Newspapers & Craigslist

As everyone talks about the death of newspapers, i’d like to remark on one of the majors elements in this death spiral: Craigslist.  To me the two major killers of the newspaper are:

1. Decrease of authority & differentiation
2. Lack of classified revenue

First, the decrease in authority and differentiation.  Every web site and publication needs to be an authority on something, anything.  Newspapers in the past were authorities for:

• local news
• international news
• sports
• entertainment

Over the past 8 years, they have no become the authority for only one of those: local news.  International news is dominated by CNN, Reuters and others who focus explicitly on that area.  Similarly, sports is dominated by ESPN and Fox News and Entertainment has a variety of outlets that provide much more in depth coverage and reviews than newspapers ever did.    This decrease in authority minimizes the importance of newspapers to readers.  For most categories listed above, it’s a nice piece of reading material to have but by no means necessary.

The second piece is Craigslist.  In 2000, newspapers pulled in $20 billion in revenue from classifieds. That went to $10 billion in 2008.  So, in 8 years revenues for newspapers got chopped in half (stats here).  Where did this money go, most of those services are now free on Craigslist.   Craigslist took $10 billion out of the industry and pocketed about $100 million of it.  To be exact, Craigslist is pulled in $80 million as of April ‘08 (stats).  Who knows what that will be for 2009 but prob at or around $100k.  With a  staff of 28 people so that’s pretty damn good.

Imagine that, a staff of 28 people is decimating an entire industry.  That is the true power of the internet.

Related articles:

• Rupert Murdoch on the future of newspapers (vator.tv)
• Newspaper ad revenue plummets! (ceoworld.biz)

I Don’t Agree with the Hog Pile on Facebook

There’s a growing trend in the media to attack facebook.  It started when their redesign got pretty bad reviews, continued when their CFO left, and now is gaining steam as mainstream outlets are questioning it’s core business proposition. There are three different things here and the media is pointing to them as an indication of Facebook’s failure.  I disagree.  Here’s why:

Product enhancements. One thing i’ve admired about Facebook is their ability to keep pushing their product forward.  They introduced a great photo experience before any of their competitors (and have grown to be #1 on the web).  Even as they were experience phenomenal growth (they hit 8 million student readers), they completely redid their home page when they introduced the News Feed.  While initially hated by their users (FB blog) and the media (Time article), it set the standard for how social networks should display user activity and is now seen as a stroke of genius.  And growth climbed even higher.  At 70 million users they then completely redid the profile page to be a feed-based page as this is the best way for users to continuously portray themselves (see Tumblr for an example).  This was hated at first too.  Now, they redone the Facebook Home page to better showcase conversations and user activity.  Is it like Twitter? Yes.  Is it hated by their users? Yes. But it is also an improvement.  More than any other company i know of, Facebook is constantly pushing to get better in all areas and doing it fearlessly.  Even if they misstep, I applaud them for it.  From my experience at AOL i’ve seen that when yoy have a large user base it’s very easy to become tentative and second-guess every move.  Not changing becomes the easiest path.  It also means you start dying.   This latest change is more an indication that they’re not dying but moving forward.

Valuation.  Facebook got an absurd $15 billion valuation from Microsoft when it sold them some equity.  That deal was more than just equity sales but it also solidified Microsoft’s relationship with them as their exclusive third-party ad provider (story).  That valuation has become a problem as every new raise that happens in the industry (Twitter,  FriendFeed) is evaluated against it.  Facebook is now raising at a more reasonable level at a $5 billion valuation.  I don’t think this is an indication of failure of FB but rather a reflection (a) that these raises are straight equity and not part of an ad sales agreement, and (b) the market is the worst it’s ever been.  I think it’s ridiculous to think that the environment is the same as it was in October 2007.

Business Model. The media talks about Facebook’s failure to make an ad business out of their inventory.   Time’s article this past week was called, “Facebook Takes a Dive: Why Social Networks Are Bad Businesses.” This is completely ridiculous.  First of all, MySpace is making money.  Let me repeat.  MySpace is making money.  They were bought by Fox for $580 million and they then immediately did a deal with Google to sell ads on their search page from 2006 to 2010 for $900 million dollars (details here).  That’s a quick profit of $320 million.  Everything else on top of that year-in and year-out seems to be gravy.  The article in Time continues to say:

What is true is that social network sites have had trouble making money. MySpace was supposed to be a big part of the revenue growth at News Corp. Wall St. thought Murdoch was a genius to buy it. Last year, News Corp had to admit that MySpace would not hit its revenue targets. That is usually not the hallmark of a property that is going to take over the Internet.  Analysts believe that MySpace rival Facebook had revenue of $265 million last year. That is astonishingly low for a company that had 57 million unique visitors in the U.S. last month. And, Facebook also has a very large international user base.

So let me get this straight, even though MySpace is profitable at $500-800 million dollars a year in revenues and even though it’s generated hundreds of millions of dollars for News Corp it’s a bad business becuase they missed their revenue target last year?  That is completely ridiculous.  Facebook is a differnt issue.  They have repeatedly said that they are deprioritizing ad revenue and instead focusing on growth and user engagement.  Since they started saying this (starting in late 2007), they have grown from 50 to 200 million users.  I’d say that’s pretty good execution.  Facebook makes about $275 million a year.  Could they make another 100-200 million if they started selling more ads on search pages and profile pages?  Absolutely.

All of these reasons above are why sensationalist articles discussing the demise of the social network drive me nuts.   Nobody knows what the future holds, but one thing that we can pretty much be sure of is that sites that have great user engagement and activity – and facebook has over 20 million users update their status at least once a day – will get the ad dollars.  Nick O’Neil has a good post on AllFacebook today on why he’s willing to pay a $34 CPM on facebook.  It’s not the silver bullet but it shows that there is a profitable end in sight for the company and it’s not necessarily the horrible business the media would like it to be.

“Just Enough” is the new “Big” – but can it work?

They should draw an equation: What level of fame do you need to achieve to keep doing what you want? Because you don’t want any more than that.

if you get too famous, you have people wanting to take a picture of your butt on the beach.

(Tina Fey

These are quotes i read from Grant’s blog and this blog post which discusses that being big enough to do something interesting without burdening yourself is what’s hot right now…

In the 1950s, it was one size fit all: gigantic or nothing at all. We wanted groaning buffet tables. We celebrated the “good life:” by consuming heroic quantities of sugar, salt, fat, nicotine, alcohol and sun (and as much carbon as possible). We wanted cars the size of a 1958 Cadillac, block long conveyances, fins and all. We wanted more shoes the Imelda Marcos. We wanted homes the size of a small town.

The world used a Denny’s model: all-you-eat plus 3000 calories more. “No one leaves this place with an empty plate.” A Martian would wonder at this. Denny’s had given us more food than we could possibly eat. Food was being wasted.

We are hearing a “just enough” sentiment more and more. It’s as if we are as a culture working on a new definition of what’s enough.

You see it with the Green movement and in music. It’s not all about being The Beatles. This makes complete sense to me. As they say in Batman Begins, “with great power comes great responsibility.” And responsibility is exhausting if you’re a celebrity, sports hero or when you’re running your own business.

In the case of an entrepreneur, “just enough” is about control. Staying small(ish), staying private, supplying your own capital, all these mean calling your own shots. Venture capitalists and Wall Street can drive someone else crazy. The just enough entrepreneur can take his or her own chances. When it comes time to choose between interesting and profitable, you can go with interesting. Just enough in this case is about control.

One problem i see with this model is that if you don’t achieve some scale or critical mass you won’t be successful. As the world becomes advertising-based, this means the person with the most engagement, page-views, etc is the one that gets the business and can continue to operate and innovate. The smaller guy doesn’t get the PR and mindshare and thus loses the users to the bigger guy. For web applications dependent on ads, can they survive in a long-tail world?

For bands does this work – can you be a medium-sized “just enough” band and still pay the bills? Ani Difranco, Clap Your Hands, and Tori Amos would say so.

Do you “get” Twitter?

I read a post today by Fred Wilson that his kids finally “got” twitter. He wrote:

We are headed to Honolulu today. I twittered that fact and within minutes Joshua was back to me (via text message) with a recommendation for a ramen place called tenkaippin. I didn’t ask for it, but he offered it and we are now headed there for lunch

Earlier this week Jessica had gotten a text from her friends who were in boston visiting colleges. They wanted a recommendation for a sushi place. Jess asked me and I twittered the question

We got back a half dozen messages, and quickly determined the best place which she texted back. Her friends were thrilled

They used to think twitter was a stalker service. They still do, but they also think its awesome (‘at least for you dad’)

i hear what his kids are saying. I’ve been using Twitter for about a month now and while i see some useful parts of it, the service has yet to deliver the goods to me. I don’t have enough people i know on it and i don’t get enough useful twitter posts. It seems to be simply a way for people to advertise for themselves. There’s no real communication. I also don’t know if i should be following more strangers or if that’s tacky. The strangers i do follow (because their are blogs i read) like Mashable and Calcanis simply repeat what’s on their blogs so it’s pointless. I wish they could take the time to add a little more personality to the medium.

I think it’s hard for kids – or anyone – to understand the utility of Twitter because for the new user it doesn’t offer any immediately positive feedback or benefit. When you first begin, you twitter something and nothing happens – you just sit there. Similar to a typical social network, it’s not until you have lots of friends using it or until lots of users are following you that it becomes useful and even then i’m not sure if it’s much different than a massive chatroom with a better interface

Twitter may hit the mainstream, but i’d be willing to guess that it’s only useful for the hardcore who are actively trying to make it useful. That’s not mainstream, that’s digging for gold. I personally want my web services to just hand me the gold.

Red Band Trailers are Back!

There are 2 types of trailers: red-band and green-band. The trailer you usually see in front of a movie that reads, “This trailer has been approved for all audiences” has a green background and is a “green-band” trailer. There is another kind, the red-band, that is not approved for all audiences because it has something “bad” in it (read: more fun to watch).

In the past, only green-band trailers have been shown. But today, Regal Cinemas announced that they are going to start showing red-band trailers again. And since Regal is the nations largest chain, i have to hope that this starts a trend of it getting nasty before your film begins.

Bebo for $850 million. Now Hi5?

This is an interesting graph which shows Bebo, MySpace, Facebook and Hi5. Clearly one of them is stuggling.

However, what Bebo has that Hi5 does not is a English speaking user base which is able to be monetized. AOL has a slew of Advertising companies that must be just itching to get their hands on the Bebo inventory. I’m sure there was plenty of analysis done such that AOL’s pretty sure they’ll earn that $850 back and more

The short head is human, middle fat is social and long tail is algorithmic

This was a quote i found on Chris Anderson’s  – the author of The Long Tail – and it refers to how search will be done in the future.  The short popular stuff will be pre-loaded results by humans, the medium will be populated by friends and the obscure long tail is found by algorithms.  The quote from the blog post is:

“The short head will be human, the fat middle social and the long tail algorithmic” Still, that single sentence is worth another book. I won’t write it, but I’ll bet someone else does.

It is an interesting way to think about it.  Of course, it is all ad-supported and it does make a good case for Mahalo.

Animals at a strip club – crazy video

Saw another video that was sent to me via VSL and it is indeed worth a view.  It’s an Orangina commerical which has a bear and deer involved in a seductive dance that spirals into an all out stripper montage with animals throughout the jungle.  I don’t really know what to say

Halo3 has arrived

Can’t wait to get my hands on it.  I just saw this ad (video below) – as if i wasn’t excited enough.  If you haven’t heard about the game yet, there’s a great article about what went into it in Wired.  Article here.

Gorillas and Phil Collins

I love Phil Collins as much as the next guy. Ok, well maybe a little more than the next guy.  Because of this i was happy to see this ad for chocolates with a Phil-loving Gorilla.  Check it out by clicking on the image below: