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Posts Tagged ‘Search

Facebook: still bad at making money

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This blog post is based on the one I posted on www.warc.com

Deloitte has produced some great research into the UK TV market to coincide with the Edinburgh International TV Festival.

The study, entitled ‘Perspectives on Television in Words and Numbers’, is full of all sorts of stats about video-on-demand uptake, product placement and other TV goodies. But one statistic in particular caught my eye. Deloitte makes the point that television as an industry remains far far more effective at converting users into revenues. The report, which is based on UK data, states: “It takes 93 days to generate a pound of advertising revenue per Facebook user; this compares to 11 days for an ITV viewer [ITV is the UK’s leading commercial broadcaster]. Social network’s CPMs are estimated at between 30 and 40 pence, far lower than the average for television. YouTube’s CPM has been estimated at 72 pence.”

It’s not exactly comparing apples with apples (a Facebook user is not the equivalent of a TV viewer), but it’s an interesting point. Facebook may be making money, and its revenues may be growing quickly, but it’s still pretty ineffective at turning users into dollars.

A further illustration of this is in the Deloitte endnotes. ITV, a UK-only broadcaster that has had a torrid few years, pulled in £987 million (around $1.5 billion) of revenue in the year to 30 June 2010. Facebook, which has upwards of 500 million users around the world, is forecast to make $1 billion in the more optimistic forecasts.

I was recently asked whether I thought social media revenues were likely to follow the same growth trajectory as search revenues did a few years ago. To recap, here’s a reminder of just how quickly Google grew in the middle years of the last decade.

Despite the forecasts of some tech evangelists, on the current evidence, it would take an almighty shift in advertiser behaviour to push Facebook along the same path. Recent forecasts from eMarketer show solid growth in adspend on social networks over the next two years from $1.4 billion to $2 billion in the US. Good, but it’s no Google! It’s fair to say that Facebook et al are still seeking the ‘killer app’ when it comes to attracting marketing investment; the equivalent to Google’s AdWords.

Of course, it’s worth remembering that Google’s rise was driven as much by SMEs and direct-response advertisers as by big brand advertisers. It created a whole new direct-response channel.

Interestingly, there are social media companies out there already making large sums of money. China’s Tencent, owner of the QQ platform, is one of them – its revenues easily eclipse those of Facebook despite being a single-market operator. Tencent’s growth, however, has owed little to advertising. Online ad revenues make up less than 10% of its turnover. The bulk of its revenue comes from ‘internet value-added services’, mostly online gaming. It makes money, in other words, from its users.

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Written by davidtiltman

September 2, 2010 at 6:01 pm

Nice paywall, Mr Murdoch; now what are you going to do about Google?

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So after all that talk and months of planning, Rupert Murdoch’s NewsCorp has finally unveiled his grand scheme to make his newspaper websites turn a profit.

And it is, er, a paywall.

NewsCorp’s The Times will charge £1 a day or £2 a week for access.

Bit of a disappointment really. I was at least expecting some form of tiered charging system, a la the Financial Times. But on a global level, a micropayments system, similar to the ones used in online gaming, does seem to have traction.

Can it work? I asked that months ago on my old Media blog. And frankly, we’re no nearer any answers. It seems crazy to think that people will pay £1 to read a news story they can read anywhere else for free. The BBC is still out there, of course, and even if it goes through with plans to scale back its online content, there is still the Guardian, which has pledged itself to a free-access future. The Times is really going to have to show it can deliver value-add content, or rely on a very loyal minority. And let’s face it, Murdoch’s online track record isn’t exactly sparkling.

Still, the sums involved are pretty substantial, according to the Guardian:

Assuming that only 5% of daily users convert to the paywall system – a standard metric for paywalls – that would bring in £1.83m if they each buy a £1 daily pass. At a 10% conversion, it would net £3.66m per month for the two papers. If more people of those choose to buy the weekly pass, the revenues would be lower.

Compare that with the £40m made by The Guardian’s web division in the last financial year, according to outgoing CEO Carolyn McCall.

The big question now is what to do about Google. We all know that if you paste a headline into Google you can bypass a paywall – just try it with the Wall Street Journal. Should The Times block Google and protect its paywall but hurt search traffic? Or should it be like the WSJ and just pretend nobody knows about that?

There’s been a lot of sabre-rattling toward Google from NewsCorp, suggesting it might seriously pull back from Google. Instinctively that feels like a mistake, and something that could seriously set The Times back years. From personal experience I know that news sites get more than half their traffic via search. What’s more, The Times seems to be looking for one-off payments rather than tying people in to annual subscriptions. That approach will require regular traffic through the site.

One thing’s for sure, though. If Murdoch starts making money from this, there will be a lot of others following him. And the more of them that do so, the less free competition there will be for The Times.

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Written by davidtiltman

March 26, 2010 at 11:32 am

Six reasons internet measurement is rubbish

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The greatest fallacy in digital marketing is that the internet is the most measurable medium. It’s not. Yes, it’s the medium with the most data (absolutely phenomenal amounts), but making sense of that data to get a true picture of what consumers are actually doing (ie measuring it) is still far from an exact science.

Last week I journeyed into the heart of data geekery, spending two days at the biennial I-com conference in Lisbon, a conference dedicated solely to online measurement. I’d be lying if I pretended my brain didn’t hurt by the end of it. But several themes emerged over the course of the conference that deserve recognition outside this specialist world. For marketers (precious few of whom actually attended the conference), sorting this stuff out will be vital if they’re ever going to spend serious money online. And for publishers, this stuff is key to the way they will sell online performance.

1. Even the things you think you know, you don’t. One of the key problems with measuring online activity is that the data comes from machines, not humans. Linking up what we know from humans (ie panels) with the data deluge from the internet is tricky. The result is that we often assume the machine data tells us things it doesn’t.

Take unique users for example. Sounds like a pretty basic piece of information, and something most campaign metrics seem to look at these days. But as one speaker pointed out, measurement of unique users is usually based on cookies. Now people use multiple devices to access the web (mobile, home computer, work computer etc etc), and each has a different cookie. Also, they are increasingly using multiple browsers on single device, adding even more cookies. Some users, said the speaker, had around seven separate cookies. So what does that make a unique user?

2. Clicks are pointless. This isn’t new news, but that doesn’t stop click-through rates being used as a measure of campaign success. Yes they’re easy, but they mean absolutely nothing unless an ad is purely a direct-response piece. What’s more, click-through rates are declining fast; that means campaign measures based on clicks are looking at a diminishing audience. Also, there are, said one panellist at the conference, no correlations between click-through rates and other brand scores.

3. The last click tells you little. All the action is still around the last click – this particularly applies to search, where search engines make their money from people clicking on links. But much of the hard work in terms of taking people through the purchase funnel comes much earlier – and this bit is really hard to measure. Doron Wesley from Cheil/Samsung admitted at the conference that the brand had not even started to look at so-called ‘attribution’ – working out where and when a consumer interacted with a brand online and what the influences on purchase were. If a brand like Samsung can’t do this, not many others can either.

Search is an interesting one, because on the surface it is so measurable. But in truth it is still extremely difficult to measure search’s total impact. How do you measure ROPO (research online, purchase offline)? Or even the branding impact of search activity?

4. People can’t even agree what needs measuring. Many years ago, when I first started writing about online marketing, an agency boss told me that the medium needed reach and frequency measures like TV to get marketers interested. Imagine my surprise when I find the exact same argument is raging in 2010. In Lisbon it was the GRP system that holds such sway in the US that caused debate – does the internet need to adopt GRPs to be able to get marketers interested? There’s no consensus here – everyone knows the internet needs some sort of standard measurement currency, but nobody can agree on what that should be.

5. Increasingly the action is in social, but that’s even less measurable. Social media is increasingly used as a PR tool. Terms such as ‘engagement’ and ‘conversation’ abound. But what does that mean and how do you work it’s delivering.

The last couple of years have seen all sorts of buzz-tracking services launch, and some were at the conference. But they didn’t really have an answer when one delegate asked why, when he asked five different word-of-mouth measurement companies to track his Superbowl ad, he got five different responses. These services sell themselves as tracking tools, but actually they are hugely reliant on human input to categorise brand mentions on social media. They’re better than nothing, but they’re still flawed.

6. Don’t even start on mobile. The mobile expert that appeared on stage simply described mobile measurement as ‘icky’. Nuff said.

As Geoff Ramsey, CEO of eMarketer, put it:  “Right now, we’re in the dark ages.” And as one of the few clients at the conference told me, without a proper currency online that allows some sort of comparison between media, he cannot advise heavy spend in digital.

So next time you hear an agency lazily praise the measurability of online media, it’s time to ask a few hard questions.

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Written by davidtiltman

March 17, 2010 at 1:58 pm