Amazon to challenge Google in online advertising?

By | Advertising, Amazon, Google, Yahoo! | No Comments

Amazon has been slowly building an adtech business for the past few years now. Back in 2008 I wrote about the launch of their advertising network and since then there has been a steady trickle of announcements and hires that show they are getting more and more serious about becoming a player in the adtech market. The pace of announcements seems to have picked up a bit recently and this morning the FT ran an article entitled Amazon opens up new advertising front.

Their big hope, of course, is that the proprietary data they have about shoppers on Amazon will allow them to target ads much better than their competition. I hope they are successful, because right now Google stands pretty much unchallenged as the only major tech player in the adtech space, which limits partnership and exit options for startups. When we invested in back in 2006 AOL, Microsoft, Yahoo and Google were all credible potential acquirers, and we spoke to all of them before ultimately selling to AOL, and I’m sure that the existence of those other players as alternative suitors helped us complete the AOL deal quickly and at a better valuation. Fast forward to today and Google is the only player left on that list that makes regular adtech acquisitions, which is why I hope that Amazon will enjoy enough success with their advertising products to want to step up and provide some competition for them in M&A.

There is also a sliver of good news on this front from Yahoo today. Their Q4 results showed an improvement in their search advertising business and Marissa Mayer has said that she wants to take back some market share in search from Google. I have nothing against Google, but once again, I hope they succeed.

Google’s domination is total

By | Advertising, Facebook, Google, Yahoo! | No Comments

I was going to write about how I’m getting on with the new Google Samsung Galaxy Nexus phone today, but I was so gob smacked when I saw this table on AllThingsD that I had to re-blog it.

It is easy today to think of Google as slightly old hat.  The startup that everyone used to love turned monopolist that is now struggling to innovate and getting outdone by Facebook.  Whilst there is some truth in that characterisation these market share stats are a stark reminder that Google dwarfs its competitors.  In market share terms it is an order of magnitude bigger than all of its competitors bar Yahoo.

Size matters and the worlds biggest online advertising company is not just the biggest, it is continuing to grow share faster than anyone else, at least in terms of market share gross percentage points.

Beyond the growth of Facebook, which probably isn’t a surprise to anyone with a computer, the other thing that leaps out from this chart is the speed with which AOL and Yahoo are declining.  Ten years ago they were the Google’s of their day, and look at them now.

I would hazard a guess that ten years from now two or three of these players will no longer be in the top five, but given the size of the market today and the scale of market share difference it is hard to see Facebook or anyone else managing to knock Google off the top spot.

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Touchscreen web apps

By | Apple, Yahoo! | No Comments


Last week I wrote about the beauty of the touchscreen interfaces on some native iPad apps and then in a post about HTML5 briefly explored the notion that web standards will need to evolve if web apps are going to keep pace with the user experience available in native apps on touch screen devices.

Evidently the folks at Yahoo! have been having the same thoughts.

There is a piece on Techcrunch today detailing Yahoo’s release of the latest version of their open source User Interface Library, YUI which will make support for touch events like flicking, sliding and I hope pinch to zoom, “a whole lot less of a chore to build”.

The post also has a good description of the basic challenges of turning traditional browser into a touch browser, and it is a whole lot more complicated than assuming a mouse click and a touch are the same thing.

I also like Techcrunch’s description of the problem that touch screens are bringing to web designers:

Gather up a group of people who make their living through web design, and they’ll probably all agree on at least two things: A) touchscreens aren’t going anywhere, and B) designing web stuff for touchscreens sort of sucks. Native apps have, in a sense, spoiled users; with things like drag-and-drop and basic touch gesture recognition almost laughably simple to implement in native apps, web app developers are left to hack in such features themselves or risk having their app seem dated from the get-go.

Establishing authority on the web

By | Advertising, Facebook, Google, Social networks, Startup general interest, Yahoo! | 4 Comments

image Companies have been building ways to establish authority and credibility online since the beginning of the web.  Yahoo started life as ‘Jerry’s guide to the world wide web’, a site where Yahoo founders David Filo and Jerry Yang lent their authority to what they viewed as the best sites.  Google’s link based algorithm did the same thing, but scaled better because it was automated.  Turning from search to commerce, one of ebay’s great innovations was the supplier ratings system which put enough trust into the system for people to buy from other people they didn’t know.

More recently a lot of the innovation seems to be around looking for ways to lend authority to entities rather than content – entities can be people or businesses (often small businesses).

On the small business side reviews and recommendations are the most obvious way to extend the ebay concept to entities like restaurants, clubs, bars and other local businesses, and for the last couple of years a number of companies have been doing that with varying degrees of success – e.g. Yelp and Qype.

Where things are starting to get exciting now is a focus on people.  A couple of weeks back Fred Wilson wrote about a UK company called Peer Index which is getting started in this space with an algorithm which establishes authority by analysing social media activity to determine the extent to which people are listened to (Azeem Azhar founder of Peer Index is a friend of mine).

The underlying activity which is being measured here is sharing of links and I’m writing this post this morning after reading on Techcrunch that sharing widget company ShareThis have started measuring social reach by tracking the number of times a link is shared AND the number of times it is clicked.  Incorporating data on clicks is a good step as to my mind a link that is shared and clicked has a lot more significance than a link that is merely shared.  (ShareThis is a DFJ Mercury company.)

Facebook’s Like button is also all about establishing authority – in this case via crowd sourced data.

So where is all this headed?

It seems to me there are parallels with the online advertising world.  There is an increasing amount of authority related data swilling around and companies that have the traffic to help create more data will be in a good place (e.g. Facebook and ShareThis), but perhaps the most value will accrue to those that build services off the back of algorithms that crunch the data to tell us something useful (e.g. Facebook and startups like PeerIndex).  I also think that this data could be profitably incorporated into ad targeting services.

To close I’m going to pull out a couple of interesting facts that ShareThis found.  Firstly more links are now shared through Facebook than over email (45% of the total compared with 34%, Twitter is in third place with 12%), but secondly email links are much more likely to be clicked on than Facebook links (91% chance of click through on email compared with 80% on Facebook).  This suggests a difference between the way people view content shared between the two services which is relevant for authority calculations.  This data is from the Techcrunch post I also linked to above and is un-corroborated.  The click through rates seem a little high to me.

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Everything is going social – Yahoo showing the way

By | Content, Facebook, Social networks, Yahoo! | One Comment

Yesterday Yahoo announced a deep integration with Facebook, and there is more detail on Techcrunch here.  The integration allows users to:

  • link their accounts to view and share updates with friends across both networks
  • log into Facebook from the Yahoo home page and other places throughout Yahoo
  • consumer their Facebook newsfeed on the Yahoo homepage
  • more easily share Yahoo stories and comments into Facebook

I think this is a smart move for Yahoo – I don’t know whether it will be enough to turn their fortunes, but it will help them in two ways

  • increase sharing of their content and hence page views – the lifeblood of their business.  As social networks account for a larger and larger share of content discovery content business like Yahoo need deals like this in the same way they need SEO
  • keep existing customers on Yahoo rather than going off to Facebook to view their feed, and longer term giving them a shot at being a social network aggregator

The first of these strategies is obvious these days and Yahoo is simply taking it to the next level.  Social media integration has been a mainstay of innovative content businesses for a while – witness HuffPo’s integration with Facebook and now LinkedIn and the sharing features on blogs from Techcrunch to The Equity Kicker.

The second of these is equally not a new idea, but is more ambitious for Yahoo.  If they are successful in becoming a single destination that people visit to manage their activity across multiple social networks they will have carved a new and high value market.  At the moment it is difficult to look past Facebook which makes the aggregation play look less interesting, but it is a decent bet over that over the medium term the social network landscape will become more complex and fragmented (again).

Beyond the impact on Yahoo’s fortunes this development is interesting because it shows the value social adds to traditionally non-social activities and the benefits of weaving social network integration throughout our web activities.  Email would also benefit from social media integration, and startups like Gist and Xobni are building interesting products in this area.

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Judging market timing when change is inevitable

By | Startup general interest, Yahoo! | 2 Comments

Yesterday I wrote about the emerging evidence that digital is starting to pay for the music industry and Rhitu Baria commented that it is only a matter of time before the music industry allows new technologies to permeate through, and linked to a post on her blog detailing the history of change in this sector:

I sometimes wonder why we have all the noise about streaming music services and the associated revenue losses for record labels. At every stage of the music development cycle – live concerts, sheet music, gramophones, vinyl discs, magnetic tapes, CDs – there has been a huge hue and cry about the change i.e. no one will go to live shows or buy sheet music or buy tapes or buy CDs thus leading to a loss of sales for the musicians.

That’s not to say that there wasn’t an impact on sales in the traditional way of operations of the industry at each step. But the music industry as any other has moved with technological developments, been flexible and adjusted its business model, finding new ways of surviving even thriving. After all, no industry can put on blinkers to the world around them and hope to survive or better themselves.

These historical analyses of technology change are a useful reminder that new developments are often greeted with fear and scepticism, particularly if they have social ramifications – TV will destroy society by stopping us from reading books and computer games will stop kids being social are two others I remember well, and the Daily Mail’s dislike of Facebook is a more recent example (see How using Facebook could raise your risk of cancer).  These histories also a useful reminder that in the end society and companies always adapt and life always goes on, often looking a little different, and sometimes very different, but life always goes on.

Technology driven change is therefore a constant of modern society and for many observers (including a lot of VCs) it is easy to form very strong opinions about how the world will change.  In fact many VC investments are bets on a vision of the future, making it a part of my job to form these opinions (which is one of the reasons I write this blog).

For me forming the future vision is the easy bit – unfortunately we also have to bet on timing, which is much harder.

Rhitu’s point in the comment was that it is inevitable that streaming music will come to be a major part of the music landscape – and I agree with that.  It is a superior user experience than having to bother about downloading and storing files, and then being able to access them from your various devices – for me it is as simple as that.

My reply to her comment was therefore to agree it is only a matter of time before these new technologies permeate through the music industry, but to add that the question is ‘how much time?’, and ‘how many startups perish in the interim?’.  Remember the story of Imeem, the popular music streaming service that raised a lot of venture capital, did deals with the music majors and ultimately had to sell out to Myspace for $1m.  Hopefully Spotify will be more successful.

Other markets where the future was clear for a long time before it happened include mobile network operators and their evolution to being dumb pipes, and the software as a service business model for software companies.  The transition to hosting apps in the cloud and everything that means for standardised hardware and virtualisation is another that is underway right now.

All of which begs the question of how to judge the timing.

Most of these markets tip pretty quickly when they go, especially the ones that are interesting for startups.  So judging the timing is about spotting the tipping point, and knowing the extent to which you can make it happen sooner.  With hindsight tipping points are periods when massive demand was created (Ben Horowitz today defined winning a new market as 1,000 enterprise customers or 50 million consumers) – so judging timing is all about understanding the obstacles to creating that demand and the extent to which you can get over them.

In the music industry the chief obstacle to (legally) creating demand has been getting a service to market.  The problem has been that the startups need co-operation from the players with the most to lose (the record labels).  The result – slow innovation.  The key to judging timing in this market is understanding the point at which the writing is so obviously on the wall for the old model that industry veterans can only look forward AND when their legacy revenues are declining sufficiently fast that there is a financial imperative for them to face up to reality.  Unfortunately that is a very hard call to make.  The two things that startups can do are a) generate consumer pressure for change by building popular services, which Spotify has done well, and b) look for win-win solutions with the old guard – but the biggest driver of industry acceptance of change comes from within.

Similarly, in the mobile industry the services that would turn operators into dumb pipes have to run over those same operators networks, giving them a control point which they have used to hold back the future while they continued their (in my opinion) futile search for an alternative business model.  It took the consumer power of Apple and the iPhone to really make a change here.  In this market there was next to nothing startups could do to help speed operators towards their destiny.  The key to judging timing was spotting the catalytic effect of the iPhone before anyone else.

In contrast, back in the 1990s Yahoo! was more easily able to quickly beat AOL and realise their vision of an inevitably open internet because users on ISPs other than AOL could easily switch to their better portal service.

This post is already overlong so I will end here with a quick summary – which is to look for the value chain blockers that slow down the transition to an inevitable future and not to underestimate how long they can take to overcome.  Often it is years and years.

Yahoo uses Nectar database to improve targeting

By | Advertising, Yahoo! | 4 Comments


Tim Bradshaw has a piece in the FT today describing how Yahoo and offline loyalty card company Nectar are teaming up to help target display ads on Yahoo’s properties:

Online advertisers will be able to target shoppers based on their high-street purchases for the first time in the UK under a new scheme from Yahoo and Nectar.

The internet company and the loyalty card provider have signed an exclusive deal to combine their databases for customers who opt into the campaign.

Privacy buffs out there will note that this is opt-in only.  Nectar customers are given extra loyalty points if they opt-in and the number who do so will be an interesting indicator of the value people place on their privacy (to the extent this anonymised service is a privacy threat).

Beyond better targeting this deal offers advertisers the ability to see the impact their ads have on offline spending, which is automatically tracked by Nectar.  Apparently this is the first deal globally which will link online ad views with automatically captured purchase data.  This could be a very big deal, helping to drive FMCG ad spend online, which still accounts for only 4% of total online adspend.

Nectar covers a number of the largest UK stores, including Sainsbury’s, Homebase and BP.  They have 16.8m members, and 20,000 have signed up so far.

Some of the smarter people I know are talking about the general case of the first part of this.  That is taking lists of profiled people (cookies) and offering them to advertisers (probably ad networks) who can then generate higher CPMs and/or better click through by targeting against the profiles.  The business model might take the form of auctioning blocks of impressions from the list.  There might be a startup opportunity here.

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Yahoo is moving content from paid to free

By | Business models, Content, Yahoo! | No Comments
The Yahoo Logo

Image by Santosh Dawara via Flickr

At a time when newspapers are considering how they can start charging for online content Yahoo is moving in the other direction.  The FT reported this morning that Yahoo has removed the paywall from in front of their realtime stock quotes and from their US Fantasy Football site which charged for premium services including realtime football scores.

This is interesting because it will now be harder for newspapers to start charging for their online content (particularly as Yahoo is also considering increasing the amount of commentary it provides with its free news product) and because timely information is one of the things that theorists have been saying might remain chargeable as many things move towards being free.

In one of my early posts on the ‘free’ subject I quoted Kevin Kelly’s list of eight things that will remain chargeable in a world where the price of many (or even most) things is heading towards $0, and number one on that list was ‘immediacy’, the notion that people will pay to get something before everyone else.  The trouble with this idea is that it ignores one of the central pillars of the ‘free’ argument.  The theory has it that when the marginal cost of delivering a product or service trends towards $0 the price will also trend towards $0.  By this logic the price of immediacy will trend towards zero (in most cases at least), after all the underlying cost of delivering a stock price fifteen minutes delayed is the same as for a live feed.

Yahoo’s move to stop charging for the immediacy of financial information and sports news can be understood in this light.

Business decisions are made a little differently to this of course, and the reason that Yahoo gave is that the small amount of revenue they were generating by charging for the live information wasn’t enough to justify degrading the experience for non-paying users of the service.  This tells us that on average the public at large didn’t value the immediacy that highly.

As I was reading the FT piece I was thinking that just as the marginal cost of immediacy is trending towards $0, so is the marginal cost of mobility, or more precisely, getting content onto mobile phones, and that content owners hoping to make good by charging for mobile access should think again.  Half way through the article I read that Yahoo are thinking the same way and have dropped the charges for their Fantasy Football iPhone app.  I expect that this trend will generalise, and the average price of iPhone apps will continue to decline.  Moreover, when Apple gets the in app transaction model right my guess is that the rate of decline will increase.

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App stores just a flash in the pan?

By | Apple, Mobile, Yahoo! | 11 Comments


FactoryJoe wrote an amusing tongue in cheek piece around a month ago poking fun at the app store.  He called it Steve Jobs hates the app store…  As well as doing a great job of charting the problems of the app store, many of which we’ve discussed here before he also makes the case that the App Store’s existence will be fleeting:

App Stores in general are a flash in the pan — hardly a competitor to the net. They’ll last a couple more years, but the web will win, if it hasn’t already — the missing piece is discovery — which is why iTunes is so critical to the iPhone’s success. We’re in the Yahoo! Directory phase of the application web — but rapidly entering the world of searchable, on-demand functionality. Are you really trying to tell me that I need to keep installing apps for the rest of my existence when I can just type URLs and pull down any app I want on the fly? Puh-lease.

I think he has a point here.  He is right that discovery is a missing piece, but he forgets that we will also need better mobile payments before web apps can bypass iTunes.  Beyond that I largely agree with him.

Ian Forrester quotes Vic Gundotra, a Google VP, making the same point, via the FT:

"We believe the web has won and over the next several years, the browser, for economic reasons almost, will become the platform that matters and certainly that’s where Google is investing.”

Mr Gundotra won some support from the rest of the panel. Michael Abbott, head of application software for Palm, said advances in the browser being introduced through HTML5 standards meant that web applications could tap features of particular phones such as their accelerometers.

As ever, timing will be a key question and it may well be that the leading iPhone app vendors are the ones best placed to win when the model transitions to the web, but it seems unlikely to me that five years from now we will be getting all our mobile apps via tightly controlled app stores.  This is AOL versus Yahoo! over again.

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