Online Advertising

Though most assumed Google would spend some time sulking after the Microsoft-Facebook deal, the search giant has instead unveiled plans to take Facebook head-on.

Codenamed “Maka-Maka,” according to TechCrunch, Google plans to add a social matrix atop its applications, from Gmail to Google Maps. Google will also incorporate “activity feeds” (a la Facebook’s “news feeds”), using the same engine that powers Google Reader.

And like Facebook, the search giant plans to open its back-end to developers — starting with social network Orkut, and ultimately spreading to all things Google. It’s even taking it a step further by making those third-party apps compatible with non-Google parts of the web, such as competing social networks.

At Maka-Maka’s core, Google sees the entire web as its playing field, instead of limiting social features and user apps to a closed-in social network.

It must first, however, work to match what Facebook has built. In the six months since Facebook originally opened its back-end, over 4,000 third-party apps have landed on the site.

Microsoft has won a high-profile technology industry battle with Google and Yahoo to invest in the social networking upstart Facebook.

The two companies said on Wednesday that Microsoft would invest $240 million for a 1.6 percent stake in Facebook. The investment values the three-year-old Facebook, which will bring in about $150 million in revenue this year, at $15 billion.

The deal ends two months of jockeying between three major Internet players for the right to invest in and forge close ties with Facebook.

As part of the deal, Microsoft will sell the banner ads appearing on Facebook outside of the United States, splitting the revenue with it. Last year, Microsoft struck a deal with Facebook to run banner ads on the site in the United States through 2011.

The astronomical valuation for Facebook is evidence that Microsoft executives believed they could not afford to lose out on the deal. Google appears to be building a dominant position in the race to serve advertisements online. Fearing it might lose control over the next generation of computer users, Microsoft has been trying to match and in some cases block Google’s plans, even if that effort is costly.

“We are now stepping outside what is typically a business decision,” said Rob Enderle, the founder of the strategy concern Enderle Group. “This was almost personal. I wouldn’t want to be the executive that’s on the losing side at either firm.”

A Google spokesman said the company had no comment. Facebook is planning to comment on the deal later today.

Representatives of Facebook say the investment will allow it to add employees, expand overseas and aggressively develop its own advertising system that will tailor ads to the personal preferences users make public on their Facebook pages. Facebook is expected to introduce such an ad network at an event in New York next month.

The Microsoft investment throws the value of the holdings of Facebook investors into the stratosphere. Mark Zuckerberg, the 23-year-old Facebook founder who dropped out of Harvard to build the company, owns a 20 percent share which is now valued at $3 billion. Accel Partners, the venture capital firm that invested $12.7 million in May 2005 and owns 11 percent of Facebook, now holds stock worth $1.65 billion.

The high valuation also represents a belief that Facebook is creating an important new operating system — one that exists on the Web instead of on personal computers. In May, it opened its platform, inviting other companies and third party developers to create tools for the site and share in the advertising revenues.

The move unleashed a flurry of activity around the social network. More than 4,000 applications, like games and music-sharing tools, have since been created for the site, which in turn has accelerated Facebook’s membership growth. The company says it now has more than 42 million members and will exceed 60 million members by the end of the year.

“Once a social operating system takes over a country it’s like it becomes the native language of that country,” said Lee Lorenzen, a venture capitalist who is bullish on Facebook and notes that Google’s Orkut dominates Brazil, Friendster dominates the Philippines and Facebook is becoming the dominant forum in the United States, Canada and Western Europe.

Facebook boosters say that social networking represents the future of online activity.. Advertisers are attracted to these properties because they offer an opportunity to aim ads to particular users interested in their product or service.

Mr. Lorenzen and other Silicon Valley investors are often dismissive of MySpace, Facebook’s larger rival, which has more than 110 million active users and is owned by the News Corporation. “MySpace is not based on authentic identities. Facebook is based on who you really are and who your friends really are. That is who marketers really want to reach, not the fantasy you that lives on MySpace and uses a photo of a model,” he said.

Though they won’t appear for British subscribers, BBC.com will start serving ads to its 40 million non-UK monthly visitors next month.

BBC Worldwide’s CEO John Smith said the move was “a key step in delivering our strategy of growing our online revenues to 10 percent of [total] revenues.”

This news comes after the BBC announced it would cut 1,800 jobs, subtracting 120 to 130 positions directly from its Future Media & Technology division. This will reportedly not affect the iPlayer payroll.

The cuts are part of a plan to restructure BBC in an effort to streamline the media company and ensure “a digital step change […] to offer audiences programmes wherever and whenever they want them - from iPlayer to My BBC Radio,” according to paidContent UK.

Ultimately BBC will combine TV, radio and web news operations under one roof to create “the world’s most advanced multimedia newsrooms.”

 Google Inc., owner of the most- popular Internet search engine, said third-quarter profit jumped 46 percent, beating analysts’ estimates, after the company sold more advertisements on the Web and its YouTube video site.

Net income rose to $1.07 billion, or $3.38 a share, from $733.4 million, or $2.36, a year earlier, Google said today in a statement. Sales advanced 57 percent to $4.23 billion.

Google’s sales growth has topped 50 percent in all of its 13 quarters as a public company, spurred by search query gains against Yahoo! Inc. and Microsoft Corp. Today’s report may reassure investors that company’s earnings justify its stock price, which hit $660 in extended trading.

“They’re still looking good across the board,” said Erick Maronak, chief investment officer at Victory NewBridge Capital Management in New York, which oversees $1.3 billion including Google shares. “It’s hard to really come across a company that’s at the intersection of such big trends.”

Excluding stock-compensation costs, profit was $3.91 a share, Mountain View, California-based Google said. That topped the $3.78 average estimate of analysts in a Bloomberg survey. Revenue, excluding sales passed on to partner sites, rose to $3.01 billion, beating the average estimate of $2.94 billion.

Google shares rose $7.38, or 1.2 percent, to $647 in extended trading. The shares gained $6.14 to $639.62 at 4 p.m. New York time on the Nasdaq Stock Market and have advanced 39 percent this year.

Beating Estimates

“It’s obvious to us that our model continues to work very well,” Chief Executive Officer Eric Schmidt said on a conference call with analysts.

Schmidt, 52, has now beaten analysts’ profit estimates in all but two of Google’s earnings reports. The stock passed $600 this month, buoyed by Google’s market-share gains and advertisers shifting more spending to the Web.

Three months ago, Google reported profit that missed analysts’ estimates because the company increased spending on research and hired more workers.

“It’s nice to see them back on track, delivering earnings above expectations,” said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

Hiring Plans

Google added 2,130 employees in the quarter, bringing its total to 15,916. Schmidt said some of these employees represent an “overhang” from previous agreements and that the company is paying close attention to its hiring plans.

Revenue on Google’s own sites climbed 68 percent to $2.73 billion, while sales on partner sites gained 40 percent to $1.45 billion. Capital spending rose to $552.6 million from $492.2 million a year ago.

To sustain growth, Google began selling ads in video clips on YouTube during the quarter, and this month started offering Web sites a way to run clips and related ads alongside articles. The company bought YouTube for $1.65 billion last year.

“We’re surprised at the number of people willing to experiment with these new formats,” Vice President Marissa Mayer said in an interview yesterday at the Web 2.0 conference in San Francisco. “They ultimately will be very large businesses.”

Google is also trying to extend its ads beyond personal computers to mobile handsets. Last month, the company introduced a version of its AdSense software for mobile-phone Web sites, letting them show ads relevant to their content.

Mobile Services

“It’s very important to have these kinds of information services available in mobile phones” for countries such as India where mobile phones outnumber computers, co-founder Sergey Brin said in an interview. In 10 years, mobile ads and services may make up half of Google’s business, he said.

Google didn’t forecast profit for this quarter, a policy the company says prevents it from finessing earnings to meet analysts’ expectations.

Yahoo, owner of the most-visited U.S. Web site, reported profit two days ago that beat analysts’ estimates on higher sales of display ads. That lifted expectations for Google. Of 38 analysts who follow Google’s stock, 34 recommend buying it and four say hold.

Google accounted for 61 percent of global search queries in August, ahead of Yahoo’s 14 percent and Microsoft’s 4 percent, according to Reston, Virginia-based ComScore. In the U.S., Google had 57 percent of the market in September, compared with 24 percent for Sunnyvale, California-based Yahoo and 10 percent for Redmond, Washington-based Microsoft.

Rich media applied to display advertising typically increases engagement, but does it produce a memorable ad? San Francisco-based AdBrite says, “No.” But the company does think its new full-page ad unit will rival the impact of print and TV ads. Launch advertisers include Sanyo, Pennzoil, Live Nation, Chilis, and Investor Minute.

The format appears as an interstitial like those commonly used on news and content sites, but overlays a clickable micro-site or landing page, allowing the user to interact without leaving the publisher site. The full-page ad unit appears after a user has clicked a few pages deep into a publisher site.

“We want to reach people after they have clicked one or two times and already engaged with the free site,” said Jim Benton, VP of sales at AdBrite.

The ads are currently running on 5,000 Web sites, according to AdBrite. Initial publishers include Excite, iMeem, Fanpop and Egotastic.

The unit could be served as an interstitial when a site visitor goes from homepage to an article page, for instance. Instead of similar interstitial units that run on sites like GameSpy.com, the AdBrite unit allows advertisers to display clickable creative on a microsite or landing page, enabling interaction without clicking away from the main site.

Benton said the unit could be thought of as the new :20 or :30 ad.

A default frequency cap of one-view per day is applied across the network. Individual publishers can increase the rate to three-times per day, which is spaced out between intervals of six hours. AdBrite wants to ensure sensitivity to the user, Benton said. Anytime after the ad appears, users can click a “skip this ad” button to continue to the content.

The AdBrite system allows advertisers flexibility to test multiple creatives across a single buy. Advertisers also can insert a pixel on their site to track conversions.

As media becomes more and more fragmented, content providers and advertisers are looking for new ways to distribute their messages to the right audiences at scale. To better connect content providers with consumers and to give publishers new ways to further engage their audiences, Google today announced the availability of video units, the first offering for content distribution on AdSense™. Video units enable AdSense publishers to display relevant, targeted video content within a customized, embedded player that’s ad-supported. Google is working with select YouTube content partners including TV Guide Broadband, Expert Village, Mondo Media, lonelygirl15, Extreme Elements, and Ford Models to supply the video content. The video units are user-initiated and will play only after a user has clicked to play the video.

The ads within the video unit are targeted based on a combination of the video content and the publisher’s site content. Advertisers are charged on a cost-per-click or cost-per-impression basis. Ads appear as a companion banner ad at the top of the video unit and as a text ad on the bottom portion of the video once the video begins playing. AdSense publishers and YouTube content partners will receive a share of the ad revenue.
Content distribution on AdSense improves the overall web experience by connecting consumers with more relevant information and entertainment on the sites they visit. This new program is a scalable and cost-effective way to distribute content online, creates a new revenue opportunity for publishers and content owners, and helps advertisers reach their target audiences in new and innovative ways. It will also allow AdSense publishers a unique way to enhance their sites with fresh, dynamic content.
Video units are now available in the U.S. for English language websites. Over the coming months, we will expand the program to include other types of content to bring these benefits to content owners no matter their medium of choice.
For more information, please see: http://adsense.blogspot.com/
Google, YouTube, and AdSense are trademarks of Google Inc. All other company and product names may be trademarks of the respective companies with which they are associated.
Source: Google

Two Committees in the U.S. House of Representatives are mulling hearings on Google’s proposed acquisition of DoubleClick. If placed on the committees’ schedules, the proceedings would follow a hearing already conducted last week by the Senate Judiciary’s Antitrust, Competition Policy and Consumer Rights Subcommittee.

Sources at the House Energy and Commerce and the House Judiciary Committees indicated separate hearings, or possibly a joint hearing, could take place, but nothing is on the calendar yet.

“The chairman is interested in this issue,” said a House Judiciary Committee spokesperson, regarding Google’s proposed DoubleClick buy. Representative John Conyers of Michigan chairs the committee, as well as the Judiciary’s Antitrust Task Force Subcommittee, the likely forum for any potential hearing on the deal.

Opponents of the acquisition speaking at last week’s Senate hearing characterized Google and DoubleClick as direct competitors that, if connected, would unfairly dominate the online advertising industry. Others sounded alarms over privacy implications of the deal, suggesting the two merged firms would control the largest consumer information database ever known.

“Google will become the overwhelmingly dominant pipeline for all forms of online advertising,” said Microsoft SVP and General Counsel Brad Smith during the Senate hearing. Smith went on to call the proposed deal bad for publishers, advertisers and consumers. Microsoft is among the most vocal rivals of the deal, joining consumer privacy advocates in calling for further investigation of the acquisition, or an end to it all together.

Though the Federal Trade Commission has oversight over the acquisition, congressional hearings could serve to influence the FTC’s decision on whether to approve the controversial deal. The FTC is currently investigating the proposed acquisition.

Representative Bobby Rush, chairman of the House Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection, has conducted the non-public briefing with the FTC he requested in July. In a letter sent to the commission, the Illinois Congressman stated the Subcommittee was considering holding a hearing after August to discuss the deal’s implications for competition and consumer privacy. A House Energy and Commerce hearing has yet to be scheduled.

DoYell Search Engine

Accounting Software UK

The former CEO of Epsilon’s e-mail division has finally landed at a new firm, almost exactly a year after he was ushered from his post with the database marketing giant under curious circumstances.

Al DiGuido will be chief executive at Zustek, a 110-employee e-mail marketing outfit with operations in California and India. The firm was recently acquired by private equity firm Investcorp Technology Partners, which intends to buy up digital marketing companies of various stripes with the goal of assembling a full-service interactive offering.

Zustek’s services will eventually include SEO, SEM, site development, media planning and buying, creative, analytics services and CRM. As those capabilities are layered on through merger activity, he added, the acquired companies will be assimilated under the Zustek brand. Ultimately the firm aims to offer clients a soup to nuts acquisition and retention tool that will allow them — DiGuido hopes — to reduce the number of their agency relationships from four or five to one.

“It all really feeds the need I keep hearing from marketers,” DiGuido said. “They want an organization to serve as the general contractor. We’ll help them acquire customers, house them, retain them…. Down the road we’ll be able to give them analytics across the board.”

Despite Investcorp’s focus on growth through acquisitions, DiGuido said the company is not pursuing a roll-up strategy; he sought to distance Zustek from “folks out there that don’t know a lot about the market” yet are nonetheless buying up digital shops at great speed.

“You have to have the right people, the right technology, the right culture,” he said

The world’s first mobile phone network funded entirely by advertising was launched yesterday. U.K.-based Blyk will offer 16- to 24-year-olds free text messages and minutes in return for receiving advertisements on their mobile handsets.

The MVNO (define) will enable marketers to target their ads to specific groups of users, thanks to profile information provided by members themselves.

Jonathan MacDonald, head of U.K. sales, told ClickZ, “For brands, Blyk provides direct access to the 16- to 24-year-old market and enables them to create awareness, build relationships and drive sales to this hard to reach audience”.

In order to qualify for free call time and messages, members agree on sign-up to receive up to six advertisements a day, predominantly in the form of SMS and MMS messages. Users are under no obligation to respond to the ads, and do not sign a contract for the service.

Blyk claims the network will provide complete advertising transparency and guaranteed ROI. Although individual user profile information is shielded from advertisers, the service will allow them to target specific market segments, based on the users’ own expressed interests.

“If a member has expressed an interest in video games for example, advertisers could then use this information to inform them of new releases, or perhaps offer discount coupons,” said MacDonald.

It remains to be seen whether Blyk can strike a workable balance between advertising and free services. The current plan offers 217 texts and 43 minutes of talk-time a month, and MacDonald claims that this is in excess of what three quarters of consumers in its demographic use in a month.

“Users will receive an absolute maximum of six messages a day, but it is likely to be less.” he stated. “Our trials indicated that tolerance was not a problem, as long as the adverts were relevant to the user. The service links young people with the brands they like. Young people want to hear about the latest films or music releases. A large proportion of users actually claimed that they missed the service when the trial ended, and did not want to go back to paying for their calls or text messages.”

Thomas Husson, senior analyst for European mobile at Jupiter Research said, “It’s a good model and a decent free offering, but it’s difficult to see if it will be successful yet. It really depends on how clever they are with their ads, and if the members actually want to engage with the brands because of them.”

The concept of ad funded mobile networks is not a new one. Virgin Mobile launched a similar service last year, with users earning minutes by watching online flash advertisements and responding to customer surveys. A number of advertising agencies are experimenting with mobile advertising, with WPP, Aegis and Publicis Groupe all investing in, or acquiring mobile advertising firms recently.

The service itself will be marketed primarily through the use of viral invitations, passed on by existing users. New users can gain access to the service in a number

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