virtualeconomics

Update on the AOP's engagement survey

On Wednesday the AOP released the results of a survey on "the relationship between consumer engagement with website content and how it impacts on their reaction to advertising on different website types: original content sites, portals and social networks."It found that approximately twice as many respondents to the survey trusted the advertising on content sites as on social media

It raised some questions for me which I posted here. If trust and engagement are such key indicators of the value of online advertising, how can content sites maintain CPMs that are ten times greater than those achieved by social media when their own research is able to show only twice as much trust for their advertising?

New AOP research shows content sites overpriced versus social networks

New research commissioned by the AOP, and reported by Journalism.co.uk earlier today, shows that 

"...engagement and advertising responsiveness is strongest on original content sites compared to other site genres. Respondents are almost twice as likely to trust advertising and brands on content sites vs. social media sites".

Journalism.co.uk also highlights some detail from the report: "respondents were significantly more likely to trust advertising on content sites than social media sites, with 59 per cent trusting content sites compared to 34 per cent for social networks." 

Which is hardly good news for those original content sites which (at one remove) funded the report, given that as it stands they achieve CPMs almost ten times those achieved by social networks for what they appear to have just proven is only twice the value.

Why a paywall might make sense for the Telegraph this time

Earlier today the FT broke the news that the Telegraph is (probably) joining the Times, FT and indeed News of the World by putting up a paywall next year. A spokesman told Reuters by email that "absolutely no decisions have been made on the introduction of a paid-content model," but a number of Telegraph execs appear to have confirmed to the FT that there would be a paywall in place before the end of 2011. 

Paywall experiments over the past ten years have been a disaster for online newspapers. However, the Telegraph's move could perhaps be justified by two fundamental changes to this market - an increased scarcity of professional journalism online, and the effective collapse of the Telegraph's current commercial model, occasioned primarily by Facebook. 

Life begins at fifty billion

The most recent trading in the secondary market valued (unlisted) Facebook at $50 billion - more than venerable sites such as eBay or Yahoo, and within sight of Amazon's c$80 billion. Since this latest valuation is little short of fifty times Facebook's estimated 2010 revenues of $1.1 billion, it raises the question of what has to be believed about Facebook's prospects for that valuation to make sense.

 A quick comparison of Facebook with its approximate peers - major consumer technology retailers, websites and especially social networks - shows a chasm between the value placed on the revenues of other companies versus pure social networks. (Revenues rather than profits are used throughout because profits at Facebook are unknown.) But the things we have to believe for a valuation of $50 billion make sense just aren't all that wild.

Follow us on...

There's a couple of new pages regular readers might like to take a look at - a dedicated posts-only Twitterfeed (ideal if you want to just see blog posts on Twitter not every damned thing that pops into my head) and a Facebook page. The FB page is where I'm currently running the poll to see whether The Times is still considered the UK's paper of record now its website sits inaccessibly behind a paywall - if you haven't already, you can read the post here (or Roy Greenslade's take in the Guardian here) and vote here.

More about Facebook Messenger and the online display market

Yesterday Facebook announced the launch of its newest don't-call-it-email service, Facebook Messages, and I speculated that this is a move designed to capture more (a lot more) of the valuable online display ad market.

There's two big questions to ask about the new Messenger. One, how does Facebook make money? Two, how does Messenger help them make more? And (ok, there's three really) how does this particular move by Facebook fit into their broader commercial strategy?

Facebook gets ready to mop up the rest of the display ad market

Facebook just announced a new messaging system that isn't quite email or IM but something inbetween. There's plenty of coverage of the press conference out there so here's my first thought for now - this is about the display advertising market.

Facebook already serves 25% of US online display ads. Commercially, that puts it in direct competition with the two gorillas in that space - MSN and Yahoo. Both of the incumbents have a lot of advantages selling online display inventory - a mix of premium content with huge quantities of cheap network inventory, their own third-party ad network, behavioural targeting data and tech plus the best buyer relationships in the business. But those fortunes were founded on - and still rest on - the mass inventory that comes from running the world's two biggest webmail services.

The question to ask about Fmail is not about the tech or the user experience but about the money, the money, the money. FB, that is already taking over the display ad space, just announced a product that could cripple the foundations of its two main competitors. That's what Fmail is really about.

(This post was written on a phone and has subsequently had the links added.)

On network effects and information monopolies

Odd article from Tim Wu in WSJ today, in which he posits that the web has tended to monopoly in various key categories - Google in search, Facebook in social, eBay in marketplaces, Amazon in retail etc. 

There are two odd things about this. First, the Internet does no such thing. Online, empires rise and fall with terrifying rapidity. The social networking space that today is allegedly owned by Facebook was only yesterday owned by MySpace, and before that Friendster, Livejournal, Classmates, Reunion and Friendsreunited (see XKCD doing an Information-is-beautiful-esque take on the subject here and here).

Facebook email is the ultimate spam filter

Facebook email is launching Monday. That'll make spam filtering a lot more straightforward: to my mind the algorithm goes something like this. If email is from a Facebook contact, send to inbox. If not, send to spam. To whitelist senders, add them to Facebook. What's not to like from Facebook's point of view? LinkedIn should probably do the same, and then we'll have two email systems, one for work, one for friends, and no-one new will be able to pester us ever again. 

Update: hey, Craig Newmark thinks so too. Cool!

Update2: Charles Arthur at the Guardian does not. FB just ain't that great at filtering viruses or spam, so actually Fmail users will end up with lots of stuff they don't want from their allegedly trusted network. Sounds quite likely - it'll take FB a while to get email-quality filters in place, unless they've somehow done it already. 

Facebook's obvious strategy for bankrupting Google

A few days ago Google announced a one-time raise of 10% for all employees and a $1,000 bonus. Well, "announced" in the sense of circulated an internal memo and then fired the guy that leaked it. Perhaps "didn't announce" would be more strictly accurate. But they did it, and the general consensus is that they did it to arrest the brain drain to Facebook. 

This raise is estimated to cost Google one billion dollars. Then yesterday they offered one engineer $3.5 million to turn down a Facebook offer. So what does Mark Z have to do to bankrupt Google? Simply offer their engineers jobs, one at a time. 

Google employs c23,000 people. It is apparently willing offer anything from half a million to three and a half million dollars to keep them. The company has $33.4bn. Perhaps Google really can operate with its engineers sitting on cash piles of a few million dollars each. But that cash pile can get whittled down pretty quickly if other tech companies are willing to keep offering Google's best guys paper and Google has to keep outbidding them. It's sure worth Facebook's time to hire a couple of recruiters and have them wander on to the Mountain View campus every couple of days and make some offers.