Web X.0

Post-disclosure...

I guess one problem every entrepreneur wants to have is for their company to have too many clients to remember all by name. Seems like I got to that point...

Last week I wrote why I thought eBay would end up acquiring StubHub (the fantastic and highly recommended p2p ticket marketplace). When I wrote that, it was 100% from the point of view of a customer who has used StubHub to buy last minute tickets a couple of times.

Someone pointed out to me one little detail I missed about this whole story, so:

Better-Later-Than-Never-Disclosure: StubHub is a client of Quigo's, the company I have founded and am employed by. As demonstrated by the fact that I didn't even know we're currently servicing StubHub, it's needless to say that I posses absolutely no knowledge of anything relating to my bold stupid acquisition theory. In fact, I will now have to cross fingers that my prediction fails miserably, so as to not lose StubHub as a client...

NAA report: Online Newspapers' Response to Google

The NAA (Newspaper Association of America) recently published a very interesting paper titled: "Getting Serious About Search: Online Newspapers' Response to Google".

The full report is available on their site, but is available only to registered NAA members. Here are a few interesting nuggets relating to Quigo mentioned in a press release we issued yesterday:

"...For these newspapers, contextual affiliate advertising program options were nearly half as numerous as the number of total replies and included J Carte Marketing, ContextWeb, Quigo, Planet Discover, topix.net, Kontera, IndustryBrains’ sponsored links program (in conjunction with Quigo’s keyword program), Burst Media’s AdConductor program and Yahoo! Search Marketing. Among respondents, Quigo was employed separately and also paired with PlanetDiscover, Kontera and IndustryBrains. Quigo easily took the category, having affiliations with half the respondents."

...One executive, while interested in exploring opportunities to engage Google, is taking a pragmatic approach:

“We use Quigo for one simple reason. Quigo offers a white-label product that we can sell and manage directly the relationships with our customers. We set the terms of our engagement.”

Another board member is running his own internal test with different properties on either Quigo or AdSense to see which one outperforms the other. He explained, “We took this route because we believe it’s very important to own the relationship with our advertisers. By using Google, the relationship is between Google and the advertiser. We value the opportunities to up-sell our current customers and assist them with the best online ad buys in our marketplace.”

As I said in the past: A media company outsourcing its ad sales, is like a restaurant shutting down its kitchen and outsourcing the food part of the business to McDonalds. Nice to see that the newspapers are starting to understand this threat and responding to it before McGoogle eats their business.

Domain parking as a critical web service

No, the title is not a typo. And no - I don't like domain parking pages[1]. I actually hate them. Unless you make $$'s from parked domains, you probably hate them too. I especially hate how they're taking over more and more of the natural search engine results, and reducing their quality to absolute rubbish.

So how in the world can the despicable domain parking business be of any value to the web?!

Here's how -
Domain parkers make $$'s in two ways: 1) They catch web traffic (usually from search engines or typing of mispelled URL's) to their domains and monetize the hell out of it using Google AdSense or Yahoo's YPN, and 2) they buy and sell these domains.

It's #1 that I hate, and #2 that I think is such a critical service to the web community. A lot of companies buy domains these days, but very few sell them. Once a corporate decision is made to buy a bunch of domains for future use, those domains are usually gone from the market forever even if the owner never does actually use them. That's just the nature of stuff like this in big/medium companies - no one really cares about unused domains, and just the thought of getting consensus and sign-off on selling a domain is daunting.

Domain parkers, on the other hand, keep the domain inventory liquid. That's what enables many new web companies to establish brands and actually own a decent domain name. Without domain parkers, a majority of the domains would be snatched by faceless corporations "just to be safe" and never ever see the light of real use ever again.

I wish we could get #2 (liquidity in the market) without #1 (spamming of search engines), but I guess that's the price we all have to pay for this service. I just hope that Matt Cutts & Co at the search engines will find ways to push these shitty pages far down the result list...

[1] No link love in this post... if you don't know what domain parking is, Washington Post recently had a good article on this subject.

[update: just noticed that Forbes had an article on the subject of parked domains a couple of days ago. via Dan Grossman]

Google video ads - lame or brilliant?

Google's announcement of the launching of video ads today got poo-pooed  by TechCrunch, Mashable and others.

What's neat about Google's products, and the way they announce them, is that no one ever knows whether the product is:
a) A 20% pet-project developed by a couple of engineers in their spare time over a couple of beers, or -
b) Part of Sergey & Larry's master plan for world domination for which they're hiring 1000's of engineers and spending a shitload of $$'s on capex.

There's no confusion as to the significance of Vista or Live.com or adCenter for Microsoft, for example. But with Google's product you just never know and that is quite amazing when you come to think of it.

My take on Google's video ads? - If it is option A (20% pet-project of a couple of engineers), feel free to ignore all of the following.

However, if it is option B (part of the world domination master plan), then I think this is actually a pretty smart move. Not that I think the current implementation will work very well - I actually don't. As Mike Arrington pointed out, the incentive for the user to click on the video ad is questionable, there are no conversion opportunities, etc.

As I pointed out in my last post, the chicken&egg problem of any marketplace makes it very tough for insurgents to break through an existing leading marketplace and become a viable one themselves. So if Google's long term master plan is to become for TV networks what AdSense has become for online publishers, it will find it nearly impossible to do regardless of how great their technology for aggregating and serving video ads is.
The TV networks simply have all the ad inventory and the advertiser relationships and there would be no reason to use a great technology that's absent of real advertising $$'s behind it.

But that game completely changes if Google were to come to the TV networks (or TiVo & Co, which will surely get into the ad game sooner or later) with a war chest of tens of thousands of advertisers, and billions of $$'s in unspent budget. That solves the chicken&egg problem, and would enable Google to quite easily become the dominant ad platform for digital TV (not to mention taking over all advertising for the exploding online microchunked TV in the form of YouTube, iTunes and of course Google Video).

So using Google's existing asset (AdSense) to leverage them into the real target marketplace is a smart way to do it, regardless of how lame the current implementation on textual websites may seem. Microsoft has proved over the years how well criss-cross product leveraging works for creating monopolies in markets it didn't even play in, and Google seem to have taken notes. They did it in the past by leveraging their huge search user base to create a huge advertiser base (AdWords), which they later leveraged to become a huge ad network (AdSense), which they now seem to be leveraging to create a huge video advertiser base, which they will probably later leverage to become the dominant TV ad marketplace.

But then again, this may just be an engineer's pet-project... ;-)

Why eBay will acquire StubHub

Here's another episode in my "this-is-probably-going-to-make-me-look-stupid" series of predictions. I should really stop this habit... Anyhow:

I went to the Yankees-Mets game last night. It was sold out with an attendance of 56,205. However, we were able to get four tickets just a few hours before the game started, thanks to StubHub which is a marketplace for buying and selling tickets between people.

The StubHub service is really great - they have a solid feature set, the site is good, information on the events and venues is very good, the 'Buyer's Guarantee' makes you comfortable buying there, etc, etc, etc.

So would eBay acquire StubHub for all the great features and expertise they have developed around person-to-person ticket buying and selling? I bet you eBay doesn't give a shit about any of that.

What does matter in the world of online person-to-person marketplaces is becoming the de-facto marketplace of choice for buyers and sellers. Once you become that, it's a very defensible position that's almost impossible for other marketplaces to win because of a simple law - buyers won't come to a marketplace that doesn't have much inventory, and sellers won't list their inventory in a marketplace that doesn't have many buyers. This catch-22 is what makes de-facto marketplaces so defensible... even the best feature set in the world from the best known brands can hardly dent this law (ask Amazon and Yahoo, both of which tried launching eBay-clones in the past).

It seems that growingly StubHub, not eBay, is perceived as THE go-to place for buying and selling tickets to events. Once that perception is established, even mighty eBay will find it almost impossible to win back the leadership position in this category (and again - in the marketplace business if you're not the leader, you're almost by definition not a player).

eBay cannot afford to cede such a core category to another player, and will not be able to win this battle through R&D, and therefore I predict that once this is realized, eBay will acquire StubHub.

[UPDATE:] 2 for 2... 

Jensense: "AdSonar's scrolling ad units are hot"

Good catch by Jensense on a quiet test we've been doing:

Quigo AdSonar's new scrolling ad units are hot

...I find these ad units so interesting because the scrolling catches a visitor's eye without being obtrusive like some graphic animation ads can be. And they are still text ads, which many publishers and advertisers find more successful that other types of non-text advertising...

Read the full post here.

The future of Google AdWords

This post is based purely on speculation... I'll revisit it sometime in the future to see what I got right and what I got wrong.

A little bit of history first:

In the beginning there was CPM - advertisers paid websites (via DoubleClick, or whatever) to get X exposure on the website. The CPM model was all about exposure, and nothing about clicks or sales. Which was a problem, because that meant that either the advertiser was paying too much for traffic that didn't convert, or that the publisher was getting less than they could have if they had known how valuable the traffic was to the advertiser. The bottom line is that rate-card based advertising is just about as optimized as that broken clock that shows the accurate time twice a day.

Then the pendulum swung to the other side with the introduction of CPA. The solution to CPM's inefficiencies was to tie ad costs directly to what the advertiser was earning from the traffic generated from the ads.
Folks like CommissionJunction, LinkShare and Amazon Affiliates emerged and grabbed a ton of ad inventory that was previously sold on a CPM basis.
CPA is theoretically an ideal liquid marketplace, but in reality it turned out to be very problematic because it shifted the entire revenue risk over to the publisher who had little control over if and how the advertiser is able to convert traffic to sales.

And then came Google AdWords and kicked everyone's ass (well, scientifically it was GoTo/Overture that pioneered the CPC model, but it wasn't until Google that asses were actually kicked...) - The idea with CPC is simple: the publisher doesn't have to care about sales the advertisers do or don't do, but is still getting the optimal revenue for the ad space it offers. On the flip side, the advertisers don't have to worry about whether a rate card's pricing is fair or not, because they pay only exactly what they are willing to for the traffic they get.

Perfect and fluid. So is CPC it? Are we done with the ad pricing model shifts of the early days?

My prediction is that AdWords will eventually evolve back into being a de-facto CPA-based system. Google might not toot it as such, but essentially it will become just that - a CommissionJunction that actually works.

Most AdWords advertisers are direct marketers and as such care mostly about sales and ROI. Google understands that and has done 2 things to accommodate that: Smart Pricing and the acquisition of web analytics firm Urchin.

With Smart Pricing, Google discounts the price of clicks that happened on sites that seem to be delivering "lower quality" traffic (double quoted because Google provides zero transparency into what quality means or how they measure it). Compare that to the original CPA model that would tie ad pricing directly to the "conversion'ability" of the site's traffic and you start seeing the connection.

The bigger move was offering Google's Analytics service (formerly known as Urchin) free of charge to AdWords advertisers. Analytics tools make it possible for an advertiser to see what keywords are converting and how much each keyword is worth. Analytics are what drive bidding up, while maintaining a healthy ecosystem of advertisers that are actually making money.

And here's the next logical step I predict will happen. I'll code name it the Google Auto Bid Adjuster. A tiny little piece of software[1] placed between AdWords and Google Analytics could make a big difference in what AdWords actually is.
Take the human being out of the analysis of ROI and adjustment of bids, and let the software do it automatically. The advertiser sets ROI goals (I want to make 10% margin on sales), and have the Google Auto Bid Adjuster move bids up or down based on actual sales as tracked in Google Analytics.

This is not totally new... bid management companies have been doing auto-bid-adjustment for a while now. But when Google will start doing it themselves (and I have a feeling there are Googlers itching to make that connection), they'll effectively pronounce the CPC model dead for them and become a de-facto CPA network.

[1] OK, I admit that automated bid adjustment based on ROI business rules is not actually a tiny little piece of software... it is quite a challenge in fact to do it right. But the guys at Google have done a good job figuring out some bigger issues so I'm confident they can solve this too.

Welcome aboard LA Times!

LA Times gets it too. Their private label AdSonar program launched tonight.

Advertisers can sign up for LA Times' LocalLinks program here.

Welcome aboard!

Growing pains

Any entrepreneur lucky enough to bring his/her startup to the next level  feels the pain of transition from a 'just do it' mentality to a 'lets slap together a policy for this' mentality. And I can personally testify - it's a painful transition...

I'm not a huge policy fan (as you probably already gathered from the above...), but once in a while I do sin. A recent policy I instilled required our product folks to subscribe their RSS readers to a list of great blogs, including of course, 37signals' Signal vs. Noise.

How delighted I was this morning to see my policy pay off in the form of this excellent post on... policies! Go and read it.

More on IDG and AdSonar

In the past I wrote about why outsourcing ad sales to Google is a long term suicide for media companies.

Joe Wikert gets it:

Why should Google have all the fun?...
...IDG apparently feels that way as they plan to roll out their TechWords program this Spring.  Interesting and brilliant, if you ask me....
...I’m surprised we’re not seeing more and more of this popping up, at least on the sites that are part of a larger network within one parent organization.

As does Matt McAlister from Yahoo:

IDG found their private-label CPC bidding tool solution with Quigo...
...This is exactly the right way to reinforce your brand as a publisher rather than water down your marketing potential through a larger mostly blind ad network.

Well said.

Disclosure: I am co-founder of Quigo, which powers IDG's TechWords program, so I'm heavily biased about the scientific facts relating to why media companies should own and operate the ad marketplaces under their own brands...