Drama 2.0 has his mind on his money and his money on his mind more than usual lately, so this week’s installment of The Web Week in Review is focused on cold hard cash – who’s making it and who isn’t.
Eric Schmidt is eager to see a return from his $1.65b acquisition of YouTube, as well he should be.
“I don’t think we’ve quite figured out the perfect solution of how to make money, and we’re working on that. That’s our highest priority this year.”
Given Schmidt’s statements, this week’s departure of the YouTube executive in charge of turning all of those videos into cold hard cash probably isn’t the most inspiring sign.
Shashi Seth has decided to leave Google to become chief revenue officer of a startup called Cooliris.
Citing the fact that “Google got a little big for me” as a justification for his decision to move on, Om Malik hints at the real reason:
“It has been a thankless job.“
YouTube has found it hard to monetize user-generated (and pirated) video content despite growing traffic.
This while less-trafficked online video services focused on legal, full-length video content, such as Hulu (a joint venture between NBC and News Corp) reportedly have no problem selling their more limited inventory – and at higher rates.
Frankly, I can’t blame Seth for departing YouTube and at some point, I think Schmidt might want to consider that his strategy of paying a premium for deals with questionable monetization potential hasn’t been the wisest thing.
YouTube may not be making money, but those dying television networks are. Reuters is reporting that NBC has closed $1.9 billion in prime-time deals for the 2008-09 season earlier than expected.
Despite the declaration that television is dead, NBC’s “total take is up about $100 million from a year ago.”
And despite the economic woes, “most of its deals [are] at prices above those from a year ago.“
“…agency and network executives said in some cases the economy actually helped the process, with corporations looking to put money into well-tested media like broadcast television.”
“In tough times, advertisers want to fund what they know works,’ one executive said.”
Clearly, those who have prematurely called the peak of the business of television are a lot like those who are short a stock that keeps rising – they can keep waiting a long time for a drop to come and they’ll lose money all the way.
There’s bad news – Web 2.0 fails to produce cash. Then there’s worse news – that isn’t likely to change anytime soon.
Jeff Stiers, senior vice president of business growth for ad agency JWT, said that Web 2.0 is making the same mistakes as Web 1.0:
“Take a look at history, and the way Web 1.0 worked…publishers didn’t make it until the ad dollars started to scale. The same mistakes are being made in the social media space today.”
Joined by a panel of other advertising executives at the Under the Radar Conference, the message was clear: the fleet of Brinks trucks is nowhere in sight for those Web 2.0 startups relying on advertising dollars to survive and thrive.
Advertising executives cited an overemphasis on technology as one of the problems that Web 2.0 companies face, something that I’ve touched on before.
And in what serves as a harsh blow to venture capitalists who have bought into Web 2.0 startups with the notion that they’re ideal advertising platforms because of their ability to gather demographic data, that notion was dispelled:
“…many social media start-ups are marketing the idea that they have tons of data on people’s demographics and preferences. The start-ups believe that that data will lure brand managers seeking to reach new customers. Not true, executives said.”
“‘I can’t imagine a large agency giving a rat about a small firm’s data. Advertisers are looking for aggregation of data…and someone at a very high level to give an overview (of what it means),’ said Bedecarre.”
While one could argue that advertising executives are foolish old dinosaurs, the reality is that “he who has the gold, makes the rules.“
As it stands now, it doesn’t look like Web 2.0 startups will be receiving much of that gold.
If you are to believe Yahoo CEO Jerry Yang, Yahoo’s rejection of Microsoft’s acquisition offer was all about the money.
If Microsoft offered more money, Yahoo would be willing to deal. Or so the story goes.
But Yahoo, whose Open Strategy does not apparently apply to documents related to the lawsuits it’s facing, is now known to have rejected a $40/share offer from Microsoft in January 27 according to court papers unsealed in Delaware’s Court of Chancery.
In the words of oilman and hedge funder T. Boone Pickens:
“Whoever’s suing the Yahoo management and board of directors, if they had a $40 offer and didn’t take it and the stock is now $26, they’re going to want to cut their throats for being that stupid. Anybody who sued them has got a good lawsuit, I’d say. I’d hate to be on that board of directors right now.”
Carl Icahn, who has acquired a hefty chunk of Yahoo stock and who is looking to replace the current Yahoo board of directors with a fresh slate, has finally spoken out.
Not surprisingly, he wants Jerry Yang out.
While some would argue that Yahoo has every right to refuse to tie the knot with Microsoft – regardless of money – Yahoo is a publicly-traded company and it’s worth considering that the public markets that made Yang a billionaire just might throw him out on his arse because he’s unwilling to return the favor.
Apparently some people in Silicon Valley haven’t yet received my memo:
“Silicon Valley’s economy is part of an ‘open’ platform called the United States economy – it’s not a ‘walled garden.'”
One of those people is Vish Mishra of Clearstone Venture Partners. According to him, “There may be a slight economic slowdown, but we’re nowhere near a recession.“
I’d love for Vish to meet George Soros, who writes in his latest book that “We are in the midst of the worst financial crisis since the 1930s.“
Somehow I think I’ll listen to the smart money – Soros. After all, he plays ball with his own money and has made more than four times as much money in a single year than Clearstone Venture Partners has in total committed capital.