Category: Media/Tech Business Models

I’m not sure I buy this, but I really like Mike Ramsay, and I sure love my TiVo….We can dream…

In his most recent research note, Piper analyst Safa Rashtchy says based on conversations with advertisers and industry executives, the average “click charge” (or cost per click – CPC) could double from where it is now, at about .45 cents. He points out that advertisers are getting more sophisticated in their approach to paid search, and in fact are willing to “go negative ROI” in their campaigns, in order to gain a lifetime customer.

More data supporting the decline of television and print, and the rise of the web as an advertising vehicle. Self serving though it is, Doubleclick’s “Touchpoints” survey has some pretty impressive findings, according to Mediapost (scroll down to sixth item):

The survey analyzes how media affect initial product awareness (First Learn), research and information gathering (Further Learn), and the final purchase decision. Consumers were asked about their purchases during the last six months for products in the following categories: Auto, Credit Cards/Retail Banking, Electronics, Home Products, Mortgages/Investments, Movies, Personal/Household Care, Prescription Drugs, Telecom Services, and Travel.

TV advertising plays a major role in establishing early awareness of Movies, Personal and Household Care items, Telecom products, Autos, and Prescription Drugs. However, Web sites and online marketing make bigger dents when it comes to building awareness of Travel and Mortgages/Investments. In the First Learn phase, the survey found that TV’s influence dropped 8 percent in the Electronics category and 7 percent in the Movies and Automotive segments in the past year. In comparison, print drives First Learning in the Personal/Household Care and Home Products segments, while direct mail most heavily influences awareness of Credit Cards/Retail Banking offerings.

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Eric S. gave a talk at Berkeley yesterday, and Geodog has posted coverage. Observations on Orkut TOS, power use, forcing Google execs offline, the IPO (“we don’t feel forced to do it” or somesuch) and more.

Our buddy Matt is a pioneer over at Infoworld. Full text of press release is in the extended entry. Snips:

IndustryBrains, the only business performance based media firm that specializes in contextual, site-specific advertising, announced today it has expanded its business to include syndication of paid listings to publishers participating in RSS-driven content feeds….
Just as with IndustryBrains’ web-based paid listings, its RSS technology is private-labeled by partner sites and is completely transparent to the user. This enables publishers to leverage their brand and relationships with advertisers who are willing to pay more for placement on a highly regarded site. IDG’s Infoworld and CMP Media’s Techweb Network have implemented IndustryBrains listings as part of their category specific RSS syndication.

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But of course, that’s due to cable modems….MediaPost reports….

This is important as it relates to the psychology of the media buyer. Cable is a huge market, nearly $81 billion or so if I recall (more media revenue stats, head to the census, thanks Gary…). When advertisers realize that that net has better distribution than cable, there will be something of an “aha” moment. I’m feeling ever more confident of my prediction that online ad revenues will surpass expectations this year….

KeepMedia has decided, it seems, that RSS will aide them in promoting singups to their service. From a spokesman: “We launched an RSS feed today at http://www.keepmedia.com/rss/featurednews and plan to launch others in the near future. Our RSS feed contains an average of 12-15 stories per day. Our editors pick several big stories each day and provide related articles from our 160+ magazines. We will frequently select stories from the archives that serve to provide historical background. At this point, we have found that we are the only RSS source for the overwhelming majority of magazine and newspaper titles on the KeepMedia newsstand. Linked stories are free to RSS users and to anyone who accesses those specific stories. …If a blogger links to one of the stories in our RSS feed, his audience will have free access to that story, however, if they want to further browse or search on KeepMedia and are not subscribers they will hit our paid-wall.”

This means some stuff previously behind registration walls will be available for blogging…The company also announced new relationships with The Atlantic and USA Today.

I’ve found this company popping up a lot lately. Their model is interesting and they seem to address an evolutionary problem in the paid search field. Industry Brains is essentially a pay-per-click network, like Overture or AdSense, but one that offers advertisers the ability to insure their ad is placed in specific vertical content areas, such as IT. The model basically asserts that there is value (and profit) in the voice and focus of an editorial site, as opposed to the unvariegated sweep of Overture and AdSense. This approach promises to raise the advertising revenues of niche sites which draw influential but smaller audiences. Such sites to date have not been able to make much of a go at it with AdSense alone.

The problem IndustryBrains solves sets up this way: Say you’re an advertiser interested in selling laptops to IT professionals. if you were to buy laptop-related keywords on AdSense or Overture’s Content Match, your ad could be placed anywhere on their vast networks, as long as a site on that network has the keywords which trigger your ad. This leads to your laptop ads being attached to general interest news sites, or blogs, or literary sites which might mention laptops in a totally unrelated context (funny example here). When you buy IndustryBrains’ network, your ad will only be shown on sites like ComputerWorld, CNET, and, in a move that is bound to give them some serious geek cred, Slashdot. (I heard this through a reader and industry colleague who passed along an IndustryBrains announcement, I can’t find anything about it on their site or on Slashdot.)

This is a natural evolution in the paid search market. I’m sure it’d be pretty easy for Google and Yahoo to develop these kind of vertical buys (if they haven’t already). As soon as it’s proven that there’s money to made, they will. I certainly hope there is. IndustryBrain’s PPC pricing is above typical AdSense pricing, for good reason. They are delivering more qualified audience, which is the essence of what good publishing is about. The site even has a search tool that let’s you see the cost per click in real time for any search term.

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Piper’s Safa Rashtchy, who gets credit for being an early and avid Wall St. supporter of the paid search market, today released his firm’s outlook for what might be called the “internet economy” sector, and it’s pretty rosy. Note in particular “In our opinion, all of this clearly indicates that fears of a bubble-type valuation are unfounded.”

:
1. We expect average revenue growth of more than 23% and an EBITDA growth of at least 37%, resulting from margin expansion in nearly all of the companies under our coverage. We also believe that these estimates are mostly on the conservative side and have strong probability of upward revision.
2. With a 37% average EBITDA growth, the coverage companies are trading on an average enterprise value to EBITDA multiple of just over 18x, suggesting a growth multiple of less than 0.5. Similarly, the GAAP ESP, while not as a good and clean a measure of valuation as EBITDA, is still at PEG of 1.0. In our opinion, all of this clearly indicates that fears of a bubble-type valuation are unfounded. The stocks are not heavily undervalued but there is room for multiple expansion and, of course, estimate revisions that can support higher prices.
3. The universe-wide look at the 2005 growth projections underscore the value of our top picks, in particular United Online, trading at 6.8x ’05 EBITDA, a 60% discount to the universe and DoubleClick, trading at 10.3x ’05 EBITDA, a 44% discount to the universe. While the EBITDA growth rates for these two are slower than the 37% average, even growth adjusted multiple for these two companies will be substantially higher than their current valuation. We also believe that our estimates for our other top picks, Yahoo and SINA, are very conservative with a strong upside potential justifying a much higher multiple than current valuation.