Paying for Online: How Would This Work?

August 17, 2014

I read “The Internet’s Original Sin.” Talk about an interesting idea. Quite an insight: Pay for online access. So original. I believe the write up is confident in this radical concept.

Here is a passage I noted. The author recounts his experience at Tripod.com. He recalls:

At the end of the day, the business model that got us funded was advertising. The model that got us acquired was analyzing users’ personal homepages so we could better target ads to them. Along the way, we ended up creating one of the most hated tools in the advertiser’s toolkit: the pop-up ad. It was a way to associate an ad with a user’s page without putting it directly on the page, which advertisers worried would imply an association between their brand and the page’s content. Specifically, we came up with it when a major car company freaked out that they’d bought a banner ad on a page that celebrated anal sex. I wrote the code to launch the window and run an ad in it. I’m sorry. Our intentions were good.

Intentions that were good. Hmmm. Flash forward a lifetime in the zippy world of the Internet. I learn:

I have come to believe that advertising is the original sin of the web. The fallen state of our Internet is a direct, if unintentional, consequence of choosing advertising as the default model to support online content and services. Through successive rounds of innovation and investor story time, we’ve trained Internet users to expect that everything they say and do online will be aggregated into profiles (which they cannot review, challenge, or change) that shape both what ads and what content they see.

So what’s the fix?

One simple way forward is to charge for services and protect users’ privacy…Users will pay for services that they love.

Okay.

I recall that the for fee online services charged their users for information. This worked reasonably well, but the number of customers was modest. Dialog Information Services was the Big Dog. LexisNexis had the law firms whose employees would spend when clients paid the bill. SDC Orbit survived with some must have specialty files. Similarly there was success in a few other commercial shops.

But these services reached only those who met certain criteria:

  1. Money to spend
  2. Interest/motivation to learn the ins and outs of the systems
  3. Expertise to figure out what the systems were outputting.

Consumer services did come along, but these did not capture the markets which the innovators sought. Remember CompuServe? The Source? Prodigy? Dialcom?

Charging for information, in my experience, trims the number of people using a service significantly. My rule of thumb is that only three to five percent of a free service’s users will pay for the service. Those who have to use the for fee service look for ways of reducing the cost of online access.

I am confident that the whiz kids at the Atlantic have better data. Their approach might be able to show the old, panting dogs like Cambridge Scientific (Dialog), Reed Elsevier (LexisNexis), Dow Jones (Factiva), and Ebsco (bunches of confusingly named services) how to make online information generate substantial dough. Thomson Reuters and Bloomberg have a formula, but the general population is not too keen on these services.

Good enough is the cultural hook today. If one has to pay for “better”, I think there will be quite a few innovators who go back to business models that produce substantial revenue.

Like it or not, advertising is the go to solution. Oh, don’t forget to subscribe to the Atlantic in hard copy. You don’t get the good stuff for free. What’s ad supported are analyses that call for Google to walk away from $60-$65 billion in revenue this year.

I bet that is an idea that Messrs Brin and Page will embrace.

Stephen E Arnold, August 17, 2014

Xoogler Under Pressure: The Yahoo Soap Opera Renews for Another Quarter

July 16, 2014

When Chris Kitze and I started The Point (Top 5% of the Internet), we admired the Yahoo Directory. Our goal was much narrowed than Yahoo’s. We focused on putting Web sites in the Point directory that meet our criteria for family friendly and young student friendly sites. That was in 1993 or 1994. The site was a hit and we sold the company to CMGI, and the Point ended up at Lycos. That deal was pretty successful for me, and I learned three things in the wild and wooly, pre crash Internet era 20 years ago.

First, selling ads was difficult. In the early days, there were no solid guidelines for how big an ad could be. Blinking and flashing were annoying, but there was not user backlash with these lame attempts to attract attention. Proving from log data who clicked and other details required scripts and machine resources to grind through the huge files our Sparcs happily pumped out. I learned that ads were indeed good money. But the 1993 Internet required our team to be the digital equivalent of Roman trireme rowers. I don’t recall much time off, and it was hard work.

Selling ads is hard work. The landscape is altered by the process. There’s no guarantee there’s gold in them thar riverbeds. Source: http://bit.ly/1wuH5ef

Second, advertisers were reluctant to pay up front. A problem Google solved with its “account” method. We were stupid. We sent an invoice, the usage data, and waited for the check to come in the mail. Basic lesson: collecting for any online service can be difficult. When times are tough, advertisers shuffle priorities and our invoices filtered to the bottom of the stack. Collections were painful.

Third, making pages in 1993 was a time consuming affair. We experimented with many technologies, toolkits, and even systems like the incredibly sluggish Cold Fusion were tested in 1995. We learned that the best way to create Web pages in the early 90s was to code ‘em up, shake ‘em out, and let ‘em loose. I repeatedly asked myself, “Why did I agree to put resources into a family friendly online service?”

I read two “real” news stories this morning. Neither has been connected in the blog posts and news streams flowing into my Oversight service. Let me point to each and then offer a handful of observations. I would suggest you keep the three factoids I learned from the Point (Top 5% of the Internet) start up.

The first item is “Yahoo Misses In Q2 With Revenue Of $1.04B, EPS Of $0.37.” At a time when newspapers and magazines are gasping for oxygen, Yahoo seems to have no turbocharger to activate. One Alibaba follows its dream, Yahoo has only its in hand properties and acquisition opportunities to produce another Klondike Gold Rush. The write up said:

Yahoo reported its second-quarter financial performance, including revenue (excluding traffic acquisition costs, or TAC) of $1.04 billion and non-GAAP earnings per share of $0.37. Revenue including TAC was $1.08. Analysts had expected the company to earn $0.38 on revenue of ex-TAC of $1.08 billion.

The quote to note about Yahoo earnings is:

The company stated in its release that revenue growth is its “top priority,” and that it is “not satisfied with [its] Q2 results” in that context.

The second reports presents some good news for Microsoft. True, the write up does not mention the impending layoffs or the dismal device market share that this former monopoly now has. “Microsoft to Surpass Yahoo in Global Digital Ad Market Share This Year.”

Unlike some “experts” I view information about online advertising with considerable skepticism. I don’t think the individual numbers presented an “facts” are important. What struck me as important is this statement:

Yahoo’s push to maintain its position as a top global ad seller will take another hit in 2014, according to new projections from eMarketer. Though Yahoo’s ad revenues will be back in the black this year, increasing its global digital ad revenues by 2.7% after a decline of 2.1% in 2013 to reach $3.53 billion, the company’s share of the $140.15 billion digital advertising market will fall from 2.86% to 2.52%.

Microsoft—believe it or not—appears to be doing better than Yahoo in the ad battle.

The big point in my opinion is that Yahoo has racked up falling ad revenue and will continue to lost online advertising market share, not because other vendors like Microsoft are doing a bang up job. I seem to recall that the Xoogler running Yahoo saw only happy faces in the revenue a few months ago. Like IBM’s slowing arcing down numbers, Yahoo appears to be riding a fading wave.

Several observations:

  1. Xooglers do not automatically generate money. In fact, Google’s revenue comes from its magical online search results ad system. (Anyone remember GoTo.com and Overture?) I bet Yahoo does.
  2. Selling online advertising is as difficult today as it was in the era of The Point (Top 5% of the Internet). Google’s approach relies on advertisers who will deposit money to be spent, so some of the collection hassle is ameliorated.
  3. Yahoo has been in turn around mode for a long time. Maybe AOL and Yahoo should get married and produce fat, happy revenue.

Now about the Yahoo search system. I find the results less than satisfying. I can’t figure out how to look at Louisville-related news. I continue to have difficulty logging into my for fee Yahoo mail account when I am out of the country. I suppose I am the Lone Ranger in my view of Yahoo. That’s okay but I see declines as due to more users than myself.

Stephen E Arnold, July 16, 2014

The Rise of Internet Ad Revenue Continues

May 16, 2014

The article titled US Internet Ad Revenue Surpasses Broadcast on SFGate announced the tipping point for TV and print advertising has arrived. This may not come as a huge surprise to Generations X and Y who have watched with increasing annoyance as ads increased on internet videos across the board. Gone are the days when a Hulu-aired episode had just one commercial, or a Youtube video began right away, rather than pausing for an ad. The article states,

“For the first time, U.S. Internet advertising revenue has surpassed that of broadcast television thanks to sharp growth in mobile and digital video ads.

That’s according to a report from the Interactive Advertising Bureau, which said Thursday that Internet advertising revenue rose 17 percent to a record $42.8 billion in 2013. Broadcast TV ad revenue, in comparison, was $40.1 billion in 2013.

Mobile advertising revenue more than doubled to $7.1 billion from $3.4 billion in 2012…”

The article credits the alteration to companies like Google, Twitter and Facebook and their augmented attendance to mobile ads. The survey was conducted by PricewaterhouseCoopers. The article does not comment on the future of Internet advertising revenue, but it is easy to imagine that the numbers will only continue to rise.

Chelsea Kerwin, May 16, 2014

Sponsored by ArnoldIT.com, developer of Augmentext

Fetopolis Find Fault with Facebook Marketing

March 16, 2014

The article titled This $US600,000 Facebook Ad Disaster Is A Warning Small Business Owners on Business Insider Australia tells the story of Kapur Brar, CEO of small business Fetopolis. Fetopolis is a compendium of online fashion magazines with a healthy online following. Until recently, Brar relied heavily on marketing through Facebook, spending $100,000 a day. The article explains why Brar has “fallen out of love with Facebook,”

“He discovered…that his Facebook fanbase was becoming polluted with thousands of fake likes from bogus accounts. He can no longer tell the difference between his real fans and the fake ones. Many appear fake because the users have so few friends, are based in developing countries, or have generic profile pictures. At one point, he had a budget of more than $US600,000 for Facebook ad campaigns, he tells us. Now he believes those ads were a waste of time.”

Strangely, this story isn’t really being told, in spite of Facebook having 25 million small businesses using Facebook for marketing at varying levels of sophistication.

Did the purchase of WhatsApp cause this interesting story to slip into oblivion? The article offers some defense of Facebook- the majority of customers are happy, the payment of Brar’s bill is disputed, and yet it is also true that Facebook does not allow for third party “click audits,” which is standard practice.

Chelsea Kerwin, March 16, 2014

Sponsored by ArnoldIT.com, developer of Augmentext

Inflation or Desperation: Pricing Free Online Services

March 14, 2014

Yep, it’s illogical. How can a free online service get a price tag. Easy as Amazon’s boosting the fee for Prime and Facebook’s cooking up whizzy new types of advertising. But the big news is tucked between the lines of “Desktop Search to Decline $1.4 Billion as Google Users Shift to Mobile.”

Here’s a tasty factoid:

In the scope of Google’s overall ad revenues, mobile search is gaining significant share. Up from 19.4% in 2013, mobile search will comprise an estimated 26.7% of the company’s total ad revenues this year. Desktop search declined to 63.0% of Google’s ad revenues in 2013, having already fallen from 72.7% in 2012.

You may have noticed how lousy the search results are from Bing, Google, and Yahoo. Even the metasearch engines are struggling. Just run some queries on Ixquick.com or DuckDuckGo.com and do some results comparisons.

Because most of the world’s Internet users rely on Google to deliver comprehensive and accurate results, users are unaware of the information that is not easily findable. Investigators and professional researchers are increasingly aware that finding information is getting harder, a log harder if our research is on the beam.

As users shift from desktops to mobile the GoTo/Overture advertising model loses efficiency. There are a number of reasons, including the difficulty of entering queries while riding a crowded bus to the small screens to the dorky big type interfaces that are gaining popularity to the need to provide a brain dead single / limited function app to help a person locate pizza.

For Google and other desktop centric companies, the shift has implications for advertising revenue. Smaller screens and changing behavior means the old GoTo / Overture model won’t work. The impact on traditional Web sites is not good. Here’s a report for a company that did the search engine optimization thing, the redesign thing, and the new marketing “experts” thing. Looks grim, doesn’t it.

image

I won’t name the owner of this set of red arrows, but you can check out your own Web site and blog usage stats and compare your “performance” to this outfit’s.

Read more

Google Is Yesterday: Apps, Not Search, the Future

March 10, 2014

I read “Google Searches for role in App Age.” This is a for fee item, so you will need to pony up money or buy a copy of the dead tree edition of the March 10, 2014, Wall Street Journal. If you have a WSJ account, here’s your link, gentle reader, www.wsj.com and click on the “Top Stories in Tech” by Rolfe Winkler. You may want to try this link too. Great name, Rolfe.

The point of the write up for those who have not been watching Google with Murdochesque eye wear is that mobile users use apps. Mobile users are not too hip to the Web search thing.

According the the write up:

On a phone, links to apps often are more useful than Web links. The apps may be tuned for the smaller screen, and tap features of the phone, like knowing a user’s location, to provide more relevant information: the Open Table app can automatically show restaurants nearby.

Be still my heart. The write up points out:

Speaking at a conference last week, Nikesh Arora, Google’s chief business officer, said that while mobile ads are less lucrative than desktop ones today, he believes in the long-term mobile ad revenue “will be a multiple” of desktop ads due to all the extra information smartphones can capture about their users.

Was the WSJ expecting Google to watch as Facebook wormed into the global social app opportunity?

Several observations:

  1. Google is based on doing a better job of Web search than Fast Search & Transfer did
  2. Google is based on an idea developed by GoTo, implemented by Overture, and a once opportunity rich play by Yahoo
  3. The Google train has been chugging down the Web search path for more than a decade. Trains age.

Just as the automobile put the nose lock on trains, Google is working overtime to make sure its momentum does not abate. But an airplane-like breakthrough may be looming.

Will Google be able to generate revenue from its many side ventures so that top line revenue does not suffer erosion? Will Google be able to deal with a business model built on the missteps of Alta Vista, Fast Search’s vision that enterprise search was its future, and Yahoo’s stumbles?

These are interesting questions. Just as Amazon struggles to put lipstick on the pig of its soaring costs, Google seems to be frantically rummaging through its cosmetics drawer and “searching” for a plastic surgeon to make sure it is one compelling creature.

Barges, balloons, bio-engineering—perhaps these are the future of Google or not. Even the WSJ closes its somewhat shallow write up with a nod to Facebook’s “mobile app ads for engagement.” No matter. Search is not dead, but it is increasingly marginalized.

Stephen E Arnold, March 10, 2014

Branded Content at the New York Times

January 13, 2014

I did not think I would see the day. Bloomberg Businessweek informs us that the “New York Times Grudgingly Embraces Branded Content.” Though other news outfits have adopted the controversial money-making trend, it somehow seemed like the Times would prefer to shutter its doors before blurring the line between articles and ads. I guess not.

Reporter Felix Gillette describes the sneaky marketing trend:

“Branded content is a newish form of digital advertising in which marketers create story-like units that live among a publisher’s editorial products and share the same underlying aesthetic, tone, and technology. In recent years a growing number of online publishers and advertisers have embraced the change, in part because it allows brands to create ideas and messages specifically tailored for an audience, the sort of content that can live at the heart—rather than the periphery—of the publication. Brands are willing to pay higher rates for the opportunity to do just that. The downside of the format is that it comes with some risk of blurring the line between a publisher’s editorial voice and a brand’s—and, on occasion, has become the source of hand-wringing among journalistic watchdogs and ethicists who worry it can undermine integrity.”

Well, yes, those are the concerns. In an unenthusiastic memo to employees, the paper’s publisher insists it will be clear which content is advertising and which is real reporting. The branded-content pages will, after all, be surrounded by a blue border. See, it’s the essence of clarity. What could possibly go wrong?

Cynthia Murrell, January 13, 2014

Sponsored by ArnoldIT.com, developer of Augmentext

Google Ad Viewability Initiative Taking Off

December 24, 2013

An article posted on Business Insider titled Google Will Now Only Charge For Ads That People Can Actually See commented that this adjustment in advertisement policy by Google. The high number of online ads that aren’t being seen (high as in half) are often hidden at the bottom of the page or under other content.

The article spells out the changes:

“Google said its customers will now be able to make real-time display ad purchases that only include impressions that meet the Interactive Advertising Bureau’s viewability standard. The IAB designates a viewable ad as any impression where at least of half of the ad is viewable on the page for one second or more.”

Google’s viewability initiative also included the announcement of the sale of reservable inventory in April. They are the first large-scale ad network to take viewability into consideration, and will most likely be able to charge higher prices for their ad space. However, viewability “has been a controversial topic in online advertising” especially due to the lack of an industry standard for a viewable impression. This has not prevented the sale of ads. Of course it remains to be seen how revenue will be made up elsewhere.

Chelsea Kerwin, December 24, 2013

Sponsored by ArnoldIT.com, developer of Augmentext

Advice for Adwords

December 6, 2013

According to Eric Liu, chief custodial technician at Rocket Lease, people are using Google Adwords wrong. He offers advice on how to correctly use the advertising tool in his blog post: “How To Bid For CPC Campaigns (aka “Stop Doing Adwords Wrong”). Liu states that most Adwords advice suggest users play the guessing game with bidding. By grouping keywords together and applying a consistent bidding strategy users can rely on computers to manage their ad campaigns to make the biggest profit.

Liu calculated how to maximize profits with an algebraic formula and illustrates with sample scenarios. The formula is a bit complex to follow, but play around with few numbers and it should work out.

Liu notes that his formula is entirely experimental:

“It’s important to note again that you can’t look up the information to set your CPC bids or calculate it theoretically — it has to be determined experimentally. There’s nothing you can do to just start with the perfect campaign. You will make your best guesses, experiment, and then use the feedback to estimate the shape of the curve. That means you will start by running suboptimal campaigns, then use the information to get closer to optimal. The better your initial guesses, the less money you’ll spend in the “curve discovery/estimation” part of the process.”

Who says you do not use math outside of high school? By applying Liu’s formula you may be able to make a little more money out of your Web site’s ads and lower overhead costs.

Whitney Grace, December 06, 2013

Sponsored by ArnoldIT.com, developer of Augmentext

Google Surpasses Print Periodicals in Ad Revenue

December 3, 2013

Google has passed an ad-revenue milestone, Business Insider reveals in, “Google Is Now Bigger than Both the Magazine and Newspaper Industries.” Writer Jim Edwards tells us that Google is expected to rake in about $60 billion this year, mostly from advertising. The article includes a chart which compares Google’s U.S.-based ad revenue to that of U.S. magazines and newspapers since 2004. The graph shows Google pulling ahead last year.

Edwards writes:

“In part this is because the print media has suffered such a precipitous decline. But note that Google’s last full year results from 2012 are approaching the historic maximum that all magazines combined achieved back in 2007 before the crash. It’s won’t be long now, in other words, before Google not only eclipses magazines but also becomes bigger than magazines ever were — even when there was no Internet to compete with. That’s staggering.”

Is it? Personally, I don’t find this revelation that surprising, though the chart is worth a look if only to examine how the fortunes of newspapers have fallen over the last nine years. Is it really so surprising that Google is on track to dominate the information field?

Cynthia Murrell, December 03, 2013

Sponsored by ArnoldIT.com, developer of Augmentext

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