2010-10-12 AOL on a shopping spree – buys TechCrunch

Intelligence Report - 10/12/2010
By Mark Glaser & Corbin Hiar




AOL buys TechCrunch in shopping spree

Nothing like a day at the shopping mall for AOL, snapping up some videos, a feed aggregator, and an influential, tech pundit. Yes, the fiesty independent tech blog TechCrunch, run by the even fiestier Michael Arrington, was bought out by Tim Armstrong-led AOL for about $30 million, plus incentives/earnout. But Arrington won't be able to take the money and run, as part of the buyout agreement requires him to stay on for at least three years. AOL is making a strong run at tech coverage with TechCrunch and Engadget in hand. Plus, it pushed deeper into video content by buying 5min, a how-to video syndicator that will help promote content produced by AOL's StudioNow, while also providing video for other AOL sites. Rounding out the buying spree was Thing Labs, a social apps firm most famous for its social media feed aggregator Brizzly. Thing Labs' leadership helped create Google Reader, and will be tasked with revamping AOL's Lifestream product. To top it all off, AOL announced a personalized, daily-deals coupon productcalled Wow, and AOL's CTO Alexander Gounares even floated the idea of buying up newspaper companies in an interview with IDG.

What do analysts make of all this frenetic action? Wall Street seems to approve: AOL's stock price rose 3.2 percent the day AOL started its shopping spree and continued up 3.5 percent the next day. Much of this should be chalked up to the faith investors have in CEO Tim Armstrong because as the Wall Street Journal noted, the company’s previous investments have yet to bear fruit: “More than 40% of its revenue still comes from selling dial-up Internet service and related subscription products, the legacy business it has been trying to shed for years.” That doesn’t bother IAC CEO Barry Diller. “There is a real direction, a real plan; it is under a real leader. It is independent, it’s got a real chance,” he told PaidContent. Some industry watchers and advertisers want more information before they will support Armstrong’s recent moves. Business Insider's Henry Blodget believes he has a plan, he just wishes “we understood it better.” Kara Swisher reports that some investors would like to see Armstrong broker a merger with an even bigger fish, Yahoo. More troublesome for AOL’s turnaround prospects are the concerns of advertisers. “We see good intentions, but it doesn't seem to be playing out yet," Steve Kerho, the SVP of digital marketing firm Organic, told the Journal. "It is a little worrisome.”

@DickC in charge at Twitter, adds Promoted Accounts

When comedian/entrepreneur Dick Costolo was hired as Twitter COO, he tweeted: "First full day as Twitter COO tomorrow. Task #1: undermine CEO, consolidate power." When his prophecy/joke came true and he became CEO recently, he tweeted: "So *that's* what you need to do to get more followers." So is the grownup in charge now at Twitter as it pushes for more ad revenues and a real business model? Not exactly. MediaMemo's Peter Kafka shrugged at the news, saying "that’s essentially the way the company has been running for some time: [former CEO Evan] Williams spent the past few months consumed with the new Twitter.com redesign, while Costolo has been in charge of everything else." According to TechCrunch's MG Siegler, “Normally, when a company has three different CEOs in three years, it’s a very bad sign. But in Twitter’s case, this does seem to be more about a rapidly growing company making sure they have the pieces in place for a continued explosion of growth.” The company needs to solidify both its business model and its product offerings.

The pair have some daunting challenges ahead of them. While most users are happy with Williams’ #newtwitter, his advertising products have been less warmly received. The daily deal @earlybird handle has been mothballed, and Promoted Tweets and Promoted Trends have had modest success. But as Costolo took charge, he made two important moves: piping in those promoted products to third party apps such as HootSuite and launching "Promoted Accounts" so people can pay to be featured in "Who to Follow" suggestions for users (i.e. paying for followers). Costolo has a nice base of users and traffic to work with at Twitter, with tweet volume increasing 90-fold in the past year and Twitter’s traffic now surpassing MySpace, the former king of social media. With the increase in users has come an explosion of staff to over 300, and a possible valuation north of $1 billion. Some believe Costolo could be preparing Twitter to be bought by another tech firm -- Google is the name most often mentioned, but Microsoft could also be in the mix. Although both Costolo and Williams deny that any such plan is in the works, it's worth noting that both have also founded and sold companies to the search giant: Feedburner and Pyra Labs, respectively.

Boston.com to do separate free, pay sites

There's been the pay wall, the leaky wall, the metered wall, and now comes the "two brands" wall. The Boston Globe will split into two sites, one free and one pay. Most print stories will go behind the pay wall at BostonGlobe.com, while the free Boston.com site will feature daily blogging, enhanced e-commerce and social components, "YourTown" local content written by Northeastern college students, and an aggregation of local content similar to the TBD.com site in DC. Big stories or public interest pieces from the Globe may also run on Boston.com and registration will be required for heavy users. BostonGlobe.com will feature the full contents of the daily newspaper available only to subscribers and have a “simpler, newspaper-like design with less intrusive ads,” as Globe reporter Robert Gavin described the publisher’s plan. This two-pronged approach maintains the mass-market appeal of Boston.com and the ad dollars it generates while also taking money directly from the niche audience willing to subscribe to BostonGlobe.com. Print subscribers to the newspaper will get automatic subscriptions to BostonGlobe.com and free downloads of any and all apps developed by the new site. The cost of a digital-only subscription has yet to be announced.

Reactions to the decision have largely been positive. One exception might be that from George Donnelly, editor of the Boston Business Journal. In an otherwise complimentary op-ed, he fumed, “why on Earth the Globe would not leverage its popular website to drive more people (especially younger people) to pay for the paper is beyond me.” Neiman Lab’s Megan Garber is worried that it could produce a good site/bad site dichotomy “with the latter, in particular, ultimately harming the reputation of the sites’ parent organization,” she wrote. The Globe’s VP of marketing and communications Bob Powers dismissed her concerns out of hand: “No. In fact, we think that by separating them out, they’re going to strengthen each other -- that there will be greater clarity of what each really stands for.” Advertisers will likely warm to the split. There will be both more inventory on the two sites and much more biographical detail about users as a result of the required registrations. According to Boston University professor John Carroll, the split “will target the audience better for marketers and provide marketers with a more efficient division of audiences.”


Mobile Roundup: iPad boom; new Verizon iPhone?

Can competitors finally take a bite out of Apple's massive lead in the tablet category? They're trying, with the coming Galaxy Tab from Samsung and Blackberry Playbook on the horizon. In the meantime, the iPad has helped the tablet computer (at least this version of it) become the most quickly adopted device in American history, topping the DVD player. But even the DVD player had more than one major manufacturer. The Samsung Galaxy Tab looks set to be the next to go on sale. Many publishers are working with the company to preload their apps and hedge their bets against Apple. LG’s tablet has been delayed, and the Blackberry PlayBook won’t come out until 2011. Plus there are doubts about whether Microsoft can deliver on its promises to have tablets running on Windows available by Christmas. If the company does not meet that target it will be another serious setback for CEO Steve Ballmer, who had to forgo part of his annual bonus as a result of Microsoft’s struggles in the mobile market. Maybe the only thing that can slow Apple's momentum is a legal challenge from Motorola, which is suing Apple for infringing patents with the iPad and iPhone.

Tablet computers aren’t the only mobile devices attracting the attention of the public and the press. Credible sources have informed the Wall Street Journal that the iPhone is finally coming to Verizon, America’s most popular wireless network. That has set off a flurry of speculation about how decimated AT&T will be by the expanded availability of the popular iPhone 4. Many iPhone users have put up with AT&T’s spotty network coverage as the price the pay for an Apple phone, but that will no longer be the case. And with Verizon about to begin rolling out its 4G network, the speed of its service should only improve. Plus, e-readers continue to boom in the shadow of the iPad. Financial analysts upgraded their sales forecasts for the Kindle despite the new competition from the more expensive iPad. Indeed, Amazon has even begun selling Apple’s tablet computer on its website. One likely casualty of the mobile shakeup: the Symbian OS. Although the simple OS is still the world’s most popular, many manufacturers -- most recently, Samsung -- have discontinued using it in favor of Android.


MediaVest: Finding the right time, place to advertise online

Is there a bad time to advertise? According to a new study commissioned by Yahoo and MediaVest, not really -- so long as it’s the right kind of ad. Their survey of 3,300 consumers found that people go online for three main reasons: to accomplish goals (e.g. shopping or paying bills), to browse leisurely (e.g. watching YouTube videos or checking email), or to pursue passions (e.g. catching up on news). Paradoxically, consumers are less receptive to advertising when they are immersed in an online task or pursuing passions, yet those are the times when a well targeted ad is most likely to be remembered or interacted with. The study outlines how advertisers should craft messages that work in these situations and found that a consumer’s mindset was crucial to how receptive she would be. When she is trying to pay her bills, an ad should be “subtle or serious” while effective advertising for a consumer pursuing her passions is more “interesting or contextually relevant.” As Radha Subramanyam, the VP and head of corporate and media research at Yahoo, told Mediaweek, “there are not any places where you shouldn’t advertise at all.” But she said, we “have to be much smarter about how we use [advertising], and user mindsets can make us much smarter.”

Google: 50% of targeted ads sold in real-time by 2015

At an IAB Mixx conference, Google’s VP of product management Neal Mohan threw out some startling figures: Real-time transactions on its DoubleClick ad network had tripled in the past 12 months. The technology to enable these sales has only recently become available. Mohan then predicted that half of all ads sold in five years would be sold using real-time bidding tools. In a market that could be as big as $50 billion annually, that’s a tremendous amount of money. With that in mind, Microsoft has also been investing in real-time ad exchange AppNexus. The growth of AppNexus has been even more impressive than the increase in real-time ads DoubleClick has recorded. VentureBeat’s Anthony Ha reports that AppNexus is “auctioning off 4 billion ads daily, up 676 percent from a year ago. And it serves 120 ad networks in 12 countries.” According to GigaOm’s Liz Gannes, AppNexus predicts that real-time ad bidding will grow to 20 percent of the display market by 2012. Is a real-time ad bidding war between Microsoft and Google brewing?

Of Note

Ad Group Unveils Plan to Improve Web Privacy (NY Times)
A group of advertising industry’s trade organizations was set to announce details of self-regulatory program allowing users to opt out of being tracked by member organizations

Technology Firms Back Privacy Bill (WSJ; paid subscription required)
In a surprising change of tact, large Internet firms have lent their public support to a bill that could leave them legally liable for privacy breaches

Study: 92% of U.S. 2-year-olds have online record (CNET News)
American parents were more likely than those in the other developed countries surveyed to post potentially embarrassing photos of their children online.

MSNBC’s Kim: Killing Page Views Will Pay Off In The Long Term
But publishers must be patient enough to wait for their ad rates to rise

Examiner.com Execs Push for Quality, Refute 'Content Farm' Tag (PBS MediaShift)
Clarity Digital Group top brass explain how they vet the "Examiners" who contribute to sites, and created advertorial space for Iam's pet food while increasing their SEO

I Own An iPad, So What Do I Do With It? (NPD Group Blog)
The most surprising answer? Cuddle with it: “20 percent of users' time with the iPad was spent with it in bed.”


openquoteWe build products that 500 million people see… If 5 million people see a movie, it doesn’t really matter that muchclosequote

Facebook CEO Mark Zuckerberg

Mark Zuckerberg’s Take on 'The Social Network' (Mashable)


The OPA Intelligence Report is a bi-weekly email summarizing and commenting on important news and research for the online publishing industry. As always, feedback is welcome at feedback@online-publishers.org.