BuyPlayWin Blog

BuyPlayWin Industry # 2 - Web 2.0 Advertising

We believe that BuyPlayWin is a fresh and unique customer experience, joining several industries together for the first time. This is the second of a 3 part series of posts that give our perspective on each industry.

1. E-commerce
2. Web 2.0 Advertising
3. Gaming.

Lately, we’ve heard a recurring message from social network websites and some of their investors:

Show me the money dammit!

It’s clear that there’s going to be some sort of collapse to the social bubble; not everyone can survive, at least among the big guys. There are simply too many competitors for web advertising dollars. Ok, the pie is growing and will continue to grow, but new social website growth is vastly outperforming new advertiser budget growth, which is the direct result of new technologies becoming freely available to anyone. We simply can’t think of new social websites as being medium to big companies anymore, but instead, we have to include every new blog that is created, each day, small business or individual. Look at what Michael Arrington, (TechCrunch), has to say about Yahoo’s current predicament. Microsoft takeover deals, Google safety lines, angry shareholders, and ever-thinning ranks of Yahoo executives have the blogosphere speculating whether Yahoo will survive, or fall (some have already decided one way or the other). Remember, every popularly read blog entry about Yahoo, (like this one will be one day), takes another potential advertiser dollar away from Yahoo.

So, is social advertising to blame for Yahoo’s predicament? We don’t think so.

Again, we’ll reference Michael Arrington and TechCrunch. TechCrunch earns $240,000 from advertisements per month for the 1.25 million users that read the techno-blog each month. Think of some of the very popular folk’s blogs you follow, and the amount of money that person is making from everyone reading their thoughts. Need help? For quick estimates, take Michael’s $240,000 monthly revenue, divide by 1.25 million users per month, and you get a little over $0.19 cents per reader. That’s a higher number than most blog writers will be able to achieve, but it’ll give you a rough estimate of any blog’s revenue potential if you track the monthly unique views with Compete.com (not arguing over which count statistic is most accurate here). Let’s look at one popular blogger, Fred Wilson of Union Square Ventures. Fred has two blogs: http://fredwilson.vc/and http://avc.blogs.com/a_vc/ We’ll just focus on the first, since we can’t get accurate stats for the second. Compete.com, http://fredwilson.vc/

Monthly People Count: 15,391 and growing by 12% each month.

Our math: 15,391 X $0.19 = $2,955.07 per month

Remember, this site is much less popular than his other blog, which actually has advertisements. Can you see that Fred is easily paying his monthly bills, including rent, just by writing a blog?

So, why is Yahoo hurting so badly? We think it’s a result of being stretched to thin with no clear focus.

Yahoo has so many different businesses they’ve acquired over too short a time. Why? When you think of Yahoo, what phrase comes to mind? Don’t feel bad, we don’t know either. People have been saying that Yahoo is confused about what they are for years. The simple fact is that Yahoo is competing closely with many small battles, involving hundreds of competitors in some cases. This has the impact of diluting their overall advertisement worth in the eyes of advertisers, who now have more precisely targeted options.

At the Snap Summit in San Francisco, everyone was using the “social graph” to target ads, which is more like traditional targeted advertising. Facebook and other social networks constantly fret over how to make money for themselves and for their partner businesses. You can see the type of thinking occurring in these closed and open discussions in this Inside Facebook article, titled “Show Me The Monetization: Turning Apps Into Dollars.” In an attempt to diversify their revenue from just social network advertising dollars to include actual e-commerce, Facebook recently announced Radical Buy, offering a 15% fixed commissions to product resellers on Facebook, who opt to sell out their friends. Think of it as an online Amway. Community is where online has always been at, there’s nothing really new there.

Some of our team can remember the first BBS systems, and it was all about finding people you were interested in chatting with (at 300 characters a second). Then, later CompuServe and AOL were all about finding groups of people, too. UseNet, which some of us got into heavily in the early 90’s was also the same way: find a group that has people with the same interests. There are millions of community sites now, using stuff like phpbb or phpforum set up with from just a few to thousands of users. What kind of makes MySpace & Facebook more interesting these days is that like CompuServe or AOL, you could find lots of groups in one place. Of course, CompuServe isn’t around anymore, and AOL is barely.

The main lesson to learn from Yahoo is the same lesson to learn from any other social network focused business: do something unique, stay focused on it, and do it best.

Filed under: Web 2.0 Advertising |