Whither 2009 Online Ad Budgets?

From where I sit, it appears that the online advertising business has not yet fallen off a cliff. But what happens when ad buyers start spending 2009 ad budgets instead of working off the end of 2008 ad budgets that were set in a different economic environment? That’s a question I’ve been pondering for months and have mentioned once or twice on this blog.

Yesterday, I saw my friend Andy Monfried, founder and CEO of social ad network Lotame, had done a quick twitter poll on the subject. I decided to follow his lead and do the same:

twitterpoll: agency, mktg & ad sales
ppl replies only pls: will ONLINE ad budgets in 2009 be flat, up, or
down from 2008? tag w/ #2009budget

I got 16 responses that were tagged #2009budget and a few more replies directly to me. Here’s the summary of the replies.

200_ad_budgets_2

So it seems that most people working in the online ad business are expecting online ad budgets to be up slightly in 2009. I tried to quantify everyone’s comment and then I took the average of all of those guesses and it works out to be about up 2%.

It’s worth noting that there are a few people who believe online ad budgets will be down pretty large amounts in 2009 and it’s also true that several of the people who commented were more specific about the ad budgets they were talking about. One area that is clearly more healthy than the entire sector is health care related online advertising which is expected to have a strong year.

And it’s also worth noting that words like measurabe, ROI, search, and CPC were all cited as stronger growth areas. I think it’s pretty well understood that money is going to move from less measurable (branding) to more measurable (remnant banner and search).

It’s not entirely clear where emerging forms of media will come out in 2009. This includes all sorts of engagement oriented marketing and of course, social media advertising. I suspect if it’s not proven to achieve key performance metrics, it’s at risk in 2009.

Anyway, this exercise was very helpful to me. I’ve thought for a while now that the mantra for 2009 is "flat is the up 20%" and that appears to be the case in online advertising too.

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I Guess It's Boxee Day at AVC

Netflixqueue1
I knew Boxee was going to announce Netflix support this week and I guess I should have waited and written one post instead of two, but the timing didn’t work out.

So in addition to the video of Avner’s interview that I posted this morning, here’s the Netflix news:

you can now access Netflix on boxee,  get your Instant Queue and
Recommendations, browse Recently Added and Most Popular, sift through
the entire Netflix Watch Instantly selection by Genre and  Search.

This is a fast running small company trying to give the users what they want as rapidly as possible and so Netflix isn’t working everywhere yet:

the bad news: we could not make it run on Apple TV ☹ . we tried real
hard. vulkanr was almost able to tame it, but he was bucked by the
Apple TV’s 1Gz processor.  it screamed back at him in thick Scots
brogue, “I can’t do it captain, I just don’t have the power!” we’re
still working on it, but don’t have a solution, yet.. also there is no
Netflix for Ubuntu, yet (i believe Netflix mentioned they will support
Linux later in 2009).

And as many Boxee fans know, none of this is available for Windows yet. Today was a milestone in that effort too, because:

Windows user? we have not forgotten you. also released today is the
pre-alpha of the Windows version. a select group of 214 users (no idea
how we came up with this number) is starting to test our Windows
release. based on their feedback we’re going to start opening it up for
more testers.

So that’s the short summary of the exciting news coming from Boxee today. The post I linked to is from the Boxee blog and is much longer and you should click thru and read it if you are following this sector closely.

If you want an invite to try Boxee, go here and as a friend of this blog, you’ll get an invite within 24 hours.

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Boxee CEO Avner Ronen On Boxee, Raising Money, and Competing With Big Companies

Boxee’s CEO Avner Ronen sat down with Tech Confidential this week and answered some interesting questions about his company Boxee, how he raised money in this environment (from Union Square Ventures and Spark), and how he plans to compete with the likes of Apple, Microsoft, Sony, and others. The video is about 5 1/2 mins long and if you don’t have that much time, fast forward to 5:15 to see the answer to the last question. I think he nailed it.

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CBS Is Quietly Building An Internet Radio Powerhouse

I’ve had a ringside seat for a number of reasons and it’s been fun to watch the team at CBS Radio quietly putting together a streaming audio powerhouse. Earlier this year, CBS acquired the rights to operate AOL Radio and yesterday they announced that they had done the same with Yahoo!’s internet radio business.

If you combine the audio streams that CBS’ owned and operated radio stations (like 1010 WINS, WFAN, KROCK, etc) generate with the AOL and Yahoo! streams, you’ll realize that they are a bigger streamer than almost anyone on the web, with the exception of YouTube.

As Tameeka Kee of Paid Content points out in the blog post I linked to above:

They’ve made the investment in the infrastructure, the platform and the sales force to operate in a sustainable way.”


CBS Radio’s ad sales expertise is a big plus: it has a 1,600-member
sales team, can sell ads on national and local levels, and has a vested interest
in TargetSpot, the ad technology firm that can serve hypertargeted ads
into various types of streaming media. CBS also has experience with a
partnership of this size, as it merged its online radio network with AOL’s
back in March. 

Our portfolio company, Targetspot, is indeed part of the equation here. Monetizing this huge listener base is the end game and highly targeted audio advertising is going to be a big part of the internet radio/streaming audio opportunity.

When we talk about internet media, so much attention is paid to web publishing (including blogs and social media) and web video. Not much attention is paid to online listening. But it is exploding, possibly at a faster rate than text or video. I know that I listen to at least an hour or two of streaming audio every day. And very little of that is monetized currently. That will change and I expect Targetspot and our friends at CBS Radio to be big beneficiaries of that trend.

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And Now, A Note From Our Sponsors

Storm_ad_2
Verizon is running an interesting campaign for their new Blackberry Storm and this blog is carrying the ad banners right now (right sidebar). You can click on a link in the banner and turn the banner into a video on the new Blackberry Storm.

This is interesting to me for several reasons. First, it’s running for two days, yesterday and today, and I believe for these two days, it’s the only campaign running on this blog. Second, it’s generating a nice chunk of change to a good cause because all the ad revenue on this blog goes to charity. And third, it’s running on a blog that was openly critical of the Storm just last week. In fact, that post which is critical of the Storm is still on the front page of this blog where the ad is running. And this blog has been no friend to wireless carriers and their abusive business models like demanding exclusives from device manufacturers.

Conversational media and conversational marketing is coming of age. Marketers are understanding that you have to be part of the conversation even if it isn’t flattering about you and your products and services. And participants in conversational media are starting to recognize that marketers and their brands have a seat at the table and a role in the conversation. In this case, they are helping to fund it (sort of).

Kudos to Verizon for understanding that you can’t control the content your campaign runs next to. And kudos to Federated Media for evangelizing conversational marketing and for putting an interesting and relevant campaign in front of this blog’s readers.

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Outsource To Your Readers

I read Maureen Dowd’s piece yesterday on a website that is covering local news in Pasadena California using stringers in India and I thought the whole idea was really nutty. How is it possible that people living half way across the world could know much about what’s going on in my neighborhood?

As Mark Josephson, CEO of our portfolio company, Outside.in, said in his post on the topic yesterday:

But why is everyone focused on trying to make the old model of
newspapers and reporting survive as opposed to innovating and embracing
new forms of news, like participatory journalism or hyperlocal bloggers?

The unfortunate events in Mumbai showed that witnesses can be a
great source of news.  And, you don’t have to look any further than our
weekly Blogiology 101 posts to see that there is incredible coverage
happening at the hyperlocal level.

These are new forms of news gathering and they cost a heck of a lot
less than even offshore operations.  News organizations should embrace
their community of readers to find new ways to help cover their news.
Use your brand, traffic and salesforce to drive traffic and revenue to
new groups of people who are already writing about their own
communities.  Hey, they already live there and actually really care
about it too!

I am convinced that the future of local news is on the web, not on paper, and I am equally convinced it will be written largely by the people who are making the news or experiencing the news first hand and not by traditional journalists or their replacements somewhere where cheaper labor can be found.

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YouTube Is A Global Media Property

My friend Steve Kane left an interesting comment on yesterday’s post about analog dollars and digital pennies. In it he noted the following:

any case, i’m not sure what comscore is counting, but most other
measurements services give youtube roughly 65 million *unique* visitors
per month

http://siteanalytics.compete.com/youtube.com/?m…

by
contrast, the CBS network alone amalgamates nearly 200 million viewers
— in just one week, and just in the three evening hours of prime time!

http://tv.zap2it.com/tveditorial/tve_main/1,100…

i’ve
never seen nielsen de-duplicate viewers numbers within a network, but
let’s say 50% of those 200MM are duplicated. heck, lets say 75%

regardless,
just one network, CBS, equals or betters youtube’s entire monthly
audience in just 21 hours (one week of three hour slots)

That caused me to go back to comscore get the exact numbers. YouTube’s monthly worldwide audience was 344mm in October according to comscore and 55mm visited each day. I don’t know what the weekly numbers are but I bet that they are about what CBS gets.

But this post is not about rebutting Steve. His comments are spot on and contributed to the discussion, which is a very good one.

What I hadn’t realized when I wrote the post yesterday is how large YouTube’s global audience is and how much of it is outside of the US. Here’s the raw stats:

Youtube_worldwide

YouTube’s audience maps pretty closely to the web’s audience around the world. It’s most popular (on a relative basis to worldwide audience) in europe and slightly less popular (on a relative basis) in asia and latin america. But it is signficant to note that YouTube’s audience in asia-pacific is roughly the same as it is in the US.

Unlike the CBS network, YouTube is a global media property and it reaches every corner of this planet. While many of the videos are in english, a growing number are in other languages.

What is also true about YouTube is that the size of the audiences for individual shows can be as large as a network TV show. CSI was viewed by 18.5mm viewers last week. YouTube has five pages of videos (20 videos per page) that have been viewed more than 25mm times.

I am not arguing here that network style television (long form, story driven) is not a superior form of entertainment. I think the succcess of Hulu to date proves that is. And we know that Hulu will be a much more attractive venue for advertisers for at least a few more years.

But I am amazed at the scale and reach of YouTube and what it tells us about video entertainment delivered over the Internet. If CBS wants CSI to reach 100mm viewers instead of 20mm each week, it can do that on the Internet with worldwide distribution. And I am sure that’s going to happen someday, hopefully soon.

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Trading Analog Dollars For Digital Pennies

Jeff Zucker, head of NBC Universal, was famously quoted earlier this year warning that the media industry had to work so "that we do not end up trading analog dollars for digital pennies."

It’s a great line and an even better observation. But I think it’s inevitable and it’s going to happen no matter how hard they try to avoid it.

Analog and digital, it turns out, are polar opposites. Analog has physical costs which lead to scarcity driven business models. Digital has zero marginal cost (or near zero) which leads to ubiquity driven business models.

In the world that Jeff grew up in, a studio created a TV show, let’s say Friends, and then a network bought the show and ran it once a week at a scheduled time where millions of people would make time, all at the same time, to watch it. That drove high CPMs and a great business model.

In the world we live in now, it’s completely different. Jeff’s network produced a hilarious SNL skit but did not air it last weekend. The skit featured Andy Samberg as Rahm Emanuel, and NBC has made it available via it’s JV with News Corp, Hulu. I watched early last week on Hulu. And since then, I’ve shown it (physically shown it) to at least a dozen people at various places and times, including last night at a friend’s house on his friend’s laptop. Hulu doesn’t show how many views this skit got, but Samberg’s Lazy Sunday clip was viewed over 5mm times before NBC had it pulled from YouTube and put it up on SNL’s website. That experience certainly was formative in the creation of Hulu.

The ability to watch a TV show or TV clip anytime anyplace is naturally going to lead to a lot more viewers than any individual show can get in the traditional TV viewing approach. The biggest weekly TV shows get around 20mm viewers. YouTube has over 300mm montly visitors according to comScore. Hulu is just getting started, but if it ever goes international (and I sure hope it does and soon), then it will eventually reach similar numbers of viewers.

The fact is there is so much internet inventory, particularly when you count the various social networks cropping up all over the world, that the $20 CPM may be a thing of the past. I know that some Internet inventory is sold at prices above $20 CPM, in fact some banners have even been sold on this blog at those kinds of prices. But I don’t think those prices are sustainable.

The Economist has an article running this week about online advertising (where I was reminded of the Jeff Zucker quote) that suggests that online advertising will be unscathed during the downturn. The article quotes a report by eMarketer that suggests online advertising will continue to grow at good clip next year:

eMarketer, a market-research firm, predicted that online-advertising
spending in America, which makes up about half the global total, will
increase by 8.9% in 2009, rather than the 14.5% it had forecast in
August. The firm thinks search advertising will grow by 14.9% and
rich-media ads by 7.5%, whereas display ads will grow by 6.6%. In
short, online advertising will continue to expand in the recession—just
not as quickly as previously expected.

I hope eMarketer is right but even if they are not, this downturn will accelerate the conversion of analog dollars to digital pennies because you can buy online inventory for a fraction of the cost of analog inventory, you can target it, you can measure it, and you can even create your own media if you want. And you can do this at a scale that traditional media can never create with its scarcity driven orientation.

That’s it for now. I am going hunting for a few digital pennies now.

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Talking Blackberry

Javelin
We had a bunch of people over yesterday for thanksgiving and at one point my daughter and a friend of ours started talking about their Blackberry Bold phones. They like them but sort of miss their older blackberries. My friend Phil misses the raised buttons of his old Curve. My daughter misses the feel of her even older 8700.

I’ve been using one blackberry or another since the original pager style Blackberry that I got in 1997. I’ve made a few detours along the way. I’ve tried the iPhone twice, the Sidekick (which I really liked), a windows mobile phone (which I really hated), and the Android-based G1. But I keep coming back to Blackberry, largely for the keyboard which I am addicted to.

I didn’t even think about getting a Blackberry Storm. David Pogue’s comment about the Storm is exactly how I feel about it.

Hello? Isn’t the thumb keyboard the defining feature of a BlackBerry? A BlackBerry without a keyboard is like an iPod without a scroll wheel. A Prius with terrible mileage. Cracker Jack without a prize inside.

If I wanted a touch screen phone, I’d get an iPhone. I certainly don’t want a touch screen Blackberry.

My Blackberry Curve recently died on me and instead of getting a Bold, I got another Curve. I think the Blackberry Curve is the perfect phone for me. Other than the lack of a decent twitter client for Blackberry, it does everything I need.

So when I saw the news today that there’s going to be a new Curve coming soon, called the Blackberry 8900 (fka the Javelin), I got very excited.

It’s basically my beloved Curve with a faster processor, a better screen, and a better camera. I’m getting one of these as soon as they are available on T-Mobile. Until then, my curve will do me fine.

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Is The Nasdaq The New Dow?

One of the things I’ve been saying recently on this blog is that the Dow is full of tired companies and tired stocks. I think the Nasdaq is much more representative of the current american economy than the Dow. And when I came across this chart on Andrew Finkle’s blog this morning it got me thinking.

1929crash

This shows the Dow from 1924 to 1939 and the Nasdaq from 1995 to September 2008 (two months ago). It’s too bad that the red line doesn’t go all the way to this week because it would be even more striking. That’s because the Nasdaq traded all the way down to 1300 as of last friday and is now at 1500. It’s not exactly tracing the 1929-1939 Dow, but it sure is damn close.

So the obvious question is where did the Dow go from the early 1938 bottom?

Here’s a chart that I found on the woodshedder blog:

Dji1921_1945

From 1938 through the end of the war in 1945, the Dow was locked in a narrow trading range between 100 and 150 and it retested the 1938 lows in early 1942.

If the Nasdaq is the new Dow, and it sure seems like it is on many levels, then this would mean the Nasdaq will trade in the range of 1300 to 2000 for the next seven years and will retest last friday’s lows at least once more before starting a slow but steady climb sometime around 2012.

It also means that the Nasdaq isn’t going much lower from here.

Now I want to say that while history does repeat itself, it’s dangerous to take too much from exercises like this. They are fun and amazing at some level. But I wouldn’t bet the farm based on an analysis like this.

I much prefer to think about fundamentals. The best companies in the Nasdaq, like GOOG, AAPL, AMZN, CRM, ABDE, and others reached levels last week that strike me as big time bargains.

GOOG traded as low as $250/share on Monday. That’s a market cap of $78bn and an enterprise value of $64bn. That’s for a company that had operating cash flow last quarter of $2bn and certainly has the ability to earn $8bn per year of cash flow even if revenues flatten out or decline slightly. When one of the top companies in the world trades at 7.5x cash flows, that’s a signal that it’s time to start buying. Think of it this way. If you had the money and you could buy all of Google (I don’t and you can’t), you could lay out the $64bn and wait 7.5 years to get your money back and then you’d own the whole company forever after that. That’s a steal in my book.

So my gut tells me we may have seen the worst of the selling in the Nasdaq for now. But it’s also instructive to think about the kind of patience you’ll need to have with these stocks if you buy them in here. If the crystal ball of the Dow from 1929-1945 is accurate, then at best these stocks will go up around 50% in the next seven years. That’s an annual return of around 6% for the next seven years. If you are good at trading (I’m not) then of course you can do way better than that.

And of course, as I pointed out in this blog post from last week, an index is not representative of what can happen with individual stocks in it. I don’t know how invidual Dow stocks did from 1938 to 1945, but I am sure there were some that did way better than up 50%. My bet is companies like Google, Apple, and Amazon will outperform the Nasdaq as a whole from here on out. They are leaders in their markets, have dominant franchises, have strong balance sheets, and positive cash flow that I believe will survive the downturn intact. That’s why I’ve been buying them and have stepped up my purchases in the past couple weeks.

I’m battered like everyone else and have not been spared the losses that most have taken for the past year. But I am optimistic and thinking about how to make money going forward. Because as my friend Fred said to a large gathering a few weeks ago, you can’t leave cash under a mattress. You have to invest capital to make money. And that’s what I am doing with my stock market investments, my real estate and hedge fund investments, and most importantly, with our venture capital investments.

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