Seeks Global 'Wow' Reaction to New OS Features
"There won't be a PC sold anywhere in the world that doesn't have Vista within six months," said Endpoint Technology Associates analyst Roger Kay, a fact that might leave ad watchers wondering why Microsoft is about to launch the product with one of the biggest marketing blitzes of all time. 'Most aggressive'This will be the company's "most aggressive launch ever," resulting in an injection, across 20 countries, of an estimated $500 million into agency and media-owner coffers -- which seems excessive for a product that will walk out of the stores on more or less every PC sold from here on in. But that's not the point, according to Microsoft -- which goes so far as to borrow from images such as a child discovering a snowfall, the fall of the Berlin Wall and Woodstock to persuade consumers that Vista is not just an operating system, but a potentially life-changing event. "Awareness is not enough," said John B. Williams, general manager-Windows global communications. "The goal for this campaign [is to] get at the heart of excitement." Several strikes against itGenerating that, and maybe getting at the heart of the mammoth marketing push, may be difficult, because although the product may become ubiquitous, it starts out with several strikes against it. First, it's from Microsoft, which detractors often paint as the monopolistic "evil empire." Then there's the fact that the product has been delayed several times and received only lukewarm reviews from analysts and beta testers. And, of course, there's Apple, which has the only other operating system. While still a small player in the computer industry, Apple has seen its market share rise from 3% to more than 5% in the past two years, thanks in part to its iPod halo effect. "They can't take any chances or leave the field pen to Apple," Mr. Kay said. "And [Microsoft] needs to spend a fair amount of effort convincing corporate clients to buy Vista." Difficult to explainLast, Vista is a difficult product to explain. It's the platform on which PCs run, but the user doesn't really see it. Marketing will help explain what Vista is and does. Some TV ads, for instance, feature 3-D flip screens with the Windows Vista border around the edge of the screen for the duration, showcasing the new Vista look. "The last time people made a decision on an operating system was five years ago -- and the world has changed dramatically since then," Mr. Williams said. "We have to show the product because when they see Windows Vista, they'll get it ... and have this kind of reaction we're looking for." And the reaction it's aiming for: "Wow." "This one word kept coming out as people sat down and played with the product," said Mike Sievert, corporate VP-Windows client marketing. "The campaign concept works very well across cultures and geographies." (Vista will have a "big advertising presence" in 20 of its 50 markets.) 6.6 billion impressionsIndeed, the planned scope of the campaign -- 6.6 billion impressions in its first few months -- is wondrous by today's narrowly targeted, niche-media standards. "The Wow starts now," two years in the making with McCann Worldgroup, encompasses an online consumer-participation promotion themed "Show us your wow" (the winner gets a trip around the world), sponsored webisodes at Clearification.com featuring "Daily Show" comedian Demitri Martin and an alternate-reality game called "Vanishing Point" that moves between online and offline. A human billboard will feature 16 dancers forming the Vista and Microsoft Office icons, and Microsoft Chairman Bill Gates himself will host an invitation-only party in Times Square. A slew of retail promotions are set for Jan. 30 in more than 30 markets around the country and will include Xbox giveaways and school PC-lab makeover sweepstakes, as well as rebates and special deals. Microsoft experts will be on-site to answer questions. Microsoft CEO Steve Ballmer will greet customers at Best Buy in New York. But it's the TV ads that will garner much of the attention-and inevitably it won't be all good. The spots picture "Wow"-murmuring moments such as a '60s-looking family staring at a black-and-white TV as a rocket blasts into space, a hippie climbing up on scaffolding to look out over the Woodstock crowd, a young boy staring out his window at a early-morning snow-blanketed street, and a man putting down a chunk of rock on the table as those gathered watch the Berlin Wall being torn down on TV. The juxtaposition will provide surefire fodder for the blogosphere. LeBron JamesBasketball superstar LeBron James also lends his celebrity to the ads. In a vignette, he is playing with a group of kids when one breaks in front of him, zipping off and doing fancy dribbles down the court. Mr. James stares after him and says "Wow." At the end of every spot, a man opens his laptop in a darkened office while the voice-over intones, "Every so often you experience something so new, so delightfully unexpected, there's only one word for it."
AdAge
Tuesday, January 30, 2007
YouTube Fans Reject Pre-Roll
AS YOUTUBE PREPARES TO SHARE ad revenues with contributors, it may want to think twice about slapping pre-roll ads on videos. Nearly three-quarters of frequent YouTube users said they would visit the site less if it started including short video ads before every clip, according to the results of a recent Harris Poll released Monday. Of those, 42% said they would visit a little less often, and 31%, a lot less often.
YouTube has not publicly stated that it plans to add pre-roll ads to videos. But in a BBC interview after announcing YouTube's plan to start paying video contributors, YouTube co-founder Chad Hurley said the site may begin running three-second spots before videos.
That's far shorter than the standard 15- or 30-second pre-roll, but the addition of video ads would still mark a major shift for the company and its millions of fans. YouTube has built a huge following by making it easy to view and share videos. Hurley told the BBC that its new system for sharing ad-revenue was still being readied, and that it will roll out over the next couple of months. In a statement issued Monday, a YouTube spokesman said that the company is "actively exploring a variety of ways to help the community monetize content," and that it would announce something in the coming months.
Aongus Burke, senior research manager of Harris Interactive's media and entertainment practice, said in a statement that previous data shows consumers will watch commercials online to catch a TV episode they would otherwise miss. "Yet those who are accustomed to finding and watching everything for free at YouTube may have developed a different set of expectations for the site," he said.
In more encouraging findings for YouTube, almost one in three frequent visitors to the site said they watch less TV because of the time they spend on YouTube, according to the Harris Poll. And 42% of U.S. adults online say they have watched a video on YouTube, while 14% say they go to the site frequently.
Not surprisingly, YouTube has even higher reach among males 18 to 24 years old, with 76% saying they've watched a YouTube clip, and 41% visiting frequently. The Harris Poll was conducted online in the U.S. between December 12 and 18 among 2,309 adults, of whom 363 are frequent YouTube viewers.
In a separate analysis released Monday, Hitwise found that YouTube's market share among U.S. Web sites had increased 18.5% during the week ending January 27, when Google Video added YouTube videos to its index. On Wednesday, Jan. 24, the day before the expanded index went live, Google Video accounted for just .73% of all of YouTube's traffic. By the following Saturday, however, it was generating 8.7% of all of YouTube's upstream traffic, according to Hitwise.
MediaPost
YouTube has not publicly stated that it plans to add pre-roll ads to videos. But in a BBC interview after announcing YouTube's plan to start paying video contributors, YouTube co-founder Chad Hurley said the site may begin running three-second spots before videos.
That's far shorter than the standard 15- or 30-second pre-roll, but the addition of video ads would still mark a major shift for the company and its millions of fans. YouTube has built a huge following by making it easy to view and share videos. Hurley told the BBC that its new system for sharing ad-revenue was still being readied, and that it will roll out over the next couple of months. In a statement issued Monday, a YouTube spokesman said that the company is "actively exploring a variety of ways to help the community monetize content," and that it would announce something in the coming months.
Aongus Burke, senior research manager of Harris Interactive's media and entertainment practice, said in a statement that previous data shows consumers will watch commercials online to catch a TV episode they would otherwise miss. "Yet those who are accustomed to finding and watching everything for free at YouTube may have developed a different set of expectations for the site," he said.
In more encouraging findings for YouTube, almost one in three frequent visitors to the site said they watch less TV because of the time they spend on YouTube, according to the Harris Poll. And 42% of U.S. adults online say they have watched a video on YouTube, while 14% say they go to the site frequently.
Not surprisingly, YouTube has even higher reach among males 18 to 24 years old, with 76% saying they've watched a YouTube clip, and 41% visiting frequently. The Harris Poll was conducted online in the U.S. between December 12 and 18 among 2,309 adults, of whom 363 are frequent YouTube viewers.
In a separate analysis released Monday, Hitwise found that YouTube's market share among U.S. Web sites had increased 18.5% during the week ending January 27, when Google Video added YouTube videos to its index. On Wednesday, Jan. 24, the day before the expanded index went live, Google Video accounted for just .73% of all of YouTube's traffic. By the following Saturday, however, it was generating 8.7% of all of YouTube's upstream traffic, according to Hitwise.
MediaPost
Apple TV debate won't wait on product
Like the iPod, Apple TV could be a phenomenon. A disrupter of lesser technology. A product that finally converges the computer with the TV set.Or not.Apple Inc. executives, including CEO Steve Jobs, have been calling Apple TV a DVD player for the 21st century. They are aiming for mainstream adoption, not just the niche inhabited by technology geeks or lovers of all things Apple.Apple TV, due next month, basically is a set-top device that lets media residing in one's iTunes library, including music, TV shows, feature films and podcasts, to be enjoyed on TV screens. Wirelessly.It will come equipped with a hard drive with enough capacity for 50 hours of movies and TV shows or about 9,000 songs.Apple TV also lets users store and display on TV screens their own photos and home movies and will show movie trailers via Apple.com.Analysts and Internet bloggers have been busy trying to figure out whether Apple TV will be a hit or miss -- or something in between -- since Jobs first spoke of an iTV gadget last year. A few weeks ago, he revealed the box and its exact functionality, as well as its change of name, only further fueling the debate."Wouldn't it be nice to just scroll through a list of your movies and TV shows and just pick the one you want?" one blogger asks."Apple TV is a solution in search of a problem," counters another. "Everything this $300 thing can do for me I can do with a $20 cable and my iPod."Plus, iTunes movies and TV shows are available for purchase on DVD or could easily have been recorded by a TiVo or other DVR. The true point of iTunes video is to make portable the stuff that you once needed a TV set for, Jupiter Research analyst Todd Chanko said."Is there really going to be a market for exporting that content back to the TV?" Chanko asks.Absolutely, counters Tobin Smith of ChangeWave Research, pointing to polling data to support his assertion.In December, Smith asked 228 members of his ChangeWave Alliance who are electronics industry professionals to name the company they thought was most likely to see success with "media centers," defined as high-power devices capable of managing digital content around the home.Apple, at 43%, was tops, followed by Sony (14%), Microsoft (11%), TiVo (8%), Hewlett-Packard (7%), Samsung (4%), Cisco Systems (4%) and Dell (4%).He also asked the panel about Apple TV specifically, and 65% predicted it is "very likely" or "somewhat likely" to be a huge success in the first year. Only 30% predicted it was somewhat or very unlikely to succeed."It's simple," Smith said. "Apple will soon deliver the 100% turnkey home computing, viewing, listening system."Look for Apple to next start selling LCD monitors up to 65 inches with Apple TV and wireless broadband connectivity built into them, Smith said."One wireless touch-screen remote running on WiFi, one portable keyboard for e-mails and text messaging and one box to run it all wirelessly to any monitor or PC in your house," he said.Not so fast, other analysts cautioned.Citigroup's Tony Wible doesn't see Apple TV "gaining widespread adoption in the near term" because of its $299 price tag and limited storage. He also calls it a "more complicated solution" than offered by others.TiVo, and other DVRs, have similar capabilities and DVRs will "represent a viable download platform in the future" for movies, he said.Either way, Apple TV further increases the company's focus on consumer electronics and entertainment products. Its iPod business already brought in the majority of overall company revenue for its latest fiscal year.Sean Badding, a senior analyst with the Carmel Group, said that if Apple can sell 500,000 Apple TV units in the first year then he will consider it a success."It's not a breakthrough product," he said. "Networking a computer to TV wirelessly has been done before. The question is, can Apple do it better? They weren't first to market with a digital music player either, but they blew the doors off the competition with their iPod."A couple of years from now, Apple TV, in addition to what it will be when it launches next month, also might have morphed into a DVR and even a video game platform, Badding said. "Hey, it has got the Apple name and Steve Jobs at the helm, and that's what will be on people's minds when they go out there kicking the tires on Apple TV," he said.
The Hollywood Reporter
The Hollywood Reporter
Friday, January 26, 2007
YouTube, Wikipedia storm into 2006 top brand ranking
Internet firm Google has again pipped Apple to the top spot in a global brand ranking that also sees YouTube and Wikipedia debut in the top five, a survey showed on Friday.
The annual survey by online branding magazine brandchannel.com often throws up controversial results, such as in 2004, when Arabic TV station Al Jazeera was named the world's fifth most influential brand.
This year the 3,625 branding professionals and students who voted have again surprised, awarding upstart firms star status when asked: "Which brand had the most impact on our lives in 2006?".
Google, the Internet search engine that has expanded regionally and moved into online advertising, mail and blogging, seized the top spot for the second consecutive year, ahead of Apple Inc, which again comes in second place.
More surprisingly, video-sharing Web site YouTube, which was bought by Google in October last year, stormed into third place. Online encyclopedia Wikipedia makes the fourth spot, pushing coffee shop behemoth Starbucks Corp. to fifth.
"The dramatic debut of these newcomers -- YouTube in third and Wikipedia in fourth -- is an indication of a larger trend -- the growing impact of online brands built on user-generated contents," editor Anthony Zumpano said in a statement.
Other new brand winners were News Corp's online chat site MySpace, debuting in 15th place in the North America rankings, and Al Jazeera, which advances to 19th place globally having launched its English language channel in November and after its drop from fifth to 25th in 2005.
The poll does not take account of economic brand value, the murky science of assigning a financial value to brand, which regularly puts Coca-Cola Co's Coke in first place.
Neither does it ask respondents to consider whether the brand's impact is positive or negative.
Brandchannel also split the poll by regions and in the North America the rundown was similar to the global outcome, albeit in a different order, with Apple in first place, followed by YouTube, Google, Starbucks and Wikipedia.
The top five places in the European list are from homegrown corporations, with Swedish furniture giant Ikea knocking Nokia off the top spot and into third place. Skype comes in second, with fast-fashion brand Zara in fourth and Adidas in fifth.
Likewise, local firms dominate the Asia-Pacific region poll with the top five places taken by Sony, Toyota, HSBC, Samsung and Honda. Third-placed HSBC has Asian roots although it is headquartered in London.
And in a refreshing change from the high-tech brands that dominate the global poll, Latin America's top two are party beverages Corona and Bacardi, with mobile phone operator Movistar in third. Sandal maker Havaianas takes fourth place and Bimbo, the world's number three bread maker, comes in fifth.
Reuters
The annual survey by online branding magazine brandchannel.com often throws up controversial results, such as in 2004, when Arabic TV station Al Jazeera was named the world's fifth most influential brand.
This year the 3,625 branding professionals and students who voted have again surprised, awarding upstart firms star status when asked: "Which brand had the most impact on our lives in 2006?".
Google, the Internet search engine that has expanded regionally and moved into online advertising, mail and blogging, seized the top spot for the second consecutive year, ahead of Apple Inc, which again comes in second place.
More surprisingly, video-sharing Web site YouTube, which was bought by Google in October last year, stormed into third place. Online encyclopedia Wikipedia makes the fourth spot, pushing coffee shop behemoth Starbucks Corp. to fifth.
"The dramatic debut of these newcomers -- YouTube in third and Wikipedia in fourth -- is an indication of a larger trend -- the growing impact of online brands built on user-generated contents," editor Anthony Zumpano said in a statement.
Other new brand winners were News Corp's online chat site MySpace, debuting in 15th place in the North America rankings, and Al Jazeera, which advances to 19th place globally having launched its English language channel in November and after its drop from fifth to 25th in 2005.
The poll does not take account of economic brand value, the murky science of assigning a financial value to brand, which regularly puts Coca-Cola Co's Coke in first place.
Neither does it ask respondents to consider whether the brand's impact is positive or negative.
Brandchannel also split the poll by regions and in the North America the rundown was similar to the global outcome, albeit in a different order, with Apple in first place, followed by YouTube, Google, Starbucks and Wikipedia.
The top five places in the European list are from homegrown corporations, with Swedish furniture giant Ikea knocking Nokia off the top spot and into third place. Skype comes in second, with fast-fashion brand Zara in fourth and Adidas in fifth.
Likewise, local firms dominate the Asia-Pacific region poll with the top five places taken by Sony, Toyota, HSBC, Samsung and Honda. Third-placed HSBC has Asian roots although it is headquartered in London.
And in a refreshing change from the high-tech brands that dominate the global poll, Latin America's top two are party beverages Corona and Bacardi, with mobile phone operator Movistar in third. Sandal maker Havaianas takes fourth place and Bimbo, the world's number three bread maker, comes in fifth.
Reuters
Automaker Economists Issue Outlook for 2007
THREE LEADING AUTO ECONOMISTS PREDICT that a slowdown in U.S. economic growth will have a ripple effect on auto sales this year, forecasting U.S. sales of light vehicles will remain steady or drop slightly -- to around 16.4 million units. But they expect gasoline prices will continue to decline, which could help segments such as sport-utility vehicles.
Economists from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG laid out their predictions earlier this month at the Society of Automotive Analysts meeting in Detroit.
Van E. Jolissaint, Chrysler's chief economist and director of economic and market intelligence with DaimlerChrysler AG, said he expects U.S. gross domestic product will slow from around 3.5% to 2.5%. He predicts that by the middle of this year "housing construction will cease to be a drag on the U.S. economy."
Jolissaint also predicts that as gas prices stabilize, sales of trucks and SUVs will rebound. "We expect small and mid-size and even large cars to lose share somewhat in 2007, and we expect pick-ups and sport utilities and minivans to regain some share in 2007," he said.
Both GM's chief economist G. Mustafa Mohatarem and Ford's Ellen Hughes-Cromwick, director and chief economist, agreed that oil prices should stabilize. But they were less bullish about the U.S. auto industry's prospects for growth in 2007. Instead, they predict that virtually all the growth that will happen in the global car industry will come from outside the U.S. in the foreseeable future -- particularly from China and India.
The growth in those markets is likely to have an impact on the kinds of cars U.S. auto buyers choose, said other analysts speaking at the meeting. The small car market --think brands like Toyota's Yaris or the Nissan Versa -- is a tiny portion of the U.S. market.
Analysts such as Wim Van Acker, managing partner with the North American operations of Roland Berger Strategy Consultants, expects that to change in the next six years as more production from China becomes available in the U.S.
"The entry-level car is something which is beginning in the U.S.," he said, projecting sales will almost double, from 400,000 in 2006 to about 700,000 in 2012.
Van Acker said that while price and fuel economy are key deciding factors for small-car consumers, brands are also important to the decision-making process. "People always think that the product is the only thing. Well it's not. You have to handle the combination of car, care and core: The car being the product, care being the service around it, and core being the brand, which is supporting it."
MarketingDaily
Economists from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG laid out their predictions earlier this month at the Society of Automotive Analysts meeting in Detroit.
Van E. Jolissaint, Chrysler's chief economist and director of economic and market intelligence with DaimlerChrysler AG, said he expects U.S. gross domestic product will slow from around 3.5% to 2.5%. He predicts that by the middle of this year "housing construction will cease to be a drag on the U.S. economy."
Jolissaint also predicts that as gas prices stabilize, sales of trucks and SUVs will rebound. "We expect small and mid-size and even large cars to lose share somewhat in 2007, and we expect pick-ups and sport utilities and minivans to regain some share in 2007," he said.
Both GM's chief economist G. Mustafa Mohatarem and Ford's Ellen Hughes-Cromwick, director and chief economist, agreed that oil prices should stabilize. But they were less bullish about the U.S. auto industry's prospects for growth in 2007. Instead, they predict that virtually all the growth that will happen in the global car industry will come from outside the U.S. in the foreseeable future -- particularly from China and India.
The growth in those markets is likely to have an impact on the kinds of cars U.S. auto buyers choose, said other analysts speaking at the meeting. The small car market --think brands like Toyota's Yaris or the Nissan Versa -- is a tiny portion of the U.S. market.
Analysts such as Wim Van Acker, managing partner with the North American operations of Roland Berger Strategy Consultants, expects that to change in the next six years as more production from China becomes available in the U.S.
"The entry-level car is something which is beginning in the U.S.," he said, projecting sales will almost double, from 400,000 in 2006 to about 700,000 in 2012.
Van Acker said that while price and fuel economy are key deciding factors for small-car consumers, brands are also important to the decision-making process. "People always think that the product is the only thing. Well it's not. You have to handle the combination of car, care and core: The car being the product, care being the service around it, and core being the brand, which is supporting it."
MarketingDaily
eBay Holds Its Turf Against Google
The online auctioneer fended off its new rival in the fourth quarter. Can Meg Whitman keep it going with her recent acquisitions?
Investors of eBay headed into the end of last year with some trepidation. The concern: an 800-pound-gorilla named Google (GOOG) would give eBay a drubbing during the 2006 holiday season. The search giant aggressively moved into eBay's (EBAY) e-commerce territory in 2005 with a product-listing service called Google Base. Last year, it stepped up the challenge, launching Google Checkout, a competitor to PayPal, eBay's online payment processing service. The new offering was dubbed by press as a PayPal "killer" before it even debuted.
But eBay kept that gorilla in check in the fourth quarter, judging from results released Jan. 24. The company said sales rose 29%, to $1.72 billion, exceeding analysts' expectations. The amount, which was about half a billion higher than what analysts were anticipating on average, grew 29% from last year. For the full year, revenue grew 31% from 2005, reaching $6 billion and meeting what CEO Meg Whitman called an internal company goal for "6 (billion) in '06." Investors liked what they heard, propelling eBay shares 13.3%, to $33.98, in extended trading. The stock gained another 7.8% on Jan. 25, to $32.35 in afternoon trading on the NASDAQ.
Positive Pruning
Whitman attributed the solid quarter, in part, to more product listings turning into actual sales on eBay's site. The company's core auction business had suffered last year from sellers dumping slow-selling and patently unwanted merchandise in their eBay stores, as well as pricing some items too high for eBay's bargain-hunting audience. The result was a poorer experience for buyers and inventory that sat on the site far longer than desired, Whitman explained.
Last spring and summer, eBay raised fees by roughly 6% in order to encourage merchants to sell items people want and to price them to move. So far, the plan seems to be working. The site saw declines in the inventory that languished in eBay stores before selling or that didn't sell at all. "We are moving toward a better eBay marketplace," Whitman said during the call, cautioning that there was still work to do this year. Company CFO Bob Swan said that conversion rates have yet to reach their 2005 levels, but that they markedly improved since 2006.
In a note to investors, Goldman Sachs (GS) analyst Anthony Noto indicated he was pleased with eBay's efforts to "prune" low-quality listings. "eBay's focus on successful listings, as opposed to listings at any cost, is the key focus and driver of growth for eBay at this juncture," he wrote, adding "improved revenue-per-listing trends reinforce our view that eBay is at the early stages of a multi-quarter period of stabilizing-to-accelerating growth."
PayPal Paying Well
Sales also got a boost from increased holiday traffic due in part to the hype over hard-to-find gifts such as the Nintendo Wii (NTDOY) and Sony PS3 (SNE). Holiday shoppers flocked to the site to bid on the items and, when they lost the bid, frequently continued shopping on the site anyway, Whitman said.
The big surprise of the season, however, was the strength of the services supposed to be suffering at the hands of Google. PayPal posted revenues of $417 million, a 37% growth rate compared with 2005’s fourth quarter. The payment-service company handled a record $11 billion in transactions, up 57%.
In fact, Whitman said that all the hype over Google Checkout actually boosted sales for market-leading PayPal, which reaped publicity amid the coverage of Google's foray. "I think we have disproportionately benefited from news in this category," Whitman said. She added that PayPal has an advantage over Google Checkout in that it's not just "a wrapper for Visa and Mastercard," but functions as an independent payment service.
Scott Devitt, an analyst at Stifel, Nicolaus & Company, says that acquiring PayPal was one of eBay's best moves. Ebay purchased the payment company for $1.5 billion in 2002. "PayPal has just been phenomenal," says Devitt. "It is one of the best acquisitions in the history of the Internet in terms of the returns."
Skype Question
In terms of acquisitions, Devitt also believes eBay picked a winner, for $310 million, in ticket reseller StubHub. Ebay expects that the site will bring in between $105 and $120 million in 2007. That would help boost the company's overall revenues this year. During the call, eBay raised its revenue estimates for 2007 to between $7.05 and $7.3 billion for the full year. It predicts earnings-per-share growth of between 20% and 23% in the range of $1.25 to $1.29.
Share gains aside, eBay thinks the stock merits a higher value and announced a plan to repurchase $2 billion in stock over the next two years. The plan shows the company's confidence in its ability to grow, says Devitt. He adds that he thinks the company will show mid- to upper-teens growth on a three-year basis.
Despite the positive glow overall, the jury is still out on the eBay acquisition of Skype. While many analysts agree that the service has potential, they worry about eBay's ability to make money off of Skype's growing number of users. One positive sign: Google is working with Skype in developing click-to-call ads, says Devitt. The move may show that Google isn't so confident about being able to effectively challenge Skype for pay-per-call ads with its own competing service.
Or it could show that, after Google's experience with Checkout, it's easier to keep eBay as a friend than a rival.
BusinessWeek
Investors of eBay headed into the end of last year with some trepidation. The concern: an 800-pound-gorilla named Google (GOOG) would give eBay a drubbing during the 2006 holiday season. The search giant aggressively moved into eBay's (EBAY) e-commerce territory in 2005 with a product-listing service called Google Base. Last year, it stepped up the challenge, launching Google Checkout, a competitor to PayPal, eBay's online payment processing service. The new offering was dubbed by press as a PayPal "killer" before it even debuted.
But eBay kept that gorilla in check in the fourth quarter, judging from results released Jan. 24. The company said sales rose 29%, to $1.72 billion, exceeding analysts' expectations. The amount, which was about half a billion higher than what analysts were anticipating on average, grew 29% from last year. For the full year, revenue grew 31% from 2005, reaching $6 billion and meeting what CEO Meg Whitman called an internal company goal for "6 (billion) in '06." Investors liked what they heard, propelling eBay shares 13.3%, to $33.98, in extended trading. The stock gained another 7.8% on Jan. 25, to $32.35 in afternoon trading on the NASDAQ.
Positive Pruning
Whitman attributed the solid quarter, in part, to more product listings turning into actual sales on eBay's site. The company's core auction business had suffered last year from sellers dumping slow-selling and patently unwanted merchandise in their eBay stores, as well as pricing some items too high for eBay's bargain-hunting audience. The result was a poorer experience for buyers and inventory that sat on the site far longer than desired, Whitman explained.
Last spring and summer, eBay raised fees by roughly 6% in order to encourage merchants to sell items people want and to price them to move. So far, the plan seems to be working. The site saw declines in the inventory that languished in eBay stores before selling or that didn't sell at all. "We are moving toward a better eBay marketplace," Whitman said during the call, cautioning that there was still work to do this year. Company CFO Bob Swan said that conversion rates have yet to reach their 2005 levels, but that they markedly improved since 2006.
In a note to investors, Goldman Sachs (GS) analyst Anthony Noto indicated he was pleased with eBay's efforts to "prune" low-quality listings. "eBay's focus on successful listings, as opposed to listings at any cost, is the key focus and driver of growth for eBay at this juncture," he wrote, adding "improved revenue-per-listing trends reinforce our view that eBay is at the early stages of a multi-quarter period of stabilizing-to-accelerating growth."
PayPal Paying Well
Sales also got a boost from increased holiday traffic due in part to the hype over hard-to-find gifts such as the Nintendo Wii (NTDOY) and Sony PS3 (SNE). Holiday shoppers flocked to the site to bid on the items and, when they lost the bid, frequently continued shopping on the site anyway, Whitman said.
The big surprise of the season, however, was the strength of the services supposed to be suffering at the hands of Google. PayPal posted revenues of $417 million, a 37% growth rate compared with 2005’s fourth quarter. The payment-service company handled a record $11 billion in transactions, up 57%.
In fact, Whitman said that all the hype over Google Checkout actually boosted sales for market-leading PayPal, which reaped publicity amid the coverage of Google's foray. "I think we have disproportionately benefited from news in this category," Whitman said. She added that PayPal has an advantage over Google Checkout in that it's not just "a wrapper for Visa and Mastercard," but functions as an independent payment service.
Scott Devitt, an analyst at Stifel, Nicolaus & Company, says that acquiring PayPal was one of eBay's best moves. Ebay purchased the payment company for $1.5 billion in 2002. "PayPal has just been phenomenal," says Devitt. "It is one of the best acquisitions in the history of the Internet in terms of the returns."
Skype Question
In terms of acquisitions, Devitt also believes eBay picked a winner, for $310 million, in ticket reseller StubHub. Ebay expects that the site will bring in between $105 and $120 million in 2007. That would help boost the company's overall revenues this year. During the call, eBay raised its revenue estimates for 2007 to between $7.05 and $7.3 billion for the full year. It predicts earnings-per-share growth of between 20% and 23% in the range of $1.25 to $1.29.
Share gains aside, eBay thinks the stock merits a higher value and announced a plan to repurchase $2 billion in stock over the next two years. The plan shows the company's confidence in its ability to grow, says Devitt. He adds that he thinks the company will show mid- to upper-teens growth on a three-year basis.
Despite the positive glow overall, the jury is still out on the eBay acquisition of Skype. While many analysts agree that the service has potential, they worry about eBay's ability to make money off of Skype's growing number of users. One positive sign: Google is working with Skype in developing click-to-call ads, says Devitt. The move may show that Google isn't so confident about being able to effectively challenge Skype for pay-per-call ads with its own competing service.
Or it could show that, after Google's experience with Checkout, it's easier to keep eBay as a friend than a rival.
BusinessWeek
Norway Blocks iTunes; Germany, France May Follow
Apple was dealt a blow in Europe on Wednesday when Norway’s powerful consumer ombudsman ruled that its iTunes online music store was illegal because it did not allow downloaded songs to be played on rival technology companies’ devices.
The decision is the first time any jurisdiction has concluded iTunes breaks its consumer protection laws and could prompt other European countries to review the situation.
The ombudsman has set a deadline of October 1 for the Apple to make its codes available to other technology companies so that it abides by Norwegian law. If it fails to do so, it will be taken to court, fined and eventually closed down.
Apple, whose iTunes dominates the legal download market, has its proprietory system Fairplay. Songs and tunes downloaded through iTunes are designed to work with Apple’s MP3 player iPod, but cannot be played on rival devices.
Torgeir Waterhouse, senior adviser to the Norwegian Consumer Council, who originally launched the complaint, told the Financial Times he was in negotiations with pan-European consumer groups to present a unified position on iTunes’ legality.
Sweden and Finland have already backed Norway’s stance, but have yet to take action, and Mr Waterhouse said the campaign was joined on Wednesday by Germany and France.
“We are satisfied the Federation of German Consumer Organisations and the French UFC Que Choisir are addressing this important issue. It means that iTunes is now being told by more than 100m European consumers to offer them a fair deal,” he said.
Apple signalled that it would fight efforts in Norway and elsewhere in Europe to prise open the iTunes service, though it struck a more conciliatory tone than early last year when it attacked a proposed French law as “state-sponsored piracy”.
“Apple is aware of the concerns we’ve heard from several agencies in Europe, and we’re looking forward to resolving these issues as quickly as possible,” it said in a statement. “Apple hopes that European governments will encourage a competitive environment that lets innovation thrive, protects intellectual property and allows consumers to decide which products are successful.”
The development comes as competition in the multi-billion dollar global market for digital music is intensifying.
Nokia, the world’s largest mobile phone maker, has set up a rival to iTunes, while Microsoft, the US technology company, has also launched its own digital music player called Zune to compete with the iPod.
However, the lack of interoperability has been blamed by some consumers and technology companies for hampering the growth of the legal digital music download market.
Record companies insist that the issue of interoperability is one for technology companies, and stress the importance of digital rights management in order to prevent piracy.
The IFPI, which represents record groups around the world, said that it “thoroughly supported interoperability, but wanted a market solution rather than one imposed by authorities”.
Financial Times
The decision is the first time any jurisdiction has concluded iTunes breaks its consumer protection laws and could prompt other European countries to review the situation.
The ombudsman has set a deadline of October 1 for the Apple to make its codes available to other technology companies so that it abides by Norwegian law. If it fails to do so, it will be taken to court, fined and eventually closed down.
Apple, whose iTunes dominates the legal download market, has its proprietory system Fairplay. Songs and tunes downloaded through iTunes are designed to work with Apple’s MP3 player iPod, but cannot be played on rival devices.
Torgeir Waterhouse, senior adviser to the Norwegian Consumer Council, who originally launched the complaint, told the Financial Times he was in negotiations with pan-European consumer groups to present a unified position on iTunes’ legality.
Sweden and Finland have already backed Norway’s stance, but have yet to take action, and Mr Waterhouse said the campaign was joined on Wednesday by Germany and France.
“We are satisfied the Federation of German Consumer Organisations and the French UFC Que Choisir are addressing this important issue. It means that iTunes is now being told by more than 100m European consumers to offer them a fair deal,” he said.
Apple signalled that it would fight efforts in Norway and elsewhere in Europe to prise open the iTunes service, though it struck a more conciliatory tone than early last year when it attacked a proposed French law as “state-sponsored piracy”.
“Apple is aware of the concerns we’ve heard from several agencies in Europe, and we’re looking forward to resolving these issues as quickly as possible,” it said in a statement. “Apple hopes that European governments will encourage a competitive environment that lets innovation thrive, protects intellectual property and allows consumers to decide which products are successful.”
The development comes as competition in the multi-billion dollar global market for digital music is intensifying.
Nokia, the world’s largest mobile phone maker, has set up a rival to iTunes, while Microsoft, the US technology company, has also launched its own digital music player called Zune to compete with the iPod.
However, the lack of interoperability has been blamed by some consumers and technology companies for hampering the growth of the legal digital music download market.
Record companies insist that the issue of interoperability is one for technology companies, and stress the importance of digital rights management in order to prevent piracy.
The IFPI, which represents record groups around the world, said that it “thoroughly supported interoperability, but wanted a market solution rather than one imposed by authorities”.
Financial Times
Nintendo Wii Sales On Track; New Role Unveiled
NINTENDO IS MORE THAN HALFWAY to its goal of shipping 6 million Wii gaming consoles by March 31, the end of its current fiscal year, the company said when announcing its earnings for April-December 2006. Robust sales of Wii helped push the company's profit up 43% in the last nine months of 2006.
Nintendo said it had shipped 4 million Wii consoles by the end of 2006 and sold 3.19 million worldwide--1.25 million in North America and 1.14 million in Japan.
In an additional development to watch, Nintendo also announced yesterday that it will make news from AP available through the Wii console.
Rival Sony also estimates it will ship 6 million PlayStation 3 machines by March 31, although it has suffered considerable setbacks in reaching that goal. The company said it had shipped 2 million PlayStation 3 machines worldwide by mid-January, with its Japanese shipments delayed by two weeks, and the European launch of the PS3 delayed until later this year.
The success of the Wii has been attributed to Nintendo's long-standing formula of marketing easy-to-play games to a wider audience, rather than catering to a narrower audience of young, male gamers. The Wii has been bought by families and single males alike, both demographics responding positively to the console's usability and library of familiar games' title characters, like "The Legend of Zelda: Twilight Princess."
Nintendo's earnings growth was also boosted by strong sales of its DS portable player, which sold 18.9 million units worldwide in the first three quarters of 2006. The company's overall sales rose 73% to 713 billion yen ($5.9 billion) during the April-December period, from 412 billion yen in the year-ago period.
MarketingDaily
Nintendo said it had shipped 4 million Wii consoles by the end of 2006 and sold 3.19 million worldwide--1.25 million in North America and 1.14 million in Japan.
In an additional development to watch, Nintendo also announced yesterday that it will make news from AP available through the Wii console.
Rival Sony also estimates it will ship 6 million PlayStation 3 machines by March 31, although it has suffered considerable setbacks in reaching that goal. The company said it had shipped 2 million PlayStation 3 machines worldwide by mid-January, with its Japanese shipments delayed by two weeks, and the European launch of the PS3 delayed until later this year.
The success of the Wii has been attributed to Nintendo's long-standing formula of marketing easy-to-play games to a wider audience, rather than catering to a narrower audience of young, male gamers. The Wii has been bought by families and single males alike, both demographics responding positively to the console's usability and library of familiar games' title characters, like "The Legend of Zelda: Twilight Princess."
Nintendo's earnings growth was also boosted by strong sales of its DS portable player, which sold 18.9 million units worldwide in the first three quarters of 2006. The company's overall sales rose 73% to 713 billion yen ($5.9 billion) during the April-December period, from 412 billion yen in the year-ago period.
MarketingDaily
MSN Ad Revenue Increases 20%
MSN'S ADVERTISING REVENUE INCREASED TO $462 million last quarter--marking an increase of $77 million, or 20%, from the last three months of 2005, Microsoft reported Thursday. The surge was led largely by growth in display advertising on home pages, portals, channels, email and messaging services.
"If you break that down into display and search, there's a better story on the display side," said Chris Liddell, Microsoft's chief financial officer, referring to the ad revenue.
While Microsoft did not provide specific numbers about search versus display ads, Nielsen//NetRatings estimated Thursday that MSN's revenue from image-based ads increased 28% from the last quarter of 2005, based on AdRelevance data.
Liddell also said in the earnings call that Microsoft was disappointed it had recently lost ground in search. "We lost market share during the quarter--we're clearly not happy with that," he said. But, he added, "we continue to take a long-term view on this business." According to comScore Networks, MSN search claimed just 10.5% of searches last month--down from 13.7% at the beginning of the year.
All of Microsoft's online service businesses posted a loss of $155 million last quarter--down from a profit of $58 million during the same period last year. Much of that decline stemmed from a loss in revenue from dial-up subscribers.
Revenue growth was offset by high costs from new hires and investment in developing adCenter, Windows Live and other online properties, Liddell added.
OnlineMediaDaily
"If you break that down into display and search, there's a better story on the display side," said Chris Liddell, Microsoft's chief financial officer, referring to the ad revenue.
While Microsoft did not provide specific numbers about search versus display ads, Nielsen//NetRatings estimated Thursday that MSN's revenue from image-based ads increased 28% from the last quarter of 2005, based on AdRelevance data.
Liddell also said in the earnings call that Microsoft was disappointed it had recently lost ground in search. "We lost market share during the quarter--we're clearly not happy with that," he said. But, he added, "we continue to take a long-term view on this business." According to comScore Networks, MSN search claimed just 10.5% of searches last month--down from 13.7% at the beginning of the year.
All of Microsoft's online service businesses posted a loss of $155 million last quarter--down from a profit of $58 million during the same period last year. Much of that decline stemmed from a loss in revenue from dial-up subscribers.
Revenue growth was offset by high costs from new hires and investment in developing adCenter, Windows Live and other online properties, Liddell added.
OnlineMediaDaily
Wednesday, January 24, 2007
One year later: Icahn gets his stock price -- without breaking up TWX
It has been a year since Carl Icahn went to investment bank Lazard and asked the company to put together a valuation of Time Warner Inc. based on three methods of coming at the number. Lazard looked at each division and set a high and low value for the company's operations: Content, cable, publishing and AOL. The report ran 371 pages. Before saving for corporate general and administrative costs, Lazard said that the company was worth between $21.46 and $24.49.
TWX shares are lately trading around $22.50. Mr. Icahn got his wish, at least in part. And the company did not have to be broken into pieces to realize the value.
Still, it is interesting to look now at the Lazard value for each unit. Lazard combined the studio unit with the cable content operation (CNN, Turner) and came up with a value range of $55.9 billion to $61.4 billion. Cable's valuation was $43.3 billion to $48.5 billion.
AOL's value was put at $17.5 billion to $21 billion. That was before the decision to transform the operation into an advertising supported model, moving away from the Internet access business. The publishing unit was valued at $12.7 billion to $14.2 billion.
Lazard then subtracted the parent company's $30.5 billion in debt (only seems fair), to arrive at its valuation.
Time Warner's stock price got where Mr. Icahn wanted it to go. It only took a year, the company is still in one piece. And think of the investment banking fees he saved.
Blogging Stocks
TWX shares are lately trading around $22.50. Mr. Icahn got his wish, at least in part. And the company did not have to be broken into pieces to realize the value.
Still, it is interesting to look now at the Lazard value for each unit. Lazard combined the studio unit with the cable content operation (CNN, Turner) and came up with a value range of $55.9 billion to $61.4 billion. Cable's valuation was $43.3 billion to $48.5 billion.
AOL's value was put at $17.5 billion to $21 billion. That was before the decision to transform the operation into an advertising supported model, moving away from the Internet access business. The publishing unit was valued at $12.7 billion to $14.2 billion.
Lazard then subtracted the parent company's $30.5 billion in debt (only seems fair), to arrive at its valuation.
Time Warner's stock price got where Mr. Icahn wanted it to go. It only took a year, the company is still in one piece. And think of the investment banking fees he saved.
Blogging Stocks
Yahoo's Panama Pleases Investors
The long-awaited upgrade to the portal's search-ad system will launch Feb. 4. The Street cheered the announcement—but will it be enough?
After struggling for more than a year to catch fast-growing Web giants such as Google and MySpace, Yahoo! isn't out of the woods yet. But it may finally be seeing some sunlight through the thicket.
On Jan. 23, the Internet portal reported fourth-quarter profit that handily outpaced expectations as sales rose 13%, to $1.7 billion. Profit fell 61%, to $269 million, from a year ago, when Yahoo logged a gain on the sale of a China operation, but the 19¢-a-share profit easily beat analysts' 13¢ prediction. Initially, that wasn't enough to thrill investors, who swiftly knocked the stock down about 2% in extended trading, thanks to a muted forecast for a 14% rise in sales this year.
Momentum
But as soon as Chief Executive Terry Semel mentioned that a long-awaited improvement to Yahoo's search-ad system, known as Project Panama, would roll out earlier than expected, the stock reversed course and shot up more than 5%. The rally reflected the relief of investors who already were betting the worst could be over for Yahoo and were watching for any sign to the contrary. Shares have risen 7% since the start of the year and have been up as much as 10% this month. That follows a 35% swoon last year.
Panama, originally scheduled to launch last year, is Yahoo's attempt to close a sales gap with Google. Yahoo's search ads produce far less revenue for advertisers because the company's formula for running ads is based solely on how much advertisers bid on search keywords—the words that trigger the placement of an ad alongside search results. By contrast, Google takes into account how many people click on those ads, so they end up being more relevant to searchers—and elicit two or three times as many clicks as ads on Yahoo.
For the past two years, Yahoo has tried to improve the performance but has run into delays getting Panama out the door. Now, the new platform goes live in the U.S. starting Feb. 5, followed by international markets, starting with Japan in the second quarter. Yahoo wouldn't say how much it expects Panama to improve search revenue besides promising that it would see a "double-digit" increase in revenue per search in the second half. "We expect to see revenue impact to begin in the second quarter and gain momentum throughout 2007," Semel said in a conference call with analysts.
"Transition"
Already, advertisers are champing at the bit. Despite Google's dominance in search ads—or perhaps because of it—companies crave an alternative so they're not overly dependent on Google. Despite some advertisers' difficulty learning the new system, early reviews of Panama from advertisers and agencies are positive, with many saying the system is easier and faster to use than Yahoo's current system. "We're definitely hoping it will help even the playing field," says Adam Kasper, senior vice-president and director of digital media for MediaContacts, a digital ad agency.
Panama is not the only upside opportunity in the coming year. Yahoo's deal to sell ads on eBay, its agreement with a newspaper consortium to run job ads online, and a partnership with ad network Right Media to sell space on less-trafficked Yahoo pages all could kick in this year. "There's some real tangible business catalysts," says Rob Sanderson of American Technology Research, who has a buy on the stock.
Even so, Yahoo is far from home free. Semel himself tacitly acknowledged as much by using the word "transition" to describe Yahoo's likely performance this year. That's usually a code word for a tough year, but it also may be an attempt to manage expectations at a time when Google's momentum shows little sign of slowing and Yahoo faces challenges on a number of fronts.
For one, Yahoo's growth in the first quarter, often soft post-holidays, could slow considerably. The company says first-quarter revenue will rise only 8%, thanks in part to higher costs to drive traffic and Panama's only partial impact on the quarter.
Getting Social
Indeed, Panama could take a while to have an impact. Advertisers need to learn how to use it, and the formulas Yahoo uses for determining the quality of the ads will need to adapt to what users end up clicking on. "Investors are betting that Panama will save the day," says Scott Devitt, an analyst with Stifel, Nicolaus & Co. in Manassas, Va. "It may, but there's no proof that Panama is working. You're betting on something that is at least six months out" in terms of bottom-line impact. Even then, it's unclear how great the impact will be. "Panama will improve things," says Ellen Siminoff, CEO of search marketing optimization firm Efficient Frontier and a former Yahoo executive. "It's just a matter of how much vs. expectations."
And while Panama may improve how Yahoo makes money on search, the company is still losing ground in search in the first place. Yahoo's share of Web search queries fell slightly from November, to 23.6%, according to market researcher Nielsen//NetRatings. Google, meanwhile, captured 50.8% of searches.
Yahoo's mainstay display-ad business also is under pressure. In the third quarter, the company surprised investors with an unexpected slowdown in display advertising. It blamed that slowdown partly on the rising popularity among advertisers of social sites such as MySpace, whose traffic overtook Yahoo's recently by one measure.
One key for Yahoo will be finding a way to generate revenue from its own social Web initiatives, such as the photo-sharing site Flickr, the Web-bookmarking site del.icio.us, and its Yahoo 360 service. "If they're not able to use those communities as strategic assets, they're useless," says Sandeep Swadia, vice-president of strategic markets for corporate-search service FAST Search & Transfer. Problem is, "fundamentally, communities don't want commercial interruptions."
Yahoo will have to make this happen with a shuffled management deck. In December, the company announced the exit later this year of Chief Operating Officer Dan Rosensweig and the elevation of Chief Financial Officer Sue Decker to head a publisher and advertiser division. A search for someone to head a new audience division is under way. But for now, it's up to Semel to return Yahoo to its former yodeling glory.
BusinessWeek
After struggling for more than a year to catch fast-growing Web giants such as Google and MySpace, Yahoo! isn't out of the woods yet. But it may finally be seeing some sunlight through the thicket.
On Jan. 23, the Internet portal reported fourth-quarter profit that handily outpaced expectations as sales rose 13%, to $1.7 billion. Profit fell 61%, to $269 million, from a year ago, when Yahoo logged a gain on the sale of a China operation, but the 19¢-a-share profit easily beat analysts' 13¢ prediction. Initially, that wasn't enough to thrill investors, who swiftly knocked the stock down about 2% in extended trading, thanks to a muted forecast for a 14% rise in sales this year.
Momentum
But as soon as Chief Executive Terry Semel mentioned that a long-awaited improvement to Yahoo's search-ad system, known as Project Panama, would roll out earlier than expected, the stock reversed course and shot up more than 5%. The rally reflected the relief of investors who already were betting the worst could be over for Yahoo and were watching for any sign to the contrary. Shares have risen 7% since the start of the year and have been up as much as 10% this month. That follows a 35% swoon last year.
Panama, originally scheduled to launch last year, is Yahoo's attempt to close a sales gap with Google. Yahoo's search ads produce far less revenue for advertisers because the company's formula for running ads is based solely on how much advertisers bid on search keywords—the words that trigger the placement of an ad alongside search results. By contrast, Google takes into account how many people click on those ads, so they end up being more relevant to searchers—and elicit two or three times as many clicks as ads on Yahoo.
For the past two years, Yahoo has tried to improve the performance but has run into delays getting Panama out the door. Now, the new platform goes live in the U.S. starting Feb. 5, followed by international markets, starting with Japan in the second quarter. Yahoo wouldn't say how much it expects Panama to improve search revenue besides promising that it would see a "double-digit" increase in revenue per search in the second half. "We expect to see revenue impact to begin in the second quarter and gain momentum throughout 2007," Semel said in a conference call with analysts.
"Transition"
Already, advertisers are champing at the bit. Despite Google's dominance in search ads—or perhaps because of it—companies crave an alternative so they're not overly dependent on Google. Despite some advertisers' difficulty learning the new system, early reviews of Panama from advertisers and agencies are positive, with many saying the system is easier and faster to use than Yahoo's current system. "We're definitely hoping it will help even the playing field," says Adam Kasper, senior vice-president and director of digital media for MediaContacts, a digital ad agency.
Panama is not the only upside opportunity in the coming year. Yahoo's deal to sell ads on eBay, its agreement with a newspaper consortium to run job ads online, and a partnership with ad network Right Media to sell space on less-trafficked Yahoo pages all could kick in this year. "There's some real tangible business catalysts," says Rob Sanderson of American Technology Research, who has a buy on the stock.
Even so, Yahoo is far from home free. Semel himself tacitly acknowledged as much by using the word "transition" to describe Yahoo's likely performance this year. That's usually a code word for a tough year, but it also may be an attempt to manage expectations at a time when Google's momentum shows little sign of slowing and Yahoo faces challenges on a number of fronts.
For one, Yahoo's growth in the first quarter, often soft post-holidays, could slow considerably. The company says first-quarter revenue will rise only 8%, thanks in part to higher costs to drive traffic and Panama's only partial impact on the quarter.
Getting Social
Indeed, Panama could take a while to have an impact. Advertisers need to learn how to use it, and the formulas Yahoo uses for determining the quality of the ads will need to adapt to what users end up clicking on. "Investors are betting that Panama will save the day," says Scott Devitt, an analyst with Stifel, Nicolaus & Co. in Manassas, Va. "It may, but there's no proof that Panama is working. You're betting on something that is at least six months out" in terms of bottom-line impact. Even then, it's unclear how great the impact will be. "Panama will improve things," says Ellen Siminoff, CEO of search marketing optimization firm Efficient Frontier and a former Yahoo executive. "It's just a matter of how much vs. expectations."
And while Panama may improve how Yahoo makes money on search, the company is still losing ground in search in the first place. Yahoo's share of Web search queries fell slightly from November, to 23.6%, according to market researcher Nielsen//NetRatings. Google, meanwhile, captured 50.8% of searches.
Yahoo's mainstay display-ad business also is under pressure. In the third quarter, the company surprised investors with an unexpected slowdown in display advertising. It blamed that slowdown partly on the rising popularity among advertisers of social sites such as MySpace, whose traffic overtook Yahoo's recently by one measure.
One key for Yahoo will be finding a way to generate revenue from its own social Web initiatives, such as the photo-sharing site Flickr, the Web-bookmarking site del.icio.us, and its Yahoo 360 service. "If they're not able to use those communities as strategic assets, they're useless," says Sandeep Swadia, vice-president of strategic markets for corporate-search service FAST Search & Transfer. Problem is, "fundamentally, communities don't want commercial interruptions."
Yahoo will have to make this happen with a shuffled management deck. In December, the company announced the exit later this year of Chief Operating Officer Dan Rosensweig and the elevation of Chief Financial Officer Sue Decker to head a publisher and advertiser division. A search for someone to head a new audience division is under way. But for now, it's up to Semel to return Yahoo to its former yodeling glory.
BusinessWeek
Future Of Music Is The Phone
To keep up momentum, analysts recommend carriers develop improved content partnerships, aggressive pricing, licensing deals, distribution channels and marketing strategies.
Global spending on mobile music from ring tones to full-track downloads is expected to reach $32.2 billion by 2010, with consumers in the Asia-Pacific region and Japan leading the market, a researcher said Tuesday.
Spending on music for handsets is forecast to increase by nearly two and a half times this year's predicted $13.7 billion, Gartner said in its global outlook for the mobile music market. The growth will occur despite competition from digital music players, and a host of challenges faced by telecommunications carriers in delivering these services.
Ring tones today are the second most popular mobile data service, with text messaging No. 1 in terms of use and revenue, Gartner said. Driving the use of mobile music is personalization and entertainment. Ring tones and ring-back tones, for example, are part of the trend to turn mobile phones into a form of self-expression. Ring-back tones are a piece of music or audio clip that mobile phone users select for callers to hear instead of the traditional ringing signal when they dial a mobile number.
Carriers own the ring-tone business, but they are not in such a strong position on the entertainment side of mobile music, such as streaming and full-track downloads, Gartner analyst Stephanie Pittet said. Wireless companies stand to lose market share in the latter to makers of digital music players, record companies and others.
Examples of digital player manufacturers entering the market include Apple and its recently released iPhone. In addition, Apple iTunes and Microsoft Zune are examples of online digital music shops that would compete with portals from mobile carriers.
To prevent losing market share, carriers will need to develop content partnerships, pricing that's acceptable to consumers, licensing deals, distribution channels and marketing strategies, Pittet said. In addition, carriers will have to address technical challenges, such as copyright protection, storage capacity on devices and network coverage.
In terms of the global market, consumers in the Asia-Pacific region, including Japan, are expected to remain the biggest spenders on mobile music through 2010, with Western Europeans second and North Americans third. The Asia-Pacific consumers are expected to take the lead in full-track downloads to cellular phones, while North Americans are predicted to continue to favor "sideloading," which is the transfer of content from a PC to the phone.
Information Week
Global spending on mobile music from ring tones to full-track downloads is expected to reach $32.2 billion by 2010, with consumers in the Asia-Pacific region and Japan leading the market, a researcher said Tuesday.
Spending on music for handsets is forecast to increase by nearly two and a half times this year's predicted $13.7 billion, Gartner said in its global outlook for the mobile music market. The growth will occur despite competition from digital music players, and a host of challenges faced by telecommunications carriers in delivering these services.
Ring tones today are the second most popular mobile data service, with text messaging No. 1 in terms of use and revenue, Gartner said. Driving the use of mobile music is personalization and entertainment. Ring tones and ring-back tones, for example, are part of the trend to turn mobile phones into a form of self-expression. Ring-back tones are a piece of music or audio clip that mobile phone users select for callers to hear instead of the traditional ringing signal when they dial a mobile number.
Carriers own the ring-tone business, but they are not in such a strong position on the entertainment side of mobile music, such as streaming and full-track downloads, Gartner analyst Stephanie Pittet said. Wireless companies stand to lose market share in the latter to makers of digital music players, record companies and others.
Examples of digital player manufacturers entering the market include Apple and its recently released iPhone. In addition, Apple iTunes and Microsoft Zune are examples of online digital music shops that would compete with portals from mobile carriers.
To prevent losing market share, carriers will need to develop content partnerships, pricing that's acceptable to consumers, licensing deals, distribution channels and marketing strategies, Pittet said. In addition, carriers will have to address technical challenges, such as copyright protection, storage capacity on devices and network coverage.
In terms of the global market, consumers in the Asia-Pacific region, including Japan, are expected to remain the biggest spenders on mobile music through 2010, with Western Europeans second and North Americans third. The Asia-Pacific consumers are expected to take the lead in full-track downloads to cellular phones, while North Americans are predicted to continue to favor "sideloading," which is the transfer of content from a PC to the phone.
Information Week
Tuesday, January 23, 2007
Pain returns for Yahoo, with options running out
After being eclipsed on many fronts, going private looks better
Back in 2001, with the Internet industry adrift after the bubble burst, I asked aloud whether anything would be left of Yahoo Inc. in the future, other than the exclamation point in its brand name.
At the time, which seems like generations ago on the Internet, Google was not yet a public company. Social networking was still just a term for what we did at parties in the real world. "Second Life" referred to the hereafter.
And Yahoo had 210 million unique visitors on its Web site -- half of what it has today.
Hollywood veteran Terry Semel was just getting his feet wet, having taken the helm of Yahoo in May 2001. Yahoo's market valuation after he settled in was some $9.8 billion, and the stock traded at a split-adjusted level of $10, after having tumbled with the overall market since the spring of 2000. It was a period of "pain," as a big investment firm put it at the time.
Particularly painful for those at Yahoo. It was also a year that saw Semel cut jobs and revamp dozens of business units.
Six years later, Yahoo which reports fourth-quarter results Tuesday seems to be at a place of, if not of exactly similar circumstances, certainly painful ones.
After collapsing 36% last year, Yahoo sports a market valuation of about $39 billion and its stock looks more like that of an old-line media company than a nimble, fast-growing Web dynamo.
The average traditional media vehicle like Walt Disney, Time Warner or Viacom trades at 22 times estimated free cash flow for this year, according to Stanford Group Co. Yahoo currently has a multiple of 23 vs. 50 for Google.
If you look at 2008 estimates, Yahoo's multiple would be lower than those of traditional media giants.
Its stuck-in-the-mud price and relatively low multiple raises the question of whether the company is ripe, or close to that, to be a leveraged-buyout candidate.
After all, private-equity honchos are flush with cash and very active these days.
Just over a third of the value of mergers and acquisition deals last year (through mid-December) were conducted by private firms. That's up from 23% in 2005 and a 10-year average of 17%, according to PricewaterhouseCoopers. According to Thomson Financial and the National Venture Capital Association, buyout and mezzanine funds recorded the highest year ever, with 138 funds raising $102.9 billion.
"Yahoo's one that's had a lot of execution problems in the last 12 months," said Mark Mahaney, analyst at Citigroup. "If you have a good strategy for turning around an asset with still a lot of traffic, it's an interesting candidate."
Losing search, now branded?
The question is whether Yahoo will be able to maintain that traffic.
Although third-party traffic statistics are questionable these days, it appears that MySpace.com already has surpassed Yahoo's page views as of November, according to comScore Networks, and MySpace maintained that lead in December.
December was the first month that Google as a parent company (including its recent acquisition of YouTube) overtook Yahoo in unique visitors. Google properties attracted a unique audience of 112.2 million while Yahoo-owned sites had 111.184 million, according to Nielsen//NetRatings.
That's not a good sign for Terry Semel's company.
As recently as 2005, Fortune magazine thought that if any Internet company would define the Internet advertising future, it would be Yahoo, even more so than Google.
It didn't take long for Google to prove them wrong. In the second quarter of 2005, it eclipsed Yahoo in terms of net sales.
Then Google quickly outranked both Yahoo and eBay in terms of market valuation.
Since conceding search to Google, Yahoo focused on its media image.
Wall Street and other observers believed that even if Yahoo couldn't win in search, at least its massive breadth in properties would make it the go-to place once marketers put their brand dollars to work.
Today, however, that dominance in media is questionable.
Google, through the YouTube acquisition and its MySpace relationships, has a lot of display-advertising inventory at its disposal.
What does Yahoo have? Lack of certainty at the helm.
In December, Yahoo reorganized its operations into three groups -- audience, advertising and publishing, and technology. Yahoo also announced the departures of top executives, including Dan Rosensweig as chief operating officer, and Lloyd Braun, who led Yahoo's media group, and CFO Sue Decker got a more important managerial role as head of the advertiser & publisher group.
And, there's shaky loyalty within the management. To wit: Its Yahoo's ails were aired in a leaked internal memo, the now famous Peanut Butter Manifesto. Of course, much of the shakeup and public venting followed a year of the many blunders, such as the delay in the newly installed Panama advertising platform, losing out to Google in striking a search deal with News Corp. and failing to buy its own big social network at a time when Google snapped up YouTube.
In a recent edition of Fortune, Google was rated the No. 1 company to work for; Yahoo was 44th. Then again, Fortune isn't exactly a leading indicator of what's to come.
But what is to come is more branded advertising around video and across social networks.
That means less is riding on the shoulders of Yahoo's search group while a lot more pressure's on its media bosses like Vince Broady, head of games and entertainment, or Scott Moore, his counterpart in the news and information division.
After all, Yahoo lost the search wars to Google; it certainly doesn't want to the same to happen to its first-mover status in the online entertainment world.
Yahoo burst onto the stock market in April 1996, at a split-adjusted IPO price of 54 cents. Now it trades in the $27 range.
A buyout of the company would only occur at the right price. And even if Yahoo trades at a relatively low multiple based on its cash flow, Yahoo's multiple on earnings is still very high.
In its heyday, everyone understood what it meant "to Yahoo." It was a way to get around the Web. Maybe the Yahooligans need to reconsider what it means to say, "Do you Yahoo?"
And, maybe they need to do it in the private-investor market.
MarketWatch
Back in 2001, with the Internet industry adrift after the bubble burst, I asked aloud whether anything would be left of Yahoo Inc. in the future, other than the exclamation point in its brand name.
At the time, which seems like generations ago on the Internet, Google was not yet a public company. Social networking was still just a term for what we did at parties in the real world. "Second Life" referred to the hereafter.
And Yahoo had 210 million unique visitors on its Web site -- half of what it has today.
Hollywood veteran Terry Semel was just getting his feet wet, having taken the helm of Yahoo in May 2001. Yahoo's market valuation after he settled in was some $9.8 billion, and the stock traded at a split-adjusted level of $10, after having tumbled with the overall market since the spring of 2000. It was a period of "pain," as a big investment firm put it at the time.
Particularly painful for those at Yahoo. It was also a year that saw Semel cut jobs and revamp dozens of business units.
Six years later, Yahoo which reports fourth-quarter results Tuesday seems to be at a place of, if not of exactly similar circumstances, certainly painful ones.
After collapsing 36% last year, Yahoo sports a market valuation of about $39 billion and its stock looks more like that of an old-line media company than a nimble, fast-growing Web dynamo.
The average traditional media vehicle like Walt Disney, Time Warner or Viacom trades at 22 times estimated free cash flow for this year, according to Stanford Group Co. Yahoo currently has a multiple of 23 vs. 50 for Google.
If you look at 2008 estimates, Yahoo's multiple would be lower than those of traditional media giants.
Its stuck-in-the-mud price and relatively low multiple raises the question of whether the company is ripe, or close to that, to be a leveraged-buyout candidate.
After all, private-equity honchos are flush with cash and very active these days.
Just over a third of the value of mergers and acquisition deals last year (through mid-December) were conducted by private firms. That's up from 23% in 2005 and a 10-year average of 17%, according to PricewaterhouseCoopers. According to Thomson Financial and the National Venture Capital Association, buyout and mezzanine funds recorded the highest year ever, with 138 funds raising $102.9 billion.
"Yahoo's one that's had a lot of execution problems in the last 12 months," said Mark Mahaney, analyst at Citigroup. "If you have a good strategy for turning around an asset with still a lot of traffic, it's an interesting candidate."
Losing search, now branded?
The question is whether Yahoo will be able to maintain that traffic.
Although third-party traffic statistics are questionable these days, it appears that MySpace.com already has surpassed Yahoo's page views as of November, according to comScore Networks, and MySpace maintained that lead in December.
December was the first month that Google as a parent company (including its recent acquisition of YouTube) overtook Yahoo in unique visitors. Google properties attracted a unique audience of 112.2 million while Yahoo-owned sites had 111.184 million, according to Nielsen//NetRatings.
That's not a good sign for Terry Semel's company.
As recently as 2005, Fortune magazine thought that if any Internet company would define the Internet advertising future, it would be Yahoo, even more so than Google.
It didn't take long for Google to prove them wrong. In the second quarter of 2005, it eclipsed Yahoo in terms of net sales.
Then Google quickly outranked both Yahoo and eBay in terms of market valuation.
Since conceding search to Google, Yahoo focused on its media image.
Wall Street and other observers believed that even if Yahoo couldn't win in search, at least its massive breadth in properties would make it the go-to place once marketers put their brand dollars to work.
Today, however, that dominance in media is questionable.
Google, through the YouTube acquisition and its MySpace relationships, has a lot of display-advertising inventory at its disposal.
What does Yahoo have? Lack of certainty at the helm.
In December, Yahoo reorganized its operations into three groups -- audience, advertising and publishing, and technology. Yahoo also announced the departures of top executives, including Dan Rosensweig as chief operating officer, and Lloyd Braun, who led Yahoo's media group, and CFO Sue Decker got a more important managerial role as head of the advertiser & publisher group.
And, there's shaky loyalty within the management. To wit: Its Yahoo's ails were aired in a leaked internal memo, the now famous Peanut Butter Manifesto. Of course, much of the shakeup and public venting followed a year of the many blunders, such as the delay in the newly installed Panama advertising platform, losing out to Google in striking a search deal with News Corp. and failing to buy its own big social network at a time when Google snapped up YouTube.
In a recent edition of Fortune, Google was rated the No. 1 company to work for; Yahoo was 44th. Then again, Fortune isn't exactly a leading indicator of what's to come.
But what is to come is more branded advertising around video and across social networks.
That means less is riding on the shoulders of Yahoo's search group while a lot more pressure's on its media bosses like Vince Broady, head of games and entertainment, or Scott Moore, his counterpart in the news and information division.
After all, Yahoo lost the search wars to Google; it certainly doesn't want to the same to happen to its first-mover status in the online entertainment world.
Yahoo burst onto the stock market in April 1996, at a split-adjusted IPO price of 54 cents. Now it trades in the $27 range.
A buyout of the company would only occur at the right price. And even if Yahoo trades at a relatively low multiple based on its cash flow, Yahoo's multiple on earnings is still very high.
In its heyday, everyone understood what it meant "to Yahoo." It was a way to get around the Web. Maybe the Yahooligans need to reconsider what it means to say, "Do you Yahoo?"
And, maybe they need to do it in the private-investor market.
MarketWatch
Album sales slump as downloads rise
As music-buying habits increasingly shift toward digital downloads, the industry experienced dramatic ups and downs in its 2005 sales results.
Down:
• Total album sales, falling from 666.7 million in 2004 to 618.9 million, according to Nielsen SoundScan, a drop of 7.2% after a 1.5% gain over 2003's sales total.
• CD sales (95% of total album sales), off even more dramatically, from 651.1 million to 598.9 million (down 8.0%).
• Most musical genres, many (soundtracks, classical, metal and R&B) suffering double-digit drops. Latin was the sole exception, rising 12.6%.
Up:
• Digital track downloads, rising from 150% to 352.7 million.
By the numbers
After a one-year gain, CD sales dropped again in 2005, by 8.0%. They're now 15.5% below 2000's record level. Digital track downloads continued to explode in 2005, rising 150% over 2004.
• Digital album downloads, climbing 194% to 16.2 million from 5.5 million.
• Internet album sales, up 11%, accounting for nearly 25 million sales.
• Overall music purchases (encompassing albums, singles, music video and digital downloads), which were up 22.7% over 2004 and passed 1 billion units for the first time.
Though the jumps are cause for long-term optimism, the overall picture for the year was far from rosy, because a digital track download sale amounts to one-tenth or less the revenue of a CD sale. This year, SoundScan began to tally track equivalent albums (TEAs), counting 10 track downloads as one album sale in an attempt to create a more realistic overall sales picture. Adding in the year's TEAs, the 2005 album-sales decline is just 3.9% (from 680.7 million units in 2004 to 654.1 this past year).
Geoff Mayfield, Billboard's director of charts, says the year is a disappointment for the music business but adds, "What we're seeing here and in other recent decline years is an industry transition."
He calls the digital-download sphere "a different business. It tends to lend itself to buying individual songs rather than albums. There was a pent-up demand on the consumer's part to be able to buy individual songs that wasn't being catered to."
Mayfield thinks the raw total of track downloads may surpass total CD sales "in the next year or two," but he is hopeful the industry will devise new ways to capitalize on the shift in music purchasing practices.
"The record industry tends to be challenged by hard times — the problems of the '70s and '80s led to a rethinking of business practices. The transformation from this round of innovation and suffering will be much more radical."
USA Today
Down:
• Total album sales, falling from 666.7 million in 2004 to 618.9 million, according to Nielsen SoundScan, a drop of 7.2% after a 1.5% gain over 2003's sales total.
• CD sales (95% of total album sales), off even more dramatically, from 651.1 million to 598.9 million (down 8.0%).
• Most musical genres, many (soundtracks, classical, metal and R&B) suffering double-digit drops. Latin was the sole exception, rising 12.6%.
Up:
• Digital track downloads, rising from 150% to 352.7 million.
By the numbers
After a one-year gain, CD sales dropped again in 2005, by 8.0%. They're now 15.5% below 2000's record level. Digital track downloads continued to explode in 2005, rising 150% over 2004.
• Digital album downloads, climbing 194% to 16.2 million from 5.5 million.
• Internet album sales, up 11%, accounting for nearly 25 million sales.
• Overall music purchases (encompassing albums, singles, music video and digital downloads), which were up 22.7% over 2004 and passed 1 billion units for the first time.
Though the jumps are cause for long-term optimism, the overall picture for the year was far from rosy, because a digital track download sale amounts to one-tenth or less the revenue of a CD sale. This year, SoundScan began to tally track equivalent albums (TEAs), counting 10 track downloads as one album sale in an attempt to create a more realistic overall sales picture. Adding in the year's TEAs, the 2005 album-sales decline is just 3.9% (from 680.7 million units in 2004 to 654.1 this past year).
Geoff Mayfield, Billboard's director of charts, says the year is a disappointment for the music business but adds, "What we're seeing here and in other recent decline years is an industry transition."
He calls the digital-download sphere "a different business. It tends to lend itself to buying individual songs rather than albums. There was a pent-up demand on the consumer's part to be able to buy individual songs that wasn't being catered to."
Mayfield thinks the raw total of track downloads may surpass total CD sales "in the next year or two," but he is hopeful the industry will devise new ways to capitalize on the shift in music purchasing practices.
"The record industry tends to be challenged by hard times — the problems of the '70s and '80s led to a rethinking of business practices. The transformation from this round of innovation and suffering will be much more radical."
USA Today
The Inevitable Death of DRM
Notwithstanding Apple’s announcement today of the sale of 2 billion songs on iTunes (all with DRM), most of the recent market signs suggest that the eventual demise of DRM is inevitable. Consumers are more frustrated than ever that certain file types are playable only on certain devices. The only real questions are when, and will it be replaced with something far more sinister?
The signs:
A year ago, Yahoo Music GM David Goldberg urged labels to abandon DRM
CD sales continue to drop and are down at least 15% from 2000, and current digital sales are not offsetting that lost revenue
eMusic, which sells only MP3s, is the no. 2 digital music reseller behind iTunes
Amazon is rumored to be opening a MP3-only music store
Sony Exec says “DRMs are going to become less important” as time goes on
etc.
Then there’s the Apple factor. The digital music market is starting to look like a monopsony for the big labels, with Apple as the only real reseller (20x the sales of no. 2 eMusic). No one else can gain enough critical mass to get users to buy a player and the music, or otherwise make much of a dent in iTunes. The only way others can sell music playable on the iPod is if it’s DRM-free. The labels will see it as a poison pill, but Apple is on a roll and their lead is getting stronger over time.
I spoke with Yahoo Music GM David Goldberg and VP Product Development Ian Rogers last week about their views on the future of DRM, given Goldberg’s comments about DRM a year ago (see above). The forty minute podcast is up at TalkCrunch. While they don’t quite agree that DRM’s demise is inevitable, they do have valuable insights as music insiders as to what may happen in the short term. One interesting prediction that Goldberg made is that we might see DRM and DRM-free tracks being sold side by side, with DRM music sold at a discount. I think that the general availability of illegal and quasi-legal alternatives may not allow that market to develop, but we’ll see. They also predict the rise of music subscription services.
Our advice remains the same. For legal reasons we do not condone the acquisition of music via BitTorrent or AllofMP3. We think Bill Gates’ advice is a pretty good way to go - buy the CD, rip and and do what you like with the music. You can listen to it on any device you own. But whatever you do, don’t buy DRM’d music. You’ll regret it down the road.
TechCrunch
The signs:
A year ago, Yahoo Music GM David Goldberg urged labels to abandon DRM
CD sales continue to drop and are down at least 15% from 2000, and current digital sales are not offsetting that lost revenue
eMusic, which sells only MP3s, is the no. 2 digital music reseller behind iTunes
Amazon is rumored to be opening a MP3-only music store
Sony Exec says “DRMs are going to become less important” as time goes on
etc.
Then there’s the Apple factor. The digital music market is starting to look like a monopsony for the big labels, with Apple as the only real reseller (20x the sales of no. 2 eMusic). No one else can gain enough critical mass to get users to buy a player and the music, or otherwise make much of a dent in iTunes. The only way others can sell music playable on the iPod is if it’s DRM-free. The labels will see it as a poison pill, but Apple is on a roll and their lead is getting stronger over time.
I spoke with Yahoo Music GM David Goldberg and VP Product Development Ian Rogers last week about their views on the future of DRM, given Goldberg’s comments about DRM a year ago (see above). The forty minute podcast is up at TalkCrunch. While they don’t quite agree that DRM’s demise is inevitable, they do have valuable insights as music insiders as to what may happen in the short term. One interesting prediction that Goldberg made is that we might see DRM and DRM-free tracks being sold side by side, with DRM music sold at a discount. I think that the general availability of illegal and quasi-legal alternatives may not allow that market to develop, but we’ll see. They also predict the rise of music subscription services.
Our advice remains the same. For legal reasons we do not condone the acquisition of music via BitTorrent or AllofMP3. We think Bill Gates’ advice is a pretty good way to go - buy the CD, rip and and do what you like with the music. You can listen to it on any device you own. But whatever you do, don’t buy DRM’d music. You’ll regret it down the road.
TechCrunch
News Corp. hopes to not 'screw up' MySpace
Peter Chernin, the president and chief operating officer of MySpace parent News Corp., says company doesn't want to "Fox-ify" social networking site.
The president and chief operating officer of News Corp., the parent company of top social networking site MySpace as well as traditional media properties such as the Fox television network and movie studio, told investors that News Corp. plans to invest more heavily in MySpace this year but will be careful to not make changes that could alienate the site's users.
Peter Chernin, speaking at Citigroup's annual entertainment, media and telecommunications conference in Las Vegas, said that MySpace should remain popular as long as News Corp. (Charts) doesn't meddle too much with how the site looks and is run.
"Our job is to continue to do a couple of things. One, is to not screw it up, not make it restrictive or look to Fox-ify it," Chernin said. "Beyond that you have to continue to give users new tools. You don't shove it down their throat but you do offer them new ones and see what they like."
Chernin said that what makes the site work so well is that users aren't forced to use MySpace services if they don't want to on their pages. To that end, even though MySpace has its own online video and photo-sharing services, Chernin said that it would be a mistake to not let users post links on MySpace sites to competing sites, such as Google (Charts)-owned YouTube for videos or Yahoo! (Charts)-owned Flickr for photo sharing.
Investors have been excited about the prospects for MySpace, which News Corp. acquired in 2005 for $580 million, as online advertising spending is expected to increase strongly in 2007 and beyond. As such, last year, MySpace struck a multi-year online ad-revenue sharing agreement with Google. Google will be the exclusive provider of contextual ads on MySpace and MySpace is expected to receive a minimum of $900 million over three years as a result of the deal.
Chernin added during his comments that MySpace also will look to expand more aggressively in international markets this year. "We want to be not just the dominant social networking site in the U.S. but also globally," he said.
Turning to the topic of online video advertising, Chernin said that online video has the potential to be the biggest positive story for media companies in 2007. But he was quick to point out that, despite all the hype about user-generated video, he did not believe advertisers would embrace this medium.
"Many big advertisers are not advertising on YouTube yet. One, they're not sure about the content and there is no scarcity value. If you put an ad on a minute- long clip of someone falling off a skateboard, people can find that somewhere else. With user-generated videos there is little way to monetize the content," he said.
Instead, Chernin said that he believed more and more marketers would look to shift more and more of their ad dollars from traditional forms of media like television to copyrighted versions of TV shows and other videos that appear online.
cnnmoney.com
The president and chief operating officer of News Corp., the parent company of top social networking site MySpace as well as traditional media properties such as the Fox television network and movie studio, told investors that News Corp. plans to invest more heavily in MySpace this year but will be careful to not make changes that could alienate the site's users.
Peter Chernin, speaking at Citigroup's annual entertainment, media and telecommunications conference in Las Vegas, said that MySpace should remain popular as long as News Corp. (Charts) doesn't meddle too much with how the site looks and is run.
"Our job is to continue to do a couple of things. One, is to not screw it up, not make it restrictive or look to Fox-ify it," Chernin said. "Beyond that you have to continue to give users new tools. You don't shove it down their throat but you do offer them new ones and see what they like."
Chernin said that what makes the site work so well is that users aren't forced to use MySpace services if they don't want to on their pages. To that end, even though MySpace has its own online video and photo-sharing services, Chernin said that it would be a mistake to not let users post links on MySpace sites to competing sites, such as Google (Charts)-owned YouTube for videos or Yahoo! (Charts)-owned Flickr for photo sharing.
Investors have been excited about the prospects for MySpace, which News Corp. acquired in 2005 for $580 million, as online advertising spending is expected to increase strongly in 2007 and beyond. As such, last year, MySpace struck a multi-year online ad-revenue sharing agreement with Google. Google will be the exclusive provider of contextual ads on MySpace and MySpace is expected to receive a minimum of $900 million over three years as a result of the deal.
Chernin added during his comments that MySpace also will look to expand more aggressively in international markets this year. "We want to be not just the dominant social networking site in the U.S. but also globally," he said.
Turning to the topic of online video advertising, Chernin said that online video has the potential to be the biggest positive story for media companies in 2007. But he was quick to point out that, despite all the hype about user-generated video, he did not believe advertisers would embrace this medium.
"Many big advertisers are not advertising on YouTube yet. One, they're not sure about the content and there is no scarcity value. If you put an ad on a minute- long clip of someone falling off a skateboard, people can find that somewhere else. With user-generated videos there is little way to monetize the content," he said.
Instead, Chernin said that he believed more and more marketers would look to shift more and more of their ad dollars from traditional forms of media like television to copyrighted versions of TV shows and other videos that appear online.
cnnmoney.com
Put up or shut up time for Yahoo!
After a rough 2006, Yahoo must reassure Wall Street that new search tool Panama will be a success and that it has a plan to compete with Google and MySpace.
Will Yahoo's fourth-quarter earnings and guidance for 2007 be smooth or chunky?
That's the question on investors' minds in the aftermath of the now infamous Peanut Butter Manifesto - a memo by a Yahoo (Charts) executive leaked to the media last November that took the online media firm to task for spreading itself too thin - and a subsequent management shake-up.
The company will report its fourth-quarter results, and give investors their first taste of how 2007 is shaping up, on Tuesday January 23. Wall Street expects the company to post revenue (excluding ad sales it shares with affiliates) of $1.22 billion and earnings of 13 cents a share in the quarter, according to figures compiled by Thomson Financial.
For the full year, analysts are predicting that Yahoo will report revenue of $5.5 billion, an expected increase of 20 percent from 2006, and profits of 59 cents a share, an anticipated jump of 28 percent.
Yahoo typically does not provide earnings per share guidance, however, so analysts and investors will be paying close attention to what the company's forecast for earnings before interest, taxes, depreciation and amortization (EBITDA) is. Analysts are predicting that Yahoo's 2007 EBITDA will be $2.2 billion.
Yahoo, the world's second most popular search engine behind industry leader Google, had a rough 2006. Shares of Yahoo plunged 35 percent due to concerns that the company was falling further behind Google (Charts) in search and was at risk of losing users and advertising dollars to the likes of popular social networking kingpins MySpace and Facebook as well as online video upstart YouTube.
Compounding matters, the release of Yahoo's much-anticipated new search platform, dubbed Project Panama, was delayed by a couple of months. (Yahoo is rolling Panama out to advertisers now, however).
And in September, Yahoo told Wall Street that third-quarter revenues would be at the low end of the company's expectations, news that stunned investors and sent the stock reeling. Yahoo blamed weak demand for online advertising from auto companies and financial services firms.
All this culminated in a management shuffle at the top of Yahoo in December. Chief financial officer Susan Decker was promoted to a new role - heading a unit dealing with advertisers - a position that many analysts said puts her in line to eventually succeed Yahoo chief executive officer Terry Semel.
Now investors are hoping that Yahoo's nightmare year is behind it. Analysts say they are looking for reassurance from the company about the adoption of Panama, which is meant to improve the relevancy of keyword results for advertisers and users and therefore boost the amount of revenue per query that Yahoo receives from its search business as well as Yahoo's market share in search.
Investors do seem to be betting that the worst may be behind the company. Shares of Yahoo have gained more than 10 percent so far this year, a possible sign that investors care more about what will happen in 2007 than how Yahoo did in the fourth quarter.
"The stock has definitely bounced nicely. The dirty laundry is out in the open," said Tim Boyd, an analyst with Caris & Co. "I don't think investors are too interested in the fourth quarter results. The 2007 guidance, which should be given on this call, will be vital because everyone will read into that what management's expectations for Panama are."
And Yahoo could clearly use a lift from Panama. According to figures from Web research firm comScore Networks released earlier this week, Yahoo trails Google by a fairly wide margin, with Google commanding 47.3 percent of the U.S. search market in December 2006 and Yahoo coming in second with 28.5 percent market share.
But Yahoo's market share did increase slightly from November and some analysts are optimistic that Panama will help Yahoo get back on track.
"The feedback we've gotten from agencies and advertisers about Panama is that it's a vastly improved product that is similar to Google. It allows advertisers to buy a greater breadth of keywords so there is strong enthusiasm for Panama," said Stewart Barry, an analyst with ThinkEquity Partners.
The company will also need to signal to investors that the weakness it cited last year in auto and financial services advertising was just temporary. There is already some skepticism about how real this slowdown was.
Jim Lanzone, chief executive officer of IAC/InterActive (Charts)-owned Ask.com, the number four search engine behind Google, Yahoo and Microsoft's (Charts) MSN, said that Ask.com did not see any weakness in online advertising at the end of 2006.
And Yahoo has to do more than just improve its search business to get investors excited again. Yahoo has been criticized by many investors and analysts for not being as aggressive as competitors in the burgeoning world of social networking. Media giant News Corp. (Charts) bought MySpace in 2005 and Google acquired YouTube last year.
Although the company has made acquisitions in the social networking arena, including photo sharing site Flickr and Web bookmarking site del.icio.us, some have argued that this isn't enough. To that end, there has been on-and-off speculation that Yahoo could buy Facebook in order to boost its presence in social networking.
"Aside from worries about search and Panama, the biggest concern is Yahoo's relative lack to exposure in social networking. One of the strongest assets Yahoo has is its enormous traffic base but if it doesn't find new ways to drive growth, that advantage will rapidly deteriorate," said Boyd.
The risk for Yahoo is that sites like MySpace and YouTube could begin to steal some of the so-called display advertising dollars from Yahoo. Display ads, which include banners, online video and other non-text based forms of ads, are an important part of Yahoo's business since it is area where it still has a lead over Google and other rivals such as MSN and Ask.com.
"Yahoo is known for being a leading company in display. But with the emergence of properties like MySpace, Facebook and YouTube, to what extent do those companies and similar offerings result in a degradation of the value proposition that Yahoo offers to advertisers?" said Scott Kessler, an equity analyst with Standard & Poor's. "Right now it's being concluded that Google and others will be the winners when it comes to social networking."
But before Yahoo can make bigger forays in social networking, it's probably going to need to find an executive to lead this push. When Yahoo announced its management changes in December, the company said it was also forming a new division that would be in charge of building Yahoo's audience base but it did not name a head of that unit.
Kessler said it is crucial for Yahoo to hire a new executive for this position soon, as well as find a replacement for Decker, who will give up the CFO spot to focus full-time on working with advertisers once her successor is hired.
"There are still a lot of questions about the new management structure. Last I checked you have important positions still open," Kessler said. "Investors are looking for details about a new CFO and a new head of the audience business. The lack of news frankly can't be construed as anything but problematic."
So it's clear that Yahoo quickly needs to prove to Wall Street that it has a plan to fend off challenges from new online media rivals like MySpace as well as get its growth back on track in search. If Yahoo doesn't deliver, Boyd said that the company may be forced to make more management changes or even look for a merger partner.
"This will definitely be a make or break year for Yahoo. If it's not a successful year then Semel, rightly or wrongly, would be gone," he said. "And if Panama does not succeed in improving Yahoo's search revenue growth, Yahoo could be an attractive buy for somebody like Microsoft."
cnnmoney.com
Will Yahoo's fourth-quarter earnings and guidance for 2007 be smooth or chunky?
That's the question on investors' minds in the aftermath of the now infamous Peanut Butter Manifesto - a memo by a Yahoo (Charts) executive leaked to the media last November that took the online media firm to task for spreading itself too thin - and a subsequent management shake-up.
The company will report its fourth-quarter results, and give investors their first taste of how 2007 is shaping up, on Tuesday January 23. Wall Street expects the company to post revenue (excluding ad sales it shares with affiliates) of $1.22 billion and earnings of 13 cents a share in the quarter, according to figures compiled by Thomson Financial.
For the full year, analysts are predicting that Yahoo will report revenue of $5.5 billion, an expected increase of 20 percent from 2006, and profits of 59 cents a share, an anticipated jump of 28 percent.
Yahoo typically does not provide earnings per share guidance, however, so analysts and investors will be paying close attention to what the company's forecast for earnings before interest, taxes, depreciation and amortization (EBITDA) is. Analysts are predicting that Yahoo's 2007 EBITDA will be $2.2 billion.
Yahoo, the world's second most popular search engine behind industry leader Google, had a rough 2006. Shares of Yahoo plunged 35 percent due to concerns that the company was falling further behind Google (Charts) in search and was at risk of losing users and advertising dollars to the likes of popular social networking kingpins MySpace and Facebook as well as online video upstart YouTube.
Compounding matters, the release of Yahoo's much-anticipated new search platform, dubbed Project Panama, was delayed by a couple of months. (Yahoo is rolling Panama out to advertisers now, however).
And in September, Yahoo told Wall Street that third-quarter revenues would be at the low end of the company's expectations, news that stunned investors and sent the stock reeling. Yahoo blamed weak demand for online advertising from auto companies and financial services firms.
All this culminated in a management shuffle at the top of Yahoo in December. Chief financial officer Susan Decker was promoted to a new role - heading a unit dealing with advertisers - a position that many analysts said puts her in line to eventually succeed Yahoo chief executive officer Terry Semel.
Now investors are hoping that Yahoo's nightmare year is behind it. Analysts say they are looking for reassurance from the company about the adoption of Panama, which is meant to improve the relevancy of keyword results for advertisers and users and therefore boost the amount of revenue per query that Yahoo receives from its search business as well as Yahoo's market share in search.
Investors do seem to be betting that the worst may be behind the company. Shares of Yahoo have gained more than 10 percent so far this year, a possible sign that investors care more about what will happen in 2007 than how Yahoo did in the fourth quarter.
"The stock has definitely bounced nicely. The dirty laundry is out in the open," said Tim Boyd, an analyst with Caris & Co. "I don't think investors are too interested in the fourth quarter results. The 2007 guidance, which should be given on this call, will be vital because everyone will read into that what management's expectations for Panama are."
And Yahoo could clearly use a lift from Panama. According to figures from Web research firm comScore Networks released earlier this week, Yahoo trails Google by a fairly wide margin, with Google commanding 47.3 percent of the U.S. search market in December 2006 and Yahoo coming in second with 28.5 percent market share.
But Yahoo's market share did increase slightly from November and some analysts are optimistic that Panama will help Yahoo get back on track.
"The feedback we've gotten from agencies and advertisers about Panama is that it's a vastly improved product that is similar to Google. It allows advertisers to buy a greater breadth of keywords so there is strong enthusiasm for Panama," said Stewart Barry, an analyst with ThinkEquity Partners.
The company will also need to signal to investors that the weakness it cited last year in auto and financial services advertising was just temporary. There is already some skepticism about how real this slowdown was.
Jim Lanzone, chief executive officer of IAC/InterActive (Charts)-owned Ask.com, the number four search engine behind Google, Yahoo and Microsoft's (Charts) MSN, said that Ask.com did not see any weakness in online advertising at the end of 2006.
And Yahoo has to do more than just improve its search business to get investors excited again. Yahoo has been criticized by many investors and analysts for not being as aggressive as competitors in the burgeoning world of social networking. Media giant News Corp. (Charts) bought MySpace in 2005 and Google acquired YouTube last year.
Although the company has made acquisitions in the social networking arena, including photo sharing site Flickr and Web bookmarking site del.icio.us, some have argued that this isn't enough. To that end, there has been on-and-off speculation that Yahoo could buy Facebook in order to boost its presence in social networking.
"Aside from worries about search and Panama, the biggest concern is Yahoo's relative lack to exposure in social networking. One of the strongest assets Yahoo has is its enormous traffic base but if it doesn't find new ways to drive growth, that advantage will rapidly deteriorate," said Boyd.
The risk for Yahoo is that sites like MySpace and YouTube could begin to steal some of the so-called display advertising dollars from Yahoo. Display ads, which include banners, online video and other non-text based forms of ads, are an important part of Yahoo's business since it is area where it still has a lead over Google and other rivals such as MSN and Ask.com.
"Yahoo is known for being a leading company in display. But with the emergence of properties like MySpace, Facebook and YouTube, to what extent do those companies and similar offerings result in a degradation of the value proposition that Yahoo offers to advertisers?" said Scott Kessler, an equity analyst with Standard & Poor's. "Right now it's being concluded that Google and others will be the winners when it comes to social networking."
But before Yahoo can make bigger forays in social networking, it's probably going to need to find an executive to lead this push. When Yahoo announced its management changes in December, the company said it was also forming a new division that would be in charge of building Yahoo's audience base but it did not name a head of that unit.
Kessler said it is crucial for Yahoo to hire a new executive for this position soon, as well as find a replacement for Decker, who will give up the CFO spot to focus full-time on working with advertisers once her successor is hired.
"There are still a lot of questions about the new management structure. Last I checked you have important positions still open," Kessler said. "Investors are looking for details about a new CFO and a new head of the audience business. The lack of news frankly can't be construed as anything but problematic."
So it's clear that Yahoo quickly needs to prove to Wall Street that it has a plan to fend off challenges from new online media rivals like MySpace as well as get its growth back on track in search. If Yahoo doesn't deliver, Boyd said that the company may be forced to make more management changes or even look for a merger partner.
"This will definitely be a make or break year for Yahoo. If it's not a successful year then Semel, rightly or wrongly, would be gone," he said. "And if Panama does not succeed in improving Yahoo's search revenue growth, Yahoo could be an attractive buy for somebody like Microsoft."
cnnmoney.com
Investors: Stay Out Of Media
We might have expected the traditional media companies to enjoy robust circumstances longer than they did. But with advertising numbers for 2006 beginning to filter in for the television broadcasters and the magazine publishers, it is becoming increasingly clear that the same sort of malady that has been so often discussed for newspapers is also pervasive for many traditional media companies.
At the newspaper publishers -- companies like New York Times (NYSE: NYT), Tribune (NYSE: TRB), and McClatchy (NYSE: MNI) -- a somewhat vicious circle of lower circulation is propelling reduced advertising revenues, which in turn is leading to talk of outright company buyouts in some cases and asset divestitures in others. The lower circulation figures themselves can be tied largely to the inherent lack of immediacy in the newspaper format and frequency.
A first pass at counting television advertising revenues for 2006 by accounting firm Ernst & Young -- and limited to a sampling of six New York stations -- now appears to substantiate somewhat the notion that advertising revenues for television may also have dipped for the second year in a row. According to the survey, the six stations billed about $1.402 billion, or about 0.3% below 2005.
Even given the biannual one-two punch provided by Olympic games and federal elections, the lack of growth was expected. And according to those who study broadcast advertising trends carefully, the "base market" -- total advertising dollars minus Olympics and political ads -- was up ever so slightly in 2006. Looking ahead, the expectation appears to be for that same base market to continue to grow in the low single digits this year, with a similarly expected decline in the overall market.
Interestingly, television broadcasters have experienced a variety of share price reactions amidst these market circumstances. Hearst-Argyle (NYSE: HTV), for instance, perhaps the purest play in television broadcasting, watched its share price increase by about 10% last year, while Belo (NYSE: BLC), which is both a newspaper publisher and a television broadcaster, experienced about an 18% share price reduction.
The world of magazines did not fare better than broadcasting last year. For instance, Time Warner's (NYSE: TWX) Time Inc. publishing unit experienced a 4.8% drop in ad pages, although its flagship Time held relatively steady, with just an 0.8% dip. At the same time, People dropped 2.8% and Sports Illustrated fell by 3.5%.
Over at Hearst Corporation, total ad pages were down 0.7%, but Esquire increased its count by 4.1% and Redbook was up 3.5%. Conversely, Cosmopolitan was 4.0% lower, and Country Living was down 4.4%. At Meredith (NYSE: MDP), which publishes mostly women's interest titles, the total decline was 1.4%, although Family Circle increased its advertising pages by a healthy 8.9%. Ladies' Home Journal was, however, essentially flat, with a 0.5% decline in ad pages, and Better Homes and Gardens fell by 8.2%.
What, then, is the lesson in these figures for Foolish investors? My take, quite simply, is that the optimum way to invest in the media space as we move into 2007 is either through those companies that were formed specifically to serve the Internet or those -- the cable operators are a noteworthy example -- whose fate is not highly dependent on advertising. The more traditional media companies clearly need more time for strategic redirections.
msnbc.com
At the newspaper publishers -- companies like New York Times (NYSE: NYT), Tribune (NYSE: TRB), and McClatchy (NYSE: MNI) -- a somewhat vicious circle of lower circulation is propelling reduced advertising revenues, which in turn is leading to talk of outright company buyouts in some cases and asset divestitures in others. The lower circulation figures themselves can be tied largely to the inherent lack of immediacy in the newspaper format and frequency.
A first pass at counting television advertising revenues for 2006 by accounting firm Ernst & Young -- and limited to a sampling of six New York stations -- now appears to substantiate somewhat the notion that advertising revenues for television may also have dipped for the second year in a row. According to the survey, the six stations billed about $1.402 billion, or about 0.3% below 2005.
Even given the biannual one-two punch provided by Olympic games and federal elections, the lack of growth was expected. And according to those who study broadcast advertising trends carefully, the "base market" -- total advertising dollars minus Olympics and political ads -- was up ever so slightly in 2006. Looking ahead, the expectation appears to be for that same base market to continue to grow in the low single digits this year, with a similarly expected decline in the overall market.
Interestingly, television broadcasters have experienced a variety of share price reactions amidst these market circumstances. Hearst-Argyle (NYSE: HTV), for instance, perhaps the purest play in television broadcasting, watched its share price increase by about 10% last year, while Belo (NYSE: BLC), which is both a newspaper publisher and a television broadcaster, experienced about an 18% share price reduction.
The world of magazines did not fare better than broadcasting last year. For instance, Time Warner's (NYSE: TWX) Time Inc. publishing unit experienced a 4.8% drop in ad pages, although its flagship Time held relatively steady, with just an 0.8% dip. At the same time, People dropped 2.8% and Sports Illustrated fell by 3.5%.
Over at Hearst Corporation, total ad pages were down 0.7%, but Esquire increased its count by 4.1% and Redbook was up 3.5%. Conversely, Cosmopolitan was 4.0% lower, and Country Living was down 4.4%. At Meredith (NYSE: MDP), which publishes mostly women's interest titles, the total decline was 1.4%, although Family Circle increased its advertising pages by a healthy 8.9%. Ladies' Home Journal was, however, essentially flat, with a 0.5% decline in ad pages, and Better Homes and Gardens fell by 8.2%.
What, then, is the lesson in these figures for Foolish investors? My take, quite simply, is that the optimum way to invest in the media space as we move into 2007 is either through those companies that were formed specifically to serve the Internet or those -- the cable operators are a noteworthy example -- whose fate is not highly dependent on advertising. The more traditional media companies clearly need more time for strategic redirections.
msnbc.com
eBay Protects PayPal From Google
When it comes to online commerce, Google seems to have eBay spooked.
At least that's the way it seemed at eBay's eCommerce Forum in San Jose, Calif., this week. Though Google Checkout--the online payment system Google unveiled to consumers in June--is just a tiny fraction of eBay’s PayPal business, eBay unleashed a host of new initiatives to keep PayPal dominant in the market.
Last July, eBay banned the use of Checkout. This week it went further, looking to shore up revenue in the face of the nascent rival. At the event, to which 250 of the company’s most powerful sellers were invited, eBay decreed Wednesday that new sellers must offer PayPal or credit cards for payment.
“We know that PayPal is the safest way to pay on eBay, and we want to make sure our buyers have this option with new sellers,” eBay North American President Bill Cobb wrote in on a blog Wednesday. And though he spun the new requirement as a security feature, enforced PayPal revenue certainly doesn’t hurt the company's bottom line.
In addition, eBay added some PayPal-only rules and perks, which could motivate sellers to stick with eBay’s payment system. Want to sell your goods across country borders? You’ve got to become PayPal certified. Want $2,000 in free listings insurance coverage? You can have it if you use PayPal only.
Pushing sellers to choose PayPal is one thing, but eBay also tried Thursday to fight back against Checkout’s recent seller promotions by dropping its own listing fee down to 20 cents per day from the typical 30 cents. Checkout is free for sellers until the end of 2007. EBay is either unable or unwilling to engage in a real price war with Google.
Why so worried? Because slipping PayPal revenues might scare Wall Street. When eBay reports fourth quarter earnings on Jan. 24, analysts will check out PayPal’s net revenue, which totaled $350 million in the third quarter, out of the company’s $1.5 billion total revenue for the quarter. PayPal is a good gauge of the health of the company’s listings business. Shrinking PayPal revenues would signify a poor job of defending eBay’s payments market share against upstarts like Google.
EBay says its PayPal moves aren't defensive. "We don't make policy decisions based on competitors like Checkout," says eBay spokesman Hani Durzy. "We just do what's good for the community."
Google, meanwhile, spent as much as $20 million during the holiday quarter to get people to use Checkout, according to a Goldman Sachs estimate, and looks to be waiving any immediate revenues from Checkout.
The millions were spent to pay sellers' transaction fees, as well as to offer buyers $10 off purchases during the holidays. The company renewed that promotion Tuesday, as advertised by a prominent notice posted to Google.com. Google also highlights Google Checkout sellers among its most prominent ads in search results.
While Google won’t disclose how many consumers have tried buying something using Checkout, JPMorgan analyst Imran Khan polled consumers on their Internet shopping habits and found that 6% of them have used Checkout, he reported Wednesday.
That’s impressive for six months on the market, but 42% of those polled had used PayPal in 2006. Only 2.3% of Khan’s respondents said they would switch permanently from PayPal to Checkout, making eBay’s recent PayPal-driven announcements seem like an overreaction. These defensive moves could worry analysts and investors who may not have thought Checkout was such a threat. They’ll be looking for some reassurance at the company’s earnings call next week.
Forbes.com
At least that's the way it seemed at eBay's eCommerce Forum in San Jose, Calif., this week. Though Google Checkout--the online payment system Google unveiled to consumers in June--is just a tiny fraction of eBay’s PayPal business, eBay unleashed a host of new initiatives to keep PayPal dominant in the market.
Last July, eBay banned the use of Checkout. This week it went further, looking to shore up revenue in the face of the nascent rival. At the event, to which 250 of the company’s most powerful sellers were invited, eBay decreed Wednesday that new sellers must offer PayPal or credit cards for payment.
“We know that PayPal is the safest way to pay on eBay, and we want to make sure our buyers have this option with new sellers,” eBay North American President Bill Cobb wrote in on a blog Wednesday. And though he spun the new requirement as a security feature, enforced PayPal revenue certainly doesn’t hurt the company's bottom line.
In addition, eBay added some PayPal-only rules and perks, which could motivate sellers to stick with eBay’s payment system. Want to sell your goods across country borders? You’ve got to become PayPal certified. Want $2,000 in free listings insurance coverage? You can have it if you use PayPal only.
Pushing sellers to choose PayPal is one thing, but eBay also tried Thursday to fight back against Checkout’s recent seller promotions by dropping its own listing fee down to 20 cents per day from the typical 30 cents. Checkout is free for sellers until the end of 2007. EBay is either unable or unwilling to engage in a real price war with Google.
Why so worried? Because slipping PayPal revenues might scare Wall Street. When eBay reports fourth quarter earnings on Jan. 24, analysts will check out PayPal’s net revenue, which totaled $350 million in the third quarter, out of the company’s $1.5 billion total revenue for the quarter. PayPal is a good gauge of the health of the company’s listings business. Shrinking PayPal revenues would signify a poor job of defending eBay’s payments market share against upstarts like Google.
EBay says its PayPal moves aren't defensive. "We don't make policy decisions based on competitors like Checkout," says eBay spokesman Hani Durzy. "We just do what's good for the community."
Google, meanwhile, spent as much as $20 million during the holiday quarter to get people to use Checkout, according to a Goldman Sachs estimate, and looks to be waiving any immediate revenues from Checkout.
The millions were spent to pay sellers' transaction fees, as well as to offer buyers $10 off purchases during the holidays. The company renewed that promotion Tuesday, as advertised by a prominent notice posted to Google.com. Google also highlights Google Checkout sellers among its most prominent ads in search results.
While Google won’t disclose how many consumers have tried buying something using Checkout, JPMorgan analyst Imran Khan polled consumers on their Internet shopping habits and found that 6% of them have used Checkout, he reported Wednesday.
That’s impressive for six months on the market, but 42% of those polled had used PayPal in 2006. Only 2.3% of Khan’s respondents said they would switch permanently from PayPal to Checkout, making eBay’s recent PayPal-driven announcements seem like an overreaction. These defensive moves could worry analysts and investors who may not have thought Checkout was such a threat. They’ll be looking for some reassurance at the company’s earnings call next week.
Forbes.com
Coming Soon: Free, Ad-Supported Mobile Service
People often say they do not like advertisements, but that may change if the ads start lowering their cellphone bills.
Cellular phone carriers like Verizon, Sprint and Cingular, now the new AT&T, are beginning to test and roll out advertising on mobile phone screens, and by next year, cellphone advertising is likely to be more common.
In exchange, the companies say, their subscribers will enjoy improved mobile Internet services and content provided free or at reduced prices. Other companies like Virgin Mobile USA and Amp’d Mobile are taking the idea a step further, rewarding customers for viewing ads by lowering their cellphone bills.
Amp’d, a cellphone company that aims its marketing at 18- to 24-year-olds in the United States, will begin offering an opt-in advertising plan this year. Customers who sign up will gain access to free shows and other content — if they are willing to put up with some ads.
“When people are consuming this stuff on their phones, it adds up to a lot of money,” said Brian Mullen, director for content business development for Amp’d.
Another company, Xero Mobile, plans to distribute one million free cellphones on college campuses across the United States this year and give customers 40 percent off on their calling plans, if they watch up to four commercials a day, said Rich Clayton, a spokesman for Xero. In Britain, a company called Blyk plans to provide a completely free plan on phones that are paid for by ads.
It was inevitable that advertising would hit the small screen sooner or later, industry analysts said. Cellphones are the most pervasive media device, beating out computers and televisions, as consumers keep their mobile phones at their side nearly every moment of the day.
A small but growing number of consumers, in particular, younger ones, are using their mobile phones for text messaging, surfing the mobile Internet, watching short shows, taking photos or videos and checking e-mail messages. Only time will tell if cellphones are destined to become like all other forms of media — supported by both subscription costs and by advertising.
Still, these new phone services will become mainstream only if their prices are lowered, possibly through advertising, analysts said. On average, consumers in the United States spend $50 to $60 a month for cellphone service, including data features. The average total bill has been flat for the last few years, even as voice call charges have decreased, because of the increase in fees for text messages and mobile e-mail messages.
“Advertising absolutely makes sense to extend expensive multimedia services and mobile TV to the mass market,” said Linda Barrabee, an analyst with the Yankee Group, a technology research and consulting firm based in Boston. “I think we will see consumers say, ‘You know what, I’m only going to spend this much money on my mobile phone.’ ”
In Asia, by contrast, multimedia mobile applications are more commonly used, and those services became more affordable there without advertising because of quick adaptation by consumers, analysts said.
The new uses of cellphones present vast opportunities for consumer brand companies, which are finding it difficult to reach customers through traditional media like magazines and television. Mobile phones can handle ads in many forms, including video, text messages, search and banner displays. And cellphone ads can be fine-tuned based on customer data.
But there is a chicken-and-egg factor when it comes to advertising. Big advertisers generally want to see further adoption of services before they pour significant money into mobile ads. Advertisers like Procter & Gamble, Burger King and Pepsi have been experimenting with mobile phone ads, but, in total, cellphone advertising generated only about $421 million in the United States last year, according to eMarketer, a digital advertising research firm. EMarketer predicted this month that mobile advertising would reach $4.8 billion across the country by 2011.
Despite the hopeful thinking, there is no guarantee mobile ads will catch on. “I would not want them on the phone even if that would help cut costs,” said Conor Kelly, 20, a student at Savannah College of Art and Design in Georgia. Mr. Kelly said he did not mind subtle sponsorships of content on his phone, but he would not want it go beyond that.
“It gets to a point where you’re almost encroaching on someone’s privacy,” Mr. Kelly said.
In the early days of the commercial Internet, some service providers tried giving away online access in exchange for showing ads to users, but those efforts did not pan out.
For the subsidized approach to work this time around, cellphone companies must prove that consumers pay attention to ads. “We have to ensure that the models that we pursue are those that actually get seen and acted on by consumers,” said Marc Lefar, chief marketing officer for AT&T’s wireless unit, which used to be called Cingular Wireless. AT&T is testing various forms of cellphone advertising, with introduction of ads planned this year.
As of now, text messaging is the most common venue for mobile phone ads. Signs, food packaging and even TV spots feature a code that phone users can text to be entered in promotions. 1-800-Flowers, for example, is running a sweepstakes in the New York area for a flower arrangement that comes in a small margarita glass. Next week, Nike will allow consumers to alter one of its TV commercials online and send their creations to their friends’ phones.
Some consumers may not realize that opt-in text message ads generate a charge for those who pay for each incoming text message. Such costs have deterred some marketers from creating mobile ads, said Sarah Kim Baehr, vice president for media at Avenue A Razorfish, an interactive ad agency that is part of aQuantive.
As mobile phones are used for more tasks, ads will pop up increasingly in more varied forms, ad executives said. Preroll video ads have already started to appear. Advertisers like Toyota have created 10-second commercials to run before miniepisodes of Fox shows, and the network promotes the strategy as a great way to reach a young audience.
“Look around,” said Mitch Feinman, senior vice president of Fox Mobile Entertainment. “All the young males and kids, they’re on their mobiles.”
Advertisers are generally paying a high price to try cellphone ads, about $40 for a thousand viewings of their ads, or twice as much as many TV spots, analysts said. The performance of these ads over the next year or so will determine whether they are likely to provide enough income to justify giving customers a price break on service fees.
Some companies are not waiting to find out. Virgin Mobile USA introduced a program last summer it calls Sugar Mama that compensates its phone users with free calling minutes for watching commercials, reading advertiser text messages and taking surveys from brands. Since last July, about 250,000 phone users have participated, earning a total of about three million minutes, said Howard Handler, chief marketing officer of Virgin Mobile USA.
Advertisers like the United States Navy and Levi Strauss Signature are showing ads through Virgin Mobile USA’s program, in part, because they liked the idea of compensating consumers for the time they spend watching their ads. “It gives us the assurance that our message is being heard,” said Stacy Doren, director for media and online at Levis Strauss Signature.
The carriers have so far been wary of exposing their customers to ads because the wireless marketplace is so competitive, said Scott A. Ellison, vice president for mobile at IDC, a technology and communications research firm.
“Advertisers are always hungry for new ways to reach people, however that’s a little scary for the carriers because they’re concerned over how the end user experience will be impacted,” Mr. Ellison said.
Google and Yahoo are also investing in mobile advertising, moving their search capacities to phones and selling sponsored search ads. Google executives have said publicly that they think phone service will one day be free and supported by advertising.
If advertising on mobile phones generates enough income to offer significant phone subsidies, many companies will probably allow phone users to choose whether they want ads, analysts said.
There are some consumers who would not want much advertising, no matter the price break. Younger consumers, whose parents do not want to upgrade their phones, and lower-income shoppers who cannot afford the upgrades may be the most receptive to ads.
Future ad packages might include free text messaging for people who agree to receive text message ads, said Roger Wood, senior vice president and general manager of the Americas region for Amobee Media Services, a company that is working with cellphone companies to test advertising-financed services in the United States and abroad. Underwriting mobile phone services would be a good opportunity for brands to provide value to customers rather than just blasting them with messages, said Mark Kingdon, the chief executive of Organic, a digital ad agency and part of the Omnicom Group.
Danny Herb, an avid text messager, said he would welcome advertising if it helped him cover his phone’s mobile video and Internet capacities. Mr. Herb, 25, said he did not use other features on his phone because they were expensive. But he said he would use them if they were free with ads.
“I wouldn’t pay for mobile Internet or video,” Mr. Herb said. “My text messaging costs me too much.”
Cellular phone carriers like Verizon, Sprint and Cingular, now the new AT&T, are beginning to test and roll out advertising on mobile phone screens, and by next year, cellphone advertising is likely to be more common.
In exchange, the companies say, their subscribers will enjoy improved mobile Internet services and content provided free or at reduced prices. Other companies like Virgin Mobile USA and Amp’d Mobile are taking the idea a step further, rewarding customers for viewing ads by lowering their cellphone bills.
Amp’d, a cellphone company that aims its marketing at 18- to 24-year-olds in the United States, will begin offering an opt-in advertising plan this year. Customers who sign up will gain access to free shows and other content — if they are willing to put up with some ads.
“When people are consuming this stuff on their phones, it adds up to a lot of money,” said Brian Mullen, director for content business development for Amp’d.
Another company, Xero Mobile, plans to distribute one million free cellphones on college campuses across the United States this year and give customers 40 percent off on their calling plans, if they watch up to four commercials a day, said Rich Clayton, a spokesman for Xero. In Britain, a company called Blyk plans to provide a completely free plan on phones that are paid for by ads.
It was inevitable that advertising would hit the small screen sooner or later, industry analysts said. Cellphones are the most pervasive media device, beating out computers and televisions, as consumers keep their mobile phones at their side nearly every moment of the day.
A small but growing number of consumers, in particular, younger ones, are using their mobile phones for text messaging, surfing the mobile Internet, watching short shows, taking photos or videos and checking e-mail messages. Only time will tell if cellphones are destined to become like all other forms of media — supported by both subscription costs and by advertising.
Still, these new phone services will become mainstream only if their prices are lowered, possibly through advertising, analysts said. On average, consumers in the United States spend $50 to $60 a month for cellphone service, including data features. The average total bill has been flat for the last few years, even as voice call charges have decreased, because of the increase in fees for text messages and mobile e-mail messages.
“Advertising absolutely makes sense to extend expensive multimedia services and mobile TV to the mass market,” said Linda Barrabee, an analyst with the Yankee Group, a technology research and consulting firm based in Boston. “I think we will see consumers say, ‘You know what, I’m only going to spend this much money on my mobile phone.’ ”
In Asia, by contrast, multimedia mobile applications are more commonly used, and those services became more affordable there without advertising because of quick adaptation by consumers, analysts said.
The new uses of cellphones present vast opportunities for consumer brand companies, which are finding it difficult to reach customers through traditional media like magazines and television. Mobile phones can handle ads in many forms, including video, text messages, search and banner displays. And cellphone ads can be fine-tuned based on customer data.
But there is a chicken-and-egg factor when it comes to advertising. Big advertisers generally want to see further adoption of services before they pour significant money into mobile ads. Advertisers like Procter & Gamble, Burger King and Pepsi have been experimenting with mobile phone ads, but, in total, cellphone advertising generated only about $421 million in the United States last year, according to eMarketer, a digital advertising research firm. EMarketer predicted this month that mobile advertising would reach $4.8 billion across the country by 2011.
Despite the hopeful thinking, there is no guarantee mobile ads will catch on. “I would not want them on the phone even if that would help cut costs,” said Conor Kelly, 20, a student at Savannah College of Art and Design in Georgia. Mr. Kelly said he did not mind subtle sponsorships of content on his phone, but he would not want it go beyond that.
“It gets to a point where you’re almost encroaching on someone’s privacy,” Mr. Kelly said.
In the early days of the commercial Internet, some service providers tried giving away online access in exchange for showing ads to users, but those efforts did not pan out.
For the subsidized approach to work this time around, cellphone companies must prove that consumers pay attention to ads. “We have to ensure that the models that we pursue are those that actually get seen and acted on by consumers,” said Marc Lefar, chief marketing officer for AT&T’s wireless unit, which used to be called Cingular Wireless. AT&T is testing various forms of cellphone advertising, with introduction of ads planned this year.
As of now, text messaging is the most common venue for mobile phone ads. Signs, food packaging and even TV spots feature a code that phone users can text to be entered in promotions. 1-800-Flowers, for example, is running a sweepstakes in the New York area for a flower arrangement that comes in a small margarita glass. Next week, Nike will allow consumers to alter one of its TV commercials online and send their creations to their friends’ phones.
Some consumers may not realize that opt-in text message ads generate a charge for those who pay for each incoming text message. Such costs have deterred some marketers from creating mobile ads, said Sarah Kim Baehr, vice president for media at Avenue A Razorfish, an interactive ad agency that is part of aQuantive.
As mobile phones are used for more tasks, ads will pop up increasingly in more varied forms, ad executives said. Preroll video ads have already started to appear. Advertisers like Toyota have created 10-second commercials to run before miniepisodes of Fox shows, and the network promotes the strategy as a great way to reach a young audience.
“Look around,” said Mitch Feinman, senior vice president of Fox Mobile Entertainment. “All the young males and kids, they’re on their mobiles.”
Advertisers are generally paying a high price to try cellphone ads, about $40 for a thousand viewings of their ads, or twice as much as many TV spots, analysts said. The performance of these ads over the next year or so will determine whether they are likely to provide enough income to justify giving customers a price break on service fees.
Some companies are not waiting to find out. Virgin Mobile USA introduced a program last summer it calls Sugar Mama that compensates its phone users with free calling minutes for watching commercials, reading advertiser text messages and taking surveys from brands. Since last July, about 250,000 phone users have participated, earning a total of about three million minutes, said Howard Handler, chief marketing officer of Virgin Mobile USA.
Advertisers like the United States Navy and Levi Strauss Signature are showing ads through Virgin Mobile USA’s program, in part, because they liked the idea of compensating consumers for the time they spend watching their ads. “It gives us the assurance that our message is being heard,” said Stacy Doren, director for media and online at Levis Strauss Signature.
The carriers have so far been wary of exposing their customers to ads because the wireless marketplace is so competitive, said Scott A. Ellison, vice president for mobile at IDC, a technology and communications research firm.
“Advertisers are always hungry for new ways to reach people, however that’s a little scary for the carriers because they’re concerned over how the end user experience will be impacted,” Mr. Ellison said.
Google and Yahoo are also investing in mobile advertising, moving their search capacities to phones and selling sponsored search ads. Google executives have said publicly that they think phone service will one day be free and supported by advertising.
If advertising on mobile phones generates enough income to offer significant phone subsidies, many companies will probably allow phone users to choose whether they want ads, analysts said.
There are some consumers who would not want much advertising, no matter the price break. Younger consumers, whose parents do not want to upgrade their phones, and lower-income shoppers who cannot afford the upgrades may be the most receptive to ads.
Future ad packages might include free text messaging for people who agree to receive text message ads, said Roger Wood, senior vice president and general manager of the Americas region for Amobee Media Services, a company that is working with cellphone companies to test advertising-financed services in the United States and abroad. Underwriting mobile phone services would be a good opportunity for brands to provide value to customers rather than just blasting them with messages, said Mark Kingdon, the chief executive of Organic, a digital ad agency and part of the Omnicom Group.
Danny Herb, an avid text messager, said he would welcome advertising if it helped him cover his phone’s mobile video and Internet capacities. Mr. Herb, 25, said he did not use other features on his phone because they were expensive. But he said he would use them if they were free with ads.
“I wouldn’t pay for mobile Internet or video,” Mr. Herb said. “My text messaging costs me too much.”
To Keep Your Brand Going Strong, Shake It Up
NEW YORK -- Want to make sure your brand is still viable? Then rip it up and start over every three to five years. And that doesn't mean overhauling the packaging.That's the key the finding of a new survey sponsored by the American Marketing Association, and independent firms Luth Research and MiresBall. The trio's State of the Brand Report found that brands that were refurbished within that time period scored highest on its success index.According to the survey, almost two-thirds of the 100-plus marketers polled online in the latter half of 2006—the majority of which were director level or above—believed their brand would benefit from a revitalization. Thirty-eight percent said they would like to fully reposition their brand; 57% of brands have been revitalized during the past two years and 83% during the past five. The efforts appear to be paying off: Brands that were refurbished during the past three to five years scored the highest on the survey's success index, which is based on market share, the ability to derive premium pricing and internal brand perception. Marketers surveyed said the challenges facing their brands motivated them to change things up. The top driver was strong competition, according to 59% of respondents. Thirty-six percent of those surveyed cited changing customer demographics/psychographics, pricing pressure and lack of brand awareness as their motivation. Surprisingly, despite all the revitalization efforts under way, marketers anticipate very little change in their brand's positioning over the next five years. "Brands seem to be clustering around premium, value and innovation. Brand positioning by definition should by differentiated," said Rachel Thomas, marketing director at design firm MiresBall in San Diego. "They're spending a lot of time and money keeping their brands fresh, but they're not making a whole lot of moves when it comes to positioning."As for marketing tactics, Web and interactive initiatives were deemed the most valuable for brand communication behind only word-of-mouth. Still, despite ranking 13th in terms of importance, broadcast advertising ranked No. 1 in terms of spend, largely because it's considered one of the best media for driving awareness. A third of respondents said driving such awareness was their primary goal. Another third said their priority was to create brand preference, while creating loyalty (24%) and understanding (11%) rounded out the mix. Though the study didn't cite any brands by name, recent refreshes by AT&T and Citibank (which is changing its name to Citi and considering ditching its red umbrella brand icon) underscore the trend. AT&T rebranded itself last year with a new logo and tag to battle rivals Verizon and Comcast. When it comes to wireless, landlines, cable, DSL and other services, "customers have articulated that they want to do business with one company, not a patchwork of providers," said Wendy Clark, svp-advertising at AT&T, San Antonio, Texas. Pepsi, meanwhile, is working with the Arnell Group, New York on refocusing itself around the concept of "sustainable discovery." For starters, the brand's bottles, cans and cups will have 35 new looks each, including Web addresses for exclusive online content, games and contests. The repositioning will also include a new tagline, likely: "Feel the Pepsi."James Miller, director of brand Pepsi in the U.S., said brand revitalization is "increasingly important these days, especially among youth-related, "badge" brands. What we found is young people are embracing change and constantly exploring for the next big thing. We need to deliver that on an ongoing basis." Martyn Tipping, co-founder of TippingSprung consultancy in New York, said such periodic changes are the best way for marketers to avoid obsolescence: "You don't want to get to a stage of the cycle where you say, 'Yikes we need an overhaul.'"
Brandweek
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