Profiting from the Panic

Two interesting developments / reads over the weekend.  First, John Borthwick, who runs the Betaworks incubator, sent a memo out to his portfolio companies on Saturday afternoon to address the current economic issues.  While the entire memo is a good read, I found the following excerpt to be a good representation of today's opportunities:

Advertising
There will be a flight to quality; this always happens. But this time I think it's going to be more than that.    For TV and print this has been an unusual year: The shift to online has been stemmed first by the Olympics and second by the election. But year-over-year  growth in ad spend has been down across the board (see slide 32 of the sequoia deck, linked below). Expect the next year to be ugly and different. I think spend will move online, very fast, and print may right downhill.  And people will look for ROI -- real measurable results. Monetizing social media is hard. Much to do here, much money/share to make/take.

Beyond advertising
Much of Web 2.0 was about advertising to the tail -- the wonders of Google and AdSense. The truth that most people haven't spoken up much about is that (a) neither Google or Yahoo did a great job of monetizing much outside of search and (b) the Google business is still mostly in the head of the curve, not the tail.

Then tonight, MySpace publicly launched their much anticipated My Ads platform.  MySpace is clearly driving towards the opportunity that John identifies: improving monetization in social media, and reaching out to the long tail.  That said, it will be interesting to see how big of an opportunity this is for MySpace. I still side with Scott Karp, who several weeks ago, nicely summarized the challenges facing MySpace, Facebook and others....their ad programs have yet to provide value to the user.  As Scott notes: "If you’re in media in the web era, you’d better be working on a business model that creates huge value for users. Either that, or be content to have a small business by traditional media standards."

 

Comments

[william]

This is a nice move by myspace; but it continues to follow their stale old act of creating large amounts of revenue on the backs of members and their content.

myspace is easily worth at least a billion, and where is the value coming from other than members/the communities content and activities.

How much ad revenue is myspace sharing with members that generate ad revenue for them ? Are they giving anything back to the community that has put them where they are ?

I am technology consultant, and this summer I became so feed up with the share cropper mentality of sites like myspace that I decided to build an application that shares the wealth that is created with the community.

We also have a stand alone ad service and we have a granular micro revenue sharing service that allows members to share their revenue with Friends, Groups, or Causes.

And unlike myspace and the rest we will be releasing most of the service to the open source community because we know we are not the smartest guys in the room.