Om Malik Says "Yahoo! Should Buy Hulu". It Won't Happen and Here's Why.

Om Malik surprised me today by suggesting [praized subtype=”small” pid=”4ba3024afad224aed466c0367141ce59″ type=”badge” dynamic=”true”] should buy [praized subtype=”small” pid=”b4e172b2799ee9f440309b3b6454633c” type=”badge” dynamic=”true”], the joint venture video portal of NBC Universal and News Corp.  The company was founded in 2007 to create a destination site to present content from TV networks and was a response to the meteoric rise of YouTube.

Malik comes to that conclusion while thinking about the need for a solid number 2 exec at Yahoo! now that they’ve named Carol Bartz as their new CEO. He thinks Jason Kilar, Hulu’s young CEO, is a natural for that role and he suggests Yahoo! buys them.

He says: “With his service growing by leaps and bounds, and advertisers lining up to get on board, Kilar’s only problem is that he doesn’t have enough traffic –- like, say, YouTube. That will change over a period of time; and as we all know, time is an elastic concept. Perhaps this is where Yahoo can help. Or rather, where the two can help each other. Clearly search and search advertising isn’t quite working out for Yahoo; what Yahoo knows best is media and content. Which is why buying Hulu would be a strategically relevant acquisition for the company — it would play to Yahoo’s media strengths.”

He adds to explain why NBC and News Corp. would sell: “You’re probably thinking, why would Fox and GE sell their pet project to Yahoo? Well, why not? After all, they took a $100 million investment from Providence Equity Partners, which means they have an interest in making some sort of a return on this company.”

Wrong. Wrong. Wrong. Hulu is one of the core elements of NBCu and News Corp online video strategy.  They were ridiculed when it was first announced (Techcrunch called it Clown Co., they’ve changed their minds since then) but they proved everybody wrong.  Most people thought a joint venture between traditional media companies would fail, that the user experience would be bad, that no one would use it. According to this article, in September 2008, they streamed 142 million videos, a 42% month over month increase. It’s growing fast and on the verge of becoming a major player online. Selling Hulu to Yahoo! would be like AT&T selling YellowPages.com to Google. Won’t happen, nope. Don’t even think about it. As for return on investment, expect an IPO in a couple of years, not a sale.

And Hulu!  We want access in Canada!

Om Malik Says "Yahoo! Should Buy Hulu". It Won't Happen and Here's Why.

Om Malik surprised me today by suggesting [praized subtype=”small” pid=”4ba3024afad224aed466c0367141ce59″ type=”badge” dynamic=”true”] should buy [praized subtype=”small” pid=”b4e172b2799ee9f440309b3b6454633c” type=”badge” dynamic=”true”], the joint venture video portal of NBC Universal and News Corp.  The company was founded in 2007 to create a destination site to present content from TV networks and was a response to the meteoric rise of YouTube.

Malik comes to that conclusion while thinking about the need for a solid number 2 exec at Yahoo! now that they’ve named Carol Bartz as their new CEO. He thinks Jason Kilar, Hulu’s young CEO, is a natural for that role and he suggests Yahoo! buys them.

He says: “With his service growing by leaps and bounds, and advertisers lining up to get on board, Kilar’s only problem is that he doesn’t have enough traffic –- like, say, YouTube. That will change over a period of time; and as we all know, time is an elastic concept. Perhaps this is where Yahoo can help. Or rather, where the two can help each other. Clearly search and search advertising isn’t quite working out for Yahoo; what Yahoo knows best is media and content. Which is why buying Hulu would be a strategically relevant acquisition for the company — it would play to Yahoo’s media strengths.”

He adds to explain why NBC and News Corp. would sell: “You’re probably thinking, why would Fox and GE sell their pet project to Yahoo? Well, why not? After all, they took a $100 million investment from Providence Equity Partners, which means they have an interest in making some sort of a return on this company.”

Wrong. Wrong. Wrong. Hulu is one of the core elements of NBCu and News Corp online video strategy.  They were ridiculed when it was first announced (Techcrunch called it Clown Co., they’ve changed their minds since then) but they proved everybody wrong.  Most people thought a joint venture between traditional media companies would fail, that the user experience would be bad, that no one would use it. According to this article, in September 2008, they streamed 142 million videos, a 42% month over month increase. It’s growing fast and on the verge of becoming a major player online. Selling Hulu to Yahoo! would be like AT&T selling YellowPages.com to Google. Won’t happen, nope. Don’t even think about it. As for return on investment, expect an IPO in a couple of years, not a sale.

And Hulu!  We want access in Canada!

Life Connected

Was reading this summary of last week’s Consumer Electronics Show. Saul Hansell underlines the fact that every new device shown at CES “is becoming a computer connected to the Internet. ” Howard Stringer, CEO of Sony, even predicted that “In two years, 90 percent of all Sony products will connect to the Internet”.

Hansell offers a major insight: “If the most exciting thing about your phone or truck or TV is the Web sites you go to and the software applications you download, then the device itself is less important.” He continues: ” Increasingly what will differentiate one TV from another is the software it runs and the Internet services it connects to.”

Olli-Pekka Kallasvuo, chief executive of Nokia, quoted in the same article said: “For a long time, our business was defined as cellphones. Hardware is not enough. We need to have a wider array of services and content. This is a major change for us.”

Jong Woo Park, the president of Samsung’s digital media business, said: “In the next five years, we are not only going to provide hardware, but content through our devices, in an easy, more convenient way. TV is no longer just TV. TV is interactive TV these days. You will use the same TV and the same remote control, but have completely different functionality.”

What it means: as they all realize they need something to differentiate themselves, electronic device manufacturers will be hungry for content and software functionalities in the next three to five years. Content providers will need to watch out for this new trend and try to measure the installed base of a wider variety of electronic devices. But context will be key (screen size, navigation device, etc.). By the way, a television could be a wonderful local search device if executed correctly! It’s also an amazing social network!

TV Content Atomization is the Biggest Threat to Cablecos

The Wired blog reports on a new customer satisfaction study from market researcher [praized subtype=”small” pid=”e70e73bc173c08791d52fb78fc51947def” type=”badge” dynamic=”true”] explaining that Cablecos could soon see customer exodus if they don’t improve their customer service.

“Cable subscribers are generally less satisfied, which creates opportunities for satellite and telco/IPTV providers to grab customers,” said Kurt Scherf, vice president, principal analyst, Parks Associates, in a prepared statement. “Although cable operators have improved service efforts, cable operators will still hemorrhage subscribers unless they are perceived as offering leading-edge features at equal or better value. In today’s economic climate, carriers cannot afford to ignore these findings.”

What it means: I suspect the biggest threat to cable companies in the long run is not bad customer service.  It’s content atomization.  Initiatives like Hulu.com, internet broadcasting on TV networks web sites (I can watch full episodes of popular US series on CTV.ca) and BitTorrent allow anyone to watch their favorite TV shows anytime anywhere.  Compare this to cable packages, where you need to buy a minimum number of channels, some of which you never watch.  TV viewers will soon clamor for personalization and customization and will want to pay only for channels “consumed”.  Expect TV sets to come with Wi-Fi chips allowing you to connect your TV to your wireless router.

Can Social Media Save The Automobile?

At the Mixx Canada Toronto conference on Monday, I saw a great presentation by Natalie Johnson, [praized subtype=”small” pid=”597ce70258167de10a3ead0ceea0179355″ type=”badge” dynamic=”true”]’s Manager of Social Media Communications and Monik Sanghvi, Senior Vice President at [praized subtype=”small” pid=”8149cff86ec3b9508702f6a11159609082″ type=”badge” dynamic=”true”]. They showed the various ways GM uses social media to promote its various brands. GM approaches social media marketing via three angles: Engage (entertain), Educate (inform) and Enable (connect).

Some examples:

  1. I Got Shotgun is a videoblog at the intersection of cars, culture and entertainment
  2. ImSaturn, a Saturn social network, uses Ning, the white-label social networking platform
  3. A series of blogs at gmblogs.com
  4. Pontiac Underground, a blog powered by Typepad
  5. The Saturn Astra Facebook page
  6. Chevy Aveo Livin’ Large, a promotion around user videos and the Chevrolet Aveo
  7. A Twitter account under the @GMblogs alias
  8. GMNext, that could be described as the “portal” for all social media initiatives at GM

What it means: I was surprised by the depth of social media tools usage within General Motors. I’m especially amazed by the fact they reply to questions/comments addressed to their Twitter account. They’re definitely joining the conversation. Reading between the lines, I believe GM sees social media as multiple very powerful branding opportunities. Given that I suspect they mostly use television for branding today, it’s possible social media might eat into television advertising budgets if GM is able to prove the social media ROI.

Why did Cox Buy Adify?

From the press release:

Cox Enterprises, Inc. today announced that its subsidiary Cox TMI, Inc. will acquire Adify Corporation. Adify will operate as a stand-alone company and will continue to be led by Russ Fradin, CEO and co-founder of Adify. (…) Adify is the premier technology and media company focused on vertical online advertising. The company’s comprehensive technology and services allow major media companies, venture-backed businesses and entrepreneurs to build and operate targeted ad networks that support their advertisers’ goals. Vertical advertising networks offer marketers the reach, targeting and quality that brand advertisers increasingly seek in the online advertising space. More than 100 premium ad networks currently operate on Adify’s technology platform.

What it means: A bit late blogging about this news, but wanted to come back to it as it validates two of my key predictions for 2007 and 2008. I said in December 2006 that 2007 would be see more site “verticalization”. I also wrote in December 2007 that 2008 would be the “year of ad networks”. Adify sits at the confluence of these two major trends. They’ve seen amazing traction in the marketplace. Why would Cox buy them? I see two reasons: i) it’s a great business to be in, major growth to be expected in the next few years, and ii) it provides Cox with access to many ad networks to push their own ad networks (newspapers, television, autotrader, etc.) as an optional backfill, thereby extending their reach tremendously. Very smart strategy!

 

On Atomizing Your Business Model: The TV Industry

Additional food for thought for yesterday’s blog post on atomizing your business model: this Fortune magazine interview with Irwin Gotlieb, CEO of GroupM (a media-buying company owned by WPP Group) details a portion of their strategy regarding future business models for television.

GroupM Logos

Last spring, for example, he crafted a $1 million pact with NBC Universal that changed the age-old model of how TV ads are bought: The bigger the hit, the more you pay. With DVRs allowing people to skip commercials, Gotlieb decided that a show’s popularity no longer mattered. He told NBC executives that he would pay based on who was watching the commercials. It was a controversial move, but again competitors adopted the new system. Rino Scanzoni, GroupM’s chief investment officer, who negotiated the deal, credits his boss. “He was saying, ‘Digital video recorders are being incorporated in set-top boxes. Television is going digital by 2009. What impact will that have on our business, now and in five years?’ ” says Scanzoni. “This is something we needed to do to get ahead and drive the change.”

As the line between the web and TV blurs, viewers will have even more control over what they watch. Inevitably that’ll mean watching fewer commercials, and Gotlieb knows it. So while spending money on increasingly dear (and often unwatched) spots in “Lost” and “The Office,” he also wants to own the shows themselves to figure out new ways to infuse them with ads. That’s why he started GroupM Entertainment, a throwback to the 1950s, when shows like The “Colgate Comedy Hour” dominated primetime, to create everything from rock concerts to TV series. In March, GroupM Entertainment produced “October Road,” a series that aired after “Grey’s Anatomy” and has been picked up for another year. (In exchange, ABC gave GroupM discounted ad slots to pass along to clients.) It also produced “Dr Pepper Band in a Bubble,” an MTV reality show. The goal isn’t to turn TV shows into run-on commercials. But having a hand in content creation gives GroupM a better idea of what types of shows will be hits – not to mention first dibs on prime ad buys. “The Digital Age requires advertisers not to interrupt content but to create it,” says Peter Tortorici, a former president of CBS Entertainment. “Programming only works if people really enjoy it and keep coming back.”

What it means: I note a few insights in those two paragraphs. First, the fact that GroupM has been very proactive in trying to reinvent the TV business model even though they’re not a TV network. Maybe the distance helps to craft more innovative ideas. The second insight is the introduction of a performance-based model for TV in a DVR world. I believe we will see those models launched in every traditional media vehicles. The third insight is the blurring of the line between editorial and advertising content. The smaller the content atom becomes, the closer the advertising atom gets to its “cousin”. As a consequence, I think we will see more and more conflicts in the future between editorial and advertising. Will society be mature enough to discriminate between these two?

Oops! We Forgot to Atomize Our Business Model!

A couple of news articles caught my eye last week. Mediapost reported on a TV exec seminar hosted by Havas’ Media Contacts unit. Talking about the online video revolution, Mediapost says major TV providers are moving aggressively online–and not only to their own online destinations, but in an array of “distributed” online content options to deliver their programming directly to consumers regardless of where they are on the Web.”

In addition, TorrentFreak discussed data from Mininova (one of the largest torrent listing sites) showing that “ 50% of all people using BitTorrent at any given point in time do so to download TV-series, quite an impressive number. In total, over a billion TV-shows are downloaded every year, and this number continues to rise.”

Our friend the Atom

Flickr photo by Marshall Astor

What it means: recently, all savvy media industry strategists have been talking about content atomization and clearly, in the TV industry, TV channels are being atomized by new Web technology. Whereby, in a traditional cableco world, channels used to be the basic content building blocks (think about how your cable TV subscription is structured), TV shows have become the new atomic element.

But there’s a problem.

The content is being atomized but the main TV business model (30-second ads) was built to be part of a larger element, the TV channel. Ads used to fill, i) the “empty spaces” between shows and ii) planned 3-minute interruptions during the show. In the first scenario, those empty spaces don’t really exist anymore as shows become the basic element and BitTorrent is disrupting the second scenario by offering easily accessible ad-less versions of your favorite programs.

Guess what. Someone forgot to atomize the TV business model while they were busy atomizing the content.

So, how do you atomize TV’s business model? Is it all about product placement, sponsorships, pre-roll ads? Do you move to a user-paid subscription model for individual shows? And BTW, is the future cableco the equivalent of a RSS reader for online videos?

And what does it mean for other media, newspapers for example?

In the case of newspapers, from a content point of view, news articles are the new atoms. This is the way news information travels online. But, in that situation, newspapers’ business model has been blown to bits (no pun intended). Let me explain. Like TV channels, newspapers are inserting ads in the empty spaces around news articles. These spaces don’t really exists anymore, so how do you monetize? News article sponsorships? A-la-carte article user-paid
subscriptions? This one is not easy as journalism ethics (rightfully so!) have kept news article and ads completely separated. How do you bring ads closer to the article without breaking readers’ trust?

What about radio?

For the traditional FM radio industry, individual songs are clearly the basic atom of content. But those are so easy to find online through legal (music streaming services, iTunes) or illegal means (BitTorrent again). As for their business model, radio stations insert ads around songs. Again, these slots don’t exist in an atomized world. Maybe radio stations should invest in original content or better DJs (Wired calls them robo-DJs in “Why things suck”)? Can radio stations move online as trusted brands and become real music aggregators/recommendation engines? It might be too late. So, is FM radio as we know it screwed? Maybe more than people think. That one again is not easy to solve.

And finally, directory publishers?

As for directory publishers, their business model is currently in the ranking of directory listings. But those individual listings might be the new content atoms. And if they are, it means that the ranking structure does not exist anymore. Is it now the merchants’ phone number and a pay-per-call model? Is it pay-per-click to individual merchants? Given that directory content is all about advertising, atomizing content does not impair a directory publisher from atomizing their business model but it just needs to be properly executed. I believe pay-per-call and pay-per-click to individual merchants might definitely be the way to go.

Conclusion

If you’re atomizing your content, don’t forget to atomize your business model! This blog post raises important questions about future traditional media business models. I don’t have all the answers at this point but I meant this post as a wake-up call to stimulate deeper strategic thinking in all traditional media firms.

YellowPages.com Revenues to Reach $1B by 2010

AT&T held an analyst conference today and Ray Wilkins, Group President – Diversified Businesses, was presenting the “advertising and search” portion of the allocution. The presentation shows that YellowPages.com currently generates approximately $550M in revenues and that AT&T is aiming at more than $1B in revenues in 2010 for the site. They also expect a good revenue lift from advertising appearing in U-verse, their interactive television product.

Yellowpages.com revenues

Other interesting data points include:

  • Print and Online Ebitda margins in the mid-40% range in the next three years
  • Mobility advertising starting end of 2008
  • 2 billion search queries in 2008 and 3 billion by 2010.

You can find the slides (.pdf) here.

(found on PaidContent.org)

Online Video Ads: Are We Trying to Replicate the TV Business Model?

A new Forrester report (as discussed on NewTeeVee) forecasts online video advertising spending in the U.S. will reach $7.1 billion in 2012, an incredible 72% CAGR for the next 5 years!

forrester video advertising forecast 2007-2012

NewTeeVee adds: “Forrester analyst Shar VanBoskirk praised the emergence of “customer-centric” ad formats like the overlays used by VideoEgg, YouTube and others, which, rather than forcing an ad in their video streams, allow viewers to decide if and when to pause a video to watch an ad.”

That same report indicates that “spending on social media (…) will grow to $6.9 billion as marketers understand how to use and measure this channel.”

What it means: every time I see reports forecasting the enormous growth of online video ads, I get the feeling that this growth will be mostly driven by the desire of current TV ecosystem stakeholders (networks, media placement firms and advertising agencies) to replicate the existing TV business model. I’m not totally convinced consumers will be well served by that new medium unless precise targeting technologies are developed. Nonetheless, I definitely expect that the two darlings of online advertising in the next five years will be online video ads and social media advertising.