Some observations on what is happening in the US digital media world right now ...

It's impossible not to feel the overriding tone of impending doom that is all over the US tech media blogs/journals right now.

From SAI to TechCrunch, Valleywag to Paid Content, the tone has changed from unrestrained optimism to a grim reality. TC and Paid Content used to be dominated with stories on startups receiving huge valuations and big funding, Valleywag reported the new wave of dot com excess ... not anymore.

What are the main areas we are seeing being covered and how could these relate to the local industry

- Layoffs

Remember fuckedcompany.com? Well ... I do. If you worked at a dot com around 2000/2001 and things were looking shaky you could rely on fuckedcompany to show you there was another start up somewhere else in the world that was more fucked than yours. All of the media are reporting layoffs - with ebay, Glam, Heavy, Seesmic, Gawker, Wikia, SearchMe, AdBrite, Hi 5 all laying off staff, and Yahoo being reported to be announcing laying off anywhere between 1-3,000 employees within the new few weeks.

TC covers it here - http://www.techcrunch.com/2008/10/17/keeping-count-the-techcrunch-layoff-tracker/

Yes, some of these companies were bloated to begin with ... and some probably had no real way to generate revenue ... but many are successful and do monetise well. Regardless, you can be sure that we've only seen the beginning of the layoffs.

No real public announcements of layoffs in AU - will they happen? Hopefully not but you'd have to assume if US companies like ebay and Yahoo! are cutting costs there would have to be some flow on effect here.

- Ad Slowdown

Blodget came out this morning with this bomb - http://www.alleyinsider.com/2008/10/let-s-be-serious-online-display-ads-will-fall-sharply-in-2009

For a year, we've listened to analysts passionately explain how online ad spending will power through any broader economic and advertising weakness. Eyeballs are moving online, this story went (goes), ad dollars will follow. Online advertising is accountable. Online advertising is the future. Blah, blah, blah.

It's time we woke up and faced reality. Online display-ad spending will fall in 2009, probably sharply. It will probably fall again in 2010.

Is he right? Maybe ... display ad spending in AU could flatline over the next 18-24 months. Why? Q4 will be soft, as will Q1 and Q2 of 2009 ... Q3 2008 was very strong with the Olympics and a pretty robust economic outlook, as a result Q3 2009 will struggle to show much growth.

The US was already seeing a general slowdown in YOY growth (surely a by-product of the market maturing) and now the general consensus is this will get worse.

The three biggest display categories in AU are finance, motor vehicles and technology products - three categories that will feel some pressure from tougher times. These 3 categories combined accounted for 51% of display spend in Australia for Q2 2008 ($59m)

The bigger issue is online - across the board - needs to do a better job at showing its value than reverting to the tired accountability argument. The reality is most marketers struggle with online metrics and need measurement that is tied closer to actual marketing objectives and not impressions and clicks. Agencies and publishers need to work closer together to resolve this. This is a global problem however it is probably worse in AU than in Europe and the US - and has been a problem even during prosperous economic times.

However, the current situation presents huge opportunities to both publishers and agencies if they can go beyond what they see as their core purpose (publishers = selling display ads, agencies = buying display ads) and expand their offering to the market and offer more value and insight. And this is the exciting thing.

It's not all doom and gloom, it's more about avoiding complacency.

- Consolidation

Google CFO Patrick Pichette made an interesting quote in this article - http://valleywag.com/5064903/google-cfo-hints-at-future-starve-the-losers

"One of his priorities, Pichette said, "is pushing to make sure all the resources are used efficiently, that you feed the winners, starve the losers."

Gawker also published this - http://gawker.com/5065922/the-scary-future-of-internet-ads

Here's what you can expect in the coming year, internet lovers: lots of young internet companies going broke. The ones you love! Including, but not limited to, user-generated video sites, ad networks, fringe social media sites, and companies that make all those sweet apps. Why? Because in our brave new economy, companies are slower to buy bullshit ads of questionable efficacy on every random "Web 2.0" site.

Not sure I really agree with their defintion of "bullshit ads" but the general point is valid. The "me too" online industry will struggle. From publishers to networks to agencies. Web businesses that set up because it seemed like a good idea and there was plenty of capital to go round might find things will get tough.

Lets look at locally? Do we need 10+ ad networks selling the same remnant inventory? Probably not ... Do we need as many third party repping houses? Doubtful. Do we need as many media/creative/strategy agencies who effectively are doing the same thing. No.

Consolidation in this regard isn't a bad thing, as it won't do anything to harm the market. This huge array of choice/supply doesn't do anyone any real favours. A cull should improve the overall level of the industry and rid the market of the more questionable operators.

Another thing to watch is increased attention paid to digital media businesses. Last month AdNews ran a story on 3rd party networks placing premium brands on porn sites without their knowledge. Classy look for the industry hey ... And then yesterday The Oz's Lara Sinclair ran a great article on dubious 20% rebates paid by publishers to certain agencies who believe that is a fair 'pay to play' policy.

Real Estate sites feeling it as interest rates start to bite

I saw this post on TC about selected US real estate sites bucking the downturn in the market and seeing strong usage increases.

http://www.techcrunch.com/2008/08/19/real-estate-sites-are-holding-up-despite-the-housing-slump-some-trulia-better-than-others-zillow/#comments

It made me wonder what impact the continuing interest rate rises have had on the Real Estate category online in AU.

We bought a place last year in November, moving in in January and have been bombarded with rate rises since.

However when we were in the market it was white hot. The market for new homes up until the end of December 07 was incredibly competitive.

Take a look at the below graph (taken from Nielsen Netview, July 2008) ...

Real Estate as a category was peaking around January 2008 ... and since Jan has dropped over 15% of users (until July). The trend is evident - and across market leaders Realestate.com.au and Domain as well as the category

You have to wonder what impact interest rates and economic uncertainty has had on this.

I have noticed some real estate sites have been a lot more aggressive in market seeking display advertising - offering very low CPMs to try and woo non real estate/finance clients over to their sites - which might be a consequence of falling revenues for their bread and butter - real estate listings and finance tenancies.

Arrington tries to create a model to value social networks

Michael Arrington of Techcrunch has come up with a model to try and value social networks

http://www.techcrunch.com/2008/06/23/modeling-the-real-market-value-of-social-networks/

It involves looking closer at where each of the main networks has usage numbers and looking at the average Internet advertising spend per user in each of those territories (ie a valuation based on where your numbers are strong and if the market is bouyant in those areas)

He does admit the model is somewhat flawed as the modelling is based on some one dimensional data ... but he still pushes it through.

Personally I think he has ballsed this one up. I love Arrington and read his work religiously ... but this is way off mark.

It assumes:

1) Social Networks are an effective place to place display advertising. (unproven)
2) It assumes advertisers value eyeballs over anything else (they don't)
3) It doesn't take into consideration how people are using each network and the advertising contexts each offers (ie Linked In is fantastic for a higher yield C suite target in a relevant environment, whereas myspace has a load of 14-17 males which can be reached elsewhere)
4) Unique audience (ie eyeballs they have that are tough to find elsewhere)
5) Engagement (Unique Browsers combined with page views combined with time spent and repeat traffic)
6) Growth (where is it coming from - what areas, what demos?)

Personally, neither myspace or Facebook are doing a particularly good job of bringing in money. They are both probably the largest single sellers of remnant cheap inventory and in doing so are doing a great job of devaluing their audience. I don't think this is just limited to Australia either, as the consensus amongst the marketers at Ad:Tech SF seemed to be the same. Yes they have shedloads of users, but that offers them minimal advantage because this doesn't alone appeal to advertisers.

These hypothetical valuations are nice and make for interesting reading - but they completely miss the mark. The challenge for FB and myspace isn't just finding the killer application, it's finding the killer spin that brings in the advertising dollars they want more than anything.

Would you miss ...

I was at a lunch the other day and we were talking about certain online properties and whether people would miss them if they suddently disappeared off the face of the earth.

It stemmed from me making a comment that online there are, effectively, too many versions of the same product in numerous areas. Do we need 112 weather sites? Probably not. Do we need 400 sites that have sports scores? Absolutely not.

I am of the belief a slimming down of most publishers offerings would be beneficial to all involved - the user, the publisher and their advertisers.

I noticed this has been a recurring theme on the Brand Autopsy blog - http://brandautopsy.typepad.com/brandautopsy/2008/05/would-you-mis-1.html

So ... what are those web sites/areas that if they vanished, users would quite easily get the same experience elsewhere?

I can only speak for myself - so what are the five sites I would miss if I woke up tomorrow and they were gone ...

I encourage you to add your own comments. Then each week we'll go through a variety of online offerings and ask the question 'Would you miss [x]?'

My 5 essentials

1. Google. It organises information. Keeps me connected. Without the GOOG I'd feel helpless. Search, maps, video, images ... handy for work and home.

2. MSN Messenger. I use it for work, play, transferring files, talking to friends ... it is a huge time saver for me and it's been a daily staple for 10 years.

3. Techcrunch. Keeps me updated on my profession. I would miss a lot if it disappeared.

4. ebay. Has revolutionised selling and buying. I am comfortable with the interface. I have picked up heaps of cool things from there. I love how it empowers both buyers and sellers.

5. Trip Advisor. Before this travel was a mess online. Another great example of shared knowledged through an engaged community.