TechRadar

Dinosaurs did Extinct, So can Yahoo!

Posted on: February 2, 2008

Microsoft and Yahoo! have been struggling ,as we all know, to monetize the real estate of the Internet World, i.e the Page Views. Where Microsoft lost about 250M$ in the online business last quarter, Yahoo also suffered a 23% drop in their net earnings in the same quarter. It’s not that these giants don’t know the business, they just seem helpless especially since they have no share in the strongest online business value chain, i.e. the Search. No wonder google still raked in a kewl 17% increase in their annual revenue.

While Microsoft was busy writing petitions against a possible buyout of double click by Google, Yahoo was busy firing its employees and trying to lower the opex to show healthy earnings to its investors

But Investors are smart and they can clearly see the Armageddon. They know that Dinosaurs did extinct and so can Yahoo.

But was Yahoo sleeping the whole time? No

Jerry Yang,Mr Yahoo, tried to reinvigorate life back in Yahoo management by calling a 100 day management review last year in July. Here’s a presentation

Irony is that do u really need a 100 days to identify a disease that has such visible side effects. When you don’t have a share in the Search market, no matter if your clicking Trillion page views you just cant make money. For the four weeks ending in January 2008, Google accounted for 65.98% of U.S. searches, while Yahoo! and Microsoft combined amounted to just 27.84% of searches.

The second big question for Yahoo has been how to enter the SNS market. But Can you really sell the concept of making money by doing SNS now to Investors, NO? You could have 2 yrs back,but you wont have the back of your investors to invest into the SNS space especially When Google’s struggling to monetize their Myspace inventory

So does this mean the quest to make money on Social networking sites is never ending?

Well Microsoft seems to think otherwise, especially since they’ve been acting happy about their investment and the advertising deal with Facebook. Hmmmmm……

Does all this hint that Google is the Achilles with out the week heel ?

O Sorry, not yet the Giants are trying their Last move…..lets wait until then…

Here’s more stuff for you to munch on the deal: Cnet

Social networking is one of the biggest and fastest-evolving phenomena on the Web, and Microsoft’s proposed takeover of Yahoo will undoubtedly send it in new directions. More than anything, a MSFT-YHOO acquisition will shake up the debate over just how you can make money off a Facebook or MySpace.com–because they’re running out of time to figure that out.

Should the Microsoft-Yahoo acquisition go through, expect them to try to corner the social-network advertising market.

The common wisdom is that neither Microsoft nor Yahoo is a real force in social networking. Both companies own multiple social media properties, and the only resounding success among them is Yahoo’s Flickr. (Sorry, Microsoft, I’m not counting the Zune’s “song-squirting.”) “They’re very interested in the space,” Forrester Research analyst Charlene Li said in an interview with CNET News.com. “They haven’t been able to get traction in it. They look at it very longingly.”

Social networking, in addition, will be a tasty slice of the Web for a hypothetical Microsoft-Yahoo because it’s also one of the few niches of the Web on which Google doesn’t already have a stranglehold. Its OpenSocial developer initiative isn’t ready yet, its Orkut social network has only gained traction in a few regions of the globe, and the company admitted in its recent quarterly earnings call that social advertising (specifically on News Corp.’s MySpace) isn’t bringing home the bacon.

Taking the reins on the advertising market is probably the best way for Microsoft-Yahoo to make waves in social networking without actually launching a big social-media initiative–and I certainly hope they don’t try to, because there are way too many networks out there already. Microsoft already has a foot in the door with its $240 million stake in Facebook. (Yahoo tried to acquire it outright in 2006 and was promptly spurned.) And Facebook’s own Social Ads were met with high-profile opposition and plenty of bad press.

With Microsoft’s and Yahoo’s resources pooled, the two companies could devise a more effective social advertising strategy (if such a thing is even possible). Even if it’s dubious in its effectiveness, expect it to be very high profile. Think about it: Microsoft-Yahoo could claim they’re doing what Google couldn’t do. How’s that for instilling confidence?

“A potential acquisition, if it actually goes through, could be a much, much more interesting player for Facebook to want to do business with,” Li said, noting that Facebook’s current deal with Microsoft only covers display advertisements, not search ads. “If Microsoft and Yahoo can actually make a play in search, that makes Facebook a lot more comfortable going with an all-Microsoft deal and maybe even be acquired by it. Who knows?”

But beyond advertising, a combined Microsoft-Yahoo has a massive social-networking tool at its fingertips, Li continued. “Yahoo and Microsoft both have this wonderful asset called e-mail address books and instant-messaging buddy lists, which are essentially a social graph,” she said. “A lot of people are using those services, much more so than Gmail, for example, and so that’s an instant social graph.”

Google still waiting for social ad payoff

You may be friending and poking your acquaintances on social networks, but that doesn’t mean you are paying attention to the ads. Or, maybe Google just made a bad deal with MySpace in which it guaranteed to pay a lot of money even if you don’t click on the ads.

Google’s fourth-quarter results missed expectations on Thursday, partly due to a rise in traffic acquisition costs that cut into revenue. Executives acknowledged in a conference call with analysts that they made less money serving up ads on social networks than they expected.

The news, which prompted a drop in the share price after-hours, is a sign that social networks may not be the easy Holy Grail for advertisers once believed to be.

“When you have the largest online advertising player with the most advanced monetization tool set out there talking about challenges monetizing certain types of pages, yeah, it would seem to be an indication of a broader industry issue,” said Derek Brown, an analyst at Cantor Fitzgerald.

Microsoft, for its part, isn’t seeing the same thing as its chief rival. A Microsoft executive told CNET News.com on Thursday that monetization rates are good and have been steadily rising since the company first began feeding ads to Facebook in mid-2006.

Google executives declined to specify exactly what the problem is. Chief Financial Officer George Reyes referred to “a few AdSense partners” to whom Google is required to make guaranteed payments. “We have found that social-networking inventory is not monetizing as well as expected,” he said.

Under further questioning, co-founder Sergey Brin said the company was disappointed in experiments it had run on some of the approximately 20 social networks it works with, which include MySpace and its own Orkut.

“I don’t think we have the killer best way to advertise and monetize social networks yet,” Brin said. “It’s a big opportunity because it’s so much inventory.”

MySpace executives were not available for comment Thursday night and a Facebook spokesman did not return a call seeking comment.

While MySpace.com has a 72 percent market share in the U.S. and Facebook has 16 percent, Facebook rose 50 percent over the last year and MySpace dropped 8 percent, according to Hitwise.

Back in August 2006, when News Corp.’s MySpace was the top social-networking site with 100 million members, Google beat Yahoo and Microsoft for the opportunity to supply ads and search to the start-up. Under the deal, Google promised to pay $900 million over three years as long as certain traffic requirements were met.

Within weeks, Microsoft had signed a deal to supply banner ads in the U.S. on Facebook, which had about 9 million members at the time. Terms of the deal were not disclosed. Then in October, Microsoft agreed to pay $240 million for a stake in Facebook and the ad deal was expanded to include all types of ads and reach globally.

Although Microsoft won’t say whether the company made any revenue guarantees to Facebook, Brin has suggested as much. “Some of our competitors might be willing to spend very large amounts of money…and we’re really interested in doing sustainable economic deals, so we would rather not participate in those sorts of transactions,” he told journalists at Google Analyst Day in response to questions about Microsoft’s expanded Facebook.

Regardless of what the terms were, the outcome appears to be different, according to Microsoft’s Jon Tinter, who was among the executives who brokered the Facebook deal.

“Generally speaking, we don’t share Google’s point of view,” Tinter said in an interview. “We are very happy with the performance of advertising in social networks, both if you look at our third-party partnerships with companies like Facebook or on our own sites, like (Windows Live) Spaces…Since we signed the original Facebook deal we have seen steady improvement in the monetization rates.”

Part of the disparity between Microsoft and Google’s experiences, he said, could be due to the fact that the companies are doing things differently.

“What Google has essentially attempted to do is take the AdSense approach and put it on MySpace,” Tinter said, while Microsoft has been trying a range of advertising, including contextual and display ads.

“We’ve gotten better at targeting the advertisements. We’ve gotten better at how we sell it and package it for advertisers,” Tinter added. “I think we’ve tried a more adaptive approach then they necessarily have.”

Mark May of Needham & Co. said the jury is still out on social networks as an advertising platform.

“Social networks today, much like e-mail, are utility-like and often used as a communications platform. These types of channels have never monetized well with advertising,” he said. “This will improve but it will take a lot of time.”

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