Posted by jeremyliew in advertising, business models, Consumer internet, Internet, social media, user generated content, video.
Over at NewTeeVee, Liz Gaines says that Ad startups are turning away from user generated video. She says that all of the online video ad startups that she is interviewing these days are focusing on professional video over user generated video, calling out Kiptronic, Blinkx, DigitalSmiths, Brightroll, YuMe, Adap.tv and Broadband Enterprises by name. She says that only Scanscout hasn’t dissed UGC.
Liz did omit from her list VideoEgg, which is taking on monetizing UGC head on (with social networks like Bebo, Tagged, and Dogster among its client list) and making some good headway. Notwithstanding what they told Liz, Brightroll is also serving a lot of UGC video sites.
But Liz is right, advertisers prefer professional video inventory. The market has spoken. These startups are going to where the money is, and today, its easier to monetize professional content than user generated content.
However, there are a lot of “shades of gray” between professional and user generated video. Its worth while parsing out some of the issues that separate the two:
Professional content can guarantee no “Objectionable content” that would be problematic for an advertiser (e.g. hate speech, risqué content, violence etc); UGC can not.
Professional content can guarantee to not have copyright/rights issues; UGC can not.
Professional content tends to have better metadata for targeting advertising than UGC.
Professional content tends to have higher production values than UGC.
The first two of these are show stoppers for many advertisers. Proctor and Gamble or Budweiser just can’t afford to have their ads show up next to videos of naked people, neo nazis or street brawls, or against copyrighted content.
The other two are a matter of degree – they just affect CPM. Diggnation for example, which comes close to UGC on production values and has limited metadata for targeting, has no problem getting advertising because it keeps on the right side of the line on the first two points.
I think that if we see user generated video that can guarantee no “objectionable content” and no copyright violations, and if it has the ability to target ads well (e.g. through a synthetic channel, or behavioral targeting), then lower production values will not prevent a healthy market for advertising against this inventory. Examples might be sites like Turn Here, Diversion Media and VoD Cars.
I’d love to hear reader’s thoughts.
Also, please don’t forget to switch your RSS feed to feeds.feedburner.com/lightspeedblog if you haven’t already.
Posted by jeremyliew in business models, Consumer internet, facebook, hotornot, social media, user generated content, web 2.0.
James Hong put up a long post today about reinventing HotOrNot. I am a big fan of the company. After resting on its laurels for a while, HotOrNot has revved back up in the last few months, making its Meet Me online dating service free, and diving head first into Facebook.
As a result, HotOrNot is one of the four companies with multiple successful apps in Facebook.
Its move to free has also paid off in a big increase in traffic (James claims that traffic has doubled in the last 3 months to about 20 million page views per day), as can be seen from the Alexa graph below:
HotOrNot may be one of the rare companies that solves the Innovators Dilemma and reinvents itself to survive a disruptive innovation. Its worth reading James’ whole post.
Posted by jeremyliew in facebook, platforms, social media, social networks, viral, widgets.
Facebook apps continue to proliferate, but there is a strong “long tail” effect to their adoption. Below is a graph of the number of users of the top 100 apps as of 4pm on June 26th according to appsaholic.
While much attention has been focused on top apps like iLike and Top Friends, there are only 20 apps over 1 million users in the directory, 53 over 100k users and and 145 over 10k users.
In aggregate, the top 100 apps have 63.5m users. Given that the 100th app, LOLcats, has 22k users, and even accounting for apps not yet in the directory, its likely that no more than 70m apps have been installed so far.
A recent WSJ article says:
Already all the activity has helped Facebook grow to 27 million active users from 24 million before the platform launch, with more than half using at least one of the new services, Facebook says.
So if there are 13.5m Facebook users with at least one app, then a Facebook user with at least one app has around 5 (~70m/13.5m) apps installed on average. There is likely a long tail distribution to this statistic as well, with many users with just one app installed (likely Top Friends given that it has 7m users) and some “application sluts” with 12 or more.
This suggests that there is still a lot of room for growth for apps on the Facebook platform.
Posted by jeremyliew in Consumer internet, facebook, media, myspace, platforms, portals, social media, social networks, web 2.0.
On Friday, Christopher Beam at Slate takes a stab at How Facebook could crush MySpace, Yahoo!, and Google, saying about the site:
Facebook will turn into a do-everything site with the potential to devour the whole Internet…
But a Facebook homepage would have a huge intrinsic advantage: The social network is already built in. Sure, the other portals incorporate Gmail and BBC headlines and YouTube searches and podcast directories. By adding a social context to all of this content, however, Facebook would immediately trump its main competition…
If Facebook adds e-mail, IM, and RSS, it’s one step closer to becoming as comprehensive as Yahoo! and as popular as MySpace. The rest of the Internet might as well surrender.
Of course, he is far from the first to suggest that Facebook could become a portal. David Sacks, the founder and CEO of Geni, suggested the same thing in a guest post on Techcrunch in late May:
For the last several years, Yahoo, MSN and AOL have all suffered a declining share of pageviews, but that does not mean the portal is going out of style. Rather it has been redefined, first by Google, and now by Facebook in potentially even more profound ways.
The core question a portal needs to answer for a user is “How do I find the information I need?”…
Facebook has a new answer to the portal question. The “social graph,” or your network of relationships, will push information to you. You’ll learn from your friends. Thanks to Facebook’s new developer platform, the types of information being disseminated now include not just news, photos, events, and groups but also music, videos, books, movies, causes, political campaigns — and the list is rapidly growing into almost every conceivable category.
Others put their money on Myspace as the new portal. As Safa Rashtchy said at the Piper Jaffray Global Internet Summit last year:
Social networks such as MySpace.com are already challenging traditional portals. MySpace, for example, has surpassed MSN and AOL by measure of monthly page views, Rashtchy said, and its traffic equals roughly 75 percent of Yahoo’s, the No. 1 site on the Web.
Despite the digerati’s preference for Facebook over Myspace, Myspace has been a lot more aggressive about adding channels that mirror the traditional portal experience, including news, weather, music, movies, jobs and many more.
These are all folks much smart than me, and I agree that AOL, Yahoo, MSN and yes, even Google, have something to fear from the social networks. But it’s not because they’re becoming more portal-like. Wikipedia defines a portal as:
… a site created to function as a single point of access to information on the web, internally and externally. Portals present information from diverse sources in a unified way. … Aside from the search engine standard, web portals offer other services such as news, stock prices, infotainment and various other features.
What the portals need to worry about is not the social networks adding content and functionality to match this criteria. It’s something much nearer term because its already happening. It’s that social networks are becoming the home page for many users.
According to Comscore’s May data, the portals still have more of their traffic coming from “Logon” than the social networks do.
WEBSITE: LOGON %
Yahoo: 20.0%
MSN: 17.9%
AOL: 11.8%
Google: 10.5%
Facebook: 5.1%
Myspace: 4.1%
But the social networks are gaining a toehold, and there can be only one “homepage” for any user. Because of the power of the default, capturing the “homepage” centrality is an incredibly significant position; it offers the ability to direct a user elsewhere on the internet. Comscore does not let me cut the “traffic sources” data by age as it would be interesting to see if the “homepage” behavior is more widespread among the younger demographics that have adopted social networks more fully; this would be more troubling for the portals as demographics are destiny.
I’ve previously analyzed the websites most frequently visited by their users; here is how the portals and social nets stacked up then:
SITE: VISITS/MONTH
Yahoo: 29.2
MSN: 24.7
AOL: 21.4
Facebook: 20.9
Google: 19.2
Myspace: 19.1
If Myspace and Facebook’s numbers continue to trend upwards, there is a very real chance that more users will switch to using them as their home page, and that is the REAL challenge to the centrality of portals.
REMINDER: If you’re reading this through an RSS reader, please switch your feed to feeds.feedburner.com/lightspeedblog to help me with my stats analysis
Posted by jeremyliew in Uncategorized.
I have only just installed Feedburner (slow learner) and am trying to get a better handle on my traffic through feed readers.
If you’re getting this through a reader, would you please redirect your reader to:
feeds.feedburner.com/lightspeedblog
or just click through if you’re using a web based reader
thanks a LOT.
Posted by jeremyliew in Consumer internet, facebook, user generated content, viral, web 2.0, widgets.
It’s becoming fashionable to question Facebook’s importance recently. Its so “first half of June”. But I’m still young, naive and in love.
At least four companies have really made a big “multi app” push into Facebook; Hot Or Not, Rockyou (Rockyou is a Lightspeed company), Slide and Trakzor.
Its hard to get complete data on all the apps that these companies have built as many are not listed in the app directory, and many are listed as having been created by employees names, rather than by the company, but here is at least a partial list, sorted by number of users and color coded by parent company:
Word doc with URL’s is below if you’d like to download it
Multi app companies on Facebook
I know that this is incomplete both by apps, and by companies with multiple apps. Reader comments, corrections and updates very welcome
Posted by jeremyliew in ad networks, advertising, business models, Consumer internet, Internet, user generated content.
Today’s WSJ has an excellent article on behavioral targeting. It details Pepsi’s launch of Aquafina Alive,their new low cal vitamin enhanced water. The campaign was backed by an online campaign through Tacoda and targeted to people who had previously visited “healthy lifestyles” websites.
The result? Pepsi recorded a threefold increase in the number of people clicking on its Aquafina Alive ads compared with previous campaigns. “We’ve never been able to get to this level of granularity,” says John Vail, director of the interactive marketing group at Pepsi-Cola North America.
Brand advertisers like Pepsi (you’re not buying the water online after all!) having this sort of success is a strong indicator of the growing importance of ad networks.
Last week the FTC announced that they would investigate Microsoft‘s acquisition of aQuantive and Yahoo‘s acquisition of Right Media, adding them to their ongoing investigation of Google‘s acquisition of Doubleclick. Although the American Association of Advertising Agencies and the Association of National Advertisers asked for antitrust review, I think that they have little to fear and much to benefit.
First, let me give some context on ad sales. As I guy who has “carried a bag” myself, I believe that sales cycles are directly proportional to the complexity of the sales message, and RPMs inversely proportional.
A simple sales message results in a short sales cycle and high RPMs. Take automotive advertising; imagine you’re selling online advertising to Toyota.
Autoblog has the next easiest sales proposition. Autoblog has amassed an audience of auto enthusiasts. While they may not all be in-market car buyers, they have a natural affinity to cars, and selling ads against this vertically targeted audience is a relatively simple proposition with relatively high RPMs.
The Washington Post sells its demographic. It argues that its readership skews higher income and hence is more likely to buy a Lexus. Its a pitch that has worked in print and on TV for years, and works online as well, although not quite as well. Sales cycles will be reasonable, and RPMs lower than for Autoblog.
Many large sites or networks sell reach. The pitch goes something like “Lots of people visit us, and some of them might want to buy a car, right?” Its a tougher sale, and even when successful, it generally results in CPC campaigns that mitigate the advertiser’s risk, often resulting in low effective RPMs.
So what does this mean for the networks and the “fattening long tail”? As I’ve posted about in the past, I’m a fan of “synthetic channels“, or vertically targeted ad networks, that can take advantage of the first two of these categories of sales.
But many sites generate pageviews that are unable to take advantage of these sales pitches. They are untargeted, and as such, are likely to be soldat a deep discount as “run of site” or “remnant” inventory, if they are sold at all.
This is where ad networks who apply behavioral targeting can really have a big impact. eMarketer predicts that behavioral targeting will increase by 7x over the next four years.
A large network can anonymously track a user as they move around the internet, recognizing them to be the same person when they show up at different sites across the network. They then use this data to target ads more effectively on “lower value” sites, thereby increasing the value of the ad inventory. So for example, a user who had previously visited Autoblog gets a Lexus ad when they show up on a MySpace page, even though the Myspace page has nothing to do with cars. This has become standard procedure at many of the big networks.
As we saw from the Aquafina example, behavioral targeting works for advertisers.
The key question is how does the incremental value (the increased CPM between the Lexus ad and a “run of network” ad) get split between the three constituents in the relationship; Autoblog, MySpace and the network. This is partly the outcome of supply and demand. Because of the massive surplus of “broad reach” inventory online, the bulk of the value goes to the network and Autoblog.
The network gains disproportionate value from having Autoblog in its network because it can now make a lot of its “broad reach” inventory more valuable. However, in a world with multiple networks, a site that ads “behavioral information” to a network can take that data advantage with it to any other network.
So sites with the opportunity for endemic advertisers have an advantage, not just as standalone sites, but also as members of ad networks.
Its not the advertisers that need to worry about consolidation of ad networks, but sites with content that can be used for behavioral targeting.
I’d love to hear what readers think on this issue.
Posted by jeremyliew in gaming, mmorpg, platforms.
This weekend the NY Times does a color piece on the life of a chinese gold farmer. Gold farming is a topic that the BBC also covered recently, and that is the subject of an emerging documentary.
This an area which conjures up strong emotions. The “Chinese Goldfarmers must die” crowd has many adherents. The arguments that they make are that “It’s cheating” and that “They make it harder for ‘real players’ to get ahead by increasing competition”. As PC Gamer magazine said when they banned advertising by gold farmers:
For the record, PC Gamer’s official stance on these types of companies is that they are despicable: not only do they brazenly break many MMOs’ End-User License Agreements, but they all-too-often ruin legitimate players’ fun.
Opposing reactions have ranged from “You’re racist” to “Don’t blame the suppliers, blame the buyers”.
Blizzard and other game publishers have largely come down against goldfarmers for economic reasons, frequently banning accounts that they suspect to be used for gold farming. Quoting from the the NY Times article:
As Mark Jacobs, vice president at Electronic Arts and creator of the classic M.M.O. Dark Age of Camelot, put it: “Are you going to get more sympathy from busting 50,000 Chinese farmers or from busting 10,000 Americans that are buying? It’s not a racial thing at all. If you bust the buyers, you’re busting the guys who are paying to play your game, who you want to keep as customers and who will then go on the forums and say really nasty things about your company and your game.”
Interestingly enough, Gamerprice.com and the University of Sheffield did some research earlier this year that shows that this “hard line” on policing against gold farming is enforced far more on US servers than on EU servers, resulting in much higher prices for gold on US servers:
Coincidentally, this weekend GigaOm reports that World of Warcraft has stopped growing (see chart below, originally sourced from Warcraft Realms, showing player activity at peak hours declining from a peak in January when the Burning Crusade expansion pack was released.)
One wonders whether these two facts are related.
I posted last week about the Facebook platform where I quoted Brad Silverberg on the three elements needed to make a platform successful:
* wide distribution
* application developers making money
* good tools
Blizzard is clearly taking a stand on the second of these elements – it appears NOT to want “application developers” to make money. Second Life, vastly smaller, has taken the opposite approach.
Companies like IGE and Sparter will hope that Blizzard and other MMORPG publishers change their minds over time. While its always possible to live in the grey market, its much easier to do so out in the open.
Posted by jeremyliew in business models, Consumer internet, distribution, facebook, social media, social networks, user generated content, viral, viral marketing, web 2.0, widgets.
Facebook is transforming a lot of social media companies right now with its platform release, and its getting a lot of well deserved coverage.
Marc Andreessen put up a good post yesterday analyzing the facebook platform . He comes up with a few interesting conclusions which I paraphrase below but you should read the whole thing.
1. (Open) Platforms always beat (closed) applications, therefore Facebook platform is a winner and an advantage over Myspace
2. Facebook did a pretty good job of it.
– Its technically sound
– Its highly viral
– Third party widget/app developers have economic freedom to keep 100% of revenues
3. If you’re not large or careful success can beget failure as usage volume overwhelms your servers
4. Underground apps are being released outside the Facebook application directory (due to issues or bottlenecks with application approval)
and they need to find an alternative way to seed their growth
On 1. and 2. I agree, but with a quibble. As Seth Goldstein points out:
In 1999 I sat down with Brad Silverberg of Ignition VC who Microsoft recruited out of Borland in the early 90’s to become the lead developer and project manager of Windows 95. Never has there been a more valuable platform. He described 3 things that platforms needed to have:
* wide distribution
* application developers making money
* good tools
Let’s test those three axioms against the preeminent platform play of our time, Google:
* Wide distribution? YES
* Application developers making money? YES (if you count all the adsense publishers)
* Good tools? YES (all the adwords and adsense self-service goodness)
Now let’s test these axioms against Facebook:
* Wide distribution? YES
* Application developers making money? NO (at least not yet, I will comment on 3rd party Facebook developers such as Slide, Rockyou, and AttentionSoft)
* Good tools? YES
Marc is right that app developers can keep 100% of the revenue that they make, but today that revenue isn’t much. As I’ve commented before, we need a standard for social network advertising, and until that standard emerges, ad revenue growth will be slower. But this will come in time, and so we can expect the Facebook platform to grow as well.
Unsurprisingly, the other big social networks (not just Myspace) have been rocked by the success of the platform and are all racing to build competitive responses.
On 3., where Marc seems to primarily base his conclusion on iLike’s experience, I side with James Hong who says:
I disagree with this. iLike’s application may have been particularly heavy, but it is not inconceivable (in fact I think it is more likely than not) that people will come up with massively popular apps that are not as machine intensive as ilike’s particular application might have been. Combine that with the fact that facebook allows advertising, and the fact that managed hosting companies exist, and i think it is quite feasible for 2 guys and an idea to scale.
Two of the companies I’m invovled in, Flixster and Rockyou, combined have four of the top twelve apps on Facebook. They have certainly worked hard to keep up with load issues, but none of them have struggled as much as iLike, partly because iLike has so many users, partly because they were already scaling outside of Facebook, and partly because their apps are lighter weight.
On 4. I think Marc overemphasizes the importance of being in the application directory. While we techcrunch readers obsess over the directory (I reload it at least once an hour when I’m at my PC!), the data I’ve seen suggests that the key drivers of virality are (i) profile virality (ii) invite virality and (iii) feed virality, with very little growth coming from the application directory at all.
However, to me, the most important part of the Facebook platform is that it commoditizes the social map. A lot of social media companies have built their value in creating a social map. For many broad based social networks, where communication and self expression are the key activities, the social map largely IS the value. When I was at AOL a few years ago and social networking was just beginning, we considered opening up the AIM friends list as an API to commoditize the social map and allow others to build on top of it (we didn’t do it in the end… sigh…). These companies are most threatened by a world of commoditized social maps.
What this forces social media companies to do is to build value on TOP of the social map. Yelp does a great job of this – the byproducts of their members communication are rated merchant reviews, information that has lasting value. For Flixster it’s movie reviews and ratings. For Rockyou, its photos. For iLike, music preferences and affinities.
Not all facebook apps build value on top of the map, and despite their virality, they are the ones that may be the most business model challenged on a standalone basis. Examples here include Slide’s Fortune Cookie, Rockyou’s “x me” and Graffiti. While these may have value for distribution or user acquisition, they don’t add much value on top of the social map, despite their popularity.
I’d be interested in hearing from readers examples of other apps that both DO and DO NOT add value on top of the social map.
Lightspeed Venture Partners Blog 