The playground brawl between Microsoft and Google just got nastier, with Microsoft lodging an antitrust complaint to European Union regulators, and Google and others taunting back: "It takes one to know one!" Even Microsoft admitted the irony in a one-time EU antitrust scofflaw running to the same body to complain about a rising competitor. Microsoft's legal eagle Brad Smith outlined the complaints: Bing doesn't get access to YouTube for search results nor can Windows Phones easily play YouTube videos; Google restricts advertisers' access to their own data; Google blocks websites in Europe from distributing competitors' search boxes; and Google makes it hard for advertisers to leave its search-ad system. The reaction to Microsoft's first-ever antitrust complaint against a competitor was mixed, with smaller rivals arrayed against Google happy to have the Redmond giant on board. And yet, skeptics can easily downplay complaints from Microsoft because the company has made so many of its own mistakes in the search and online ad business. "Does Microsoft find itself behind in these areas because Google has abused its dominance, or because Microsoft has failed to build on its historic desktop savvy?" asks Robert Andrews of PaidContent.
Meanwhile, the pressure on Google is mounting in various other antitrust arenas. While the EU has had a long-running antitrust probe of Google in search, Bloomberg reported that U.S. regulators were seriously considering taking on Google as well -- the question was just whether the FTC or Department of Justice should lead the case. FTC Commissioner Thomas Rosch, a Republican, told Bloomberg he supported a probe of "dominant players in the Internet-search industry" without naming Google. The Justice Dept. just approved Google's buyout of travel search powerhouse ITA Software for $700 million after months of scrutiny, and attached various anti-competitive restrictions on the buyout. “This merger monitoring actually creates an ongoing investigation of sorts,” analyst Rebecca Arbogast told the New York Times. “Anything related to search or travel, the government’s going to be permitted to get information, which looks very much like an investigation.” But going after Google in search might be more difficult for U.S. regulators because Microsoft/Yahoo control 30% of the search market, while in Europe Google is much more dominant, with 95% of the search market in many countries. The EU could potentially fine Google up to 10% of annual revenues, which works out to $3.5 billion.
Facebook is worth $50 billion, Groupon is worth $25 billion, so this has got to be a flashback to the dot-com bubble, right? Not exactly, but it is definitely bringing back the fears. And none other than Warren Buffett was warning about valuations of social media companies at a conference recently. “Most of them will be overpriced,” said Buffett.” It’s extremely difficult to value social-networking-site companies. Some will be huge winners, which will make up for the rest.” The New York Times' DealBook did a side-by-side comparison of hot tech companies in 1999 to 2011, showing that 24 companies at the height of the dot-com boom were worth $71 billion, while just 5 companies now are worth $71.3 billion (with Facebook dominating). The story details the investments that went bad at the turn of the millennium and then lists all the massive VC funds for tech now: "Bessemer Venture Partners is said to be closing in on $1.5 billion for a new fund. Greylock Partners, Sequoia Capital, Andreessen Horowitz and Kleiner Perkins Caufield & Byers have collectively raised more than $3 billion in the last six months." The problem is that there are far fewer winners now among all the bets that will be placed.
What's making the flashback even more pronounced is the participation this time by so many of the same players. In a separate report, DealBook's Susanne Craig reports that high-profile dot-com investors such as Thomas Weisel, Mary Meeker, Frank Quattrone and Sandy Robertson are all participating in Frenzy 2.0. “Right now, these business models are typically brand new and not fully vetted,” Weisel told DealBook. “They have to figure how to continue to monetize the traffic they are getting or valuations will fall off.” Despite the skepticism, true believers continue to make their case, whether on a BBC TV roundtable about a new bubble or in a detailed blog post from VC bigwig Ben Horowitz. "While we can see many signs of a bubble these days, it’s important to keep in mind that signs of a bubble look almost exactly the same as signs of a boom," Horowitz wrote. "In fact, it’s usually not a bubble until everyone agrees that it’s a boom... Will all the excitement around the opportunities created by the Internet and the shift to cloud/mobile computing eventually lead to a bubble? Absolutely. Are we in a bubble today? I don’t think so." Time will tell.
Dial-up service provider-turned-content powerhouse AOL has been on a roll lately, buying up sites such as TechCrunch and Huffington Post. That's one way to buy street cred in the publishing world. But it also can end in tears for the hundreds of writers laid off in the wake of the HuffPost buyout. Plus, some Huffington Post bloggers (who aren't paid) went on strike because of the buyout, and the issues of "content farming" and writer pay continued to roil the company. The latest blow came when eight senior editors of gadget blog Engadget departed AOL to join sports network SB Nation, which is led not coincidentally by Jim Bankoff, a former executive at AOL who helped engineer the site's purchase of Weblogs Inc. -- including Engadget. The site's former editor-in-chief Josh Topolsky explained in a blog post why he was leaving AOL: "SB Nation believes in real, independent journalism and the potential for new media to serve as an answer and antidote to big publishing houses and SEO spam."
GigaOm's Mathew Ingram explained the pickle that AOL is in, not able to keep talent nor improve journalist quality without large expenditures. "All content companies suffer from the same kind of problem, since their main assets — the writers or creators of their content — are fungible and can leave at a moment’s notice," Ingram wrote. "But AOL is in a particularly tenuous position because its content-focused strategy is so new, and suspicions about its true motivations are so high." Now the focus moves to relative newcomer SB Nation, a sprawling network of sports fan sites originally built by The Daily Kos founder Markos Moulitsas. “We have proprietary software that empowers talented editors and writers,” SB Nation's Bankoff told David Carr of the New York Times. “I have a history with these folks that leads to a conversation. They saw our process and technology and decided it was an environment that they would be able to succeed in.” But SB Nation is not known for high pay or quality journalism either, so it's an open question as to whether it can build a suitable home for a successful gadget site among crowded competition.
Media mogul Rupert Murdoch has made the business of paying for news into a kind of religion. If you believe in journalism, you need to pay up. That's the thinking behind his strict pay wall at the Times of London and Sunday Times sites, as well as the 99 cents/week price tag on the iPad-only The Daily. Both have been shaky out of the gate, with the Times losing 90% or more web traffic in the first few months of the pay wall, and The Daily being savaged in reviews. Now comes more mixed news, as Nieman Journalism Lab tracked tweets from inside The Daily app to find that numbers were dwindling since launch. What was about 400 tweets per day around launch was down to less than 100 tweets last week. It's not a direct indicator of traffic in the app, but it's something. The bigger problem for Murdoch and Co. is their attitude about online content: "They're good at producing content. They're dreadful at actually engaging with a community," wrote TechDirt's Mike Masnick. News Corp. itself has been mum on The Daily downloads, saying they have been "hundreds of thousands" though that gives no indication on readership or subscription revenues.
On the Times pay wall, News Corp. has been a bit more forthcoming, trumpeting a rise to 79,000 paid subscribers, up 29,000 (or 60%) over the last 5 months. The company crowed that the digital uptake had countered a loss in print circulation, making for an overall 3% circulation rise when including digital subs. The problem, however, was that those digital subscriptions are priced much lower than the print ones. A detailed analysis by the Guardian's Dan Sabbagh showed that the paper likely lost £18.2 million a year in lost print circulation while only gaining £7.1 million a year from digital. "Growth will only happen when printed sales stabilize -- although the screaming question is whether print sales are being hit by the pay wall strategy," wrote Sabbagh. "Or when print prices are hiked again. Or when online prices are jacked up. However, Murdoch has long had a strategy of long-term price cutting to win over customers; it may well work with the pay wall eventually, but it is too soon for anybody to think about declaring victory."
While the online advertising market as a whole has recovered nicely from the great recession, according to recent research, there are two subsets of the market that show particular promise: display advertising and video. “We continue to see solid growth and positive momentum for the display ad industry,” said Macquarie Research’s Ben Schacter in a note to investors. He predicts “low double-digit display growth” for online display ads in 2011. In particular, his note highlights the success AOL has had with its massive 300 x 1050 pixel Project Devil ad placements. AOL redesigned its stable of websites to “clear the right rail for the units, which include different modules that can hold video, maps, coupons, photos and other brand assets,” reports Digiday’s Brian Morrissey. At the Digital Publishing Summit, AOL executive Greg Rogers told attendees that the new unit, which was recently endorsed by the IAB “is commanding unheard-of CPMs of $60 and up,” writes Morrissey. He goes on to note that, “if accurate -- and publishers are notorious for overstating their ad rates -- the new ads would represent a huge opportunity for AOL and other sites to lure brand dollars to the Internet.”
Video ads show similar promise for online publishers. A recent IAB survey found that "69% of marketers and 55% of agency executives say digital video advertising will rise in the next 12 months,” reports MediaPost’s Wayne Friedman. The market for video advertising already exceeds $1 billion in the U.S. and advertisers expect it to grow by 22 percent in 2011, says the IAB. Most encouraging for publishers is the finding that “marketers will shift TV ad dollars to digital video because of better ROI, while media agencies will shift more emphasis to digital video to follow target audiences,” Friedman notes. While pre-roll video ads remain the most popular with survey respondents, they also expressed interest in expandable banner video, in-banner video, mobile video, rich media overlays and post-roll videos. Investors have followed suit, directing tens of millions in venture funding to online video startups like Adap.tv and TidalTV.
From car buying to baby raising, consumers are increasingly using their smartphones in surprising ways, according to new research. Mobile ad network Greystripe found that “one-quarter of iPhone, iPod touch and Android users plan to buy a car in the next year and nearly eight in 10 (78%) will use their mobile device as part of the process,” reports MediaPost’s Mark Walsh. Smartphone owners use their devices for initial research (48 percent of those in the market for a new car), on-the-lot price comparisons (44 percent), finding a dealership (32 percent), and contacting dealers or sellers (23 percent). Auto advertisers were among the first to experiment in online ads and now appear to be doing the same in the mobile space, says Walsh. “A separate recent report from Millennial Media said automotive spending on its mobile ad network increased more than six-fold in the fourth quarter from a year earlier -- more than any other industry vertical,” he notes.
Another surprising consumer group embracing the mobile web is mothers. According to a report from BabyCenter, “moms with smartphones such as the iPhone spend more time with the mobile web (6.1 hours a day) than the PC-based web (4.1 hours),” Adweek’s Mike Shields reports. According to BabyCenter chair Tina Sharkey, mothers are “surprisingly big on mobile apps favoring those for health information, shopping, diet and exercise,” Shields writes. They are also more active on mobile social networking than the general population and receptive to mobile advertising: “46 percent of moms claim to have taken an action due to a mobile ad,” Shield notes. “Mobile has thrown the [traditional] purchase funnel for a loop,” BabyCenter’s Sharkey said. Advertisers seem to have recognized this. Borrell Associates' Benchmarking Local Online Media study predicts that “advertisers will spend 17.8% of online ad budgets for local this year -- up from 14.9%, or $13.5 billion,” reports MediaPost’s Laurie Sullivan. An earlier study from Borrell found that small and medium sized businesses are also boosting their digital advertising budgets in 2011.
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