Apparently, so I have read, not even Facebook believes in the $15 billion valuation any longer.  Evidence to that fact by insider selling of shares at a $3-$5B valuation, which I still think is high. 

So why is the valuation coming down to earth?  In my opinion it’s simple.  Facebook is justifying the valuation on their monetization strategy, which is based entirely on advertising revenue.  Their advertising revenue is expected to come in around $300 million this year, so an agressive 20x multiple on sales put’s the valuation at $6B.  Why is advertising revenue much weaker than expected?  Again, it’s simple.  Their ad strategy is based on banner ads…yes those annoying ads that show up on websites that everyone ignores and no one clicks on.  Ask yourself, when is the last time you clicked on a banner ad, let alone completed the advertiser’s desired call to action?  Click through rates are anemic, especially on social networks.  Industry averages peg CTR on social nets in the .01-.04% range.  With CTR that low, already low CPM pricing is continuing to contract.  At StashCast, we have run campaigns on Facebook with CPM rates in the .$50 range and CTR within the industry average.  Try it…I bet you find similar results. 

Google is facing similar issues when trying to monetize all the YouTube traffic through advertising.  Nothing they have tried thus far is working effectively.  Today’s consumer has changed.  They have control and are not going to click on web ads if they don’t have to.  Hence, the anemic click through rates and the poor ad performance create the gravitational pull of sky high valuations back down to earth.

In an expanding inquiry into the state of consumer privacy on the Internet, House Energy and Commerce Committee leaders sent letters Friday to more than 30 companies, demanding to know whether they track where their users go online and use that information to deliver personalized advertising.

Among the companies receiving the letters were Google Inc., Yahoo Inc., Microsoft Corp., AT&T Inc., Comcast Corp., Qwest Communications International Inc., Verizon Communications Inc., Time Warner Inc.’s AOL unit and Time Warner Cable Inc. The companies were given a week to respond.

But the latest letters broaden the inquiry to encompass much bigger and better-known players on the Internet. The letters seek details on how many consumers have been tracked, whether those people have been notified and whether they were given the option to “opt out” of it. The committee also wants to know how the collected information is used and how it is gathered — for example, whether the companies aggregate data from different online applications.

Ari Schwartz, vice president of the Center for Democracy & Technology, a civil liberties group, said he is optimistic that the congressional inquiries could lead to general privacy legislation that would safeguard consumer data gathered both online and offline.

We will be keeping a close watch on the results as the impact to consumers and marketers could be profound.  Our belief all along is that marketers who employ behavioral advertising solutions to better target consumers with relevant advertising are walking a very fine privacy line, and could suffer significant brand damage when consumers realize those brands are tracking where they go online, what they are searching for, and their email communications.

]]> http://www.stashcast.com/lawmakers-demand-info-on-web-tracking-practices/feed/ http://www.stashcast.com/nintendo-wii-giveaway/ http://www.stashcast.com/nintendo-wii-giveaway/#comments Fri, 11 Jul 2008 17:03:02 +0000 david http://www.stashcast.com/?p=44 To help grow our Clever Sherpa Network, we have launched a contest for a Nintendo Wii or $250 in Amazon.com money! Whoever can get the most people to register wins! The contest ends on Monday, July 28 at 8pm EDT.

We will announce the winner on August 4th!

“Given the serious privacy concerns raised by the sophisticated ad-serving technology Charter Communications planned to test market, I am pleased to hear that the company has decided to delay implementation of this program, which electronically profiled individual consumer web usage. I urge other broadband companies considering similar user profiling programs to similarly hold off on implementation while these important privacy concerns can be addressed.”

Ars notes, however, that Charter is as of yet just delaying implementation of NebuAd and that other companies, such as UK outfit Phorm, are attempting to bring similar services to market.

Read Ars’ full report here or check out a Washington Post article on the matter here.

For more on Charter’s initial plan for the NebuAd program hit Ars’ excellent report from May.

-Jake

Behavioral targeting has become a hot button issue recently, as industry enthusiasm for delivering customized experiences and improved marketing metrics runs up against consumer privacy concerns and calls for greater transparency around emerging tracking and targeting techniques. Here are the survey results:

71% of online consumers are aware that their browsing information may be collected by a third party for advertising purposes, but only 40 percent are familiar with the term “behavioral targeting.”

57% of respondents say they are not comfortable with advertisers using that browsing history to serve relevant ads, even when that information cannot be tied to their names or any other personal information.

91% of respondents expressed willingness to take necessary steps to assure increased privacy online when presented with the tools to control their internet tracking and advertising experience, suggesting a need for added education, transparency, and choices for behavioral targeting.

64% would choose to see online ads only fro online stores and brands that they know and trust and 44% of respondents would click buttons or icons to make that happen.

42% of consumers say they would sign up for an online registry to ensure that advertisers are not able to track browsing behaviors, even if it meant they would receive more ads that are less relevant to their interests.

The division posts a serious dilemma for BT practictioners and industry privacy advocates, because consumers say they want more relevant advertising, but don’t want to be tracked in order to get it.

For the TRUSTe behavioral tracking study, TNS conducted an online survey among a randomly selected sample of American adults whose households belong to TNS’s online consumer panel. In total, 1015 interviews were completed between February 1 and 5, 2008. The data were weighted by region, market size, age, gender, and household size, composition, and income to reflect the demographic composition of the online adult population in the continental U.S.

According to a recently released study by IDC, the U.S. Internet Advertising 2008-2012 Forecast and Analysis, overall Internet advertising revenue will double from $25.5 billion in 2007 to $51.1 billion in 2012. During the forecast period, Internet advertising will grow about eight times as fast as advertising at large.

The Internet will go from the number 5 medium all the way to the number 2 medium in just 5 years, says the report, making it bigger than newspapers, bigger than cable TV, bigger even than broadcast TV, and second only to direct marketing.

Video advertising will be the principal disruptor of Internet advertising during this time, as its revenue grows sevenfold from $0.5 billion in 2007 to $3.8 billion in 2012 at a compound annual growth rate of 49.4%. Brand advertisers will shift significant amounts of money into video commercials, primarily from broadcast television and to a lesser extent from cable television.

Karsten Weide, program director, Digital Media and Entertainment, says “What will (help) drive this trend is that consumers are starting to realize that, as opposed to TV, Internet video lets them watch what they want, when they want, and increasingly, where they want.”

IDC concludes that

Search ads will remain at the top of the Internet ad hierarchy with revenue at $10.4 billion last year, reaching almost $18 billion in 2012. IDC believes search, now having almost 41 percent of the market share, will have just above 34 percent by 2012.

Online video ad spending will grow from about $500 million in 2007 to $3.8 billion in 2012 and its Internet advertising share will expand from 2 percent to 7.4 percent.

Referral and lead-generation services will see the second strongest market share gain, says IDC. Revenue from referral and lead generation services will grow from $2.3 billion in 2007 to $5.9 billion in 2012.

Mobile advertising will also show robust growth but the segment will still have “just shy” of 1 percent of the overall online ad market by 2012.

]]> http://www.stashcast.com/web-2-ad-medium-in-five-years/feed/ http://www.stashcast.com/microhoo-the-deal-that-wasnt/ http://www.stashcast.com/microhoo-the-deal-that-wasnt/#comments Mon, 05 May 2008 17:59:55 +0000 nash 23

As most have learned by now the proposed Yahoo acquisition by Microsoft seems to be toast.  I guess the deal got too expensive for MS and was too cheap for Yahoo.  It seemed last week they were close with MS willing to offer $33/share and Yahoo stating they were worth $37.  So who is the winner and who is the loser in this deal?  Personally, I think Google is the biggest loser.  Yes, that right…Google.  I believe Google was hoping the deal would happen because it would take MS and Yahoo’s focus away from customers, partners, and revenue, which would ultimately allow Google to take advantage.  Now Google has two large and focused competitors vs. one unfocused competitor.  Big mergers are tough to make work in the technology industry, mostly because of soft issues (i.e. internal politics, conflict of cultures, etc.).  Look no further than the AOL Time Warner merger or Compaq/Digital for recent evidence.  I have learned along the way sometimes the best deals are the deals that don’t happen.  This may be the case with MicroHoo…time will tell.

]]> http://www.stashcast.com/microhoo-the-deal-that-wasnt/feed/ http://www.stashcast.com/the-brand-momentum-effect/ http://www.stashcast.com/the-brand-momentum-effect/#comments Mon, 21 Apr 2008 18:00:44 +0000 nash 24

I recently read a terrific blog post by Ashu Garg, who is a entrepreneur in residence at Trinity Ventures.  I have copy/pasted his blog post here because I believe in it so strongly.  For those interested in more of Ashu’s posting’s please visit his blog by clicking here.

The “Momentum” Effect. In traditional media, brand advertisers kept control on the story and obtained reach and engagement through mass media. In digital media, especially with young consumers, that model no longer works. Consumers control what media and brands they engage with, and advertisers need to start conversations and then let their consumers continue the dialog. In so doing, consumers often evolve the story (which is challenging for brands) but also often create a tremendous viral effect. An example of this is a recent Adidas campaign on Myspace where the Adidas brand page only got 690,000 page views but the Adidas brand “built momentum: through the 21 M+  exposures it got thorough links that consumers inserted into their Myspace pages or forwarded to their friends. In short, the most successful brands will start conversations and then “build momentum” by leveraging communities of consumers that in effect become brand ambassadors, but without any constraints on hat they can say or do.   ]]> http://www.stashcast.com/the-brand-momentum-effect/feed/ http://www.stashcast.com/tapping-your-phone-is-not-cool-either-is-tapping-your-web/ http://www.stashcast.com/tapping-your-phone-is-not-cool-either-is-tapping-your-web/#comments Sat, 05 Apr 2008 18:01:35 +0000 nash 25

The Washington Post recently had an article in their business section that did an excellent job of detailing what I am calling the “Quiet Storm.”  How would you like being tracked on-line?  In other words, do you want your ISP and others, such as advertisers, knowing what websites you are visiting?  What emails you are sending?  Or what about your search history?  Although the Ad Networks, technology companies, and ISP’s admit they are tracking this information, they won’t talk about it?  Why are they so quiet about it?  One industry exec said they are being quiet about it for fear of consumer backlash.  It’s akin to the mortgage industry selling loans to people who should have never qualified.  The banks knew they should not have sold these sub-prime loans but greed got the best of them.  Now everybody is going to lose - the consumer, the bank, the industry, and the American taxpayer.

Although the companies that are quietly collecting this data about you state they will never tie anything back to your personal information, my “bullshit meter”, when hearing this, registers on the high side.  The web advertising industry is too hyper-competitive for someone not to break the rules and when that happens, hits the national news, watch out because the public backlash will be so fierce that Congress will be forced to enact new laws with stiff penalties.

Marketers, who are leveraging this behavioral data, to better target offers, should be very cautious with how they proceed.  Once the consumer wakes up to the notion that their web traffic is being tapped, the “Quiet Storm” brewing could turn into revolutionary consumer backlash and do irreparable damage to the brand.  Once you have lost the consumer’s trust, they will go out of their way not to buy your products and share their negative feelings with their friends and colleagues, further eroding the brand’s ability to sell products and services.

]]> http://www.stashcast.com/tapping-your-phone-is-not-cool-either-is-tapping-your-web/feed/ http://www.stashcast.com/consumer-initiated-engagement/ http://www.stashcast.com/consumer-initiated-engagement/#comments Fri, 28 Mar 2008 18:03:57 +0000 nash 27

There is good news for brand managers out there.  There are some excellent ways to engage with consumers on-line and measure the impact.  But guess what?  It’s not through on-line display advertising.  First of all, the CTR’s are way too low to have a serious uplift in brand metrics.  Secondly, what is a click really worth to a brand?  Not much, as recent research by Comscore pointed out there is no correlation at all between clicks and brand equity.  Pre-rolls, mid-rolls, etc. are not the way to the promised land either.  Anything that interrupts the consumer and is not initiated by the consumer has been shown to have little to no value to the advertiser.  After all, what is branding all about - building relationships over time resulting in increased sales, etc. right?  Do you have a lot of friends who constantly interrupt you?  Well, if a brand wants friends, the same holds true - stop interrupting.

So, how do brand managers engage with consumers?  Well, savvy brand managers implement campaigns where engagement must be initiated by the consumer, not the other way around.  For example, if you provide video content on your site, you can certainly measure the amount of “engagement time” people are choosing to spend with the content.  You can measure each view, how much time they spent with the content, etc.  Consumer initiated engagement is really the only engagement metric worth measuring and placing serious value on.  That’s exactly why search marketing is effective - because it’s user initiated.  There are many ways to drive engagement…first, have great content on your site worth engaging in.  Second, allows consumers go participate in the content creation through UGC, mashups, rating, voting, sharing, etc.  Third, instead of the focus being on pushing the brand one can create “brand pull” by providing a “community” where the brand is not in the starring role, but still crucial to the story .  For a good example of brand building look no further than Barack Obama’s website.  I don’t know if Barack will ultimately become the next President but I do know he and his people know how to leverage the web to build his brand equity.

]]> http://www.stashcast.com/consumer-initiated-engagement/feed/