Facebook could damage your wealth!

The growth of social networks such as Facebook, MySpace and Bebo has been extraordinary and represents the one of the defining services of the Web 2.0 user driven internet. With an estimated 500 million plus members of social networking sites and driving an estimated 8% of worldwide web traffic, the sector is clearly a major driver of web activity.

However, if you thought your MySpace or Facebook page is just a bit of fun and a great way to stay in touch with your friends, you also need to be aware of the far reaching aspects of the information that you place in your profile will have on other aspects of your life. Particularly these days, as it is possible for employers to check peoples profiles to get a better idea of the individual they might be taking on and if they see something they don’t like in your personal life it may cast a shadow over your professional life. For example, I know of a colleague who was interviewing for a nanny for her child and checked them out on Facebook. Whereas from the interview, the young lady seemed like the perfect candidate, her Facebook profile revealed a whole other side of her lifestyle that wasn’t particularly compatible with the type of person that anyone might want looking after their child. This maybe one of the more trivial examples, however, a more serious one was a recent case reported on the BBC website. A senior police officer lost out on the chance to become a Chief Inspector after he was found to have posted very personal information on the internet. The revealing information on his Facebook account was considered to have been very damaging due to his profession and resulted in him losing the opportunity to be considered for promotion.

So next time you are posting up those photos of the riotous night out, just take a minute to consider what your employer may think of the picture of you in a less than complimentary position.

Time to cut the Internet Bureaucracy.

I am frequently struck by how Internet businesses seem to grow staff numbers on an exponential basis. Employing new people - preferably MBA types and under 35 - in endless non-jobs with little or no impact on the creation of new and exciting areas.  

Yahoo! are a interesting example.  Anybody who comes into contact with that organisation can see that at least 50% of their 15,000 staff could be made redundant and the underlying business would not suffer.  They are hugely overmanned and it seems that the management is either too inexperienced to see how to change things or view a the number of direct reports relates to the bonus they can demand.

Take Google, they now employ over 20,000 people worldwide.  The only business line that is really driving the revenue of the business is the original search business and the associated AdSense revenue.  Today the product is much the same and just as brilliant as it was when I met with Brin and Page when the company had just 7 employees back in 1999.  I suspect that percentage of today's 20,000 employees directly involved in that search and AdSense business line is fewer than 10% of the total workforce.  A friend of mine was telling me about a meeting he recently had with Google.  A recently appointed Director spent 45 minutes trying to explain precisely what her roles and responsibilities were within the company.  Anyone who takes 45 minutes to communicate such a basic aspect of their job is probably trying to desperately cover up the fact it is a non-job.  The same stories can be found in Yahoo!, Microsoft, and eBay.

The major Internet business have frequently fallen into the same trap that ultimately caused the demise of major telcos, steel companies and car manufactures back in the 1980s.  They failed to understand their markets and had grown into huge bureaucracies. This recession maybe a good time for the major Internet businesses to look critically at their businesses and start to cut the deadwood and also look to fund the brightest of their exiting alumni to start new businesses and generate real dividends.

Friends Reunited - is it worth just £20M?

Following on from my blog of yesterday on the potential for a sale by ITV of Friends Reunited, I note that JP Morgan is suggesting that the business is worth  just two times Friends Reunited revenues of £18.9 million, making the business worth approximately £38 million on paper.  Well valuations are calculated in many different ways, whether it is a multiple of turnover as in the case above or as a multiple of earnings or profits. When I looked at the Friends Reunited books back in 2003, the percentage profit was phenomenal, in the region of 80% plus, if my memory serves.  This was due to the fact that costs were very tightly controlled amongst the then 10 employees including the founders, and the low cost of the infrastructure.  It would be interesting to know how the cost base has changed since 2003 after Mr Murphy's involvement and since the unique user numbers are well down on three years ago when it was sold to ITV. My belief is that Friends Reunited still has a very strong web and non-web brand recognition and has the potential to make a very strong financial return whoever decides to buy it, if they are able to give the management the freedom to develop the business.  It has been suggested that Friends Reunited are in the same space as MySpace or Facebook.   Well it is worth noting that neither of these companies are profitable yet and keep generating huge losses whilst having multiple billion dollar price tags bandied about.

Friends Reunited is a very sound business and has extended well into the genealogy and dating markets.  It has the potential to make profitable business and out live some of its more flashy rivals and maybe even ITV!

As for JP Morgans, well they announced a $1.3 billion loss in January 2008.  I wonder what they will come out at the end of the credit crunch and given that they claim to have avoided the worst of the problems seen elsewhere.

Friends Reunited would probably make a very good fit for Barry Diller's IAC, which also owns Ticketmaster and Ask.com and continues to acquire assets being knocked down and sold by less able corporations.  Just as long as they let the Friends Management run the show, the business model could make an excellent return for them.  At £20 million Friends Reunited would be a steal.

Has Rich Media Advertising come of age?

Following on my comments on the future of ITV and their multimedia future post Friends Reunited, I thought I might take a look at the state of rich media advertising and how it is developing.

On a recent assignment I was tasked to develop a revenue model that would support a free-to-air Internet TV service.  Most of the models in place utilised versions of Google’s Adsense, but I felt that the user would be unlikely to click on such ads and so I started to look at rich media advertising such as ad-rollers of various types such as this pre-roller ad for the Jaguar XF.

Future revenue will be as a result of a user driven addressable advertising model whereby income is derived from the advertising model powering the Internet today.  Rich media addressable advertising is a new class of advertising currently being deployed across the internet and it makes extensive use of video traditionally associated with the TV and Cinema advertising and extends the capability of the internet to enable users to interact with the advert offering numerous opportunities for advertisers to extend the contact with an interested party.

Rich media advertising provides addressable, accountable television advertising solutions that enable the delivery of targeted messages and engage viewers through interactivity. This advertising solution improves the overall effectiveness of advertising campaigns while providing true accountability through real-time reach measurement.

The New Advertising Model

Consider the advertising model from simple pre-roller advertisements which are shown whilst applications are loading and simple pay per click advertising for the purposes of building the revenue model.  Pricing for rich media vary, but ads such as a 20 second pre-roller ad is approximately £12.50 CPM. 

The IPA TouchPoints Survey in July 2008 indicated that the current consumer usage of broadband access is 34 hours per month in the UK per subscriber and according to a May 2008 Report from Forrester, typical online video viewing is achieving average levels of 4 hours per month per user.  Over a 4 hour period a Internet/TV viewer is forecast to view ten 20 second pre rollers.  For 100,000 users, this would equate to £50,000 in advertising income per week.  Pre-rollers are the cheapest form of video rich media ads available.  Longer 30s and 60s linear ads, mid-rollers and end rollers generate higher levels of CPM income.  In the US, Microsoft is experimenting with running 60s mid-roller ad breaks for every 15 minutes of video viewed.  High advertising rates are being generated by the likes of Navic Networks (recently acquired by Microsoft) who are providing a range of interactive TV ads powered by web capabilities enabling users to respond to ads and make requests and provide feedback on content.  Internet/TV advertising pricing is currently at a higher level than corresponding standard Internet advertising as it is being treated as an extension of TV advertising which is historically very expensive per viewer compared to the Internet.

Pay per click (PPC) advertising provided by Google has been tried with internet video applications such as RooTV.  These PPC ads currently attract and average click price of around 40p per click on Google and 29p per click on Yahoo!  Click through rate (CTR) is dependent on subject matter and targeting. However, I would suggest that for the purposes of modelling use a CTR of 2% which is equivalent to current run of site rates across PPC advertising and the lower Yahoo! rate of 29p per click.

Addressable Advertising solutions help advertisers to reach the full potential of television advertising and improve the overall effectiveness of campaigns. These solutions allow advertisers to target groups of viewers using overlays on 30-second, 60-second, targeted video, or long-form advertising using any or a combination of the following: Request for Information (RFI), Telescoping, Viewer Polls, or Targeted Information Overlays.

Request for Information (RFI) & Fulfilment

RFI overlays are targeted, interactive enhancements that invite viewers to elect to receive more information on a product or service. RFIs generate highly qualified leads and provide the most targeted and direct connection with digital cable viewers. Advertisers are able to send coupons, product samples or brochures to self-selected viewers.

Telescoping

Telescoping is also known as linking to long-form advertising and bridges both linear and on-demand advertising by connecting customers with enhanced product information and enabling direct ecommerce.  Interactive overlays allow viewers to link directly to long-form VOD content such as the Jag ad above.  Telescoping combines the reach of linear advertising with the one-on-one nature of interactive on-demand content.

Telescoping brings together targeted interactive overlays with 30-and 60-second roller ads pushing viewers into longer more in-depth information about the advertised product or service.  Telescoping to VOD solution addresses one of the biggest challenges facing advertisers today that of implementing VOD advertisements without having viewers’ access content through a complex click through process.  By clicking on an interactive prompt, viewers are linked directly to the long-form video advertising content without the risk of them losing interest while navigating menus.

Viewer Polling

Poll overlays are graphical, interactive enhancements that are designed to engage viewers while obtaining their interests and opinions through viewer self-segmentation. Viewers use their existing remote controls to respond to questions posed in the overlay. Poll results are recorded, compiled, and electronically communicated back to the advertiser and can then be used to define targets for subsequent advertising campaigns.

Targeted Impressions/Spot Tags

Targeted Impressions are non-interactive overlays that enable advertisers to update their spots with time-sensitive information, address or phone number of the nearest location, product/service specials, etc.  Using targeted impressions, advertisers can customise a single spot for different groups of targeted viewers.

Conclusion

Rich media advertising combines with Internet TV content now offers a powerful new advertising medium for traditional broadcasters to extract a whole range of new advertising revenues to support their transition away from declining broadcast advertising.  The increase in efficiency of TV based advertising for delivering relevant messages to targeted viewers has huge additional benefits and allows the broadcaster to target new advertisers who have not traditionally tried TV advertising due to the high cost and unaccountability.  Rich Media Advertising has clearly come of age and so will the major Broadcasters be able to move from the dying big budget ad spend to this form of accountable advertising?  Time will tell and probably very soon!

Friends Disunited! Breaking up is so expensive……

It was reported in the weekend papers that ITV is to sell Friends Reunited.  ITV bought Friends Reunited back in December 2005 for an eye-watering £175 million ($280 million).  According to the story in the Sunday Telegraph, “Analysts believe that Friends Reunited is now worth significantly less because of intense competition from rivals such as MySpace and Facebook” or just maybe they overpaid in the first place.  Back in 2003, one of the major accountancy firms, BDO Stoy Hayward, was looking for a buyer on behalf of the original founders Steve and Julie Pankhurst and co-founder Jason Porter.  I was asked by a client to review the business and come up with a valuation.  The business was hugely profitable although there was obviously need for significant investment in their infrastructure.  However, the most “toppy” valuation I could come up with was in the region of £30 million which was higher than market sentiment suggesting a £25 million price tag.  In the event, Friends Reunited decided not to sell and brought in former Financial Times chief Michael Murphy as part of a global expansion plan.

This was a phenomenally successful move since Murphy increased the business’ valuation from £30 million to £175 million in just over two years.  The spirit of 1999 seemed to be in the air again!  Heady days indeed and at the time ITV said that the Friends’ team would have a leading role in developing ITV’s online and broadband strategy.

Sadly it hasn’t worked out as everyone had expected and yet another smart internet business failed to develop into a major force within the big company corporate world of ITV.  Now ITV will pay the price in what is likely to be a fire sale of the asset at a knock down price.  I wouldn’t be surprised to see Steve and Julie Pankhurst looking to use the money ITV paid them to buy back the company for a much lower figure.

I wonder whether ITV is still using the same analysts that thought £175 million was a good deal!  Well it would seem they maybe since today ITV is suggesting that the downturn in TV advertising revenues is temporary and is just down to the deepening recession.  Sadly anyone who follows new media with more than a passing interest will know that Google had their lunch last year and recession or not I just don’t see the Internet juggernaut altering course from taking a greater share of the converging TV and Internet advertising markets.

However, one potential future of TV lies not in traditional broadcast, but in the selective world of view-on-demand via the broadband Internet and content will be the key to its success.  Whilst we are all happy to catch an amusing 30 second clip of a cat flushing a toilet on YouTube, it is hardly compulsive viewing and unlikely to attract advertisers.  In reality, view-on-demand of quality content available at the user’s convenience is an attractive offering and one ITV is well placed to deliver.  ITV is content rich with access to a significant back catalogue and a continuing, although diminishing, commitment to developing new content.  Content will make Internet TV and IPTV fly.  As for the advertising model that is evolving for video content such as pre-rollers and mid rollers etc, the pricing level will be fundamental different from the millions of pounds once paid for a 30 second slot during Coronation Street and far closer to the Internet pricing model.

So as traditional broadcast advertising continues to decline, ITV must act quickly to build a content rich Internet based future.  The recent Kangaroo controversy is just a side show and quite frankly a waste of money for ITV as I believe was the development of the iPlayer a waste of licence payers money when there exists many fully developed home grown alternatives such as Vividas.  ITV should use some of the funds they get for selling Friends Reunited to look to develop content in collaboration with some of the current alternative Internet TV channels such as Joost, Blinkx or even Wii TV.  ITV could get into these areas with a much lower level of investment than the grand gestures of 2005 and they have the potential to offer a much more interesting future than managing decline!

BT must be desperate to turn to Phorm

BT all but confirmed that they are going to implement the Phorm service across their 4 million users. Phorm has developed a service to deliver targeted advertising based on user browsing habits by using deep packet inspection (see comment).  Phorm claims that the targeting system is entirely anonymous and the Information Commissioner seems to agree although he has advised BT that users should only "opt-in".

However, there is some doubt on the part of industry experts that the sort of targeting planned by Phorm can ever be anonymous.  So why is BT involved in this dodgy area of activity?  Both Talk Talk and Virgin walked away from trialling Phorm when the level of resistance became clear on the part of users and industry commentators and pressure groups.  Well the answer maybe in BT's recently released financial numbers and the income that Phorm is suggesting BT can make from implementing the service despite the "opt-in".  However, Iain Livingston will face the prospect of BT yielding the ISP number one spot in the UK if they sacrifice the delivery of a quality service for some dodgy incremental income.  There are many more ways of making incremental income without upsetting your user base.  Sadly BT is increasingly run by accountants who neither understand the technology or customers' needs it would seem. (Isn't that similar to what happened to our Banks!)

BT should be very careful or their financial worries could multiply with the addition of Phorm.  This is just targeted spam and we do not want it.  BT should heed that old saying - "All that glisters isn't gold!"

The Kindle 2 – is it a sequel worth reading?

This morning Amazon announced its second-generation ebook, the Kindle 2.

The new Kindle 2 is lighter (well its 3 grams lighter!), is a more contemporary design and it can now hold approximately 1,500 books.  This is many times larger than the original 200 titles of the original Kindle and there are up to 230,000 titles to choose from the Amazon Kindle Shop.

The most interesting development is the new Text to Speech feature which can read any book to you in one of three speech rates, and in either a male or female voice.

Sadly the Kindle 2 is still only available in the US.  Over here we just have the Sony Reader eBook which can have just 160 books and is exclusive to Waterstones or the iRex Iliad which at £449 is a great incentive to continue to buy the “real” thing.

So when will we see the Kindle 2 in the UK?  It is suggested that the problem lies with tying up deals with mobile operators or maybe it’s a problem of translating all those 230,000 titles from American into the Queen’s English.  Whatever the reason, when it eventually arrives the ebook will become a definite “must have”.  Interestingly, Google is also reported to be offering a browser tool running on Android, Google’s mobile OS, that allows you to read books via your Android enable mobile.  It can’t be long before a Android enable ebook emerges, then the ebook market will be a little more dramatic.

Is Amazon about to enter the Grocery business in the UK?

It was recently reported that Amazon is to take on the major supermarkets with the launch of an online food store in the UK and Industry experts say the ambitious plans are a huge threat to Tesco, Sainsbury's, Asda and Morrisons.

However, speaking in the Grocer, Amazon’s UK MD, Brian McBride has denied that they have any such plans, as the company “had enough on its plate” adding that “it’s a bit of a speculative story”.

So what is the background to this story.  Amazon is undoubtedly an incredibly successful online retailer and has a massive customer base for its range of DVDs, books, electrical products and most recently opened new clothing offering.  In the US, Amazon have indeed launched an online grocery service called Amazon Fresh, which was piloted in 2007 and is limited to Seattle and the surrounding area.

Unlike the US, the UK has a plethora  of main supermarket groups running successful Internet Grocery services as well as the privately funded Ocado service delivering Waitrose products.

Despite claims in the Daily Mail at the end of January, that Amazon could easily roll out a grocery service in the UK as “due to the shorter delivery distances”.  I suspect Ocado might disagree.  Amazon have been running the “trial” service for almost two years and is still limited to their home town of Seattle.  It still has not rolled out to other lucrative metropolitan markets in the US let alone considered expanding in the UK.  Equally I wouldn’t necessarily accept that Amazon is entirely on top of its delivery game in the UK judging by some recent delivery experiences of my own.  It is one thing to deliver a book or DVD, it is quite another to deliver ones weekly shop.  Maybe a better plan may be a JV with Ocado would be a better option extending the Amazon online brand magic to the newly independent internet grocer.

In the meantime, I don’t think Tesco’s or ASDA will be factoring in UK competition just yet.  Lucky the snow came along before the newspapers wrote any more "speculative stories".

Internet TV - Is it a viable alternative to Satellite?

With the advent of 20Mb Broadband service, Internet TV is beginning to look like a viable offering compared to costly satellite services such as Sky or Cable alternatives such as Virgin. 

In my definition of Internet television, the combination of digital TV and seamless Internet based TV services such as on-demand Internet services such as the BBC’s iPlayer or web based sites such as Joost, offer a credible alternative to the competitive products allowing viewers to choose the show they want to watch from a library of shows as well as a broad range of conventional TV.  With the fall in PC and TV prices the opportunity to join the two together to make a credible entertainment package with a relatively low investment.  The Internet TV service can ride on the back of existing infrastructure including broadband, ADSL, Wi-Fi, cable and satellite.

The primary models for Internet television are streaming Internet TV or selectable video on an Internet location, typically a website. The video can also be broadcast with a peer-to-peer network (P2PTV), which doesn't rely on a single website's streaming.

It differs from IPTV in that IPTV offerings, while also based on the IP protocol stacks, are typically offered on discrete service provider networks such as that from Tiscali in the UK or BT Vision.

Specialised PC/TV solutions like that offered by the  Sony VGF-HS1E, an all-in-one home server for total control of your multimedia entertainment.  Alternatively, there are a range of downloadable solutions which offer the opportunity to run a menu of services on a diverse range of equipment such as PS3 PlayTV  and Wii Games stations or even via your iPhone (see my blogcetera comment).

As we see traditional TV viewing habits fragment, the opportunity to create your own schedule to fit your life style will undoubtedly see the rise of a broad range of both equipment and software solutions that will drive new media options.  The key issue for content providers will be - how they make money from the punters of these new usage models?  Nintendo reckon that 18 million of their 40 million Wii are connected to the Internet and they can create a viable TV channel and delivered credible internet based advertising.  The key will be creating a viable programmable programme guide which the users can set-up and is easy to use and allow simple navigation both of digital TV offerings with Internet offerings.  We shall be following these developments in the Internet TV space, which clearly offer the user huge potential offerings from a boundless Internet and a powerful competitor to expensive satellite and cable services.  Whatever method you choose to view your TV content, the Government will still expect you to pay the licence fee!

UK ISP, Cable and Dongle User Numbers - Jan 2009

Here is an update of the UK ISP market covering DSL and Cable Access market as well as the first inclusion of the Mobile Dongle market in the UK. I have used ITU published data for Broadband usage numbers and Neilson Ratings to get an accurate picture as well all the reports and disclosures for each of the companies shown below. I believe these figures represent a reasonably accurate representation of the genuine adoption of broadband either via DSL, Cable or mobile dongle. Broadband connections included in this data cover download speeds equal to or faster than 256kbit/s.

ISP     Total    % of   UK Accts. BT 4,600,000 25.87% Virgin Media 3,885,800 21.86% CPW (inc AOL) 2,700,000 15.19% Sky 1,955,000 11.00% Tiscali UK 1,774,000 9.98% Orange 1,023,000 5.75% Royal Mail 560,000 3.15% O2 (Be & Dongles) 287,090 1.61% 3 (Mobile Dongles) 215,000 1.21% Kingston      195,255 1.10% T-Mobile (Dongle) 132,000 0.74% Thus 126,000 0.71% Vodafone (Dongle) 116,000 0.65% Entanet 92,000 0.52% Clara.net UK 72,000 0.40% Breathe 12,000 0.07% Supanet 6,000 0.03% Others 28,000 0.16% Total    17,779,145   100.00%

Following on from C&W acquisition of Thus, Kingston still look very vulnerable and would make a good fit for C&W or for Sky as they continue to make their play to achieve 3 million broadband users.  The Tiscali saga seems to have no end in sight and given the current economic climate the allure to perspective buyers of plain utility broadband (PUB) is looking increasingly unattractive.

One exciting area of development has been the inclusion of the growing “Internet Dongle” market.  T-Mobile, 3 and Vodafone are all significant players in this growing market and I have decided it is worth including them in the list as their business takes share from the PUB operators.

BT is beginning to roll out its 21st Century Network (21CN) and they are seeking to work with a whole range of ISP partners to offer new services.  The investment in 21CN must deliver much slicker broadband to ensure BT maintains top slot as Virgin and notably O2 are making great play of the 20 Meg plus services.  The rise of 3G Mobile Dongle market is beginning to mop up the rest of the available UK broadband demand and the only way to retain users will be through increased speed and extended range of services many of them bundle into the basic price.

This begs the question, where will future revenues come from?  PPC rates are declining across the board and Google is eating everyone’s lunch.  CPA continues to prosper, but it is a long way from the major sources of new media advertising revenue.  Let’s hope that it isn’t to the likes of Phorm that BT come to rely on from value added income from user activity.