Net ad spend poised to overtake national press

The internet will this year overtake national newspapers to become the third biggest advertising medium by spend, according to authoritative forecasts.

By the end of 2007, internet advertising will close the gap on regional newspapers, the number two medium, but will still be well short of television, the biggest outlet in the £12bn-a-year media advertising market.

Old media to embrace internet upstarts

High-level media and advertising executives are to meet for a brainstorming session aimed at capitalising on the surging popularity of social networking websites.

McKinsey, the management consultancy, is understood to have asked senior executives from old and new media groups alike – from Yahoo to YouTube – to a session with advertising agencies to discuss ways of turning the hugely popular internet sites containing photos, videos, blogs and other user-generated content into viable media businesses.

The meeting, which could take place in New York within the next month but no date has been finalised.

Plans for the meeting reflect the rapid shifts felt by the media industry as people, particularly younger internet users, spend increasing amounts of time on social networking sites such as MySpace and sharing photos, videos and blogs created by themselves rather than professionally produced content.

In addition, the growth in high-speed internet connections has led to a sharp increase in video viewing on the web. Content from movie studios and television networks is increasingly available online.

So far, advertising linked to online video is estimated to be worth about $300m but this is expected to grow to $1bn within the next few years, according to Merrill Lynch. Of the record $12.5bn spent on internet advertising last year, most of it was spent on search and this remains the biggest source of online ad revenue.

“Advertisers are looking for leadership on how to find ways of reaching the growing audience for user-generated content,” said Aaron Cohen, chief executive of Bolt Media, who is involved in the meeting plans.

The Interactive Advertising Board will be asked to attend the meeting. One of the subjects that could be discussed is whether certain standards should be developed for user-generated content, such as always ensuring that content with ads has been deemed appropriate.

Most online video advertising is linked to professionally produced content, reflecting concerns that home-made content could be inappropriate or offensive.

However, technological advances are making it easier to insert video ads into online content.

The focus of large media companies on ways to attract advertisers to the web is expected to push this area. “Video [on the web] is a big deal,” said Jonathan Miller, chief executive of AOL, last week.

DOMAINS > Domain Parking's New Tack

REDHERRING.COM: Companies are dressing up unused domains with cheap content for profit.

When you type a web address directly into your browser, there’s no guarantee you’ll find what you were looking for. Using a search engine or following a link from another site gives you much better odds. But a growing number of companies are finding profits in showing visitors a good time as long as they’ve stumbled in. It’s nothing fancy or time-consuming—a list of related links, a search engine. Tarting up “parked domains” may become a billion-dollar industry, both for paid search operators like Google and Yahoo as well as a new breed of Internet real estate developers.

Los Angeles-based Demand Media burst out of stealth mode last week, announcing that it had raised $120 million and bought domain name registrar eNom and content provider eHow. Demand Media CEO Richard Rosenblatt says his plan is to put up low-cost content on the 150,000 domains he has acquired—sites like beautifulhomes.com and mobilephone.com—driving up their number of visitors (already 25 million per month) and collecting click-through dollars for sending them to real destination sites. Similarly, Waltham, Massachusetts-based YesDirect, which was formed last year in a buyout of BuyDomains, says it has 650,000 sites with 24 million monthly visitors and tens of millions in revenue.

The companies face the challenge of eliminating trademarks from their growing portfolios of domains, as approximations of brand names often end up in collections after search engine marketing speculators try them out and drop them. “Cybersquatting” brings its operators millions every month, but it’s being increasingly cracked down on. The World Intellectual Property Organization said in January that cybersquatting disputes over domains such as internetexplorer.com and google.ir rose 20 percent last year, to 1,456 cases, and 84 percent were found in favor of the accusers.

On the other hand, what Demand Media, YesDirect, and publicly traded Marchex want to do—drive up the value of the estimated 5 percent of Internet traffic that comes through direct navigation—isn’t illegal. The industry could be worth a little under a $1 billion.
“It’s a little mercenary,” admits Steven Marder, the CEO of Eurekster, a San Francisco-based startup that makes customizable search engines and has seen revenue streaming in from initial tests with domain farms. “But it’s a really nice sandbox to play in.” Nicesandbox.com anyone?

SOCIAL NETWORKS > FastStats: Social Network War

The battle for the scalding-hot social networking space shows no sign of slowing down, and segment leader MySpace is continually beset by challengers, notably Bebo. According to Nielsen//NetRatings, MySpace and Bebo, respectively, are the fifth- and sixth-biggest brands online in terms of total web page views. During the month of April, MySpace had 2.84 million visitors, 680,000 more than Bebo. Since News Corp. purchased the site in July 2005, MySpace’s audience has grown 295 percent (see Murdoch Buys Intermix: $580M). Over the same time period, Bebo has seen a 162 percent jump in traffic. While MySpace remains the leading social networking site, its users also visit competing sites, and vice versa. According to NetRatings, 698,000 people visited both sites in April. Some 33 percent of Bebo users visit MySpace, while 25 percent of MySpace users visit Bebo. Crossover aside, each of the two sites is increasingly serving different types of users. Sixty-nine percent of MySpace’s audience is 18 or older. A majority of Bebo users (54 percent) are under 18. Both Bebo and MySpace have more than 1.2 million female users, but Bebo’s smaller size means a greater percentage of its users are women. Among social networking sites, Bebo reports the highest number of page views (429) and the greatest amount of time spent online (1 hour 52 minutes) per user each month. Bebo may see some success differentiating itself from MySpace, but competitors continue to make the market dynamic and uncertain (see The MySpace Wannabes).

SOURCE: Nielsen//NetRatings

DIGITAL > Microsoft to buy eBay?

The New York Post created some buzz among those who didn't cut out of town early this (U.S.) holiday weekend by reporting Friday that Microsoft, for several weeks, has been discussing the possible acquisition of online auction site eBay.

The Post cites multiple unnamed sources in its story claiming that Microsoft has considered buying eBay and merging it with its MSN portal in an effort to better take on Google.

"Sources indicate that the talks, while still active, have cooled somewhat in the last two weeks as executives considered antitrust issues," the story says, adding that it's unclear what impact news that Yahoo and eBay have joined forces will have on the talks.

SOCIAL NETWORKS > MySpace seeks link with Google or Microsoft

MySpace, the fast-growing “social networking” site, is in talks to forge a internet search link with either Google or Microsoft, in a move that would confirm the emergence of Rupert Murdoch’s internet site as a significant new power online.

The rapid growth of MySpace has turned it into one of the most attractive potential allies for search engines, which are hunting for new online audiences for their search-related advertising.

The internet site, bought by News Corp last year for $580m (£310m) and which now has nearly 80m registered users, is discussing an alliance that would let one of the search giants supply internet searches on its pages, along with adverts tied to results, according to people familiar with the discussions.

Such deals typically involve the two sides splitting advertising revenues, with the lion’s share going to the website that delivered the audience.

“They are looking for a partner and trying to figure it out,” said a senior executive of one of the internet search companies. “They have a good opportunity to increase the revenue on that property.”

The rivalry over MySpace is expected to echo the competition between Google and Microsoft last year over a link with AOL, which was eventually won by Google after the search company agreed to invest $1bn in the business.

Google and Microsoft are believed to be talking to MySpace. Yahoo is believed to be less interested. The search market is dominated by Google, which in April increased its share of US searches to 43.1 per cent, according to comScore Networks. Yahoo’s share was unchanged at 28 per cent and Microsoft’s share fell slightly to 12.9 per cent.

The rapid growth of social networking sites such as MySpace and Facebook has threatened to tip the balance of power on the internet away from traditional portals and search engines.

Their potential to become the places where many young people spend most of their internet time could make them the “gatekeepers”, or the entry point for online activity.

The rise of the social networking sites has already forced the established internet powers to revise their views of how new audiences will emerge on the internet.

“We’ve looked at this carefully, these online communities will evolve and search will be part of it,” Eric Schmidt, chief executive of Google, said earlier this month. “There’s not going to be a single winner.”

Steve Ballmer, chief executive CEO of Microsoft, added: “All the analysis suggests that’s where all the growth will come from.”

MySpace.com declined to comment on the status of its search negotiations.

Ross Levinsohn, president of Fox Interactive Media, the News Corp internet division of which MySpace is the cornerstone, said last week that improving the technology underpinning the site and making it easier for advertisers to access its users was “still our highest priority”.

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