Let me conflate three headlines from the last few days into one question, which I'll get to below:
1.What Americans Do Online: Social Media And Games Dominate
Activity
2. Ouch: AOL misses low earnings expectations
3.Facebook Advertisers Boost Spending 10-Fold, Sandberg Says
And now for the question: Are portals obsolete? Answering that will require digging a little bit deeper into all three headlines, but here's how the data stacks up:
The first
headline, from a Nielsen report on online activity, reveals the stunning fact that Americans are using social networks 43% more than they did only a year ago, spending 22.7% of monthly time
online time on social nets. Social networking is now the No. 1 online activity. Meanwhile, activity on portals dropped by 19%, to only 4.4% of time spent.Though it's been
true for some time that AOL's first name could just as well be "beleaguered," its missing of already-low expectations for the second quarter -- even as the overall online ad
economy rebounds -- is pretty troubling. Ad revenue dropped by 27% (!) compared to the second
quarter of last year (though the company said there was a slight sequential bounce because of improved sales of premium inventory). But still... 27%? What does that say about sites that
aren't inherently social? Not a very good thing, whether you're talking about the AOL site or the other sites it sells inventory on.Facebook, as a private company, doesn't
have to release revenue numbers, but COO Sheryl Sandberg told Bloomberg that the site's "biggest advertisers have boosted spending by at least 10-fold in the past year." That's stunning.
Some are speculating that Facebook's sales could reach $1.4 billion in 2010 -- last year's were estimated to be in the $700 million to $800 million range. Further, in the same Bloomberg
interview, Sandberg said that pricing on Facebook had remained stable, despite the constant increasing of inventory caused by 500 million users.No one has to stay up late
wondering where the money, and traffic, is going. It's crystal clear. But the details I've outlined don't even touch on a key point: that the way Nielsen measures activity is by site, not by what
people are doing within those sites. In other words, one reason the Nielsen data shows declines not only in portals, but also in email (28%) and instant messaging (15%) is because content sharing and
communication activity are now largely the province of social networks, so portals just aren't as necessary.
Now, you may find it unfair that I singled out AOHell as a point of comparison
-- but it's not as though Yahoo is ripping up the record books lately, either. While Facebook crows about its exponentially expanding ad revenue, what Yahoo terms "marketing services" revenue crept up
by 4% in the last quarter. That's much better than AOL, but it's nothing to email home about. It's no coincidence that in its earnings release, Yahoo touts the expansion of its relationship with
Facebook as one of its key business highlights.
So, are portals obsolete? Perhaps. Or maybe -- just maybe -- they are useful in the broader Internet ecosystem as content creation
engines, which can then provide fuel for the sharing activity that goes on within social networks.
Interestingly, in the same Bloomberg story, Facebook Director of Corporate
Development Vaughan Smith hints that Facebook wants to buy bigger companies (though I should note, he did not say anything about portals): "As we get bigger and our platform gets more stable, I fully
expect that we will be doing more significant acquisitions," he said. "This is working for us, and it's working for the people that we're acquiring."
So, for the fun of it, let me
rephrase the question: Is it time for a social network to buy a portal? Or do portals need social networks so much more than social networks need portals that it doesn't make sense?