Monday, February 4, 2008

Microsoft buys Yahoo! (maybe) by Even Aas-Eng

Its pretty clear what’s the talk on the town at the moment, here is my take on it.

This is a big but expected move. I will try and touch on the different relevant areas.

Search: Google is number one in search in most markets except where local competition has triumphed (China,Russia) Microsoft has failed spectacularly, there is very little traffic and adcenter don’t have to many clients either. As everyone knows Yahoo! is the number two player in search. The problem is that Google is so dominant that even a Yahoo!/Microsoft merger won’t be adequate to challenge Google. In the US market where Yahoo! is very strong the market share including Microsoft will only reach 33 % (comscore figures) In many large European markets the two companies will only have single digit market shares even after a merger, in a market like Spain for instance Google has a market share of 90%+
But all this doesn’t mean that Microsoft or Yahoo! can/should give up search. Search is growing and SEM is growing and we don’t know how long Google’s crusade around the world will last. But it will last for a very long time if no one tries to compete with them.

Clients: Google didn’t not invent SEM, Bill Gross did! He started Overture and sold it to Yahoo! years before Google copied the model and invented Adwords. My point is that Yahoo! much like Google has clients and partners all over the world that has been spending ad dollars for years. These client relationships are worth a lot. Yahoo! like Google has dipped in to the long tail of advertisers, Microsoft has focused more on the agency world and large clients. If the merger becomes reality Microsoft will suddenly have a much larger client list, they will instantly make more money on adcenter and Yahoo! search will get new larger clients that already cooperates with Microsoft on their advertising products. So even if “Microhoo” doesn’t instantly capture new market shares they will instantly make more money.

Display advertising: This is where it really gets interesting. Google has Adsense and Google bought Doubleclick. Microsoft bought Aquantive but they don’t have a large enough inventory. Well they do now if this merger happens. As advertising dollars goes digital the display ad segment will grow immensely in the years to come. Technology will enable advertiser to reach their target groups across the WWW, but you need to own that technology and you need an ad network. Yahoo! has developed a competitor to adsense but it has had limited success but Yahoo! has portals and various content verticals (Sports,finance, etc) plus the fact that they are one of the largest email providers on planet earth. In other words, they have a lot of inventory to sell. Combine this with Microsofts MSN portals, IM, xbox and Hotmail you have one big online advertising platform with global reach and local presence. This platform obviously needs to be complex and fitted to all sorts of clients, well if you are Microsoft and you just bought Yahoo!, Aquantive and FAST you should have the opportunity to create something spectacular.

What happens now: I think that this “war” is mostly about two things, technology and eyeballs, with an emphasis on eyeballs. Both Google and Microsoft have the technology which means that this race now is all about the eyeballs. I therefore assume that we will see more companies swallowed by the two giants in the years to come. Who is next? My guess is vertical ad networks and affiliate networks. The rest of the world’s media companies thought they had their hands full with Google, now it looks like they have two giants to fight with. It will be interesting to see if they will be more willing to join resources with Microsoft than they have with Google. “Google-phobia” has infected many of them, will they get “Micro-phobia” as well?

Steve Ballmer declared last year that he was an advertising man; I think he just placed his money where his mouth is!

Tuesday, January 22, 2008

Recession is here! By Even Aas-Eng

Everyone who has money in stocks or funds has had a terrible 2008. And it continues today, as I write this Asian markets are down between 5 and 10% and the stock exchange in my home town Oslo is down about 5% today.

I guess this is interesting enough itself but since this is a blog about online media I will try and look at this from a different perspective. The media industry always gets hit hard by recession. Advertiser slash their budgets to save money and agencies struggle because the last thing on a CFOs mind is to put money aside for the next big brand campaign. I am sure that we will see this happening during the next years but with a twist! In all markets online media is experiencing a massive growth. In mature markets between 10-20% and in more undeveloped markets between 20-50% (undeveloped markets here doesn’t necessarily mean undeveloped economies)

The last couple of years I have said many times that I welcome the next recession so that online media finally will have its final and mayor break trough. This was obviously said with a smile as I also save in the stock market and I have very little to smile about at the moment… But I really think that my joke brings some matter of truth to the table. The staggering growth of online media spend will continue and in some cases I sincerely believe that the growth could be further increased by the wobbling state of the world economy. Why? Well as advertising budgets gets slashed and CMOs are pressured on their ROI it’s not totally off to think that they will allocate more money to the most predictable, accountable and cost efficient media channel. It might be a bit naïve way to look at things but it could happen. During the last years of growth, online media has taken big market shares but companies haven’t spent less money on other media channels. On the contrary, they have spent more. It’s my guess that most companies are in a position to save money on their marketing budgets without risking growth in sales or their brand. And it’s also my guess that they won’t save on their online campaigns.

So if it’s true that we will see further growth or even an increase in growth for online media spend it might be possible to make a buck or two in the stock market as well! For those who read the following you should keep in mind that I am NOT a financial analyst!
Google is down about 20% this year and I guess they will be down even more after today’s trading. Google is definitely a company that has many years of fantastic growth ahead of them. In many markets Google is still enjoying growth rates above 100% and Asia and Eastern Europe hasn’t really started yet. They don’t in the US but the US market is less and less important for Google. So Google might be a good buy if the market continues to slide.

The Swedish company Tradedoubler is also an interesting case. Last year AOL tried to buy the company for 215 SEK a share. Shareholders turned the offer down and the stock reached an all time high of 235 SEK. At the moment they are trading at 123 SEK! Tradedoubler is in the affiliate marketing business and they are doing well, so is affiliate marketing and everything seems to indicate massive growth in the years ahead.

There are many, many other interesting cases around. Companies that operate in the ad technology sector, tracking and web analytics companies, search engine marketing technology and e-mail marketing are all interesting.

So I guess my final conclusions are that there are many opportunities out there and that online media will not be hit by the sliding global economy.

God, I hope I am right!

Wednesday, January 9, 2008

Microsoft buys Fast search and transfer, by Even Aas-Eng

It’s not very often that Norway is the centre of events in the digital world but yesterday there was an exception.
Trading in Fast was stopped on Tuesday and something big was obviously about to happen. On Wednesday morning the news broke.

For those who doesn’t know Fast I will give a quick intro. Fast is (or was) a Norwegian software company who has specialized in search technology. Enterprise search has been their core business but they have also created other interesting solutions. I will get back to that later. The company sprung out around a tech school in the city of Trondheim. Norway actually has a search technology hub in that city, besides Fast both Google and Yahoo has engineering offices there.

In statements made by Microsoft regarding the acquisition they say that they bought Fast because of their technology and their standing in the enterprise search market. I am sure that is true but I also think that there is a reason beside this that have more to do with media then with technology.

Early in 2007 Fast launched a product called Fast Ad momentum. This product resembles Googles adsense technology, it’s a long tail tool that makes it possible to commercialize your total inventory. It’s perfect for companies like Schibsted that has many websites and search engines but no technology for automated ad sales. Since there are a number of big media companies around the world that are desperate to copy Googles success but they are dead scared of cooperation with Google the ad momentum product could be an interesting one indeed. It was at least the reason that I bought Fast shares!

Microsoft is also a company that is increasingly becoming a media player and they have not been very successful in trying to match Google. I would not be surprised if Microsoft will use the Fast ad momentum to get some momentum of their own!

For other media companies Fast is now history as an independent software maker, so I guess its time to by stock in other companies with the same competence. Did anyone say autonomy?

Thursday, January 3, 2008

2007 top digital events by Even Aas-Eng

Here is my very subjective take on 2007.

1) Google buys doubleclick
The number one in search and the company with the largest ad network on the planet decided that it’s was time to put some (ad)sense into it! Buying doubleclick Google looks set to become the worlds leading display advertiser. I am already looking forward to what the Mountain View people will buy this year.

2) Facebook launches social media ads
Zero to one million members in Norway in one year is not too bad. But for me it was the launch of their advertising concept that was the big story. Global reach, local presence with endless targeting possibilities. Still in its infancy it can only get better and I project a 2008 packed with news from facebook.

3) Microsoft enters the online advertising race buying Aquantive and a small stake in facebook
2007 was the year that Steve Balmer decided that he would not only talk about Google but actually try and do something. The Aquantive deal will bring opportunities across Microsoft channels that hopefully can give many of them a boost. What Microsoft and facebook are up to, I don’t really know.

4) Marketer’s world wide realizes that Second life is just that and that they won’t have to close shop in real life just yet!
Thank God this hype worn off during the first part of the year. I am not saying it’s not interesting, I am just saying that there is so much else more interesting.

5) Iphone
It came, it looked good and it conquered! People bought it and they started to surf the web. Numbers from UK shows that 60 % of Iphone users move about 25 MB of data back and forward per month. Only 2% of other mobile phone owners move the same amount of data. The floodgates are open, the ad dollars will start to move towards the cell phone in 2008. And did I mention that it looked good?

6) Search conquers Europe outside UK
Staggering growth numbers all over the continent and finally the media agencies and big advertiser are starting to see the light. The only problem is that many of the newly convinced see SEM as the only online solution, need to stop that! Mantra for 2008: SEM targets existing demand it doesn’t necessarily create more demand.

7) How difficult it was to find enough people!
Young people all over the world unite! Come and work with online media, we need you!