Speculation has been brewing for weeks that a collaborative search deal between Microsoft and Yahoo is as good as done. Many believe it will happen in the next 24 hours. But a source inside Yahoo took it one step further Tuesday and told Online Media Daily, "We're excited that Microsoft will buy Yahoo's search business." This is, of course, counter to many reports saying a deal is in the final stages, making it sound like the mutual agreement everyone has been expecting ever since talks started back up. Word is the two companies have been negotiating the terms of the transaction for weeks, and lawyers have now stepped in to negotiate the final details, though it still doesn't mean it's a done deal. TechCrunch's Michael Arrington writes that for the most part negotiations have been over an upfront payment to Yahoo, speculated at one point to be in the $500 million to $1 billion range. The size and specifics of the payment upfront have been the sticking point, including whether it is a simple payment for the deal or a guarantee on future revenues. The Wall Street Journal reports that Bing will become the search engine on Yahoo searches. And Ad Age and BusinessWeek reports indicate that contrary to what was expected, Yahoo will not even receive any upfront payment. An announcement is expected Wednesday, barring any delays -- which, of course, at this point are to be expected.
Big online ad networks have an average profit margin of 45%, according to Jordan Rohan, a veteran Internet analyst and the founder and managing partner of Clearmeadow Partners -- and some are taking an even larger percentage. Speaking at MediaPost's OMMA Adnets conference in Los Angeles on Tuesday, Rohan pulled back the curtain on the inner workings of the ad network business, arming the audience with facts that might help media buyers negotiate lower prices -- "because if you know the person across the table is making 60% spread, wouldn't you offer them a little bit less?" As a preamble, Rohan noted that the core metrics for Internet advertising seem to be recovering after a trough at the end of last year. "Things like conversion rates, response rates, frankly really sucked in the late fourth quarter and early first quarter. They're a little bit more normal now." But this means that inflationary price pressure will return as well, raising rates that are already yielding substantial profits to the networks. Citing publicly available information, Rohan observed that "Burst.com has 47% margins on 116 million unique, ValueClick has 45% margins. Intermediaries receive about $0.45 cents every dollar -- you're paying them almost half of your spend." How can media buyers remove some of the fat from their ad network buys? First of all, they should be aware that there is a great deal of redundancy in the ad network business. Rohan said that TechCrunch had "27 pages of listings of ad networks that received more than $2 million of funding since 2005." Furthermore, many of the qualities (and quantities) that supposedly differentiate them, in fact, do not. "Anyone who's trying to tell you that reach is a key differentiator, you need to ask them 'what else?' It's much more complicated than that." Rohan dismissed other so-called differentiating factors like "efficiency" ("since the margins are so wide for the ad networks, wouldn't it be more efficient if you did it yourself?") and "diversification" ("it's a lot easier to achieve broad reach across many publisher outlets than they would have you believe"). On this last point, Rohan also took issue with the veracity of terms like "blind" and "transparent" networks. In the first case, publishers should realize that "It's not really blind -- just pose as a media buyer and ask the networks. Absolutely they advertise the publisher brand. It has to work that way, because at the sales force level, what else are they going to sell -- just say 'trust us?'" In the second case, "they're not totally transparent. Total transparency would mean that they transfer terabytes of data to you that you would have no idea what to do with." Rather, useful transparency (for media buyers) consists of data filtered to describe the context surrounding online conversions: "Typically you don't know where all the conversions came from. Which sites did they visit, how many impressions before they converted, these are the kinds of data you need." While ad network sales forces may object that these demands are too onerous, Rohan concluded: "Especially when you see the profit margins they're getting, you have a right to have much more transparency on their side of the business."
For the second time this month, Facebook has been sued by an advertiser for click fraud. This latest case, filed Monday by software marketer United ECM, alleges that Facebook charged marketers for "non-existent, fraudulent or invalid clicks." United ECM, which is seeking class-action status, brought suit in federal district court in San Jose. "Based on plaintiff's records, Facebook has overcharged plaintiff," United alleges in its complaint. United does not provide other details about the size of the discrepancy or how long it advertised on Facebook. The complaint extensively references a June 21 TechCrunch post about alleged click fraud on Facebook, which also appeared on The Washington Post's Web site. That item discussed recent marketer complaints made on the WickedFire forum. At the time, Facebook acknowledged that it had seen an increase in "suspicious clicks" and was rolling out a fix. The company also said it was identifying advertisers who had been affected and would credit their accounts. Earlier this month, sports site RootZoo sued Facebook for click fraud based on allegations that the site charged for clicks that never occurred. RootZoo, which advertised on Facebook from November of 2007 through June of 2008, said its found discrepancies between data provided by its own analytics programs and Facebook's numbers. RootZoo alleged that on one day in June, its software programs showed that 300 clicks had been generated by Facebook, but the company was charged for 804 clicks.
With its $483 million acquisition of Virgin Mobile USA, Sprint is poised to dominate the prepaid phone market and take on value-oriented competitors like TracFone Wireless, MetroPCS Communications and Leap Wireless. The deal, announced Tuesday, gives Sprint control of two of the biggest prepaid wireless brands in Boost Mobile and Virgin, with a total of more than 9 million customers combined. It leaves only TracFone, with nearly 12 million prepaid subscribers nationwide, as the major competitor for Sprint in the segment. Prepaid phones, offering low-cost calling plans without contracts, have become increasingly popular as cash-strapped consumers look for ways to save money amid the economic downturn. Research firm Gartner forecasts about 9 million prepaid net subscriber additions in 2009, up from 5.1 million in 2008. Boost Mobile earlier this year introduced a $50 monthly all-you-can-eat calling and data plan that brought in 764,000 net prepaid customers in the first quarter. TracFone, renting capacity on the Verizon Wireless network, earlier this month launched a rival unlimited service plan branded Straight Talk for $45 a month. "Now that Sprint controls both prepaid brands (Boost and Virgin Mobile), it can control offers and meet any offer TracFone's Straight Talk throws out," said William Ho, research director for wireless services at technology research firm Current Analysis. Even so, analysts don't necessarily expect the Virgin acquisition to trigger a new wireless price war among the major carriers. "What a lot of operators are doing is trying to deliver more value to subscribers in terms of what they can offer," said Tuong Nguyen, a principal analyst at Gartner covering the mobile industry. The major carriers generally offer unlimited calling and data plans, with some variations, for about $100. But the focus is still on higher-margin postpaid, or contract, customers to drive wireless revenue. Buying a bigger share of the prepaid market won't be so easy, either. "There aren't many substantial prepaid brands out there for the major carriers to buy," said Ho. "Verizon Wireless' immersion in the space is through its relationship (a 6 month trial) with TracFone through the Straight Talk brand." But he suggested the Sprint/Virgin Mobile deal could potentially reopen merger talks between regional players MetroPCS and Leap. MetroPCS in 2007 wound up withdrawing a proposed merger offer for Leap after saying the company had failed to engage the target company in meaningful negotiations. "This action may prompt better discussions between MetroPCS and Leap to get together earlier to meet this looming competitive threat," he said. Both companies have benefited in the last year from the upswing in prepaid subscribers. Whether Sprint will merge its own two prepaid brands seems unlikely for now, say analysts. They say both Boost and Virgin have their own followings, with the former shedding its initial focus on the urban youth audience to reach a broader value-oriented market, and Virgin still targeting young customers. Tracfone itself offers different brands including Straight Talk, Net10 and Safelink. "So there is precedence," said Ho.
By mixing brain-eating aliens with the prospect of free network programming, Hulu's marketing efforts appear to be paying off as 35% of Web users now say they have viewed such content online. By comparison, just 16% of Web users said they had watched or downloaded TV shows or movies in 2007, according to new data from the Pew Internet and American Life Project. "Efforts to lure viewers to these portals appear to be paying off," according to the report. The use of video-sharing sites currently outranks many other headline-snatching Internet pastimes among American adults, according to an April survey of some 2,253 adults by Princeton Survey Research International. Watching online videos on sites like YouTube is more prevalent than the use of social networking sites -- 46% of adult Internet users are active on such sites; podcast downloading -- 19% of Internet users do this; and the use of microblogging sites like Twitter -- 11% of Internet users do this. Young adults continue to lead the adoption curve in online video viewing. Nine in 10 Internet users ages 18-29 use video-sharing sites, up from 72% one year ago. On a typical day in 2009, 36% of young adult Internet users watched video on these sites, compared with just 30% in 2008. Online adults ages 30-49 also showed big gains over the past year; 67% now use video-sharing sites, up from 57% in 2008. Online video viewing is still far from being the norm among Internet users ages 50 and older; however, this segment of the Internet audience continues to grow each year. Among Internet users ages 50-64, 41% now say they watch video on sites like YouTube -- up from 34% in 2008. Likewise, 27% of wired seniors ages 65 and older now access video on these sites, compared with just 19% who were doing so at this time last year. Over the past year, the share of online women who visit video-sharing sites has grown substantially--from 46% in 2008 to 59% in the latest survey. That compares with 57% of male Internet users who reported online video viewing in 2008 and 65% in 2009. On a typical day, online men are still more likely to have watched a video on sites like YouTube; 23% now report doing so compared with just 15% of online women. The latest survey found that there are now no significant differences across income or education groups when looking at the use of video-sharing sites. Among those who have watched television shows and movies online, 23% have taken the next step to connect their computer to their TV screen to watch online video from the comfort of their couch. Online men are almost twice as likely to rearrange the living room in this regard; 29% of male viewers who watch TV and movies online have connected their computer to the television screen, compared with just 16% of online women. As stated in the Pew Internet Project's "Home Broadband Adoption 2009" report, overall, 22% of American adults say they have cut back on their cable or television services over the course of the past 12 months. That compares to just 9% who have cut back on their Internet service. Those who have canceled or cut back on cable and TV services are more likely to have "rerouted" their online video viewing to their television screen. Among this economizing group of online video viewers, 32% have connected their computer to their TV screen to watch Internet video. As Internet users become accustomed to regular on-demand video viewing online, many are choosing to watch from the comfort of their couch. Among those who watch TV shows or movies online, 23% say they have connected their computer to a television screen so they could view video from the Internet on their TV. That amounts to roughly 8% of all internet users.
Online media company Blip.tv announced the addition of several content partners on Tuesday, including YouTube, Vimeo, NBCU Local Media NY, and digital video player Roku. The startup assists independent content producers in a number of areas from hosting and distribution to ad monetization and promotion. The new partnership with YouTube enables show creators to send episodes directly from blip.tv to their YouTube account. Blip.tv, meanwhile, can traffic ads on shows syndicated to YouTube, with a revenue share back to content creators. "Our mission is to provide services of scale," said Mike Hudack, co-founder and CEO of Blip.tv. "We believe that we're building the next-generation television network." Blip.tv's new relationship with Roku enables owners of the company's digital video player to watch Blip.tv shows on their TV sets. The Blip.tv channel will be available later this fall for Roku customers. The deal with NBC means Blip.tv shows will air on WNBC's "NY Nonstop" broadcast channel in New York City. Despite the bright prospects for original video online, growth is proving to be elusive to some of Blip's rivals. Digital media startup Next New Networks, which develops micro-television networks online like Pulp Secret for comic book buffs, recently laid off what the company described as fewer than 10 employees. In addition to the new distribution partnerships announced today, Blip.tv already distributes to iTunes, AOL Video, MSN Video, Blinkx, Facebook, Twitter, Sony Bravia televisions with Bravia Internet Video Link, TiVo, Verizon FiOS Video On Demand, iPhones and the Internet Archive. In addition, Blip.tv's partnership with TiVo expands today, as show creators can now syndicate shows to the pioneering DVR service with just one click on the blip.tv dashboard. Using the new dashboard, creators can batch edit and reorder show episodes, reply to comments and friend requests from different Web sites directly from the dashboard, track video and advertising views and see, in near real-time, how much revenue their shows generate across every distribution channel in the blip.tv network. Shows hosted and distributed on Blip.tv currently reach some 22 million viewers, totaling more than 72 million video views per month.
While the amount of time North American consumers spend online has plateaued, the integration of their on- and off-line lives continues apace, according to new data from Forrester Research collected in its annual survey of 40,000 Americans. "People's online behaviors are becoming more integrated into their offline interactions," said Jackie Anderson, Forrester analyst and author of the new report. "Engagement with the online channel has deepened, as evidenced by the widespread adoption of such activities as social networking." The number of households that reported being online only grew slightly more than 3% between 2008 and 2009, while broadband adoption among Internet households grew slightly more than 6%, according to a survey conducted earlier this year of 53,668 U.S. and Canadian households and individuals ages 18 and older. This means that there are now almost 71 million households that report they have access to the abundance of activities on the Internet that are enabled by faster connection speeds. Despite more households having broadband access, most media behaviors remained relatively flat year-over-year. Overall, time spent with the Internet, for example, remained static at about 12 hours per week. While the time consumers were spending with the Internet grew considerably between 2004 and 2007, the maturation of users, as well as the ultimately limited amount of time consumers have to spend with media, has resulted in a tapering of that growth, according to Anderson. While many of the early-stage online activities like email and search are nearing saturation, there is a significant uptake of more advanced online activities like social networking and online media use. "Instead of meandering aimlessly in search of content, users can take advantage of tools like Google, companies' advertising of their Web pages, or even banner ads to direct them to content that interests them," Anderson said. As users become more comfortable with the Internet, they also develop specific behaviors and interests, many of which mirror those in the offline world. For example, while one-quarter of online consumers are watching full-length TV shows on the Internet, these same consumers are still spending 13 hours a week watching TV offline. Functions such as email and search are the mainstays of online activities. Regardless of what else they log on to do, most consumers will be engaging in these activities at some point in their time online. In response, companies continue to funnel a majority of their online marketing dollars into search engine optimization and email marketing campaigns. Signaling the dawn of the mobile age, the percent of consumers sending or receiving picture messages jumped from 20% in 2008 to 29% in 2009. "These somewhat entry-level activities illustrate that consumers are gaining comfort with the additional options that mobile phones have to offer," said Anderson. "As the services improve, growth will follow." As consumers' online behavior continues to mature, Forrester suggests keeping an eye several key demographics and trend-setters. For one, even as better economic times emerge, cost-conscious consumers should be a top-priority for most marketers. Indeed, while this group generally puts price over brand, its members hold more than $56 billion in annual online purchasing power. Another group, brand loyalists, spend an average of nearly 18 hours online per week, but are not as inclined to spend their time on social networks, according to Forrester. "This can be a little disheartening, considering that these consumers are likely to be great advocates for a brand," said Anderson. However, brand loyalists can be found engaging through more traditional online channels. They use the Internet to find content on things they're passionate about, whether it's their favorite hobby or your brand. In fact, 30% read about their favorite hobbies online at least once a week. Understanding the full profile of brand loyalists will ensure that marketers know where to find them, Forrester suggests.
Making the best use of ad networks has become difficult. Ad-targeting technology to improve efficiencies has lagged behind use, and daisy chaining and verification processes have been anything but perfect. When the topic at the OMMA AdNets conference, The Buyers' Market: Vetting the Nets, in Los Angeles Tuesday turned toward how to handle top networks that daisy chain, or re-broker inventory to expand the reach of the ad, the conversation got heated. The clients that Universal McCann works with have pretty hefty goals. And to reach those goals, daisy chaining or re-brokering will likely occur. "I'm okay with that as long as it's not through a thousand different people, so my effective CPM or CPC is bid up high," says Sarah Potemkin, group communications director, Universal McCann. "I'm not okay when it gets daisy chained into that land of fraudulent clicks, impressions and spyware. That's not cool." Potemkin says Universal McCann has a three-strikes-and-you're-out policy for ad networks. Ad networks can re-broker, but "you're done" if the ad traffics through one of the domains the agency doesn't want to broker through. Verifying campaigns and audiences have become important as advertisers demand proof of success. This will prompt companies to create and introduce more innovative tools to monitor performance. Agency.com VP Analysis Director Jeff Burger says it's not rocket science to verify a client and campaign. "We spend millions of our clients' dollars on media and agency fees," he says. "Then we stuff it in an envelope, shove it out the door, say 'go with God,' and see what happens." When you start embedding campaign verification tools with third-party ad servers, paid search and other tools, it becomes complex. The stack keeps building with every campaign, Burger says. It becomes one more technology to introduce to clients. Campaign verification is important, but it could create an additional cost, which we don't want to see in the online business, says Jitka Petrickova, group director, media, Organic. "On the other hand, technology is moving so fast that we can start building the system and it will become available by the time we get there," she says. "It's important, as we move from buying the inventory, to buying the audience, that the planners optimize campaigns to not manage CPUs against the reach, but rather the ROI."
Almost two-thirds of mobile content consumers use their handheld devices to act on advertising in other media like out-of-home ads and digital videos, especially while on the go, according to new research from Starcom USA. That's among the key findings from the second phase of the agency's ongoing study of mobile consumer behavior and attitudes toward mobile advertising. Starcom released an initial set of research findings in January 2008 based on a survey of both light and heavy users of mobile data in Chicago, Houston, New York and San Francisco. Among the earlier results was that while people are not averse to advertising on mobile devices, they object to the lack of relevant ads. Working with comScore on its latest round of mobile research, Starcom found 63% of mobile data subscribers are using mobile phones as a way to access ads or offers in other media. "What's happening is the mobile device is becoming a gateway to further dive into brands or advertising to get more information about products being promoted," said Brandon Starkoff, senior vice president and mobile activation director at Starcom. That can range from billboard ads featuring mobile short codes to in-store promotions to print and TV advertising. A study by the Mobile Marketing Association earlier this year showed that the Internet is the medium that advertisers are most often integrating mobile efforts with, at 70%. Trade shows and other promotional events were the next most popular, at 36%. The latest Starcom research also found mobile data users are most likely to act on mobile ads for higher-end product categories, like automotive, electronics and computers. That wasn't so surprising given that mobile data users tend to be more sophisticated about technology and more affluent than average consumers. Because mobile fits seamlessly into consumers' daily activities, Starcom advises marketers to develop ad strategies that tie into their behavior, especially through location-based services. "So if someone is searching for restaurants in a certain area you can have an ad pop up for a restaurant or bar in that location," said Starkoff. Such location- and intention-based advertising is far more effective than the more common SMS text ad messages which mobile users find invasive. Starkoff said the agency has worked with client Research in Motion on a campaign that shows ads based on what type of device someone is using. An existing BlackBerry user might see an ad for an upgraded phone and showing nearby retail locations, while a Palm user might get an ad encouraging them to switch devices. "We've already started to apple these learnings," said Starkoff, who added that mobile spending by clients had increased despite the economic downturn. "Overall as an agency were seeing a really strong level of growth in spending in mobile and a lot of clients doing more testing," he said. "They're thinking of mobile as part of their overall plans as opposed to a separate line item." He acknowledged that brands continue to vary widely in mobile budgets "from zero to $3 million," with technology and automotive clients tending to spend more than consumer packaged goods and financial services advertisers.
Discovery Communications, the parent company of the Discovery Channel, and Chinese search engine Baidu have inked a deal to jointly produce a Web site focused on science, technology, space, natural history, engineering, paleontology, archaeology, history and culture. The announcement was made by Ren Xuyang, VP of marketing and business Development, Baidu; and Tom Keaveny, EVP and managing director at Discovery Networks Asia-Pacific. Discovery Networks International President and CEO Greg Ricca believes the deal with Baidu helps Discovery reach into a key market to give the company a stronger footprint in China. The agreement expands Discovery's presence in China, where the company first began broadcasting in 1998 with several shows featuring content from across its networks. These include Discovery Channel, Animal Planet, Discovery Travel & Living, Discovery Home and Health and Discovery Science. Furthermore, Discovery Channel is available as a 24-hour channel in hotels and foreign compounds throughout China. Baidu will take responsibility for the management of the Web site, dubbed discovery.baidu.com, while Discovery provides the content. Discovery will translate the custom content for the Chinese market, and advertising will support the site. Discovery and Baidu will share the revenue from third-party advertising sales. Both parties intend to continue developing projects together that will facilitate the sharing of knowledge and information, including in primary and middle schools throughout China. The fastest-growing Chinese online platform, Baidu has already captured a 73.2% market share for search requests. In 2008, approximately 246 million users in China utilized search engines, with the total number of requests for Web page searches exceeding 150 billion. In 2009, it is estimated that the number of search engine users in China will exceed 300 million.