Category Archives: google

Calling BS on Wall Street’s YouTube Revenue Estimates

Posted by Todd Sawicki on July 9, 2008 View Comments

The recent WSJ article on Google’s difficulties monetizing YouTube has caught a lot of attention with the stat that Google can only sell ads around 4% of the videos on the site (due to copyright concerns).  With roughly a billion videos viewed a day that leaves a lot of unmonetized traffic.

At the same time as noted by SAI and Venturebeat, a bunch of silly and seemingly crack-smoking inspired revenue estimates were published by Wall Street analysts estimating YouTube’s 2008 revenue at around $200 million for 2008 and $350 to $400 million for next year.

As I noted in a recent post – the video ad market has a long way to go to be anything of significance.  Given Wall Street’s ability to hype hallucinogenic estimates I am not surprised to see those crazy numbers thrown out there.  But someone has to take a closer look and expose the crack smoking for what it is.

Let’s take a look – 4% of YouTube’s content is monetizable.  Let’s assume for a moment that 4% represents 10% of YouTube’s traffic – given the 1 billion videos viewed per day – that’s 100 million views.  YouTube is selling a new format – the video overlay with some estimates as high as a $20 cpm.  Now being in the ad business – I doubt very much that Google is actually getting anywhere close to $20 – real 30 second video ads are getting $20 CPM for essentially the equivalent of a 5-10 second banner-sized pop-up ad.

Let’s say Google sales force is good and they are getting a $10 cpm on what they can sell and let’s assume they are achieving a typical premium sell through of 30% of their inventory.  That means that they aren’t selling 100 million overlay ads per day that means they are selling 30 million.  At a $10 CPM that’s $300k per day, $9 million a month and just under a $100 million per year.  And given the amount of inventory – I highly doubt YouTube is seeing a 30% fill rate and a $10 eCPM a much more likely scenario is half that fill rate at half that CPM or $25 million a year.  Also as more inventory opens up to Google, the eCPM’s are likely to fall as the social networks have shown having a ton of inventory puts a lot of downward pressure on CPM’s.

Now a $25 to $100 million dollar a year business is nice especially for a business that’s not even 4 years old but I doubt that even covers YouTube’s bandwidth costs even at the high end of the estimate.

Oh yeah some money changed hands (Opera switches from Yahoo to Google for Search)

Posted by Todd Sawicki on February 27, 2008 View Comments

Presumably with a straight face Marshall Kirkpartrick over at Read/Write Web writes about Opera switching it’s default search provider from Yahoo! to Google saying “Presumably there’s some money changing hands.”

Ya think?  Search distribution is a big money game.  Google pays $10 per box to Dell for pre-installing the Google Toolbar and pays Mozilla just under $100 million a year. Market rates for toolbar or embedded search box (ie. built in search box in Opera or Mozilla) distribution are steep – Google pays anywhere from $1.50 to $10 per new user from what I understand with most top tier deals in the $3-6 per user range.  I’ve seen estimates that Google makes $12 per user per year per toolbar or embedded search box installation.

What’s interesting is how Google’s dominance becomes self-reinforcing.  Because Google makes more money per search then Yahoo! it can always outbid Yahoo! for distribution deals (on a rational economic basis that is Yahoo! could always overpay).  So no one should be surprised when Google beats Yahoo! on a financial deal based on search economics.  Yahoo! should lose everyone of them.  Now this once again leads us down the Google paid search monopoly path where Google buys market share at a rate no one else can pay.  Just not in the bullying fashion that MSFT was accussed of back in the day.

end of year rant

Posted by Todd Sawicki on December 31, 2007 View Comments

A friend of mine, Kevin Merritt, blogged recently that folks should blog about the startups they like to help them out.  In this case, I’m going to blog about things that are driving me nuts, batty, bonkers or just plain up a wall.  I want to get these things off my chest before the end of the year so I can start fresh.

- Firefox for Mac (v 2.0.x) is awful.  Just awful.  It has to be the slowest browser on any platform on the planet.  It crashes all the time, hogs a ton of memory and seriously makes me yearn for IE7 on WinXP so much so that I am finding myself using it more and more in Parallels on my Mac.   Until Camano and Safari support the toolbars and plug-ins that Firefox and IE support, using those alternatives is a non-starter in my world.  Maybe Firefox 3 will be better, it certainly can’t be any worse.

- MacOffice 2004 and Entourage actually are slower then Firefox.  Just pitiful cousins to their Windows counterparts.  Why in heaven’s name did Microsoft not just knock them off literally instead of attempting to re-make them in some seemingly half-ass way for the Mac? Excel 2004 and Entourage drive me especially batty.

- Mac laptops need 2 mouse buttons.  Steve Jobs it’s going to be 2008 already.  Get over it.  You’re damn company’s OS supports a right mouse click natively and has for years.  Get over yourself already.  In fact – the single mouse button at this point almost makes the laptop in many situations.

-  I can’t believe how hard it is to find a Wii.  Seriously the lack of supply in this day and age of endless contract manufacturing in China is mind-boggling.  I have read some estimates that Nintendo left a couple of billion – yes billion – dollars on the table this Christmas season due to lack of supply.  This is almost as stupid as Yahoo was for not having a yield based SEM platform for years until Panama came out some 4.5 years after Google introduced the concept thus leaving tens of billions on the table.

- The GMail interface still drives me nuts.  Seriously when will Google realize some people actually don’t like a threaded view (in fact I hate it).  Classic example of one size fits none.

- When will folks pay attention to Amazon.com’s privacy practices?  After the over-rated digerati uprising over Facebook’s beacon platform, I can’t figure out how Amazon gets such a free pass.  Seriously have you read all the data on and – yes – outside of their domains on their users?  Have you noticed you many dozens – yes dozens – of pages their privacy policy is?

- Why is Twitter so damn buggy and down all the time?  Recently the Twitter to FB status sync has been broken dozens of times while my Twitter feed misses friends updates.  Twitter’s help desk acknowledges its a known bug.  Fix it please.  The point of twitter is to keep in touch with many friends and not be left guessing what’s going on in their lives.

- TSA and Airport security.  What a joke and waste of time.  Either do it right ala the Israelis (now that’s security) or give it up.

- Laptop battery life or why don’t all airlines have power plugs at their seats yet?  I thought they actually wanted higher paying business customers on their flights?  And why laptops don’t last 8 hours yet on a single charge in normal use modes is amazing to me – we’ve been stuck at >2 hours for 10 years.

- Untargeted online ads.  Seriously in this day and age there’s no reason to be ads by the tonnage anymore.  And the way I’m tracked online, I’m sure somone (likely google) has figured out what my grandkids names are going to be.  I don’t need to see any more dating ads (i’m happily married).

That’s it for now.  <phew> I feel better already.

Marketing and Editorial – The Line Blurs

Posted by Todd Sawicki on September 11, 2007 View Comments

Reading Stefanie Olsen’s summary of this evening’s sessions from the Conversational Marketing Summit (another great example of why living in Seattle can be a PITA when the center of the web 2.0 is 700 miles away and staying here can mean missing out on interesting events) reminded me of how blind the world can be to the reality of the world around them. The tone of piece and likely the same for many readers is that there is still this chinese wall between editorial and marketing. As Seth Godin noted in his book All Marketers are Liars (one of my favorite godin books even if overlooked in the canon of godin books) people love to tell themselves stories about their idealized view of the world even when deep down they know the truth is often much more crass. And with the rise of huge financial incentives for publishers of online content to conform to contextual ad-targeting technologies and payouts – the line has already been covered up much the way batters cover the line at the back of the batter’s box.

The notion of content as a non-commercial, purely for spreading the soul of the creator is a fantasy and myth that has lived for centuries. DaVinci and Michelangelo did works for hire. Their masterpieces were all commissioned works – that means they were done for commercial purposes. Dickens was paid by the word and boy did he get his money’s worth as any high school lit student will tell you. Newspaper have lived for sensational head lines because that sold newspapers – and in the old days (see Deadwood) the publisher and editor were one and the same person. Having worked at Disney I can tell you that many folks view Disney animation as the infomercial department. Each animated movie a 2 hour commercial for the rest of the Disney merchandising empire.

It sounds crass but you know what? It isn’t.

People like brands, they like commercialism when it means something to them. It’s why people pay to where Nike logos – that’s because Nike stands for athletic performance. And when content and editorial reinforces that brand it works for them.

Now let’s fast forward to the world of web. What has happened particularly when it comes to content is this tiny little thing called Google Adsense. See what Google Adsense does is match banner ads based on keywords on a webpage. So now folks who write for websites or blogs have a financial incentive to write for the ads. In some cases this has lead to spam sites (the very ones that inspired Jason Calacanis to create his latest venture Mahalo) and in other lots of sites and blogs dedicated to high-paying & popular keywords (see travel, finance, etc.). The people who publish those sites definitely have one eye on their Adsense earnings whenever they write (do a search for top paying adsense keywords and you will see exactly what I mean). So in a world where contextual advertising rules the day, then that world will likely have a very blurry line between marketing and editorial.

McClure + Google + Metrics = Advertising OS and Lock-in

Posted by Todd Sawicki on August 3, 2007 View Comments

Dave McClure puts down the Facebook crackpipe to grok about Google Analytics and how it represents another layer of Google’s online marketing dominance.  And Dave’s right – Dave and I talked extensively about this notion back at the Web Analytics Summit in SF back in May (just took Dave 2 months to write the post amazing).  Analytics now drives everything marketing related online – the more and better analytics the easier it is to justify business and marketing decisions.  So much so that when hiring for various marketing roles over the past few years, I have transitioned away from hiring folks with traditional marketing backgrounds or marketing degrees in favor of folks with economics degrees and backgrounds.  It’s all about the math these days.  Online marketing is a science.

And Google is killing it with the tools they are providing for FREE.  Web analytics and multi-variate testing for free are very powerful tools for marketers of all stripes to figure out what works and doesn’t – small or large.  I am an avid user of Google Analytics and having used Omniture, Unica and Webtrends over the years – Google Analytics compares very well with those other commercial offerings.  Now is Google doing this out of the goodness of its heart?  Heck-no!  The better you understand the 50% of your marketing that works – the more you are going to spend on Google advertising and at higher CPC’s.  What’s interesting is Google not only becoming the Search OS but potentialy also the Advertising OS?

At the same time, to what Dave Winer and I have blogged about with regards to Google’s acqusition of Feedburner does show up with Google Analytics.  Google Analytics shares a lot of deep ties with Google Adwords.  They make it very, very easy to track your Adwords campaigns performance but not very easy to track your Yahoo or Ask.com search spend (it’s possible but a major PITA).  So if you are locked into Google Analytics (and to an extent you are because you can’t export the historical data – another example of lock-in theme that Dave Winer has been talking about recently) – you are likely going to biased to use Google Adwords over other search marketing programs.   So though free, there is a cost as a user to using Google’s free advertiser tools.

winer’s on to something here – open source feedburner that is

Posted by Todd Sawicki on August 1, 2007 View Comments

Dave Winer has been bloggingabout feedburner in response to Google’s acquisition of the company.  Dave is concerned about how Google might co-opt feedburner to their benefit – ie. special tie-in’s to google reader for instance that might put other readers at a disadvantage (hmmm sounds a lot like what Microsoft has been accused of with regards to Office and Windows integration).  

Fred Wilson – VC extraordinaire (this is a compliment) and investor in feedburner (seriously has there been a better web 2.0 hit rate then Fred’s?) believes Dave is just whining unnecessarily - that if Google were to muck with Feedburner folks will just switch their feed aggregator to a Feedburner competitor.

My two cents (though probably only worth 1/10th of that):  I am in Dave’s camp.  I don’t think Google will do anything maliciously, but I do worry about the unintended consequences of google trying to improve the google reader-feedburner-analytics integration.  Integration points will go undocumented (because that happens with all software which is what I think happened with Windows per my earlier comment) and the marketplace will be forced to choose between Google’s “closed” platform and everything else.

Re: Fred’s point – I actually don’t think switching is a realistic alternative.  The switching costs are too high (as a VC I think Fred understands the value of high switching costs since it comes up in every competitive review I’ve ever been involved in).  My guess is that 80% of anyone’s RSS subscribers are passive and 20% active.  My assumption is the 20% who are active would take the time to switch the RSS feed, but you would likely lose 80% of your subscribers by switching feeds.  Is it worth the risk of losing perhaps 80% of one’s blog subs?  For most likely not.  For an analogy look at how many people switching cell carriers before number portability – essentially none.  One’s RSS URL is likely the equivalent of a cell phone number – change it and you lose touch with your network.  So as much as Fred says that we can all just leave Feedburner – I think he’s wrong – for the moment we’re stuck at the mercy of Google.  And being any more at the mercy of any company – Google included – is not a good thing.

are you kidding me? no search in google reader, huh?

Posted by Todd Sawicki on July 13, 2007 View Comments

I recently switched to using google reader (google’s rss reader – to which I can’t believe newgator still charges for their rss reader a serious but separate are you kidding me but that’s an aside).  What pushed me over the edge despite my general disdain for google apps (see my post why I can’t stand gmail for an example) is their mobile browser support.  It’s killer and works great on my blackberry curve.  What I discovered for me at least was the killer app for rss reading was synching the read items.  Just like email – having a single, common, synched list was vital especially as someone who subscribe’s to over a 100 feeds.  The mobile device as an extension of the desktop really makes a world of productivity improvement.

That being said – I wanted to look for a blog post that I had a few weeks ago tonite to reference for another post here and so I headed over to google reader and fully expected a big, fat search box.  I mean it’s google the king of search for god’s sake.  Well what did I realize – no search box.  Nada, Zip, Zilch, Nunca, Nothing.  That’s right – there’s no search function in the Google Reader.  Who would have thunk that?

Here’s a screenshot – note the lack of search box or feature.

googlereader

been busy blisting and hanging with the loomiacs

Posted by Todd Sawicki on June 14, 2007 View Comments

blist and Loomia have been keeping me busy for sure.  And on top of that helping with the Casual Game Association’s – seattle conference (Casual Connect) coming up next month I’m swamped!  I have a bunch of posts in the backlog that I need to get on here, but in the meantime, just wanted to drop a note to say I haven’t disappeared or forgotten about this blog.  

Startup observation of the week – should startups provide computers and software anymore?  Is it necessary – everyone who works in tech seems to own their own laptop and with free alternatives to practically all software today from productivity apps like office (zoho, open office, google) to even programming and graphics apps as well.  I know there have been plenty of posts about how its 10x to a 100x less capital intensive to start a tech or web-based startup today, but this is part of that story.

Food for thought.

google’s new tag line: we do nepotism

Posted by Todd Sawicki on May 23, 2007 View Comments

Henry Blodgett (yes that Henry Blodgett) posted a good critique of the google investment in sergei brin’s wife biotech startup.  And to his point – what in heaven’s name is google thinking?  What a total PR blunder.  No matter how google’s kingpins try to justify this investment, the public will never buy it.  It screams nepotism and in this case like most public matters – perception is reality.  Now there’s nothing illegal about it, but if I were a google investor I would start to wonder who’s minding the store and whether or not sergei has jumped the shark.