Making further inroads against Internet rivals Google and Yahoo, Microsoft Corp. has entered into a broad advertising agreement with Viacom valued at $500 million over five years. Under the deal, Viacom will license TV and movie content to Microsoft--while the software giant will serve display ads on Viacom's entertainment sites including MTV.com via its Atlas advertising platform. Microsoft also gains the exclusive right to handle Viacom's remnant display ad inventory. The wide-ranging alliance will allow Microsoft to use content from MTV and BET shows and Paramount Pictures films in properties such as MSN.com and the Xbox 360 game system. Viacom will also work with Microsoft to develop downloadable casual games on MSN and Windows. Financial terms of the deal were not disclosed, but the companies said it includes a "combination of revenue-sharing provisions, guarantees and content licensing agreements" amounting to at least $500 million. The deal strikes a blow to DoubleClick--whose DART ad-serving technology is being replaced by Atlas AdManager, which Microsoft acquired through its $6 billion purchase of ad services company aQuantive in August. It also represents a corporate tag-team play by Microsoft and Viacom against Google, which is poised to acquire DoubleClick for $3.1 billion pending approval by federal and European authorities. Viacom, meanwhile, is pursuing a $1 billion copyright suit against Google over unauthorized clips posted on YouTube. For Microsoft, the deal represents further tangible payoff from its expensive aQuantive acquisition, and another step in its effort to become a major player in online advertising. Earlier this year, Microsoft CEO Steven Ballmer said the company plans to derive 25% of its total revenues from digital advertising within a few years. In October, Microsoft gained exclusive rights to sell advertising on Facebook outside the United States in exchange for a $240 million investment in the hot social networking site. In its most recent quarterly earnings released that same month, Microsoft said its online services unit grew 25% to $671 million, but its revenues amounted to less than 6% of Microsoft's quarterly sales. "This deal is another milestone in our quest to build a world-class advertising platform to serve the broad needs of advertisers and publishers," said Kevin Johnson, president of Microsoft's platforms and services division, in a statement. The company's ad platform has picked up about 50 Web publishers since the aQuantive deal was first announced in May. Without knowing more about the financial details of the Viacom deal, analysts said its full impact was still difficult to assess. "It does help Microsoft in their quest to compete more head-on with Google, but it really is too early to determine just how meaningful it is in the long run," said Tim Bajarin, president of technology consulting firm Creative Strategies Inc. He added that Microsoft would need to line up more agreements like that with Viacom to truly challenge Google in online advertising. From Viacom's side, the pact provides yet another avenue of digital distribution that doesn't include YouTube. Viacom has lately shown increasing interest in expanding into video gaming, where Microsoft would be a powerful partner. Microsoft already distributes some Viacom content through its Xbox Live Marketplace. Viacom on Wednesday also announced a high-profile deal with Hollywood producer Jerry Bruckheimer to develop video games across various MTV platforms. The Bruckheimer pact is the latest in a flurry of digital deals that MTV has disclosed this month, including an investment in video site GoFish and a plan to syndicate clips through AOL Video. MTV last week also launched a new advertising division called Digital Fusion, designed to centralize marketing efforts for its portfolio of more than 300 disparate sites. More Viacom sites are on the way. Through their deal, Microsoft and Viacom also plan to create co-branded sites for events such as the MTV Video Music Awards and BET Awards, and share ad revenue generated by the sites.
Facing financial woes, online video provider Roo Group Wednesday announced a change in leadership and staff reductions. The company said JumpTV executive Kaleil Isaza Tuzman will take over as chief executive and chairman, replacing Robert Petty. Roo also announced the resignation of four independent members of its board of directors--Simon Bax, Stephen Palley, Scott Ackerman and Doug Chertok. In addition, Roo said it had cut 21% of its staff, or about 40 employees. Isaza Tuzman, who still serves as president and COO at international Internet TV broadcaster JumpTV in Dubai, will assume his new role on Jan. 9. Petty will remain with the company as part of a three-member board for now, which also includes Executive Director Robin Smyth. Before joining JumpTV, Isaza Tuzman ran the media-focused investment firm KPE in New York. He may be best-known, however, as the star of the 2001 documentary film Startup.com, which tracked the demise of his GovWorks.com startup. One of Isaza Tuzman's immediate goals at Roo is to bring its burn rate under control. The company powers video distribution and syndication on a network of more than 1,000 Web sites including properties owned by News Corp., a Roo investor. It also provides advertising services for clients, including media buying and planning. But revenue growth hasn't kept pace with increasing expenses. For the quarter ending Sept. 30, Roo had a net operating loss of $8.5 million on revenue of $3.4 million. For the first nine months of 2007, Roo posted a loss of $22 million on revenue of $10 million. It had $16.3 million in cash and cash equivalents. "Historically, the company has not demonstrated the kind of cost discipline that it should given its cash position," Isaza Tuzman said. "I think that Roo will be run a bit more like a traditional business that has a short time frame in which to become profitable." He did not rule out further layoffs, but said the company would also seek other ways to reduce expenses, including outsourcing more functions and instituting a "broad swath" of cost-control measures. In terms of business strategy, Isaza Tuzman said a key change would be for Roo to deliver live streams instead of focusing on providing video-on-demand for third-party sites. "Once we have live streaming, we have a much better chance of getting exclusive content," said Isaza Tuzman. "To the extent that we can show up with a broader menu of content products, we'll be in a stronger position to expand our distribution network." In addition to News Corp., other Roo content partners included mtvU, VNU and Agence France-Press. Isaza Tuzman said he did not expect News Corp., which took a 5% stake in Roo earlier this year, to invest further in the near term. However, Isaza Tuzman has the right to buy up to 51% of the company's preferred stock at 38 cents a share, and up to $5 million of its common stock at 16 cents a share. Roo closed Wednesday at 20 cents a share, down from a 52-week high of $4.49. Isaza Tuzman said four new board members will be appointed by January.
Get ready for the CSI-Rock Band video game mashup. Jerry Bruckheimer has inked an exclusive video game development deal with MTV Games. MTV Networks' gaming division has partnered with Bruckheimer to create new and original video games and launch a "game incubation studio"--marking the producer's first foray into video game development. Bruckheimer's gaming studio will house a team of creative, tech and marketing pros who will work with MTV Games staff on all phases of game development--from idea-generation and storytelling, to production, distribution and promotion. MTV's Executive Vice President of Programming Enterprises Jeff Yapp and Vice President of Electronic Games and Interactive Products Bob Picunko will oversee the relationship between the two divisions. Some industry observers view the deal as a major coup for MTV Games, because Bruckheimer's industry clout could make it easier for the network to obtain the rights to properties like the CSI franchise. Jonathan Epstein, president and CEO of in-game ad company DoubleFusion, said it makes sense for traditional media and game makers to step up integration efforts. "For a long time, people have wondered why the industry hasn't done a better job at harmonizing traditional media properties with video games," he said. "But the financial and creative incentives haven't been aligned for game companies in the way that they are with this." Epstein added that franchises like the "Lord Of The Rings" series showed the industry that collaboration could be done in a way that was beneficial for developers, movie studios and the gamers. "At the end of the day it's incumbent on everyone to make good games, and it works best when all the elements of success are in place," Epstein said. An MTV spokesperson declined to comment on possible ad tie-ins. "We're working on finding staff, and not even discussing what the ad integration would look like," the spokesperson said. "It's too premature to have any answers." Epstein agreed that it was too early to speculate about possible offerings, but said that Viacom's ability to distribute games across multiple mediums will ramp up the likelihood of Bruckheimer MTV Games becoming huge franchises. "Some advertisers buy games for reach, some buy for brand and some for both. And the games that come out of that studio will probably be able to support all of those goals," Epstein said.
From car races to comedy skits, Web videos are now twice as likely to be uploaded by boys than girls, according to the latest findings from the Pew Internet & American Life Project. As of late last year, 19% of teen boys reported uploading content to video-sharing sites like YouTube and other online venues, while just 10% of teen girls admitted to engaging in this pastime. That finding surprised researchers because teen girls are more active users of other social media like blogs and photo-sharing sites. "Girls appeared to own the field across the board the last time we did this study in 2004," said Amanda Lenhart, senior research specialist at the Pew Internet & American Life Project. "That's why the video findings were different than what we expected." Released on Wednesday, this latest Pew study was based on over 900 phone interviews of 12- to-17-year-olds. Not even older girls--a highly wired and active segment of the population, according to Pew--could compete with boys in this area, as 21% of older boys posted videos compared to 10% of older girls. This trend is relevant for many marketers exploring consumer-generated-media initiatives to engage consumers, and even save on their production budgets. A number of top brands, from Doritos to Heinz, have invited consumers to create their ads over the past year. Overall, from poetry to pictures, a full 39% of teens reported sharing their own artistic creations online by late last year, according to Pew. That's up from 33% in 2004. "All our data is suggesting a significant increase in online sharing," said Lenhart. "What's interesting, too, is how teens are using their creations as an opportunity to connect and communicate with other teens." Of particular note for marketers, many teens who create and share content live in affluent households. Thirty-eight percent of those teens live in a household with an income above $75,000, compared to 21% in households earning $30,000-$49,999 and 19% in households earning $50,000-$74,999. Just 13% of teens living in homes with incomes below $30,000 were creating and sharing content online by late last year. In the area of blogging, girls continue to surpass boys. Indeed, 35% of all online teen girls were blogging as of late last year, compared with 20% of online teen boys.
Google, Yahoo and Microsoft reached a $31.5 million agreement with the U.S. Attorney's office in St. Louis to settle allegations that they accepted ads from online gambling companies. The deal, announced Wednesday, calls for Microsoft to pay a $4.5 million fine and also donate $7.5 million to the International Center for Missing and Exploited Children. The company further agreed to provide $9 million in anti-gambling public service ads. Yahoo and Google will forfeit $3 million each, while Yahoo also will provide an additional $4.5 million in public service ads. The agreements resolve allegations that the three companies accepted online ads promoting gambling starting in 1997. None of the companies admitted wrongdoing as part of the settlements. Microsoft in a statement said it stopped accepting ads from sites associated with online gambling nearly four years ago. "We're pleased to have reached a mutually beneficial outcome with the U.S. attorney's office in St. Louis that will provide substantial resources to protect consumers from harmful Internet content," the company added. A Yahoo spokesperson also said the company stopped taking online gambling ads years ago. Google likewise said the company had stopped running such ads, which it described as "a very small part" of its pay-per-click AdWords business, in April 2004. The federal authorities contended that accepting ads promoting gambling violated the Federal Wire Wager Act and other laws. U.S. Attorney Catherine Hanaway in St. Louis said in a statement that her office had previously collected $40 million in fines stemming from illegal gambling. The public service ad campaigns are slated to begin early next year.
Web users who misspell the URL of sites they are trying to navigate to have a one in 14 chance of landing on a site operated by typo-squatters, according to a recent McAfee study. Such sites are often packed with text and display ads--and are typically a source of bad clicks and rising costs for advertisers. Typo-squatters are loosely defined as companies or individuals that register a misspelled domain name (like iophne.com instead of iphone.com) in the hopes of generating a profit. For the study, McAfee focused on typo-squatting sites that featured pay-per-click ads, but typo-squatters can also profit from display and video ads, the collection and sale of visitor information, and even by serving malicious programs to visitors. The software security giant found that gaming, airlines and mainstream media were the industry categories most saturated with typo-squatters. When it came to gaming sites, users who mistyped a URL would likely end up on a typo-squatter's page 14% of the time. Airline and mainstream media sites were neck-and-neck for the second-most saturated categories, at about 11% each. Shane Keats, a McAfee research analyst, said the saturation in those categories was not surprising. "Typo-squatters are in it to make money, so they set up shop wherever the most consumers are and what's hot at the moment," Keats said. "Gaming is hot, and the young gamer demographic probably misspells URLs more often than not." He added that with airline sites, typo-squatters sought to capitalize on the "shopping state of mind" that often accompanied searches for flight or vacation info. McAfee included more than 2700 branded sites in the study, and used data from sources like Yahoo, Nielsen, Hitwise, Google and Billboard, in addition to info from its own Site Advisor product, to come up with a set of "popular sites that everyone would visit," Keats said. The goal was to mimic average user behaviors. The research team generated multiple misspellings of the URLs, from swapping and omitting letters to removing the "dot" (i.e., wwwmicrosoft.com), and came up with nearly two million possible sites. And after visiting each of these sites, McAfee determined that the industry average for typo-squatting was 7.2%, with a 22% average for the top 100 sites. Keats said that industry research and McAfee's findings show that the problem has multiple sources, from the widespread practice of domain-name "tasting," to the fact that programs like Google's AdSense make it easy for typo-squatters to set up on-site ads. Domain registration companies like Sedo and GoDaddy often give site buyers a five-day grace period to test out a site without paying for the registration. Typo-squatters can then set up multiple sites using automatic registration, run them, and see which ones snag the most traffic--then cancel the laggards before the grace period is over. Information (29%) and Hitfarm (11%) were the top two domain registration companies that facilitated typo-squatting, as determined by the percentage of squatters parked by them. Meanwhile, McAfee's research found that Google-enabled ads showed up on 19% of all the suspected typo-squatter sites in the study, and Yahoo-enabled ads appeared on 4%.