Medium’s Ev Williams finds online advertising isn’t enough to sustain a hundred million dollar publishing company. The rest of the industry is not surprised.
How do you make money from online publishing? Medium’s Ev Williams shows he is as far away from the answer as the rest of us.
Online advertising’s disappointing revenues are no surprise to pretty well anyone observing the online publishing industry for the past five years, it seems to have come as a revelation to Ev and the investors who’ve staked an estimated $140 million in the venture.
That money, which most online publishers would gag for, seems to have gone on a bloated headcount given the company can afford to fire fifty people. It’s a shame the company’s investors didn’t appoint a board that checked management’s hiring practices.
Something that should worry other publishers is the organisation’s Promoted Stories division is being shut down as part of the restructure. This underscores how branded content doesn’t scale the same way traditional advertising does and won’t represent a major revenue stream for online publications.
It isn’t the first time Ev Williams has got it wrong, in founding Twitter he and his team turned their back on ordinary users and developers to focus on courting celebrities in the hope big brands would pay large amounts to be associated with them. It didn’t work.
Contrasting Ev’s Twitter and Medium experiences with that of Buzzfeed founder Jonah Peretti is interesting. While Buzzfeed still hasn’t found the formula for profitability, Peretti and his team have gained a deep understanding of what works in online publishing.
To be fair to Ev, we’re all trying to figure out the revenue model that will work for online media, his travails with Twitter and Medium show just how hard it is to find a way for publishers to make money from the web. What is clear though is burning a lot of cash on sales staff is not the answer.
Facebook has another attempt to capture the small business search market
Before the web came along, advertising for the local plumber or hairdresser was just a matter of placing an ad in the local newspaper and a listing in the Yellow Pages. Then the internet and smartphones swamped those channels.
One of the greatest missed opportunities has been small business online advertising. With the demise of phone directories, particularly the Yellow Pages, it’s been hard, time consuming and expensive for smaller traders to cut through the online noise.
This market should have been Google’s for the taking however the local search platform has been drifting for years in the face of company apathy, mindless bureaucracy and silly name changes to fit in with the Google Plus distraction.
While Facebook has been playing in the local business space for a while they are now ramping up another service with a new site for local services search.
TechCrunch reports Facebook are experimenting with the local search function and while it isn’t anywhere near as comprehensive as Google’s at present the rich data the social media service has been able to harvest could well make it a far more useful tool.
If Facebook or Apple does usurp Google, the search engine giant will only have itself to blame for missing the opportunity as it was distracted by loss making ventures while letting potentially lucrative services pass.
The local business search market should be a lucrative opportunity for the business that gets it right. It may well be that all the big tech giants are unable to make this market work.
Rubenstein joined AppNexus as employee number 18 in 2009 and has been part of the company’s growth from a small startup to a global technology company with a workforce of 1,000 professionals.
AppNexus is one of the new wave of companies managing and programming online advertising, helping advertisers and publishers target their products better while giving ad tech companies deeper insights and data.
In this interview, Rubenstein discusses some of the forces changing global advertising along with the challenges of dealing with a high growth business.
Getting your business online shouldn’t require a doctorate says domain registrar GoDaddy’s international boss
“The days of getting a PhD to get your businesses online are over” declared James Carroll, GoDaddy’s International Executive Vice President last week on a visit to Sydney.
GoDaddy is the world’s biggest internet domain name registration service and Carroll was in Australia to promote the expansion of the company’s local operations.
Australia’s a prime target for the company with nearly half the nation’s two million businesses not having a web presence. “I think there’s an awareness issue about the skill that are needed to get online,” says Carroll.
GoDaddy’s Australia and New Zealand country manager Tara Commerford suggested two reasons why small businesses aren’t going online, “I think it’s lack of awareness and people don’t know how to do it”.
Commerford suggests that simplified online tools are making it easier along with the easy access to other platforms like social media and location online services.
One of the barriers to getting online is confusion and the new top level domains haven’t helped this by muddying the message about which domains they should be registering under. This is only increasing the fear among small business owners that going online is complex, expensive and risky.
It’s understandable that domain registrars like GoDaddy would push the new domains given the industry’s low margins and need for scale, but that’s not the problem for smaller operators.
The problem for small businesses is getting the basics right with with a mobile friendly website, particularly for hospitality and tourism operators. Having the right domain name is an important first start of an important journey for most businesses.
The performance of Apple and Microsoft in recent years show two very different management philosophies.
The stunning quarterly results of Apple announced yesterday compared to Microsoft’s indifferent performance illustrate how the fortunes of two different business cultures have changed.
Apple yesterday announced a spectacular result for its quarter finishing at the end of last year with revenues up 30%, profits by 38% and Earnings Per Share just short of fifty percent.
The announcement was an emphatic vindication for Tim Cook and his management team who made some big bets on the larger form factor iPhone 6 which paid off spectacularly with shipments growing 46% to 74.5 million and revenue reaching $51.2 billion, over two thirds of the company’s total sales.
One notable aspect of Apple’s success is the difference with Microsoft’s and this shows how different business cultures come in and out of fashion.
The Triumph of the MBA
For two decades Microsoft’s licensing business model was dominant and this confirmed the MBA view that companies should do everything they can to move design, research, manufacturing and distribution out of their operations – the virtual corporation where there was no inventory, few costs and even fewer risks was the ultimate aim of the modern manager at the turn of the century.
Microsoft encapsulated this philosophy with its licensing model, while the company made massive sales with huge margins – as it still does – all the business risks in the computer market were carried by resellers and equipment manufacturers. For many years the markets loved this.
Apple tinkered with the licensing model under John Sculley in the mid 1990s during Steve Jobs’ exile but was never really serious about giving away its hardware capabilities and in 2001 moved into retail with the opening of the first Apple Store.
Coupled with the App Store, Apple have come to control the entire customer journey from marketing, design, purchase and ongoing revenue after the product is bought.
King of the new Millennium
While the 1980s and 90s were the time of triumph for the Microsoft model, the 2000s have been good to Apple as shown by the revenue and profit figures.
Apple and Microsoft Revenues 2000-2014Apple and Microsoft Profits 2000-2014
The key inflection point in these charts is, of course, the iPhone’s release in 2007. Apple caught the wave of change as computer use switched from personal computers to smartphones and is now the dominant vendor.
For Microsoft the success of Apple is bittersweet; the company had a smartphone operating system in Windows CE but it was too early to the market and the devices vendors went to market with were, at best, substandard.
Microsoft’s failure with the smartphone was also echoed with tablet computers and exposed the licensing model’s reliance on vendors to supply and support decent products, even today Microsoft’s hardware partners struggle to release decent tablet systems.
Cloudy on the web
Another problem that exposed Microsoft’s weaknesses was the rise of the web where hardware and operating systems really did matter so much any more. Along with pushing out personal computer lifecycles it also had the consequence of allowing other systems into the marketplace, notably Linux and Google Android.
With OS X, Android and Linux systems no longer hampered with the compatibility issues that irritated non-Windows users in the 1990s the market was open to adopting those systems. While the PC market has remained quite loyal to Windows, although the Apple Macs are showing serious growth as well, Microsoft’s system has barely any marketshare in other device segments except servers which are also declining as business increasingly move to cloud services.
Apple have shown in the computing and smartphone business that controlling the hardware products is as important as supplying the software, a lesson that Microsoft now acknowledges with its restructure into a ‘Devices and Services’ company under former CEO Steve Ballmer.
Under current CEO Satya Nadella Microsoft is focusing on cloud services which also aren’t as profitable as its legacy operations but see it competing with companies like Amazon and Google who don’t boast the profits from their online operations that Apple makes from its hardware.
Microsoft aside, the lesson Apple gives the technology is pertinent for its competitors in the smartphone space as well; companies like Samsung, LG and the army of Chinese handset vendors are going to find their markets tough unless they can take control of their software development and distribution channels – relying on Google for Android and telcos to get their phones to customers leaves them exposed in similar ways to Microsoft’s partners in the last decade.
In the battle between business models, Apple is the current winner and shows throwing all of your business operations over the fence to partners and licensees is a risky strategy. How those lessons are applied in other sectors will test the limits of both management philosophies.
2015 will see many companies trying to justify their massive investor valuations
2015 will feature more boneheaded moves as over valued companies try to meet investors’ expectations, a good example is Twitter adding sponsored accounts to its lists service.
The move by Twitter, reported by Search Engine Land’s Danny Sullivan, is another attempt by the service to get revenues that justify the company’s ten billion dollar valuation. While adding little income, the move further erodes trust in the service.
That home delivery services are again the investment flavour of the time is a worry given similar stakes marked the peak of the first Dot Com Boom in 2000. Whether today’s equivalents are any more sustainable will be one of the questions for 2015.
Another question for 2015 will be whether Twitter can crack the magic code and justify its valuation.
The rise and and fall of Yahoo!’s core product illustrates both the volatility of the web and how the underlying dynamics of the internet has changed; at the time Yahoo! Directory was launched, we were struggling the task of keeping track of all the information being posted online.
Even in those early days it was clear that task was becoming unmanageable and this was the problem Google set out to solve and its success destroyed the directory business along with a whole range of other industries.
Yahoo! Directories’ demise needs to be noted by today’s web and social media giants; just as these technologies are disrupting old industries, new businesses aren’t immune to those changes.
The tools for building new businesses have never been more accessible says Canva’s Chief Evangelist Guy Kawasaki
“My job is to spread good news,” says Guy Kawasaki of his role as Canva’s Chief Evangelist.
Kawasaki was speaking to Decoding the New Economy about his role in popularising the online design tool which he sees as democratising force in the same way that Apple was to computers and Google to search.
Democratisation is a theme consistently raised by startups and businesses disrupting existing industries and Kawasaki continues this theme.
“The world is becoming a meritocracy; it’s not about your pedigree, it’s about your competence,” states Kawasaki.
Falling barriers to entry
What excites Kawasaki about the present business climate are the falling barriers to starting a venture. “Things are getting cheaper and cheaper, in technology you had to buy a room full of servers, have IT staff in multiple cities. Today you call Amazon or Rackspace and host it in the sky.”
“Before you had to buy advertising for a concert, now if you’re adept at using social media – with Google Plus, Facebook,Twitter, Pinterest and Instagram – you have a marketing platform that fast, ubiquitous and cheap.”
“What excites me is there are going to be more technologies, more products and more services because the barriers are so low.”
Creating a valued and viable product
For those businesses starting into this new environment, Kawasaki believes the most important thing a startup should focus on is getting a prototype to market; “at that point you will know you’re truly onto something.”
“If you build a prototype that works you may never have to write a business plan,” says Kawasaki. “You’d never have to make a Powerpoint, you may never have to raise money as you could probably bootstrap.”
Kawasaki view is the MVP – Minimum Viable Product – model of lean product development should have another two ‘V’s added for ‘Valuable’ and “Validated’.
“You can create a product that’s viable, ie you could make money, but is it valuable in that it changes the world?”
“Is your first product going to validate your vision? If it’s not then why are doing it?”
The story Kawasaki tells is the tools to deliver valued and viable products are more accessible than ever before; that’s good news for entrepreneurs and consumers but bad for stodgy incumbents.
How does Twitter compare to Facebook and Google when they were floated?
Now microblogging service Twitter has released documents ahead of a stock market float, it’s possible to start looking at the viability and stock market valuation of the company.
The stockmarket answer was resounding ‘yes’ despite an initial fall that saw investors face a 50% loss in the early days of Facebook being a public company. Today the stock has a market valuation of $122 billion, with an eye popping price/earnings ratio of 122.
So how does Twitter stack up at the valuations being discussed? Quite well it appears when we put it against Google, Facebook and LinkedIn.
The discussion over how Twitter makes money exposes another problem for the service in it has no obvious revenue stream which makes comparing the platform to Facebook or LinkedIn rather problematic.
Facebook has advertising while LinkedIn has premium subscriber services both of which are problematic.
Not having an obvious revenue model may not turn out to be a problem – as LinkedIn’s P/E shows – and Twitter’s founders are probably more likely than anyway to be the digital media industry’s David Sarnoff.
It may be Twitter makes its money from giving advertisers, marketers and others access to the massive stores of data the company is accumulating.
Whatever way it turns out, Twitter’s going to be the hot IPO news for the tech industry for the rest of the year. At current prices, the investors will be lining up to buy the stock.
Two business briefings raise a worrying question about the technical literacy of business executives.
Yesterday was media briefing day with a number of vendor events, including a very nice lunch with IBM, on the state of the technology industry.
One thing that was particularly striking with IBM Truth Behind The Trends survey was just how out of touch many of the executives quoted in the report seem to be with responses on topics like malware and Bring Your Own Device being firmly behind the curve.
This was borne out at the earlier media roundtable with online security company Websense where they described some of the challenges facing Chief Information Officers in making company boards and senior managers aware of technology security risks.
What surprised most of the journalists in the earlier briefing was just how clueless many of the executives seem to be about online business risks, those who went along to the following IBM briefing realised why – managers genuinely don’t understand how the internet and business technology is evolving.
That should worry investors as markets are changing rapidly and managers who don’t recognise, let alone understand, the shifts happening are jeopardizing the their business’ futures.
While little has changed on TV, today the web has 57 million websites* offering little beyond click bait and a quick rewrite of someone else’s work.
At the moment that model works for the kings and queens of the digital manor who pocket a few pennies for each of the ten stories their overworked interns pump out in a day but it’s hard to see how that form of publishing adds value to the audience.
The 1990s television stations and cable networks got away with no adding value – and still do today – because they are in industries that are tough for new entrants to enter.
But on the web there are far fewer barriers to new entrants which means offering 57 channels with nothing on, or 57 million websites with no real content, isn’t a long term path to success.
