Archive for February, 2008

More Difficulties Monetizing Web 2.0

February 7, 2008
A Branding Me First: I Was Right About Something!!!

It’s a bittersweet day for those of us who keep repeating over and over and over again that advertising on social networking sites is not effective. I think I have been spouting the same line since I started this blog: advertising, although it may create revenue, is not the most lucrative way to monetize Web 2.0.

Google’s stock tanked recently, falling 8.6%, which is the sharpest fall since it went public. As many of you already know, this is in large part due to the recent “bear hug” Microsoft gave Yahoo. But another key reason for the dive was the (semi)lack of revenue growth: although the net income rose 17% compared to a year earlier, that figure fell short of analyst expectations, and may represent the peak of continued growth.

So how come Google did not meet expectations? CFO George Reyes said, “We have found that social networking inventory is not monetizing as well as we would like.” Translation: we bought a helluva lot of advertising inventory for a helluva a lot of money, and it’s not performing. How bad is this problem? the reporter for the NY Times continues: “People involved in [the MySpace deal] said that Google never assumed that it would earn its $900 million back from that deal, but it appears to be losing even more than it had expected.”

Now, don’t get me wrong; I don’t think advertising is worth throwing out completely. I just want more creative business models for Web 2.0; there has to be other, more profitable ways to monetize these services.

Anyways, so much for me being a “naysayer” (the link back to me is in the last paragraph of this other blogger’s entry).

EDIT

Also check out AU Interactive’s rundown of a Facebook Social Ad experiment. 

Microsoft Bids On Yahoo

February 1, 2008
Trying to Compete with Google

In what Bloomberg states is “the biggest-ever technology takeover,” Microsoft made an unsolicited $44.6 billion bid for Yahoo. That figure marks a 62% premium of Yahoo’s stock price as of yesterday’s closing.

It seems this bid is the culmination of the roller-coaster ride Yahoo has been on the past month: first, according to one report, the Yahoo CFO Susan Decker stated, “We don’t think it’s reasonable to assume we’re going to gain a lot of share from Google […]. It’s not our goal to be No. 1 in Internet search. We would be very happy to maintain our market share.” (as of September of 2007, Yahoo’s share of search traffic was approximately 19.5%, followed by MSN at 12%, compared to Google’s 54%). Second, Chairman and ex-CEO Terry Semel left the Yahoo board. He is credited it reviving the company and then “losing touch,” not being able to gain on Google’s dominance as quickly as others had hoped.

This hope was one of the reasons Yahoo ditched merger talks last year: “In a letter to Yahoo’s board, Mr. Ballmer wrote that the two companies discussed a possible merger, as well as other ways to work together, in late 2006 and 2007. Mr. Ballmer said that in February 2007, Yahoo decided to end the merger discussions because its board was confident in the company’s ‘upside.'” Now that that potential “upside” has fizzled out, it may be we’ll see this bid actually go through, especially since the search advertising market could possibly grow to $80 billion by 2010.

EDIT

Found a copy of the letter sent to Yahoo by Microsoft, and a great analysis of the possible merger on Forbes (the title? “A Messy Marriage”… gotta love it).