Web X.0

On profiling, part 3

I wrote about profiling and airport security stuff here, here and here.

I didn't think I'd come back to that subject anymore, but this post by Scott Adams (the Dilbert guy) was too good to pass... :

Recently an airport security guy confiscated my 4 ounce shampoo container because he said the maximum allowed is 3 ounces. I pointed to the airport’s own sign that says 4 ounces is allowed, but that didn’t seem like a good argument to him. It was too late to check my bags, so he confiscated my mostly empty 4 ounce container.

But here’s the interesting part. (read the rest)

Israel’s Hottest Web 2.0 Start-ups

Going to the Web2.0 Conference? On November 7th (first day of the conference), Mike Arrington will be moderating a showcase of 15 of the hottest web 2.0 startups from Israel in Palo Alto. Registration for this is a steal at $100. Full details about this event are here and on the IsraelWebTour blog.

See you there!

Google, Yahoo and stock prices

I'm pretty much clueless about the stock market (unless watching Jim Cramer throw around chairs counts for anything). I guess that stuff simply skipped my DNA. So if the following sounds to you like a 2nd grader asking stupid stock questions, you are absolutely right...:

With all the Google stock mania going on, alongside the poo-pooing of Yahoo as being a terrible investment, I'm mystified about one thing:

Isn't stock investing all about the future financial growth of the company?

Google is an incredible company, no doubt about it. Their revenues are beyond staggering. One of the main reasons their numbers are so great is that they figured out how to monetize a search query and optimized and optimized and optimized. And optimized.

They've done such an amazing job with optimizing revenue-per-query, that I wonder if there are any other big optimization tricks up their sleeve. If not, it seems inevitable that revenue-per-query will flatten or at least its growth rate will drop sharply. When that happens, overall *revenue* growth will result from overall *query* growth. This can come from 2 sources: New internet users, and/or converting users over from competition. Both ain't exciting growth prospects. [1]

Yahoo on the other hand has done a terrible job at monetizing their search queries so far. Their ads were too long, the placement was by bid price and not by overall yield, the relevancy was questionable, etc, etc, etc.

But that's all part of the past. At this point it seems like Yahoo has all the optimization growth in front of it, while Google is basically done with most of its per-query optimization growth. With Yahoo's new Panama system being soft-launched these days, it seems like they're focusing exactly on squeezing the hell out of each query's revenue potential.

So, if stocks are all about the *future* financial growth prospects of a company - Is it terribly stupid to go long on Yahoo, and short Google? I'm surely missing something that the rest of the market is seeing.

[1] Of course YouTube might start generating gobbles of money, etc. That might be. But today Google is basically a 1-trick revenue pony called AdWords (AdSense is mostly a money wash because of the low margins Google is operating it on).

Making money from fantasy sports

A post I wrote a few months ago speculating that Fox would some day acquire a wildly popular fantasy soccer site called Hattrick, has been causing a small global stir in the Hattrick community in the past few days. A reader named chamo summed it up nicely in the comments:

"...After that this blog has and is being commented in all the forums all over the world. Thouthands of eyes have read this article. Im from Peru and we are talking about it."

I thought this might be a good opportunity to get a reader discussion going about a topic that's been intriguing me for a while - How can companies make money from online fantasy sports?

Now the idea is NOT to say - 'we got all these users, now lets slap the game pages with evil ads and make shitloads of money'. That would be stupid. Fantasy sports are all about the passion of the players, so any short term monetization scheme that doesn't chime with the gameplay would fail fairly quickly.

What I'm looking for here are intelligent ways to monetize the game while keeping the players passionate about it. Think long term; Think of elements that integrate with the game play and enhance them; Think of ways beyond the obvious two: banner ads and charging gamers to play.

The rules: If you have any ideas you'd like to share - post them as comments below. Any ideas posted here are free for the world to take and execute on.

Speaking at WebmasterWorld PubCon 2006

I'll be speaking at WebmasterWorld's PubCon 2006 on November 15th in Vegas. Details on my panel here.

Drop me a note if you plan on being there!

Fox outfoxed by Google

According to TechCrunch, some executives at Fox are unpleasantly surprised by Google's acquisition of YouTube:

A source inside of Fox, which owns MySpace, tells us that they were surprised that Google was aggressively pursuing a deal with YouTube, given Google’s nearly $1 billion advertising relationship with MySpace. MySpace views YouTube as a competitor, and recent Hitwise data shows Myspace Video quickly catching up to YouTube.

The only surprise is that Fox is surprised by this.

Last month when the MySpace-Google deal was announced, I wrote this:

MySpace is essentially outsourcing its kitchen over to Google and becoming another node in its network. When that happens, MySpace will actually deliver *less* traffic to retailers, while feeding the Google beast and giving it an even bigger share of web traffic. Retailers looking at their log files will see the traffic coming from "Google AdSense", not from MySpace.

In this relationship, Google is the only one that walks away with the long term assets of advertiser base and deep expertise in monetizing traffic.

Google makes ~5x more money (bottom line) on each ad impression on a Google-owned page than it does on a 3rd party AdSense page. If the company wants to continue growing the way it has so far, they won't be doing it via deals like MySpace on which their margin is negotiated down to barely nothing. They will do this by building and acquiring their own media, which is 5x more valuable to them.

Deals like the MySpace-Google deal are pretty much a trojan horse for Google to build its direct advertiser relationships and monetization expertise on the shoulders of others. The real money will be made on the content that Google owns/will own. It's a loss-leader game.

Every time Google signs a mega-deal for powering a 3rd party media company, its almost guaranteed that they will shortly after get into that business themselves and become the biggest competitor around (with all the ad relationships). If they don't balance Google-owned media with 3rd-party ad syndication, they risk significantly diluting their overall profit margins because of that 5x factor. And that doesn't seem like something they're intent on doing.

IMHO - The best use of the Google money going into MySpace, AOL, Ask.com, etc is to build or acquire their own in-house ad capabilities and eventually phase out Google. Otherwise they are bound to lose the battle both on the ad front, as well as the content front.

I wrote a couple of related posts on this here and here, and probably a few other places I can't remember.

Full disclosure + a small plug: I am co-founder of Quigo. We offer media companies a solution comparable to AdSense, except that it is a private label. And we don't compete with our publishers on media. So feel free to consider all of the above to be 'interest driven objective commentary'... ;-)

Introducing outbrain

In the past few weeks I've been bugging you with posts about a mysterious 'RSS relevancy project' I'm working on. Here's the story:

RSS is a great way to consume content. So you get all excited and start adding feeds to your RSS reader. And then it quickly becomes an unmanageable crazy avalanche of content.

Out of this pain outbrain was born.

The idea is simple - If every blog/post/feed is read by many people, why don't we harness the collective wisdom of all the readers for everyone's benefit? That way we can save each reader's time by quickly floating the best posts and flagging the worst.

But 'best' and 'worst' are very subjective definitions. A post about ski that might be extremely interesting to my good friend, could be a total bore to me.

So we decided to try and take this one step beyond the collective 'wisdom of crowds' type sites (aka - Digg & clones, or should we say 'wisdom of bored teenager sites'...), and develop algorithms that try to predict personal interest in a specific article/post before it is read.

We do this by asking all outbrain users to vote on the items they read. The algorithm then seeks out similarities in voting patterns among different outbrainers, and personalizes recommendations accordingly. The more people vote about stuff they read, the smarter their outbrain becomes in recommending the right items to them.

Which brings me to the second goal we set - We hate being bugged by sites where submissions are a 5-minute process including logins, captchas, forms, etc. We want to bug our users as little as possible, and give them the benefit of the technology wherever they're already used to consuming their RSS feeds. Except for signing up, I don't think you'll ever have to visit the outbrain.com site again.

The first small step of outbrain is now available. More information about it on the outbrain blog here.

If you're interested in joining the outbrain project - head over to the website and submit your email address. I'll shoot you back an email with a user name and details on how to get started.

On profiling, part 2

I recently posted my thoughts about the highly effecient process for screening all those toothpaste-bombers that are roaming US airports these days.

A few random followup points:

1) Another good post about this by Tom Evslin, fellow blogger on the MyWay network. From it:

They didn’t even glance at the rat’s nest of wires and strange devices that always lives in my nerd bag, much better potential there for an explosive device but profiling made it clear that I’m not a likely mascara carrier.

2) Scott Adams (the Dilbert guy) confesses to becoming a toothpaste smuggler:

So, like millions of other travelers (I assume) I plan to become a smuggler. I figure I can take one small tube of travel-sized toothpaste in my pants pocket and make it through security without being busted. I rationalize that there is no danger to the public in doing this because I use a brand of toothpaste that rarely explodes.

(BTW - good opportunity to recommend the excellent Dilbert Blog).

3) It just occured to me that the FAA airport screening policies might be one of the biggest marketing opportunities of all time. I can just assume that the toothpaste and nail-cutter industries, for example, have shot through the roof overnight, courtesy of the US government.
How long will it be before a creative product marketing manager for say, Ray-Ban, pays some dude to get on the plane and make a small show out of concentrating sun light through his glasses and directing them to the plane's fuel tank?

For less than $200 you get a marketing campaign that immediately moves more merchandise than being the exclusive sponsor for the superbowl for the next 10 years....

4) Reading the comments on my post and on Tom's, it seems like the word 'profiling' might be a bad choice of word. It's not about setting up a government database for tracking the religion of each passenger and screening accordingly. It's about a simple thing - empowering the piles of security staff to actually use their brain when seeking out potential problems. The 'god-forbid-should-we-ever-insult-anybody' mentality that's driving today's brainless screening is bad for the 99.999% innocent passengers and good for the bad guys.