JohnDeMayo.com: Internet Advertising Insight

Google Q4 Earnings: My Reaction

    The fact that 42% of G's revenues are generated by 3rd party sites isn't being evaluated (publicly) enough IMO.  Given Google's healthy revenue share percentage, this piece of the business shouldn't / doesn't bring much to the bottom line.  If on 42% of your revenue, you pay out say 80% or so of revenues to your partners, it only contributes (42% * 20%) 8.4% of your margin dollars.  So growing the 3rd party business does (very) little to impact the bottom line, it would appear.  This is offset a bit by the fact that G normally charges advertisers less for 3rd party delivered advertising (so in some way it subsidizes the core business slightly) and the fact that simply by increasing the amount an advertiser can spend profitably with G (in total) they again aid their core non-3rd-party revenue line, as small/local advertisers who wouldn’t otherwise bother advertising with Google find it worth it given the volume boost as a result of 3rd party distribution.

    Long term, I expect Google's 3rd-party business' growth rate will stall.  The huge number of advertisers they bring to the table gives them less of an advantage with content advertising (as opposed to search advertising).  The long, long tail of search terms is not mirrored by the topics of content sites.  There is a much higher concentration of head topics on content sites, as such the vast array of advertisers they have relationships with gives them less benefit on content sites.  Furthermore Google's public image and reputation will inhibit them from explicitly allowing advertisers to take advantage certain behavioral targeting options which lesser known (more traditional ad network) competitors will be able to leverage.

--

    Sidenote, it's wild that analysts can't model Google's (future) tax rate.  Not that I think this is a phenomenon specific to Google, but it's amazing apparently no one can forecast this.  Seems like there's some data that the public should be provided with that isn't published.

----

    Looking forward, I think G will fare OK with their Q1 numbers.  There is some seasonality effects reflected in the estimates that don't really apply to much of Google's business...so I think analysts have/will continue to model in a lower growth rate quarter over quarter because q1 is normally a weaker quarter, despite the fact that this impacts G's business far less then it does a Yahoo and others.

    Past Q1, I think G needs to show some mighty impressive growth in Non-US markets in order to keep up their torrid pace.  The opportunity to grow the core US business further just isn't that large, the 3rd party network doesn't bring much to the bottom line, and I have no confidence new products / services will help much....they certainly haven't to date.

RSS text to podcast tool?

Can anyone tell me if there is a tool out there that will play nice with an RSS reader, and convert my unread feeds into a podcast via text to speech agent, so I can listen to new posts while I'm driving?  If not, can someone kindly create this for me?  I'd love to put the time I spend driving back and forth from Tahoe weekly to better use....

Job opening: Sales Account Manager

Job opening: Profitable, fast growing, venture-funded Silicon Valley company seeking Sales Account Manager.  Prefer someone experienced with mortgage leads.  Details here.

Consumating Party

Last minute notice I know, but if you are in the SF bay area, consider heading to the Consumating party this evening -- you know you love gawking at hipsters as much as I do.  And Chief Consumating Officer Ben is not a bad guy, if you haven't met him yet.  Well, OK, he's not a bad guy even if you have met him already ;)

Job opening: Profitable, fast growing, venture-funded Silicon Valley company seeking Search Marketer.

Great opp, great company here.

Spanish language leads or call transfers

I'm working with a great new company that is selling mortgage and debt data leads, and call transfers, in the spanish language.  All US consumers, but your call center would need to have a couple of reps that speak spanish.  Close rate on these leads is well above average.  Drop me a line for more info.

Internet Advertising Rate Ceilings, continued...

     I've received some very useful feedback from some visitors, encouraging me to revisit my last post, and completely separate the search advertising market from the rest of internet advertising.  As some readers have correctly articulated, they are very, very different markets and deserve to be considered separately.

    Search is in some ways very analogous to the yellow pages.  While the actual amount of time spent by users is low compared to other mediums, because the time spent is very transaction and purchase focused, it’s a very valuable time for advertisers to get in front of a consumer.  Revenue and cost per user attention unit are extraordinarily high.

    Non-search internet advertising (i.e. display banner advertising) is analogous to a broadcast medium like TV, as users spend many more hours, but are focused on content normally unrelated to an impending transaction or purchase, and as such interrupt advertising present is much less impactful on a revenue per attention unit basis.

    I'll try to pull some more thoughts together in regards to the parallels of the markets above, and where this might indicate both search and non-search internet advertising rates may flatten out after rates start to peak a bit.  While search already seems rationally priced in many regards, display advertising probably has significant rate increases ahead as rates catch up to comparables on TV.

Internet advertising rates continue to rise....but where is the ceiling?

Internet advertising spend continues to increase faster then increases in adoption by new households, and faster then increases in consumption by users. If money spent on advertising increases faster then new user adoption and existing user increase in consumption, spend per user and spend per user-hour are increasing. So basically if $$ increase faster then supply, rates necessarily increase. So internet advertising rates in general are continuing to rise -- as well they probably should. Looking at this report-- slides 23 and 24 specifically, you can start to see how advertisers' spend relative to user adoption and attention is significantly below average compared to other mediums.

It's ridiculous that advertisers spend more on the yellow pages, or magazines, then they do on internet / online advertising given the reach and time spent in each of these mediums. But hey, I'm not complaining. Because rates are lower with internet / online advertising as compared to other mediums, the opportunity for us direct marketers is greater. It's not only the fact that the internet is a great transactional medium that’s easy to track, tweak, and adjust that makes it a great DR medium -- it's also that media rates are low compared to alternative channels.

Where, though, is the steady state in regards to rates once the medium "matures", and what is the opportunity left for direct marketers when more brand and other money floods in and direct marketers are relegated to only being able to economically purchase a small fraction of the overall inventory/attention?

From a very rough perspective, it would be reasonable to assume that internet penetration will be slightly lower then combined Broadcast/Cable TV penetration in a few years. It is probably also reasonable to assume that average usage/time spent per user will be similar in the internet and TV mediums. Assuming (and this is a bit of a leap of faith) the percentage of attention that can be allocated to ads is similar on the internet and on TV, this means advertising spend on the internet would net out to perhaps 1/2 to 3/4ths of TV spend.....

This would mean that internet advertising spend may roughly 3x or so, holding TV spend steady. Adjusting for increased adoption, this means internet rates (on a Cost-Per-Attention basis) might roughly double.

This forces out a number of direct marketers whose economics no longer hold when rates double. Even given time to refine their campaigns and increase their effectiveness, the percentage of media that can be profitably allocated to true direct response campaigns shrinks significantly as rates rise.

So my prediction is usage and adoption in the US increases by 50% over the next few years, while advertising spend triples, resulting in a 2x increase in internet advertising rates given the above. Percentage of advertising purchased by true direct response advertisers contracts significantly. Of those that are left, let only the best and most efficient companies survive. While contracting markets are rarely as attractive as rapidly growing ones, there is plenty of opportunity in the future for the most efficient of direct marketers. Expect those just "showing up" to the game, though, without significant expertise in efficiency, to fall by the wayside. As the market matures, the number of successful direct response internet marketing companies will contract as the addressable market for direct response advertising contracts give then inevitable rise in rates.

1000tags.com, and some thoughts on cloud tag syndication

I've been following the progress 1000tags.com for the last few days, and have bought a few tags.  If you aren't familar with it, it is kind of a web 2.0 version of milliondollarhomepage.com.  I was already working on a few things in regards to cloud tag syndication, but this site definitely helped further some of my thinking.

I hope simply my mention of the concept of "cloud tag syndication" gets some people thinking and gets some new products built.  It could potentially be viewed as a push-based, most popular topics, tag-cloud aggregation widget thingee.  All kinds of options in terms of how to build the cloud and how to get it distributed.

Update: Looks like 1000tags built the functonality for publishers to be able to pull in their tag clouds, as a new advertising/linking concept.  Pretty neat and right with what I was thinking.

Student loan and related buyers needed

I am looking for buyers for the following types of leads, please ping me if you can help.  Numbers are rough but should provide some reasonable baselines.

1)  Student Loan (Estimated volume 100 - 200 leads per day, depending upon fields required, price, restrictons, etc. -- ~$100k-$200k per month revenue opportunity to start).

2)  Student Loan Consolidation (Would like buyers that can take leads with and without SSN so we can test both options.  Estimated volume 25 - 50 leads per day, depending upon fields required, price, restrictons, etc. -- ~$50k-$150k per month revenue opportunity to start).

3)  Credit report purchase or free trial w/ CC  (Co-branded link out to advertiser's site, prefer to pass data along if possible.  Estimated volume 10-20 transacts per day to start -- ~$10k-$20k per month revenue opportunity to start).

Thanks!