Fox outfoxed by Google

Yaron GalaiLeave a comment

Gootube
According to TechCrunch, some executives at Fox are unpleasantly surprised by Google’s acquisition of YouTube:

A source inside of Fox, which owns MySpace, tells us that they were surprised that Google was aggressively pursuing a deal with YouTube, given Google’s nearly $1 billion advertising relationship with MySpace. MySpace views YouTube as a competitor, and recent Hitwise data shows Myspace Video quickly catching up to YouTube.

The only surprise is that Fox is surprised by this.

Last month when the MySpace-Google deal was announced, I wrote this:

MySpace is essentially outsourcing its kitchen
over to Google and becoming another node in its network. When that
happens, MySpace will actually deliver *less* traffic to retailers,
while feeding the Google beast and giving it an even bigger share of
web traffic. Retailers looking at their log files will see the traffic
coming from "Google AdSense", not from MySpace.

In this relationship, Google is the only one that walks away with
the long term assets of advertiser base and deep expertise in
monetizing traffic.

Google makes ~5x more money (bottom line) on each ad impression on a Google-owned page than it does on a 3rd party AdSense page. If the company wants to continue growing the way it has so far, they won’t be doing it via deals like MySpace on which their margin is negotiated down to barely nothing. They will do this by building and acquiring their own media, which is 5x more valuable to them.

Deals like the MySpace-Google deal are pretty much a trojan horse for Google to build its direct advertiser relationships and monetization expertise on the shoulders of others. The real money will be made on the content that Google owns/will own. It’s a loss-leader game.

Every time Google signs a mega-deal for powering a 3rd party media company, its almost guaranteed that they will shortly after get into that business themselves and become the biggest competitor around (with all the ad relationships). If they don’t balance Google-owned media with 3rd-party ad syndication, they risk significantly diluting their overall profit margins because of that 5x factor. And that doesn’t seem like something they’re intent on doing.

IMHO – The best use of the Google money going into MySpace, AOL, Ask.com, etc is to build or acquire their own in-house ad capabilities and eventually phase out Google. Otherwise they are bound to lose the battle both on the ad front, as well as the content front.

I wrote a couple of related posts on this here and here, and probably a few other places I can’t remember.

Full disclosure + a small plug: I am co-founder of Quigo. We offer media companies a solution comparable to AdSense, except that it is a private label. And we don’t compete with our publishers on media. So feel free to consider all of the above to be ‘interest driven objective commentary’… 😉

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Introducing Outbrain

Yaron Galai2 Comments

In the past few weeks I’ve been bugging you with posts about a mysterious ‘RSS relevancy project’ I’m working on. Here’s the story:

RSS is a great way to consume content. So you get all excited and start adding feeds to your RSS reader. And then it quickly becomes an unmanageable crazy avalanche of content.

Out of this pain outbrain was born.

The idea is simple – If every blog/post/feed is read by many people, why don’t we harness the collective wisdom of all the readers for everyone’s benefit? That way we can save each reader’s time by quickly floating the best posts and flagging the worst.

But ‘best’ and ‘worst’ are very subjective definitions. A post about ski that might be extremely interesting to my good friend, could be a total bore to me.

So we decided to try and take this one step beyond the collective ‘wisdom of crowds’ type sites (aka – Digg & clones, or should we say ‘wisdom of bored teenager sites’…), and develop algorithms that try to predict personal interest in a specific article/post before it is read.

We do this by asking all outbrain users to vote on the items they read. The algorithm then seeks out similarities in voting patterns among different outbrainers, and personalizes recommendations accordingly. The more people vote about stuff they read, the smarter their outbrain becomes in recommending the right items to them.

Which brings me to the second goal we set – We hate being bugged by sites where submissions are a 5-minute process including logins, captchas, forms, etc. We want to bug our users as little as possible, and give them the benefit of the technology wherever they’re already used to consuming their RSS feeds. Except for signing up, I don’t think you’ll ever have to visit the outbrain.com site again.

The first small step of outbrain is now available. More information about it on the outbrain blog here.

If you’re interested in joining the outbrain project – head over to the website and submit your email address. I’ll shoot you back an email with a user name and details on how to get started.

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On profiling, part 2

Yaron GalaiLeave a comment

I recently posted my thoughts about the highly effecient process for screening all those toothpaste-bombers that are roaming US airports these days.

A few random followup points:

1) Another good post about this by Tom Evslin, fellow blogger on the MyWay network. From it:

They didn’t even glance at the rat’s nest of wires and strange devices that always lives in my nerd bag, much better potential there for an explosive device but profiling made it clear that I’m not a likely mascara carrier.

2) Scott Adams (the Dilbert guy) confesses to becoming a toothpaste smuggler:

So, like millions of other travelers (I assume) I plan to become a
smuggler. I figure I can take one small tube of travel-sized toothpaste
in my pants pocket and make it through security without being busted. I
rationalize that there is no danger to the public in doing this because
I use a brand of toothpaste that rarely explodes.

(BTW – good opportunity to recommend the excellent Dilbert Blog).

3) It just occured to me that the FAA airport screening policies might be one of the biggest marketing opportunities of all time. I can just assume that the toothpaste and nail-cutter industries, for example, have shot through the roof overnight, courtesy of the US government.
How long will it be before a creative product marketing manager for say, Ray-Ban, pays some dude to get on the plane and make a small show out of concentrating sun light through his glasses and directing them to the plane’s fuel tank?

For less than $200 you get a marketing campaign that immediately moves more merchandise than being the exclusive sponsor for the superbowl for the next 10 years….

4) Reading the comments on my post and on Tom’s, it seems like the word ‘profiling’ might be a bad choice of word. It’s not about setting up a government database for tracking the religion of each passenger and screening accordingly. It’s about a simple thing – empowering the piles of security staff to actually use their brain when seeking out potential problems. The ‘god-forbid-should-we-ever-insult-anybody’ mentality that’s driving today’s brainless screening is bad for the 99.999% innocent passengers and good for the bad guys.

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