November 6th, 2008 elitani
By Mark Sutton
Yahoo! CEO Jerry Yang has told a conference in San Francisco that Microsoft should buy the company, just hours after it was announced that Google has abandoned an advertising deal with Yahoo! to avoid a legal battle with regulators.
Speaking at the Web 2.0 summit, Yang said: “To this day the best thing for Microsoft to do is buy Yahoo. I don’t think that is a bad idea at all, at the right price whatever that price is. We’re willing to sell the company.”
Microsoft made a $44 billion takeover bid for Yahoo! at the start of the year, but abandoned negotiations after Yahoo! did an advertising deal with rival Google, and amid accusations that the Yahoo! board, headed by Yang, were obstructing any deal.
The deal between Google and Yahoo! would have given Yahoo! up to $800 million per year, although the US Department of Justice had raised objections, leading to Google backing out of the deal.
In a statement on Google’s website David Drummond, Senior VP and chief legal officer said: “It’s clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.”
Yahoo! said it was disappointed that Google has elected to withdraw from the agreement rather than defend it in court
While Yahoo! had placated its biggest critic, investor Carl Icahn, by giving him a seat on the board and a say in any future buy out decisions, the loss of the Google deal raised the prospect of a renewed boardroom battles with Yang.
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October 22nd, 2008 elitani
Source: BI-ME
In the fallout of the global financial meltdown, it’s difficult to think of a positive side to the economic crisis. But it actually might be good news for Web 2.0 social networking, according to a new book to be released next month.
Throwing Sheep in the Boardroom, by Matthew Fraser and Soumitra Dutta, is the first comprehensive book written for a wide audience about the powerful trend that is reshaping your life: the Web 2.0 social networking revolution
Social networking sites are a global phenomenon. Sites like MySpace and Facebook now boast hundreds of millions of members. Online social interaction has become an indispensible part of their daily lives. This book examines the powerful forces driving this social e-revolution. It also describes the equally powerful reactions to it, and makes predictions about its far-reaching consequences. As the book’s subtitle states, Throwing Sheep in the Board is about how the Web 2.0 revolution is transforming your life, your work, and your world.
It would reasonable to predict that social networking sites like LinkedIn, Plaxo, Ning — and even Facebook — will see their membership ranks soar in coming weeks and months as widespread insecurity drives people to connect with others to boost their social capital.
There can be no doubt that, as people worry about their financial security and career situation, many will feel compelled to plug into online social networks. Anxious about their institutional status inside vertical hierarchies, people will turn to the social dynamics of horizontal networks.
The empirical data already appears to validate this hypothesis. In the Spring when petrol prices were spiking, Nielsen released findings that suggested people were networking online to “cope” with hard economic times. LinkedIn meanwhile has been boasting soaring membership numbers, reaching 28 million worldwide. Nobody will be surprised to learn that many of LinkedIn’s new sign-ups are coming from the financial sector, whose membership has doubled. It may be hard to feel sorry for bonus-bloated investment bankers, but many are frantically dusting off their CVs and rushing to online social networks in the hope of repositioning their careers.
A new LinkedIn survey has revealed that 42% of the network’s members feel their job security has been impacted by the economic crisis, while 13% say it’s too soon to tell. In other words, more than half of LinkedIn’s worldwide membership is scared.
Close and weak social ties
Some have dismissed LinkedIn as “Facebook for losers”, in other words, for opportunists who are looking only out for themselves in the job market. This attitude underlines two fundamental tensions that the authors analyse in some detail in Throwing Sheep in the Boardroom. The first is the tension between rational and non-rational motivations to belong to social groups. The second is between “close” and “weak” social ties.
Motivations for joining social networking sites are varied and complex. At risk of oversimplifying, we can classify motivations into two broad categories: rational and non-rational. Professionals who join sites like LinkedIn are primarily motivated by rational calculations related to their career interests. Most teenagers who collect “friends” on MySpace, on the other hand, are not looking to improve their career prospects. Their social interaction is motivated primarily by a non-rational instinct to forge social bonds based on common values, beliefs, passions and so forth.
Most of us like to feel connected to others through close-knit ties or shared interests and passions. Yet ironically, we frequently depend on people with whom we maintain only “weak” ties, especially when we are looking for a job. The strength-of-weak-ties theory was famously elaborated by American sociologist Mark Granovetter. He defined “weak ties” as social relationships characterised by infrequent contact, an absence of emotional closeness, and no history of reciprocal favours. In professional parlance, you might say people in your “extended network”.
Granovetter found that we rely on “weak tie” connections much more often than we think. Most intelligent job-seekers don’t turn to close friends or family for jobs, unless they are expecting to benefit from the advantages of cronyism or nepotism. Most turn to their extended network. And most business networks are based on relatively “weak tie” associations.
Which brings us back to the economic downturn. When out-of-work investment bankers scramble to sign up to LinkedIn, they are making a rational calculation. They’re not looking for friends; they are seeking to leverage the strength of weak ties.
What happens, however, when people start invading Facebook where “friend” values are embedded in the site’s social etiquette? It’s easy to see how a tension between non-rational and rational motivations could create conflict on Facebook. And yet Facebook is cluttered with self-promoters, career artists, and marketing entrepreneurs. Can these people really be considered “friends”? And just how many Facebook “friends” can we reasonably have anyway?
Anthropologists tell us that it’s impossible to maintain stable social relationships with more than 150 people. This is widely known as “Dunbar’s Number“, named after British anthropologist Robin Dunbar, who argued that the necessary ritual of “social grooming” breaks down in groups whose membership exceeds roughly 150.
If we apply Dunbar’s figure to all social networking sites, any “friend” list that exceeds 150 is not credible, and it pushes social networking into the zone rational calculation. Maintaining a professional network of more than 150 connections on LinkedIn might be plausible, but it would appear to be humanly impossible to maintain social relations with more than 150 different people. And yet many Facebook profiles feature “friend” lists that not only surpass that figure, but double, triple, and quadruple it.
Some Facebook “friend” lists count in the thousands. Which leads to the question: is the virtual world exempt from basic laws of socio-anthropology?
While we ponder that question, it’s a safe bet that the economic downturn will boost sign-ups for sites like LinkedIn and Facebook. And that this membership drive will further blur the line between rational instincts to connect socially with like-minded people and rational calculations to build social networks for self-interested reasons.
Popular culture and new business models
Combining a pop sociology approach with rigorous analysis rich in economic history and organizational behaviour, authors Matthew Fraser and Soumitra Dutta have written a lively and provocative book about the global popularity of social networking platforms, from MySpace and Facebook to YouTube, Wikipedia and Twitter. Throwing Sheep in the Boardroom is unique because the authors, both academics at the prestigious international business school INSEAD, have merged their particular perspectives in an analysis that is refreshingly original, often unexpected, and always insightful. Fraser is an acknowledged expert on the pop cultural industries, and Dutta is a world-renowned authority on information technology and innovation.
Providing examples from many different cultures, the authors argue that Facebook-style social sites represent a profound e-ruption whose lessons for market forces, business organisation, and democratic institutions will be far-reaching. Throwing Sheep in the Boardroom assesses both the real-time impact of Web 2.0 sites on social interaction and consumer behaviour. It offers fascinating case studies to illustrate how social networking sites are transforming the dynamics of business models, organisational behaviour, and civic participation.
The book argues that while the Web 2.0 revolution has reached a tipping point socially, especially among young members of ‘Generation V’ who feel completely at ease in the online world, it is meeting powerful forces of resistance inside organisations , especially corporations and government bureaucracies. The authors examine the underlying reasons behind this “fear factor”, making the case that senior managers must understand the dynamics of the Web 2.0 revolution because it will soon be sweeping through their corridors whether they like it or not.
The book is organised around three major themes: identity, status, and power. The authors argue that the explosion of Web 2.0 social platforms is transforming how our identities are shaped, how status is assigned socially and inside organisations, and how power is distributed and exercised. In cyberspace, identities are becoming increasingly multi-faceted, status is becoming more democratically based on performance, and power is being diffused from centralised vertical structures to horizontal networks.
These are powerful changes with profound, far-reaching implications for how we organise our lives, our institutions, and our society.
Note: Matthew Fraser is a Senior Research Fellow and Soumitra Dutta is Roland Berger Chaired Professor of Business and Technology, both at INSEAD. Their forthcoming book, ‘Throwing Sheep in the Boardroom: How Online Social Networking Will Change Your Life, Work and World’, is published by Wiley.
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October 18th, 2008 elitani
By Alana Semuels, Los Angeles Times-Washington PostNews Service
Internet advertising revenue in the US for the first half of 2008 totalled $11.5 billion, up 15.2 per cent from the same period last year, according to numbers released by the Interactive Advertising Bureau on Tuesday. Not so shabby, right?
But when you consider that in 2007, revenue in the first half of the year was up 27 per cent from the same period the previous year, and that in 2006, revenue climbed 36 per cent from the previous year, the growth numbers aren’t that impressive.
“From what I see, this is a similar pattern to the last slowdown in 2001,” said David Silverman, a partner in the entertainment, media and communications practice at PricewaterhouseCoopers, which worked with the Interactive Advertising Bureau to come up with the numbers.
Silverman said the second half of the year typically sees more spending than the first half. But this year, he said, this may be different “given the continuing slowdown and economic conditions”.
Search continued to dominate online spending, accounting for 44 per cent of money spent advertising online, up from 41 per cent the previous year. Spending on classified advertising, at $1.6 billion, fell to just 14 per cent of the pie.
Still, online looks healthy when compared with other advertising sectors. Zenith-Optimedia on Tuesday cut its forecasts for the overall US advertising market in 2008 and 2009, predicting growth of 1.6 per cent this year rather than the 3.4 per cent it had initially projected. In 2009, ad spending in the US will grow less than one per cent, the firm said.
“All advertising is somewhat depressed, and online advertising has fared better than average,” said Joe Apprendi, chief executive of Collective Media, a New York-based online advertising firm. “It’s going to grow, which isn’t the case with all media.”
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October 18th, 2008 elitani
By Miguel Helft
In the next week, the two biggest sellers of online ads, Google and Yahoo, will disclose their third-quarter financial results. They are expected to report widely different results which mirror the increasingly diverging fortunes of two forms of online advertising: search ads and display ads like banners and video clips.
Most analysts believe that the search advertising market — Google’s bread and butter and a business that the company overwhelmingly dominates — is holding up relatively well despite the economic downturn and the financial crisis. On the other hand, the display advertising market, which accounts for roughly half of Yahoo’s revenue, is suffering both from the deepening crisis and from a glut of Web pages, or inventory, that advertisers can choose from. The trends were apparent in the spring, but analysts say they have accelerated.
“Search largely has held up fairly well in the third quarter,” said Ross Sandler, an analyst with RBC Capital Markets. However, Mr. Sandler, who conducts a quarterly survey of the market with the search advertising agency SearchIgnite, cautions that his research shows a significant slowdown in some segments of the search advertising market, like retail, in the last two weeks of September.
Over all, the SearchIgnite study, which tracks the dollars spent by existing advertisers, suggests search ads in the United States grew by nearly 27 percent from the same quarter a year earlier. Google, which receives more than half of its revenue from overseas, is expected to report net revenue of $4.05 billion, up 35 percent from a year ago.
At Barclays Capital, an analyst, Douglas Anmuth, largely agrees. “The economy has affected Google, but I think search and Google are holding up much better than any form of online advertising,” Mr. Anmuth said. “There are certainly some categories where you are going to have weakness,” he added, like retail, travel and finance.
Yahoo is a very different story, Mr. Anmuth said. He noted that the display advertising market had deteriorated in the third quarter. As the largest seller of display ads, Yahoo will suffer from that trend. And the company’s woes are compounded by the fact that it has continued to lose market share in search to Google. The company is expected to report gross revenue of $1.8 billion, up 6.8 percent from a year ago.
Much of what’s known about Yahoo’s troubles is already priced into the stock. The company’s shares are down about 45 percent since mid-June, when it ended talks with Microsoft and signed a search advertising deal with Google. (The deal is under review by regulators.) In the same period Google’s shares have fallen 35 percent, Microsoft’s, 16 percent, and the Nasdaq composite index, 28 percent.
Analysts generally say they believe that the impact of the financial and economic crisis on the online ad market will be more acute next in the fourth quarter and next year. Many have lowered their projections for both Google and Yahoo.
But they say the impacts are likely to be felt differently at both companies. Google, they say, may have to focus more on cutting its fast-growing expenses to maintain profit margins.
Yahoo’s situation is more dire. The company has been negotiating a deal to buy AOL from Time Warner for several months. With its stock price so low, and with so little support from shareholders, it is under pressure to do something more dramatic.
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October 18th, 2008 elitani
SAN FRANCISCO — For months, Google has promised investors that the company’s online advertising system would do relatively well in an economic downturn. On Thursday, it showed evidence that it may be able to deliver on that promise.
Google said that its growth rate continued to slow in the third quarter. But the company fared better than Wall Street expected as it reported a solid 26 percent jump in net income to $1.35 billion, or $4.24 a share, from $1.07 billion in the third quarter of 2007. The company’s results were bolstered by strong gains in online advertising and efforts by Google to slow hiring and rein in costs.
Google’s shares, which rose to $353.02, or 4 percent, in regular trading on Thursday, jumped another 10 percent after the company reported its financial results. However, they remain down sharply from their high of just over $740 last November.
Google’s chief executive, Eric E. Schmidt, said the results reflected marketers’ acceptance of a system that is better and more measurable than other forms of advertising. He said that while the economic environment was unpredictable, Google was poised to continue doing relatively well.
“We are very realistic about the macroeconomic climate, but we are optimistic about Google’s future,” Mr. Schmidt said during a conference call with analysts.
While Google is the largest seller of online ads, its relatively strong results are not indicative of the overall health of the Internet advertising business. Google relies primarily on search ads, the fastest-growing segment of the market. Since marketers use such ads to lure people to their Web sites, analysts say they believe they are among the last thing advertisers would cut during a recession.
“This is the first quarter when the wheels are coming off the wagon on the economy and they’ve been able to have a decent quarter,” said Youssef H. Squali, an analyst with Jefferies & Company. “Google’s business model has proven to be better than that of your typical Internet company because of its focus on performance.”
Google said revenue for the third quarter, which ended Sept. 30, grew 31 percent, to $5.54 billion, up from $4.23 billion a year earlier. The growth rate is a further indication that Google’s business is maturing. The company’s revenue grew 56 percent in 2007 and 73 percent in 2006.
Google’s net revenue, which excludes commissions paid to advertising partners, rose to $4.04 billion, roughly in line with the $4.05 billion that analysts expected. The company beat Wall Street’s profit expectations. Excluding the cost of stock options and other items, Google’s income was $4.92 a share, higher than the $4.79 a share forecast by analysts.
The company also said that the number of times users clicked on its ads grew 18 percent from a year earlier, roughly the same rate as in the previous quarter.
In the conference call, Hal Varian, Google’s chief economist, said advertisers appeared to be willing to keep buying search ads because they were effective.
“Our experience is that advertisers are willing to take all the clicks they can get,” said Mr. Varian. “Even in tough times that continues to be true. No one wants to turn away a customer.”
Ahead of Google’s report, several companies that sell services and tools to search marketers said that they had seen little evidence of a slowdown. “We are not seeing any weakness in our business,” said Christopher Lien, the chief executive of Marin Software, whose technology helps marketers manage search advertising campaigns. For example, Mr. Lien said, a large apparel retailer had recently promised to double the amount of money it would spend on search ads.
Still, many analysts cut their revenue and profit expectations for Google in recent weeks, amid signs that the slowing economy would affect advertising budgets both online and offline. And some analysts say they believe that Google’s strong results in the third quarter are not necessarily indicative of future performance.
“Everything is getting worse in real time,” said Ross Sandler, an analyst with RBC Capital Markets. Because Google provides no financial forecasts, its results are “like looking in the rearview mirror,” he said.
But investors appeared heartened by Google’s focus on the bottom line. The company added approximately 500 employees in the quarter and reined in expenses across the board. In the year-ago quarter, it added 2,100 employees. “They are operating well in a tough environment,” said Douglas Anmuth, an analyst with Barclays Capital. “The key to the quarter is that they showed a real focus on cost controls and that’s what Wall Street needed to see.”
On Thursday, Google said that David Rosenblatt, the former chief executive of DoubleClick, was named president of global display advertising, a new position. Google bought DoubleClick last year for $3.1 billion in an effort to quickly expand its fledgling display advertising business. The appointment suggests that Google is getting ready to accelerate its push into that market.
In an interview, Mr. Schmidt said that he expected the display advertising business on YouTube and on partner sites to become the first sizable new business for Google beyond its traditional text ads.
“It looks to us that the sum of YouTube plus display is going to get there in terms of scale,” Mr. Schmidt said.
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