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Apr 3, 2009

YouTube May Lose $470 Million In 2009: Credit Suisse Report

Todd Spangler -- Multichannel News, 4/3/2009 7:43:40 AM MT

Google's YouTube -- the Internet's most popular video site -- could be on track to lose approximately $470 million in 2009, according to a report Friday by Credit Suisse.

While YouTube remains the leader in online video with 41% share of total domestic video streams, "monetization remains challenging," Credit Suisse analysts Spencer Wang and Kenneth Sena wrote.

According to the firm's analysis of YouTube traffic and ad strategies, the site is on track to generate about $240 million in revenue in 2009, up about 20% year over year.

YouTubeBut the cost of bandwidth, content licensing, ad-revenue shares, hardware storage, sales and marketing and other expenses will total about $711 million, putting YouTube squarely in the red, the Credit Suisse report estimated. Bandwidth accounts for about 51% of expenses -- with a run rate of $1 million per day -- with content licensing accounting for 36%.

"In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetized (likely through more deals with content companies) and to drive more advertiser demand through standardization of ad formats and improved ad effectiveness," the analysts wrote.

YouTube, which still derives most of its traffic from user-generated content, has been attempting to increase its lineup of professionally produced content. Earlier this week, for example, YouTube announced a deal withDisney-ABC Television Group and ESPN, which will provide content clips for dedicated channels on the video site.

Credit Suisse projected YouTube will serve 75 billion video streams in 2009, up 38% compared with last year.

To arrive at the estimated $360 million bandwidth tab for YouTube, the analysts assumed the site will receive 375 million unique visitors in 2009 and that a maximum of 20% of those users are on the site at any given time. Credit Suisse's analysis then assumed each user downloads a video at 400 kilobits per second, to yield a peak bit run-rate for YouTube of 30 million megabits per second.

Sources: Google In Talks To Acquire Twitter (Updated)

Here’s a heck of a rumor that we’ve sourced from two separate people close to the negotiations: Google is in late stage negotiations to acquire Twitter. We don’t know the price but can assume its well, well north of the $250 million valuation that they saw in their recent funding.

Twitter turned down an offer to be bought by Facebook just a few months ago for half a billion dollars, although that was based partially on overvalued Facebook stock. Google would be paying in cash and/or publicly valued stock, which is equivalent to cash. So whatever the final acquisition value might be, it can’t be compared apples-to-apples with the Facebook deal.

Why would Google want Twitter? We’ve been arguing for some time that Twitter’s real value is in search. It holds the keys to the best real time database and search engine on the Internet, and Google doesn’t even have a horse in the game. In a post last month called It’s Time To Start Thinking Of Twitter As A Search Engine, I wrote:

More and more people are starting to use Twitter to talk about brands in real time as they interact with them. And those brands want to know all about it, whether to respond individually (The W Hotel pestered me until I told them to just leave me alone), or simply gather the information to see what they’re doing right and what they’re doing wrong.

And all of it is discoverable at search.twitter.com, the search engine that Twitter acquired last summer.

People searching for news. Brands searching for feedback. That’s valuable stuff.

Twitter knows it, too. They’re going to build their business model on it. Forget small time payments from users for pro accounts and other features, all they have to do is keep growing the base and gather more and more of those emotional grunts. In aggregate it’s extremely valuable. And as Google has shown, search is vastly monetizable - somewhere around 40% of all online advertising revenue goes to ads on search listings today.

If this is accurate, it’s a brilliant deal for Google - the value of Twitter is only going to go up over time. And it will be Twitter founders Evan Williams and Biz Stone’s second sale to Google - they sold Blogger to them just five years ago. But there’s one big question - where’s Microsoft in all this? Letting Twitter go to Google only hurts them, badly, in the long term search game. This is an asset they need to be competing for aggressively.

Of course, it’ll be sad to see Twitter become just another subsidiary of Google, if this happens. I would have liked to have seen the company spread its wings a little longer to see what it could do.

Updated: Yet another source says the acquisition discussions are still fairly early stage, and the two companies are also considering working together on a Google real time search engine. But discussions between the companies are confirmed.

Apr 2, 2009

Fast Change, Slow Change - Reflections from Web 2.0 Expo #w2e

Spent the day at the Web 2.0 Expo in San Francisco's Moscone Center, the hot bed of web 2.0 development. The web has been morphing at an hourly pace, yet the show evoked images of how slowly some things change. Here's the story.

The Drive to San Francisco

It's a straight shot up Highway 280 to San Francisco some 50 miles north of Silicon Valley. A sunny day typical of Northern California - not too hot or too cold. Avoiding the rush hour, the drive was fast, relaxing. Winding through the mountain scene on an 8-lane highway until one enters the unique landscape of Daly City in San Francisco - this was a pleasant change from the virtual worlds of social media and software development.

How Quickly the Web Changes

Last night, Twitter released a new version that highlights their entrance into 'search' and stretches beyond their core with social networks and 140-character messaging. Bugs were many, but corrected in real-time in less than 10 minutes. Facebook revamped their website - to weather the torrent of user complaints from millions. Microsoft is trying with new versions of Internet Explorer and Windows Mobile. Seemingly everyday, hundreds of significant developments testify to the pace of change in the virtual world. 

Facebook and Twitter have changed quickly and stormed to center stage - dominating mindshare over companies such as Google and Yahoo; and pushing Microsoft and the newspaper publishers into dinosaur history. Tens of millions of people shift with each change online.

We released the tEarn Media series of 20 supersites in early March. Traffic has grown to 100,000 unique users in the FIRST month; and the pace in early April is already at the 180,000 rate. Each day sets new records.

Rather than user sign-ups, comments, and ratings that create friction for users - we cooperate with the open network at Twitter. In two weeks, over 16,000 people follow one of our virtual hosts. By the end of this post, we will have over 17,000 followers. That's a faster path to popularity than a self-promoted real-life celebrity on Twitter. 

Everyday, thousands return to our supersites.

The change is fast. Daily. The adoption is fast. Shockingly hyper.

The #w2e

#w2e is the twitter hashtag convention for the Web 2.0 Expo. Our use of this hashtag illustrates the rate of change and adoption on the Internet and for users at the expo. 


At Moscone, here are my first flashes.
  • Sony's Meteron, which is across the street, is closed - another casualty in battles with Apple and Nintendo. 
  • The show is sponsored by two respected publishers, Techweb and O'Reilly books. Despite covering technology, have they fallen behind the times?
  • New magazines cover the topics of web hosting and video marketing. I perused the glossies, noted some of the usual advertisers. I would have returned the magazines to save trees, but the slightly soiled, over-printed magazines would be tossed anyway. Pretty. Sad. Why destroy the earth?
  • The conference used a bank of laptops connected to printers for badges. I was greeted with a 'friendly' request for a confirmation code. What code? 
  • I found the option to log in by id. I remembered, but typed the wrong password since the system demanded a certain type of password. But the error message simply said I was not enrolled. I resolved my own problem. Nevertheless, the system was not web 2.0 and fails every measure of user interface design. The organizers produce beautiful magazines and books, but fail to match their editorial advice when it comes to online execution.
  • For an advanced show where everyone carries a cell phone, a system where the guest sends a/an #imhere SMS to @w2e - would have been cool and expected.
Covering the Events

There are some 10 simultaneous conferences with seating for about 5,000; and estimated 2,000 listeners. Were they listening?
  • The security topic had 12 people in a hall with some 800 seats. 
  • Everyone had an iPhone, Apple MacBook Air, netbook, RIM, or some other of the latest fashionable device. Oh! Don't forget the leather jackets. The wirelesss devices was the story. 
  • Twitter was the most popular topic, but as the speakers talked about twitter, I saw a range of uses from registering for twitter to tweeting the talk. 
  • Users snapped iPhone photos and uploaded to their web page. Some had their FrontPage app running.
  • The most popular use was email or twitter checking, Google reader, taking notes in Word??, or monitoring web dashboards with complex panels. Perhaps the attendees were following the same talk over tweeter from other attendees!!
  • In hindsight, the most common screen was the Wi-Fi panel as users struggled to get a connection. Maybe that's why so many were using Word or some notepad.
  • The speakers droned on with buzzwords. Do they have 15,000 followers? Can they influence these followers to click their links? Techcrunch and Fred Wilson have admitted that they cannot convert followers to visitors. Have these speakers experienced a different result? Or is it just talk with no first-hand success?
So, who was listening? I don't know. You tell me.

Like the users on the web, people have become interactive - preferring to multi-task - rather than just listen to the speakers. They hear, but if they listened, they would have walked out like I did.

The Booths

A quick round of the an estimated 200 booths totaled 4 reps talking to 4 passer-byes. I would guess 2,000 people - or 5,000 for the expo this day.

Let's get back to the theme of how slowly some events change. 

Booth workers practice their elevator pitch. Did they qualify the listener? I heard some San Francisco tourists glaze over a pitch on outsourced distribution. Keynote (I'm a small investor) hired a new worker to pitch their enterprise product at a consumer show. The German government sent a delegation to Silicon Valley. BTW, IBM's morning session drew 80 in a room with 400 seats. An IBM worker admitted that their schedule of shows for the year can draw zero serious customers. Why bother?

I suspect the main draw of the show was paid jobs, San Francisco, the parties, and free lunches - in that order.

Comparing Twitter to w2e

5,000 people a day meander through the booths and catch glimpses of brands, names, and buzzwords. How's that different from our 16,000 daily followers at Twitter? 

Not much. 

Both are unqualified traffic. The chances of anyone seeing your brand or message is a small statistical percentage. The close is equally difficult.

What's different is the productivity. Do compare spending $10,000 or more to return similar results with the labor costs to use Twitter. 

For both, the ROI depends on the return and not just a smaller investment. Booth workers, like newspaper publishers, have not solved the problem of returns to cover high costs. 

Web workers are solving the return problem in creative ways. The investment is less online. Thus, there is more time for online publishers to solve the problem. 

When this article is published, I estimate that over 500 people will see and perhaps read this post. With a few diggs and retweets, perhaps 2 to 3 thousands will get a chuggle. What it generates in revenues is a big problem still. But the impact of the 500 pitches is higher than 5 days struggling at w2e or even being a speaker at the event.


Will trade shows follow newspapers? Probably not, some trade shows do very well.

Does online compete with trade shows? You bet. 

Still, one can't ignore the irony that w3e represents the community that seeks change, but moves like dinosaurs. Please note that this piece intends no disrespect for the editorial quality of the w3e hosts. 

And may the parties continue...

CLIP In-Stat Applauds AT&T’s Move to Combine Home and On-the-Go Broadband Service

  • AT&T selling netbook - to diversify their depence on iPhone?
  • Bundling Wi-Fi to go after t-Mobile. Will they allow VoIP using the netbook?
  • Integrating their wireless and DSL services could put a dent on Comcast's growth into homes with integrated video, phone, and data services.

AT&T announced on April 1st a plan to sell a subsidized netbook in Atlanta for $50. As typically done in the wireless industry, the subsidized price requires a service agreement. In this case, agreeing to pay $60/month to AT&T will not only get the user a $50 netbook and 200MB a month of data on its mobile network, but also a DSL connection for the home and access to the company’s Wi-Fi hotspot locations. Since this was first announced during CTIA, all the focus has been on the wireless portion of the announcement, and the selling of a notebook in a traditional cellular phone manner. What has been totally overlooked is the combination of home and on the go broadband access as a single service. In-Stat feels the combining of home and on-the-go broadband is just as important a trend as the selling of subsidized netbooks.

With growth in new home broadband service subscribers slowing, providers will need to steal existing broadband users away from other providers if they want to continue to grow their customer base. Our research shows that current broadband users would be willing to switch from their current broadband provider to one that could combine a home and on-the-go service. Clearwire has been using this strategy since last September to win subscribers in its two WiMAX markets.

In a survey conducted in 2008 In-Stat found the following:

  • Over 80% of respondents said they had some level of willingness to switch from their current broadband provider to one that combines both home and on-the-go service.
  • Over 40% of respondents said they would be willing to pay their current home broadband provider an extra $10-15 a month for a home and on-the-go service.
  • Network performance is important to users. Over 40% of both Wi-Fi hotspot and 3G laptop data users said they had been discouraged from using wireless broadband in the past due to poor or slow network performance.

In-Stat’s research, Waiting for WiMAX — US Consumers Want More From Wireless Broadband (IN0803969WBB), covers what US consumers like and dislike about current broadband options and their desire to have a single service that combines both home and on-the-go service. It includes:

  • Criteria used to select wireless broadband service.
  • Measure of respondents’ interest in 3G cellular, Wi-Fi, and WiMAX services.
  • The results from two surveys, one a general US consumer survey and another of just 3G laptop data users.

Mar 31, 2009

Google to Shut Down AdSense Video Units

from NewTeeVee by 

Google last week said it would discontinue its AdSense video units feature at the end of April (via paidContent). The company has lately been trimming its product offerings, even in advertising — eliminating radio and newspaper ad programs as well. Here’s the explanation for the AdSense video units closure from the AdSense blog:

“[W]e’ve found that it hasn’t had the impact we had hoped for. As a result, we’ve decided to retire this feature at the end of April so we can focus our resources on other opportunities to help publishers earn from their sites.”

Google’s AdSense video units always seemed a bit awkward to us (see our private beta coveragepublic beta coverage and followup). When I hear AdSense and video together, I think contextually targeted ads spread through the long tail of web video publishers — basically the video equivalent of AdSense for web sites. This was not that. AdSense video units enabled web site publishers to feature YouTube videos from producers on a set list, accompanied by overlay ads. Revenue would be split between Google, the web site owner and the video producer. So basically, you could get paid for people watching embedded videos on your web site.

Google now encourages web site publishers to just embed the videos directly. From comments on the AdSense blog post, it seems some people did use, like and earn money from the feature. But multiple commenters said that was only after considerable work to figure out the video ad units. Though it seems unlikely the units generated a ton of revenue, they’ll inevitably decrease some YouTube video producer earnings.

Magazines Reap Most Ad Value Per Minute

Ed: Too little, too late.


Magazines Reap Most Ad Value Per Minute

Magazines have 5.5 times more ad influence relative to the time spent with them, a multiple that is higher than for any other major media, according to an analysis of consumer time spent with media conducted by the Magazine Publishers of America (MPA), writes Media Buyer Planner.


The study is an attempt to make the measurement of advertising more meaningful by linking time spent with a medium directly with advertising outcomes.  The study assigns a score - or Ad Value Per Minute - to valuate the time readers spend with the advertising in each of the major media.

“One of the things that is important in understanding how advertising works is to separate the consumer relationship with the medium from the consumer relationship with advertising in the medium,” said Ellen Oppenheim, CMO of the MPA. Very often, she said, people look at time spent as a leading indicator of advertising engagement, rather than time spent with the advertising itself.

To help marketers address this issue, the MPA linked time spent with media to ad impact by using third party sources. The resulting metric, dubbed the Time-Ad Impact Ratio, can “help marketers to evaluate time spent in a way that aligns with their desire for better results,” said the MPA.

Perhaps unsurprisingly, the MPA discovered that magazines index with more than twice the impact of TV, online or radio, and are considerably higher than printed newspapers.

The Time-Ad Impact Ratio shows the following rankings, which differ significantly from those that exist if time spent is examined in isolation (without regard to results):

  • Magazines emerge as the leading medium with 5.5 times more ad influence relative to the time spent with magazines on an average day
  • Newspapers rank second with 4.9 times more ad influence relative to time spent
  • The internet has 2.5 times more ad influence relative to time spent
  • TV has 2.3 times more ad influence relative to time spent
  • Radio has 1.1 times more ad influence relative to time spent

Oppenheim acknowledges that the studies are based on consumer perceptions about media rather than behavior and are therefore a guideline and not a gold standard nor a potential currency.

Mar 30, 2009

STATS IAB Reports Internet Advertising Grew 10 Percent Last Year; Outpacing TV

by Erick Schonfeld on March 30, 2009

In an upbeat report this morning, the Interactive Advertising Bureau reported that internet advertising in the U.S. grew 10.6 percent to $23.4 billion. And the $6.1 billion fourth quarter (up 2.6 percent) was the first time Internet advertising surpassed the $6 billion mark. That said, the rate of growth declined both on an annual and quarterly basis. Even the 4.5 percent sequential growth over the third quarter was the lowest since 2002 (as was the annual growth rate).

Search advertising dominated, with 46 percent of total Internet advertising market share. It also grew more than 20 percent for the year. The only category which grew as fast was rich media and video. Online video advertising grew faster than any other sub-category, with 123 percent annual growth (going from $324 million in 2007 to $724 million in 2008). Display advertising was able to eke out 8 percent growth for the year, but declined 4 percent in the fourth quarter.


Performance-based advertising widened the gap over plain-vanilla impression-based advertising (CPM) last year, with 57 percent of all internet advertising revenues being performance-based versus 39 percent being CPM-based. That 18 percent gap widened from a 6 percent gap last year.

The IAB also trotted out some numbers showing that Internet advertising revenues are outpacing TV advertising by some measures. The $23.4 billion in annual internet advertising spending exceeded advertising on cable TV for the first time (which was $21.4 billion), and took the No. 3 spot behind national and local TV ads ($29.8 billion) and newspaper ads ($34.4 billion).

And in a new analysis comparing the first 14 years of Internet advertising revenues to the the first 14 years of cable and broadcast TV advertising, the IAB found that Internet advertising surpassed cable TV advertising in Year 4 ($907 million versus $499 million) and broadcast TV advertising in Year 10 ($9.6 billion versus $8.9 billion). Now, in Year 14, Internet advertising is almost twice as large as broadcast TV advertising was in its 14th year ($13.3 billion) and nearly four times as large as cable TV ($6.5 billion).


Online Journalists More Optimistic About The Future Of Journalism than Print Peers

by Leena Rao on March 30, 2009

The Pew Research Center’s Project for Excellence in Journalism released a study today that claims bloggers and journalists have an “uneasy” optimism about the future of news media on the web. But, the study says, their optimism definitely trumps that of broadcast and print employees in traditional media industries.

According to the study, most journalists who work in the online news industry believe that the internet is having a negative impact on fundamental journalistic values, including a loosening of standards (45% of respondents felt this way), increased emphasis on speed (25%), and the addition of voices from outside the traditional media institutions (31%). While there’s no doubt that the internet is changing the way journalism is conducted and delivered, I’m hesitant to think that speed and increased diversity of viewpoints from outside the industry is detrimental to journalistic integrity.

Online journalists are cautiously optimistic that their publications have viable business models compared to traditional forms of media. Over 60 percent of respondents reported that their online news units were making a profit. But only four out of every ten online journalists are “very confident” that online news can find a profitable business model for journalism, and are worried about the money-making prospects of internet advertising. Roughly two-thirds of journalists surveyed predicted advertising would be the most important form of revenue for news websites in three years. That in itself might be an overly optimistic projection for online advertising revenues, which today only accounts for less than 10 percent of overall newspaper advertising dollars in the U.S., and actually showed a slight decline last year. Print advertising, however, is diving faster than anyone expected.


Self-opinions without acknowledging economic facts blind traditional journalists. The facts are:

- Many writers have shifted from print to online. Why would integrity of content be an issue?

- There are more sources and opinions. Many filtering processes bubble the best, fastest to the top - like Techcrunch ;-)

- For newspapers, ad dollars has dropped below print costs - i.e. paper, print, distribute and associated labor. Regardless of customer preferences, there is no business model to support paper.

- The web business model is challenged by too much inventory. But low burn rates allow online publishers to sustain - until they find the right formula for profitability. Many are profitable, but not the print publishers who hold on to old models without listening to the new reality.

- Print publishers who FOLLOW the latest trends like adding social networking to emulate Facebook and Twitter - will fail. Take a look at http://media.tearn.com and compare the social awareness of old and new media personalities. Too little, too late.

Like our great leader says, Obama, it’s time to innovate and seek even more change. Publishers can only regain the spotlight if they embrace significant change of their own. Unfortunately, that’s not their nature. Sad as most print publishers will head into the deadpool.

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