2010-08-02 Sales booming for iPad, as Amazon slashes price on Kindle

Intelligence Report - 08/02/2010
By Mark Glaser & Corbin Hiar




Yahoo Japan picks Google over Yahoo for search

Bing is not big in Japan. When Yahoo Japan decided to make a search deal, it chose Google over Bing, even though Yahoo Inc. had made a 10-year deal with Bing to power its search in 59 countries. Although Yahoo co-founder and former CEO Jerry Yang sits on the board at Yahoo Japan, the majority owner of the company is Softbank Corp. This blow to Bing is only intensified by the fact that Japan, the third largest search market in the world, is one of the few places in which the Yahoo portal is dominant. In June, Yahoo Japan executed 50.2% of the country’s web searches followed by Google. As Ichiyoshi Research Institute analyst Hiroshi Naya explained to the Wall Street Journal, "For Yahoo Japan it didn't really matter if it was Microsoft or Google because there were no capital ties to begin with." Yahoo Japan President Masahiro Inoue said at a news conference that Bing wasn't strong enough, especially in Japanese language capabilities. Bing has only been out of beta testing in Japan since July 12 and currently controls around 3% of the country’s search market.

Microsoft responded furiously to the news, but stopped short of threatening legal action. Microsoft said the deal means there will be no search competition in Japan and that Google will end up controlling all personal search information for all Japanese consumers and businesses. Nevertheless, the secretary-general of Japan's Fair Trade Commission (FTC) Takahide Matsuyama expressed confidence that “the partnership wouldn't immediately cause any problems related to antitrust regulations.” Japanese antitrust experts are less sanguine. "I don't know if the FTC has correctly understood what lies ahead with this collaboration," Jiro Tamura, a law professor at Keio University, told the Wall Street Journal. Search engines are able to better target their responses based on the number of queries they process. With Google poised to take control of over 90% of Japanese search queries, Tamura told the Journal that Google's search engine will become increasingly better than rival services over time.

Newspaper revenues rebound as NY Times profits

The bloodletting at newspapers is finally over (for now). The news this quarter was better than expected: The New York Times Company posted its first quarterly revenue gain in three years. This was in part due to a newsstand price increase and a 21 percent increase in online advertising revenue at its flagship publication. Another online component of the company, the About Group, added another $15.3 million in profit on a 24.1 percent increase in revenue. Overall, the company reported a profit of $32 million, down from $39.1 million in the year-ago quarter. Commenting on the increasing significance of digital advertising to the Times -- now up 4% to 26% of its total ad revenue -- Martin Peers of The Wall Street Journal said the increase was mainly because print revenue shrank so much rather than digital's rise. Peers did note that, according to comScore, newspapers CPMs were $6.99 in April, while portals got only $2.60 CPMs and social networks were just 56 cents. At the Times, print ads revenues were down 6%, but that was a slower rate of decline than in previous quarters. Nevertheless, the results were enough to compel Standard & Poor to raise the company’s credit rating from B to B+.

Many newspaper publishers reported similar results. Media General reported that total revenues were up 1.6%, the first increase since 2Q '07, with digital revenues up 8% (though it still reported a loss of $4.3 million due to an interest expense). Meanwhile The Wall Street Journal had its third consecutive quarter with an increase in ad revenues for both print and digital, with a gain of 9% and 19%, respectively. The half-yearly results on the Financial Times were also remarkably robust. Parent company Pearson reported profit growth across of the Financial Times Groups' divisions with a continuing shift towards digital revenue, now up to 36% of its total. But as Reuters' Jennifer Saba cautioned, “the biggest question is how newspapers perform in the third and fourth quarters.” At that point, analysts will have a better feel for the strength of the ad market recovery and how the Times of London’s pay wall is working. With only 15,000 online subscribers, the early numbers are not promising. As the Journal's Peers concluded: "For now, investors need to be wary in assuming that newspapers' digital potential can outweigh the challenges in their legacy business."

Sales booming for iPad, as Amazon slashes price on Kindle

In response to some stunning quarterly iPad sales figures, market researchers from iSuppli, Forrester, and the Consumer Electronics Association (CEA) have all released dramatic new sales forecasts for tablet computers. iSuppli predicted sales of 12.9 million iPads in 2010, an increase of 82% from its projections in April. Forrester had said that Apple would sell 3.5 million iPads in 2010, a number it has already nearly surpassed by selling 3.27 million in the first quarter the device has been on the market. Although they were not yet ready to offer revised figures, Forrester’s Sarah Rotman Epps observed that “iPad isn’t behaving like other consumer devices: It has a steamroller of momentum behind it that indicates incredibly strong demand for this entirely new form factor.” CEA predicts that the tablet market as a whole will go from barely anything to 6.9 million units in 2010, with sales growing by double-digit percentages through '14. While Apple is having problems with its supply chain to keep up with demand, its rivals might have even more problems due to parts shortages for tablets.

Despite the iPad's booming success, Forrester noted in a separate report that there is plenty of room for dedicated e-readers like the Amazon Kindle and Sony Reader. They may lack the functionality of tablet PCs but e-readers have a significant untapped market in the one-fifth of online adults that read more than two books a month, said Forrester's James McQuivey. “These people love books enough to want a device optimized to provide the ideal digital reading experience, including finding, buying, carrying, and reading books. That device is the Kindle,” McQuivey wrote in paidContent. He predicts e-readers will continue to outsell tablet computers until 2012 and reach a maximum of around 30 million U.S. customers by 2015. At the moment Kindle sales remain strong and, with a new cheaper WiFi Kindle coming to market for just $139, Amazon will likely consolidate its market leader position.

FTC considers 'do not track' registry for online ads

The FTC's "do not call" registry has been a runaway success for people who don't like getting unsolicited sales pitches by phone. So how would an equivalent "do not track" registry do among a populace worried about how marketers track them online? At a hearing on online privacy in the Senate, FTC chairman Jon Leibowitz made waves by saying regulators were considering "do-not-track mechanism that's more comprehensive and easier to use than the procedures currently available." Advertisers reacted with varying degrees of horror to the idea. "Any 'do not track' national list doesn't work and undermines the basis of the Internet as we know it now, in terms of free content and companies being able to monetize the Internet," warned Jerry Cerasale of the Direct Marketing Association. Other web marketing experts like Joe Turow, a professor at the Annenberg School at the University of Pennsylvania, are less concerned. Turow told AdAge that stringent regulations around the online ad industry could stem growth, but that some measured regulation may be necessary.

The U.S. House continues to consider online privacy measures. The legislative first step was taken by Rep. Rick Boucher, who began circulating draft language of a bill in May. His Commerce Committee colleague Rep. Bobby Rush then introduced, the Best Practices Act, a competing bill that has been more agreeable to both the ad industry and privacy groups. As ClickZ's Kate Kaye reports, Rush’s bill “is seen by industry and consumer privacy wonks as a starting framework from which to craft legislation that balances consumer protection and rights with industry goals.” One of the primary issues the ad industry will seek to address is their concern over a provision allowing individuals to take legal action against companies that do not adequately guard consumer privacy. On the other hand, privacy advocates worry that Rush’s bill still does not give Internet users enough clear control over their data. Privacy legislation in the Senate has not advanced beyond the hearings phase.


Forrester: Foursquare not ready for the mainstream yet

Yes, hot geo-location game Foursquare hit 2 million users -- but it's still not ready for primetime, according to a Forrester report. Forrester found that just 1% of U.S. online adults are using location-based social networks (LBSNs) weekly, and 4% have tried them out once. Forrester's Melissa Parrish, the study's lead author, said that users are typically young, male, well educated and influential. However, the LBSN space could get more interesting with the expected purchase of Hot Potato by Facebook. Another factor that could boost the LBSN realm is that more phones will come equipped with GPS. iSuppli predicts that by the end of 2011, there will be 320 million GPS-enabled phones in use, making up 80% of all cell phones. One hurdle will be privacy concerns of users. According to a study by malware protection company Webroot, 55% of geo-location tool users are concerned about privacy, and 45% are worried about letting potential burglars know when they're not home.

ACSI: Customers not satisfied with Facebook, social nets

The announcement by Facebook that it had officially made its 500 millionth friend was overshadowed by news that many of its users are deeply dissatisfied with the company. For the first time, the American Consumer Satisfaction Index (ACSI) began evaluating attitudes towards large social networks. While all fared poorly, only the troubled MySpace network scored lower than Facebook's 64% satisfaction rating -- and even then, only by a point. The most popular network was Wikipedia with 77% of customers satisfied, 7% more than the social network average. Twitter was not included in the survey because so many users access the service through third parties like Hoot Suite. Facebook’s rating put the dominant social network at the bottom 5% of all private sector companies and, as some tech reporters eagerly observed, even slightly below the Internal Revenue Service. “Apparently, Americans were more satisfied filing their taxes online than they were posting updates on their Facebook page,” wrote Joshua Brustein in the New York Times.

Of Note

An Amazon-Facebook Alliance to Make Shopping More Social (NYT Bits)
Amazon will make recommendations based on favorites highlighted in Facebook users’ profiles, while withholding purchase data with the social network

Marketing: Disney, Google and MTV Charge Into Social Gaming (AdAge)
Disney acquired Playdom for $763 million, Google is reportedly in talks with Electronic Arts and Zynga, and MTV bought Social Express to make games based on its TV shows

Time Inc.’s iPad Problem is Trouble for Every Magazine Publisher (MediaMemo)
Apple’s unchallenged control of the tablet apps market has complicated Time Inc.’s plan to sell iPad subscriptions for the digital versions of its magazines

Study: Newspapers Sink Below Internet and TV as Information Sources (Editor & Publisher)
Digital Future Project from USC found that fewer Americans view newspapers as an important source of information, yet more also doubt news on the Internet

Google, Facebook and Ask.com want to answer your questions (Los Angeles Times)
All three are launching new services to derive direct answers to all manner of questions by relying on some combination of social search and crowdsourcing

Writers Explain What It’s Like Toiling on the Content Farm (PBS MediaShift)
Anonymous contributors to content farms offer damning insight into the sloppy editorial process at places like Demand Media


openquotePaying, at least for e-commerce, can be tough. For small-ticket items, users are understandably reluctant to enter their credit-card data. They used to be because people were worried about privacy or fraud -- now it's mostly because it's such a pain in the neck. Those keyboard strokes, it seems, have a cost of their own.closequote

Adam Lashinsky describing what he refers to as a “keyboard tax” that keeps people from paying for content online

The real reason why consumers won’t pay online (Fortune)


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.