google investors getting spoiled?
Even though Google (GOOG) managed to blow away fourth-quarter earnings on Jan. 31, its shares fell by about 1% in extended trading. The sellers may have missed the real import of the search giant's report: More than ever, it's got the entire advertising world in its sights. And this year, Google will come out with guns blazing.
Investors, who had boosted the stock 1.5% before the report, may have hoped for a little stronger revenue growth vs. the third quarter than the 20% Google reported. "Expectations got ahead of themselves," says Scott Devitt, an analyst with Stifel, Nicolaus. But mostly, some investors decided to pocket some profits following a 10% rise in the stock so far this year.
A New Light
And Google had profits to spare. It earned $1.03 billion, nearly triple a year ago, on a 67% jump in revenues, to $3.2 billion. This was the ninth of 10 quarters as a public company that Google, which now accounts for about a quarter of all online advertising, outperformed expectations.
The big drivers this quarter: strong growth in traffic thanks to holiday shopping and improvement in the effectiveness of ads placed alongside Google's search results. In fact, according to Chief Executive Eric Schmidt, Google is showing fewer ads per search on average but is making more money because it's more carefully targeting ads to the most commercial sites. "The targeting and the technical work that we are doing is producing better return for advertisers, better revenue for us, with even fewer advertisements," he told analysts during a conference call.
Perhaps most interesting for Google's future, it's now apparent that advertisers are viewing search—and Google—in a new light. Up to this point, search ads have been almost solely considered a direct-response medium, where advertisers can measure how many people they reached by tracking the number of clicks and subsequent purchases or other activity.
Aiming Big
Now, many advertisers are starting to use search ads for branding, like more traditional ads. That means companies will place ads through Google to send a message or promote a product generally, and not necessarily to get customers to take an immediate action, such as going to the Web site or purchasing an item online. "Our advertisers are now placing more brand advertising," Sergey Brin, Google co-founder and president of technology, said in the analyst call. And it appears to be working, says John Aiken, managing director at Majestic Research. "They're benefiting from people searching online and purchasing offline," he says.
The trend among brick-and-mortar retailers and even consumer-packaged-goods giants to use Google search ads for branding has made search ads more expensive for small advertisers (see BusinessWeek.com, 1/22/07, "The Small Fry Sour on Search Ads"). But it's a boon for Google. And ad agencies confirm that it's starting to take off. "Search can be a very good branding tool," says Jason Schulman, chief revenue officer for X+1, which helps companies refine their online marketing efforts.
Indeed, Google executives signaled in the clearest way yet their expansive intentions: The company aims to offer a "complete sales and marketing platform for all advertisers," Brin said. "We're talking to advertisers about using Google for all kinds of advertising," added Schmidt. For instance, Volvo, Procter & Gamble (PG), and OfficeMax (OMX) all placed image and video ads on Google's networks.
Ad Capture
Google is rapidly adding new places to advertise as well, with more to come this year. It bought the video phenom YouTube last October, and it has done deals with radio stations and newspaper groups to handle local ads. "Anything Google's selling, we're buying for clients," says Bill Wise, CEO of Did-It Search Marketing.
Schmidt even implied that television advertising was ripe for Google to handle. He said Google's targeting technology can "really apply well" to TV, and allow television stations to charge much higher rates for that targeting. He said there was an opportunity for Google to use data from TV set-top boxes, which have unique Internet addresses, to do that targeting.
Beyond its evident expansion into new territory, Google also simply continues to outmaneuver competitors such as Yahoo! (YHOO) and Microsoft (MSFT)—on both search and accompanying ads. Despite those two companies' efforts to catch up—Yahoo with Project Panama, a new search ad ranking system that starts rolling out in February—Google is expected to capture two-thirds of the search ad market this year, according to the e-business research firm eMarketer. "When a company starts advertising, it tends to go one place, and that's Google," says John Aiken, managing director at Majestic Research.
Spending Spree
Google's fourth-quarter results raised a couple of concerns, though none major. The company's so-called traffic acquisition costs, or TAC, which it pays to partners, looks to rise this year. That's because Google will have to pay more to recent partners such as eBay (EBAY) and News Corp.'s (NWS) MySpace, as well as new partners, as it moves further into radio and video advertising. "We may see additional pressure on TAC rates," said Chief Financial Officer George Reyes.
Google also spent heavily on some new initiatives. Google Checkout, its payment system, ran widespread promotions, offering consumers up to $20 off purchases to try it out and giving sites using it a price break on Google ads. The company said that this helped it get a quarter of the Web's top retailers to use it. Moreover, they found that Google Checkout logos prompted more people to click through on ads, benefiting those merchants. But Reyes said the promotions essentially cost the company 1 percentage point in revenue growth.
And Google's capital spending continued at a fast pace. It totaled $367 million in the quarter and $1.9 billion in 2006, mostly on data centers, servers, and networking gear. The company said it expects to continue making "significant" capital expenditures this year. Moreover, the company hired nearly 1,300 people in the fourth quarter alone, up 14%, and analysts expect that growth to continue.
Ultimately, analysts also want to see Google diversify its revenue stream, which remains 99% advertising. In coming weeks, for instance, Google is expected to introduce a paid version of its corporate office-productivity services, called Google Apps for Your Domain. But such initiatives will take a while to develop. For the time being, though, Google's opportunities appear to outweigh its challenges.
BusinessWeek.com
Investors, who had boosted the stock 1.5% before the report, may have hoped for a little stronger revenue growth vs. the third quarter than the 20% Google reported. "Expectations got ahead of themselves," says Scott Devitt, an analyst with Stifel, Nicolaus. But mostly, some investors decided to pocket some profits following a 10% rise in the stock so far this year.
A New Light
And Google had profits to spare. It earned $1.03 billion, nearly triple a year ago, on a 67% jump in revenues, to $3.2 billion. This was the ninth of 10 quarters as a public company that Google, which now accounts for about a quarter of all online advertising, outperformed expectations.
The big drivers this quarter: strong growth in traffic thanks to holiday shopping and improvement in the effectiveness of ads placed alongside Google's search results. In fact, according to Chief Executive Eric Schmidt, Google is showing fewer ads per search on average but is making more money because it's more carefully targeting ads to the most commercial sites. "The targeting and the technical work that we are doing is producing better return for advertisers, better revenue for us, with even fewer advertisements," he told analysts during a conference call.
Perhaps most interesting for Google's future, it's now apparent that advertisers are viewing search—and Google—in a new light. Up to this point, search ads have been almost solely considered a direct-response medium, where advertisers can measure how many people they reached by tracking the number of clicks and subsequent purchases or other activity.
Aiming Big
Now, many advertisers are starting to use search ads for branding, like more traditional ads. That means companies will place ads through Google to send a message or promote a product generally, and not necessarily to get customers to take an immediate action, such as going to the Web site or purchasing an item online. "Our advertisers are now placing more brand advertising," Sergey Brin, Google co-founder and president of technology, said in the analyst call. And it appears to be working, says John Aiken, managing director at Majestic Research. "They're benefiting from people searching online and purchasing offline," he says.
The trend among brick-and-mortar retailers and even consumer-packaged-goods giants to use Google search ads for branding has made search ads more expensive for small advertisers (see BusinessWeek.com, 1/22/07, "The Small Fry Sour on Search Ads"). But it's a boon for Google. And ad agencies confirm that it's starting to take off. "Search can be a very good branding tool," says Jason Schulman, chief revenue officer for X+1, which helps companies refine their online marketing efforts.
Indeed, Google executives signaled in the clearest way yet their expansive intentions: The company aims to offer a "complete sales and marketing platform for all advertisers," Brin said. "We're talking to advertisers about using Google for all kinds of advertising," added Schmidt. For instance, Volvo, Procter & Gamble (PG), and OfficeMax (OMX) all placed image and video ads on Google's networks.
Ad Capture
Google is rapidly adding new places to advertise as well, with more to come this year. It bought the video phenom YouTube last October, and it has done deals with radio stations and newspaper groups to handle local ads. "Anything Google's selling, we're buying for clients," says Bill Wise, CEO of Did-It Search Marketing.
Schmidt even implied that television advertising was ripe for Google to handle. He said Google's targeting technology can "really apply well" to TV, and allow television stations to charge much higher rates for that targeting. He said there was an opportunity for Google to use data from TV set-top boxes, which have unique Internet addresses, to do that targeting.
Beyond its evident expansion into new territory, Google also simply continues to outmaneuver competitors such as Yahoo! (YHOO) and Microsoft (MSFT)—on both search and accompanying ads. Despite those two companies' efforts to catch up—Yahoo with Project Panama, a new search ad ranking system that starts rolling out in February—Google is expected to capture two-thirds of the search ad market this year, according to the e-business research firm eMarketer. "When a company starts advertising, it tends to go one place, and that's Google," says John Aiken, managing director at Majestic Research.
Spending Spree
Google's fourth-quarter results raised a couple of concerns, though none major. The company's so-called traffic acquisition costs, or TAC, which it pays to partners, looks to rise this year. That's because Google will have to pay more to recent partners such as eBay (EBAY) and News Corp.'s (NWS) MySpace, as well as new partners, as it moves further into radio and video advertising. "We may see additional pressure on TAC rates," said Chief Financial Officer George Reyes.
Google also spent heavily on some new initiatives. Google Checkout, its payment system, ran widespread promotions, offering consumers up to $20 off purchases to try it out and giving sites using it a price break on Google ads. The company said that this helped it get a quarter of the Web's top retailers to use it. Moreover, they found that Google Checkout logos prompted more people to click through on ads, benefiting those merchants. But Reyes said the promotions essentially cost the company 1 percentage point in revenue growth.
And Google's capital spending continued at a fast pace. It totaled $367 million in the quarter and $1.9 billion in 2006, mostly on data centers, servers, and networking gear. The company said it expects to continue making "significant" capital expenditures this year. Moreover, the company hired nearly 1,300 people in the fourth quarter alone, up 14%, and analysts expect that growth to continue.
Ultimately, analysts also want to see Google diversify its revenue stream, which remains 99% advertising. In coming weeks, for instance, Google is expected to introduce a paid version of its corporate office-productivity services, called Google Apps for Your Domain. But such initiatives will take a while to develop. For the time being, though, Google's opportunities appear to outweigh its challenges.
BusinessWeek.com
Yahoo's Puzzling "Brand Universe"
Yahoo is cooking up new media model — one that involves creating little-to-no content. The company is harnessing its ability to build online audiences around brands, something it trumpeted at a media lunch held Tuesday at its Sunnyvale headquarters.
Throughout presentations from the Yahoo Media Group, a part of the new “Audience” division, the key word, uttered more times than we could count, was “promotions.” And so, in both overt and subtle fashion, Yahoo is a company transitioning itself into what’s essentially a marketing platform.
We’ve all wondered how Yahoo will emerge from the shadow of Google and its peanut butter demons1. Many have long said Yahoo should define itself as a media company and get out of this technology game. Perhaps a compromise is for Yahoo to put its long-nurtured skills at attracting internet traffic as well as its favored status among brand advertisers to good use.
The most obvious example of Yahoo’s increasing bent towards marketing is its new “Brand Universe” initiative, announced2 in November. The company will tie together its disjointed properties — such as search, groups, Flickr, Answers, avatars — to lead back to pages about a certain pop culture topic — for instance, Nintendo’s Wii3.
The discriminating factor here is popularity, not biz dev deal-making. Monetization is almost an afterthought; it will be varied on a case-by-case basis, and in some instances, the company that owns the brand will not even be involved, said Vince Broady, head of games and entertainment, over and over again to a bevy of incredulous reporters.
“Our whole purpose is to support their brand,” insisted Broady. “In some cases revenue sharing is not a huge priority.”
Yahoo says it will launch 100 such pages by year’s end; next up are the Sims, Halo, Lost, the Office, Transformers, and Harry Potter.
“Brand Universe” may be the most explicit projection of Yahoo’s increasing orientation towards marketing, but there are many others. A presentation about Yahoo TV and Yahoo Movies emphasized promoting pilot episodes and movie premieres4; an overview of Yahoo Music highlighted contests, online-only tracks, and the ability of the site to measure buzz about a new single.
Throughout the presentations, original content efforts were clearly deemphasized. Scott Moore, head of news and information, repeatedly labeled Kevin Sites’ war-zone reporting on Yahoo News5 “good PR.” C’mon now people, that’s what you tell analysts, not reporters!
The marketing business may not be Google-big, but it’s something Yahoo can do well. So far, however, the talk about monetization is lackadaisical. That’s most likely a result of the recent Yahoo reorg, which leaves the financial stuff to an entirely different division. Now that could be a bit of a problem.
Throughout presentations from the Yahoo Media Group, a part of the new “Audience” division, the key word, uttered more times than we could count, was “promotions.” And so, in both overt and subtle fashion, Yahoo is a company transitioning itself into what’s essentially a marketing platform.
We’ve all wondered how Yahoo will emerge from the shadow of Google and its peanut butter demons1. Many have long said Yahoo should define itself as a media company and get out of this technology game. Perhaps a compromise is for Yahoo to put its long-nurtured skills at attracting internet traffic as well as its favored status among brand advertisers to good use.
The most obvious example of Yahoo’s increasing bent towards marketing is its new “Brand Universe” initiative, announced2 in November. The company will tie together its disjointed properties — such as search, groups, Flickr, Answers, avatars — to lead back to pages about a certain pop culture topic — for instance, Nintendo’s Wii3.
The discriminating factor here is popularity, not biz dev deal-making. Monetization is almost an afterthought; it will be varied on a case-by-case basis, and in some instances, the company that owns the brand will not even be involved, said Vince Broady, head of games and entertainment, over and over again to a bevy of incredulous reporters.
“Our whole purpose is to support their brand,” insisted Broady. “In some cases revenue sharing is not a huge priority.”
Yahoo says it will launch 100 such pages by year’s end; next up are the Sims, Halo, Lost, the Office, Transformers, and Harry Potter.
“Brand Universe” may be the most explicit projection of Yahoo’s increasing orientation towards marketing, but there are many others. A presentation about Yahoo TV and Yahoo Movies emphasized promoting pilot episodes and movie premieres4; an overview of Yahoo Music highlighted contests, online-only tracks, and the ability of the site to measure buzz about a new single.
Throughout the presentations, original content efforts were clearly deemphasized. Scott Moore, head of news and information, repeatedly labeled Kevin Sites’ war-zone reporting on Yahoo News5 “good PR.” C’mon now people, that’s what you tell analysts, not reporters!
The marketing business may not be Google-big, but it’s something Yahoo can do well. So far, however, the talk about monetization is lackadaisical. That’s most likely a result of the recent Yahoo reorg, which leaves the financial stuff to an entirely different division. Now that could be a bit of a problem.
Good News Expected from Google's Earnings
Being a darling of investors isn't always easy.
In the wake of relatively strong showings by Internet giants eBay (EBAY) and Yahoo! (YHOO) , Wall Street is expecting another big quarter out of Google (GOOG) come Wednesday afternoon, when the company announces fourth-quarter results.
But unlike eBay and Yahoo!, Google enters the spotlight with already high expectations. The search giant, which tore apart earnings and revenue estimates for its third quarter, is judged by a different yardstick.
Along with strong revenue, the company likely will have to provide bullish commentary on its progress in some of its key business initiatives. Earnings, along with the expenses that may have eaten into them, also will be heavily scrutinized.
Analysts surveyed by Thomson First Call are forecasting earnings per share of $2.92 on revenue of $2.19 billion.
But since its last earnings blowout three months ago, shares of Google have performed relatively modestly, rising 7.5% to $494.32.
That's despite a three-month period in which the company not only steadily picked up search market share, but also sidestepped apocalyptic predictions that it had bought a hornet's nest of lawsuits when it acquired video-sharing site YouTube.
In addition, Google upped its ante in the burgeoning mobile market and put its muscle behind a well-received payment service that promises to drive more advertisers into its fold while vanquishing rivals.
Still, the stock heads into the fourth-quarter report trading at 35 times forward earnings, shy of fumbling Yahoo!'s 38. Moreover, the price-to-earnings-to-growth ratio -- which determines how expensive a stock is compared to expected growth -- shows Google at a mere 1.48 compared to Yahoo!'s 2.08.
But Google's almost sole reliance on one source of revenue, online advertising, continues to be a source of (relative) anxiety for investors. And while it's far too early to turn on the money spigot for the other lines of business the company is pursuing, Wall Street will be watching closely for signs of progress.
"Although revenues from new initiatives are most likely immaterial at this stage, we expect increased traction with video, radio, newspapers and software will drive incremental revenues over the next 3-5 years, which could be a stock catalyst," wrote Merrill Lynch analyst Justin Post in a note to clients on Tuesday.
Investors also may be comforted by more news about the olive branch Google recently extended to traditional media companies. Post writes that Google may be negotiating a deal with CBS (CBS) that, along with allowing the monetization of television content, could open up radio inventory for Google's radio advertising ambitions. Promising words about traditional media partnerships and airtime also could bode well for shares of Google, Post writes. Merrill Lynch makes a market in Google shares.
Among the most closely watched Google initiative will be its Checkout online-payment service. Citigroup analyst Mark Mahaney calls it "one of the most significant product launches for Google in 2006" and estimates that Google could have devoted up to $80 million promoting Checkout in the form of rebates to customers and free processing for merchants.
Although the service was launched in the summer of 2006, it got its most aggressive push from Google during the holiday season. Mahaney estimates that the service grew from being accepted at 135 online stores in July to 240 in December, and that the Checkout logo grew in December to 4% of commercial search queries, from 1.5% in July.
But Mahaney writes that questions remain, ranging from how confident Google is that it can handle the risks of fraud associated with payment services to how long it plans to push consumers to use it. Citigroup has an investment banking relationship with Google.
Like other published estimates, Mahaney's show that Checkout has been quite successful given its limited time frame, but still has a long way to go before it can compete with eBay's market-leading PayPal.
The success of Checkout -- along with the innovativeness of Google's future plans to promote it -- could provide insight about Google's ability to translate its dominance in the search market beyond its traditional playground and into the realm of more entrenched and experienced competitors. A better-than-expected showing coupled with a strong game plan would reflect well on Google's many other initiatives.
Similarly, the company's plans for YouTube warrant close attention, despite the paltry $10 million in revenue that Mahaney expects the deal has added to Google's coffers. Its YouTube strategy could provide a clue as to how -- among other avenues -- Google plans to muscle into the display-advertising market, where Yahoo! is the leader but could be vulnerable to pressure from Google's increasingly popular set of properties.
Along with new frontiers, Google's fourth-quarter results also revisit old worries. Chief among them is the company's mounting costs, with capital expenditures appearing to grow faster than revenue. Merrill Lynch expects $2.07 billion in capital spending for 2006, a growth of 147% year over year. Of that amount, $536 million comes in the fourth quarter, a growth of 118% year over year and 9% sequentially.
Basking in the glow of Google's stunningly profitable third quarter, CEO Eric Schmidt scoffed at Wall Street's perpetual hand-wringing about out-of-control capital costs, saying that the scrutiny helped the company boost performance instead.
This time around, with significant investments in new endeavors that have yet to pan out, that concern could take center stage.
TheStreet.com
In the wake of relatively strong showings by Internet giants eBay (EBAY) and Yahoo! (YHOO) , Wall Street is expecting another big quarter out of Google (GOOG) come Wednesday afternoon, when the company announces fourth-quarter results.
But unlike eBay and Yahoo!, Google enters the spotlight with already high expectations. The search giant, which tore apart earnings and revenue estimates for its third quarter, is judged by a different yardstick.
Along with strong revenue, the company likely will have to provide bullish commentary on its progress in some of its key business initiatives. Earnings, along with the expenses that may have eaten into them, also will be heavily scrutinized.
Analysts surveyed by Thomson First Call are forecasting earnings per share of $2.92 on revenue of $2.19 billion.
But since its last earnings blowout three months ago, shares of Google have performed relatively modestly, rising 7.5% to $494.32.
That's despite a three-month period in which the company not only steadily picked up search market share, but also sidestepped apocalyptic predictions that it had bought a hornet's nest of lawsuits when it acquired video-sharing site YouTube.
In addition, Google upped its ante in the burgeoning mobile market and put its muscle behind a well-received payment service that promises to drive more advertisers into its fold while vanquishing rivals.
Still, the stock heads into the fourth-quarter report trading at 35 times forward earnings, shy of fumbling Yahoo!'s 38. Moreover, the price-to-earnings-to-growth ratio -- which determines how expensive a stock is compared to expected growth -- shows Google at a mere 1.48 compared to Yahoo!'s 2.08.
But Google's almost sole reliance on one source of revenue, online advertising, continues to be a source of (relative) anxiety for investors. And while it's far too early to turn on the money spigot for the other lines of business the company is pursuing, Wall Street will be watching closely for signs of progress.
"Although revenues from new initiatives are most likely immaterial at this stage, we expect increased traction with video, radio, newspapers and software will drive incremental revenues over the next 3-5 years, which could be a stock catalyst," wrote Merrill Lynch analyst Justin Post in a note to clients on Tuesday.
Investors also may be comforted by more news about the olive branch Google recently extended to traditional media companies. Post writes that Google may be negotiating a deal with CBS (CBS) that, along with allowing the monetization of television content, could open up radio inventory for Google's radio advertising ambitions. Promising words about traditional media partnerships and airtime also could bode well for shares of Google, Post writes. Merrill Lynch makes a market in Google shares.
Among the most closely watched Google initiative will be its Checkout online-payment service. Citigroup analyst Mark Mahaney calls it "one of the most significant product launches for Google in 2006" and estimates that Google could have devoted up to $80 million promoting Checkout in the form of rebates to customers and free processing for merchants.
Although the service was launched in the summer of 2006, it got its most aggressive push from Google during the holiday season. Mahaney estimates that the service grew from being accepted at 135 online stores in July to 240 in December, and that the Checkout logo grew in December to 4% of commercial search queries, from 1.5% in July.
But Mahaney writes that questions remain, ranging from how confident Google is that it can handle the risks of fraud associated with payment services to how long it plans to push consumers to use it. Citigroup has an investment banking relationship with Google.
Like other published estimates, Mahaney's show that Checkout has been quite successful given its limited time frame, but still has a long way to go before it can compete with eBay's market-leading PayPal.
The success of Checkout -- along with the innovativeness of Google's future plans to promote it -- could provide insight about Google's ability to translate its dominance in the search market beyond its traditional playground and into the realm of more entrenched and experienced competitors. A better-than-expected showing coupled with a strong game plan would reflect well on Google's many other initiatives.
Similarly, the company's plans for YouTube warrant close attention, despite the paltry $10 million in revenue that Mahaney expects the deal has added to Google's coffers. Its YouTube strategy could provide a clue as to how -- among other avenues -- Google plans to muscle into the display-advertising market, where Yahoo! is the leader but could be vulnerable to pressure from Google's increasingly popular set of properties.
Along with new frontiers, Google's fourth-quarter results also revisit old worries. Chief among them is the company's mounting costs, with capital expenditures appearing to grow faster than revenue. Merrill Lynch expects $2.07 billion in capital spending for 2006, a growth of 147% year over year. Of that amount, $536 million comes in the fourth quarter, a growth of 118% year over year and 9% sequentially.
Basking in the glow of Google's stunningly profitable third quarter, CEO Eric Schmidt scoffed at Wall Street's perpetual hand-wringing about out-of-control capital costs, saying that the scrutiny helped the company boost performance instead.
This time around, with significant investments in new endeavors that have yet to pan out, that concern could take center stage.
TheStreet.com
Gates: Customized Web Key To Microsoft's Future
It's still a year before Bill Gates shifts from a full-time Microsoft worker to a part-timer. Which is good, because there's plenty he still wants to achieve.
In the second half of a two-part interview with CNET News.com, Microsoft's chairman talks about what's on his to-do list, including having a say in the next versions of Office and Windows and helping shape the company's strategy in search and online commerce.
"No shortage of important work," Gates said, speaking in Manhattan, where he took part in Monday's Vista launch festivities before heading back to Europe for more Vista events as well as a Government Leaders Forum in Scotland.
In part one of the interview, Gates gave his pitch for Windows Vista, the latest version of Microsoft's dominant operating system. In part two, Gates addresses some of the areas where Microsoft is trying to come from behind, including Xbox and Windows Live.
Q: One of the things Microsoft is introducing for the first time is if you want, you can go online and download either Office or Vista and buy it directly from Microsoft. Is that the future?
Gates: If you look at the beta period, where we had over 5 million users, those were online downloads, so obviously people are very willing to have that as a way to upgrade. It certainly beats standing in line. I don't know what the mix will look like over these next several years. We're going to give people the choice. Maybe next time it will be the main way they decide to upgrade.
Vista: Now or never
How soon do you plan to move to Microsoft's latest OS?
I'm standing in line right now to buy it. Whenever I buy my next PC. Windows XP is going to last me a good, long time. I'm sticking with the Mac--or moving there soon.
One of things Microsoft said on the earnings call last week is that you are not going to ship quite as many Xboxes, at least in the near term, as you had forecast. What's behind that?
Gates: The Xbox had a great Christmas, but we actually provided enough inventory to go even beyond that. People in the first half will be working off that somewhat. We're always quite conservative in terms of how we do forecasts. We feel our competitive position with Xbox 360 could not be better. We got out a year ahead of our competitor, got the volume up there so that software people see it as the platform they really want to build on. Even with the conservatism, I've never felt better about Xbox 360 and where it is.
I'm sure you guys assumed the Windows Live effort would be a challenge. It seems to have been a bigger challenge than you expected. Is it time to rethink the strategy there? Is it just a matter of time?
Gates: Windows Live is fairly new for us. Ray Ozzie came and took charge of that. With Vista shipping now, we'll get a higher percentage of R&D on that Live-type capability. Over the next year you're going to see some neat things coming out. No one has done the platform on the Internet the way we think it needs to be done. We've got a lot of breakthroughs that we're going to be rolling out.
You just got back from Davos, the big conference of business executives and political types. Were there some things you came away with?
Gates: That's a conference that hits on every topic imaginable, from global health to global warming to various political things. The biggest change agent in the world has been the Internet. Now it's a question of getting that out, not just in the rich countries, but for all of the different countries. How can we make that happen?
People want to know "Are they missing something? What should their country do?" It's a great chance for me to have dozens of side meetings about where technology is going and what people might do with it.
One of the things you talked about there is Internet television and the way it's changing things. Is the television of today really on the verge of being outmoded?
Gates: You won't have to give up what you have today. But when you watch the news you can avoid the things you don't care about and see more of the things you do care about. The ads can be very targeted to you, so they won't be as bothersome. The content that is not very popular, like your kids' sports game or some lecture, will just be right there in your guide. The use of the Internet means it doesn't matter how many people are watching it. We can bring it down to you. We get rid of these limitations, the time limitations and the number of channel limitations that the old broadcast approach forced us all into.
Video: Gates talks up Vista
Microsoft's chairman discusses the long-awaited launch of the new OS.
It strikes me that, in your foundation hat, that might be a challenge, since a lot of what you try and do is bring attention to things that people aren't thinking about. This world of customization and personalization...is there a societal challenge? Who tells us what we need to know that we don't necessarily want to know?
Gates: Part of the beauty of the online world is it will let us find people we trust who want to recommend things. Certainly if people want to know what I think is interesting, they'll see what they might read about global health. I do think there has been more attention paid to global health in the last five years than ever before.
People would like it if it could be put into terms where they can get involved. Where can their money have an impact? How can they see that it gets an impact? Online lets us do that. Just (reading) a newspaper or watching a TV show didn't draw the person in.
Is the line between professionally produced content and user-generated content shifting? Will there still be a mix of those two things?
Gates: Once upon a time a typeset document was a clear sign that a big company was behind it and had put some real money into it. Today, anyone with a copy of Office and a laser printer is making documents that look as good as a big company.
There is still a gap there in terms of movie editing. But now with this high-definition movie editor that's in Windows Vista, that barrier has really been changed.
In photography, we have this stitching capability and rich software algorithms to improve photo quality. The things that are out of reach of just a person with a PC are getting smaller and smaller. Eventually, we want them to be able to do anything, all of their creativity fully unleashed.
It's still a year before you are stepping away from full-time work at Microsoft and moving to part time. What's on your to-do list?
Gates: Certainly, the big decisions about the next round of Windows and Office. A lot of things about Live, including what we do in commerce and search. Steve (Ballmer) expects me to share a lot of ideas and make sure those things get going on the right track.
No shortage of important work. I'm thrilled to see Ray Ozzie and Craig Mundie stepping up to their pieces.
Have you picked a couple things yet that you plan on working on when you do step away from full-time work?
Gates: It's too soon to really decide what those things will be. I'd be surprised if some things related to search or tablet PCs aren't in there. It's up to Steve to think, in that new role, how can I be most effective.
In the second half of a two-part interview with CNET News.com, Microsoft's chairman talks about what's on his to-do list, including having a say in the next versions of Office and Windows and helping shape the company's strategy in search and online commerce.
"No shortage of important work," Gates said, speaking in Manhattan, where he took part in Monday's Vista launch festivities before heading back to Europe for more Vista events as well as a Government Leaders Forum in Scotland.
In part one of the interview, Gates gave his pitch for Windows Vista, the latest version of Microsoft's dominant operating system. In part two, Gates addresses some of the areas where Microsoft is trying to come from behind, including Xbox and Windows Live.
Q: One of the things Microsoft is introducing for the first time is if you want, you can go online and download either Office or Vista and buy it directly from Microsoft. Is that the future?
Gates: If you look at the beta period, where we had over 5 million users, those were online downloads, so obviously people are very willing to have that as a way to upgrade. It certainly beats standing in line. I don't know what the mix will look like over these next several years. We're going to give people the choice. Maybe next time it will be the main way they decide to upgrade.
Vista: Now or never
How soon do you plan to move to Microsoft's latest OS?
I'm standing in line right now to buy it. Whenever I buy my next PC. Windows XP is going to last me a good, long time. I'm sticking with the Mac--or moving there soon.
One of things Microsoft said on the earnings call last week is that you are not going to ship quite as many Xboxes, at least in the near term, as you had forecast. What's behind that?
Gates: The Xbox had a great Christmas, but we actually provided enough inventory to go even beyond that. People in the first half will be working off that somewhat. We're always quite conservative in terms of how we do forecasts. We feel our competitive position with Xbox 360 could not be better. We got out a year ahead of our competitor, got the volume up there so that software people see it as the platform they really want to build on. Even with the conservatism, I've never felt better about Xbox 360 and where it is.
I'm sure you guys assumed the Windows Live effort would be a challenge. It seems to have been a bigger challenge than you expected. Is it time to rethink the strategy there? Is it just a matter of time?
Gates: Windows Live is fairly new for us. Ray Ozzie came and took charge of that. With Vista shipping now, we'll get a higher percentage of R&D on that Live-type capability. Over the next year you're going to see some neat things coming out. No one has done the platform on the Internet the way we think it needs to be done. We've got a lot of breakthroughs that we're going to be rolling out.
You just got back from Davos, the big conference of business executives and political types. Were there some things you came away with?
Gates: That's a conference that hits on every topic imaginable, from global health to global warming to various political things. The biggest change agent in the world has been the Internet. Now it's a question of getting that out, not just in the rich countries, but for all of the different countries. How can we make that happen?
People want to know "Are they missing something? What should their country do?" It's a great chance for me to have dozens of side meetings about where technology is going and what people might do with it.
One of the things you talked about there is Internet television and the way it's changing things. Is the television of today really on the verge of being outmoded?
Gates: You won't have to give up what you have today. But when you watch the news you can avoid the things you don't care about and see more of the things you do care about. The ads can be very targeted to you, so they won't be as bothersome. The content that is not very popular, like your kids' sports game or some lecture, will just be right there in your guide. The use of the Internet means it doesn't matter how many people are watching it. We can bring it down to you. We get rid of these limitations, the time limitations and the number of channel limitations that the old broadcast approach forced us all into.
Video: Gates talks up Vista
Microsoft's chairman discusses the long-awaited launch of the new OS.
It strikes me that, in your foundation hat, that might be a challenge, since a lot of what you try and do is bring attention to things that people aren't thinking about. This world of customization and personalization...is there a societal challenge? Who tells us what we need to know that we don't necessarily want to know?
Gates: Part of the beauty of the online world is it will let us find people we trust who want to recommend things. Certainly if people want to know what I think is interesting, they'll see what they might read about global health. I do think there has been more attention paid to global health in the last five years than ever before.
People would like it if it could be put into terms where they can get involved. Where can their money have an impact? How can they see that it gets an impact? Online lets us do that. Just (reading) a newspaper or watching a TV show didn't draw the person in.
Is the line between professionally produced content and user-generated content shifting? Will there still be a mix of those two things?
Gates: Once upon a time a typeset document was a clear sign that a big company was behind it and had put some real money into it. Today, anyone with a copy of Office and a laser printer is making documents that look as good as a big company.
There is still a gap there in terms of movie editing. But now with this high-definition movie editor that's in Windows Vista, that barrier has really been changed.
In photography, we have this stitching capability and rich software algorithms to improve photo quality. The things that are out of reach of just a person with a PC are getting smaller and smaller. Eventually, we want them to be able to do anything, all of their creativity fully unleashed.
It's still a year before you are stepping away from full-time work at Microsoft and moving to part time. What's on your to-do list?
Gates: Certainly, the big decisions about the next round of Windows and Office. A lot of things about Live, including what we do in commerce and search. Steve (Ballmer) expects me to share a lot of ideas and make sure those things get going on the right track.
No shortage of important work. I'm thrilled to see Ray Ozzie and Craig Mundie stepping up to their pieces.
Have you picked a couple things yet that you plan on working on when you do step away from full-time work?
Gates: It's too soon to really decide what those things will be. I'd be surprised if some things related to search or tablet PCs aren't in there. It's up to Steve to think, in that new role, how can I be most effective.
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