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Yahoo! & AOL get compared to Google, but should probably fear Facebook

by drm on May 3, 2010

Yahoo! chief Carol Bartz made an interesting point about Google in an interview with the BBC today:

“Google is going to have a problem because Google is only known for search,” said Ms Bartz. “It is only half our business; it’s 99.9% of their business. They’ve got to find other things to do.  Google has to grow a company the size of Yahoo every year to be interesting.”

yahoo_logo.jpgPeople are going to focus on the bravado and positioning — after all Bartz needs to clearly define Yahoo’s value proposition in a market where the company is unfavorably compared with Google on an ongoing basis.

Search isn’t an infinitely expanding business opportunity. In fact, several dynamics at work suggest that the growth of search revenue will slow, limiting Google’s overall opportunity for growth. First, penetration of potential advertisers is higher today than it was two years ago for Google. And second, the shift of internet usage into social networks has incrementally changed the search behavior of web users.

Google’s media proposition is built on the back of search. That means that the audience that Google aggregates to the benefit of marketers — a basic definition of ad-supported media — relies to an outsized degree on search traffic.

Yahoo! has a more diverse media proposition. That’s the “half of our business” that Bart is referring to.

In this regard, Yahoo! is more like AOL than Google. Not surprisingly, AOL is facing its own challenges in terms of definition, value and opportunity.

The big issue here is that the largest diversified web media brands aren’t demonstrating the ability to grow revenues and hold on to consumers that suggest the franchises deserve premium growth valuations.

Yahoo! and AOL are predominantly content-driven media platforms that have created applications in order to enhance user engagement. That business model is an interactive evolution of the traditional media business model. new AOL logoIn this regard, the companies are very different, and have very different challenges, from Google.

The primary challenge remains how to effectively keep content and applications fresh while managing a huge consumer audience, and how to make that base of content accessible and valuable to advertisers. The problem solving is discrete, because one approach doesn’t necessarily fit to every different content platform and user experience. (In this respect, the companies suffer in comparison to Google, which is incredibly simple to explain.)  An underlying question is whether focused media brands are more viable than diversified media brands.

When thinking about the strategic challenge of Yahoo! and AOL, I’d suggest that the most salient question is how these two platforms retain consumer interest and loyalty in an environment where Facebook is becoming a de facto operating internet operating system.

One of the Google searches that drives traffic to this site regularly is “Is Facebook the new AOL.”

The query could just as easily be, Is Facebook the new interactive media model? As an interactive media platform, Facebook is organizing and directing shared content, providing content publishing tools, generating scale audience with a high definition of individual interests and producing content within its own operating system seamlessly.

Facebook allows users to dictate what content is important and interesting.  That model is fundamentally different from the Yahoo!/AOL model.

Facebook can be an incredibly valuable tool for anyone trying to generate a business from content, and it could ultimately be a profound disintermediator for Yahoo! and AOL, which today look like legacy media brands on the web.

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A new web paradigm that emphasizes the social circle over digital data bases takes shape

by drm on February 22, 2010

The discussion about Facebook experienced a tipping point last week: third-party data confirmed what many observers had been suggesting, that Facebook exerts a powerful influence on how consumers are using the web.

Sheer scale is the first hurdle. Compete released data that showed Facebook outstripping Google in terms of web visits in January, a significant accomplishment.

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Then, generating measurable activity across the web from that scale is the second hurdle.

SFGate, in an article using Compete! data, concluded that Facebook is driving more traffic to web sites than any other site. In fact, Facebook is the single biggest source of traffic to the web portals, like Google and Yahoo.

Using a snapshot of Web traffic from December, Compete’s director of online media and search, Jessica Ong, found that 15 percent of traffic to major Web portals like Yahoo, MSN and AOL came from Facebook and MySpace. The lion’s share of that traffic, 13 percent came from Facebook.

Google, which has profited handsomely from directing Web surfers to their destinations during the past decade, was third with 7 percent, just behind e-commerce site eBay, which had 7.61 percent. MySpace was fourth with just under 2 percent.

These two data points illustrates that a consumer’s internet experience has evolved from being self- directed to group-directed. Typing search terms into Google is becoming a secondary activity to following the map of the web that is being constantly updated by your social circle.

“People are spending less time navigating the Internet on their own and are now navigating the Internet based on their friends’ recommendations or their friends’ activities,” said Dave Yovanno, chief executive of Gigya Inc., a Palo Alto firm that offers social-media services. “That’s one of the big trends we started picking up on probably four or five months ago.”

One of the reasons that consumer behavior is shifting is because of the innate authenticity of their social circle. This experience of authenticity is increased the reliability of the information that people provide about themselves. The University of Texas at Austin recently released a study showing that profiles on social networks are generally very truthful.

“I was surprised by the findings, because the widely held assumption is that people are using their profiles to promote an enhanced impression of themselves,” study co-author Sam Gosling, a personality and social psychologist in the department of psychology at the University of Texas in Austin, said in a statement. “But these findings suggest that online social networks are not so much about providing a positive spin for the profile owners, but are instead just another medium for engaging in genuine social interactions.”

We’ve been talking about a new web paradigm. Clearly, it is here.

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Thinking about how Social Media gets defined and what it means

January 7, 2010

Brian Solis wrote a reflective post today that strayed from his typical forward-looking perspective to reflect on how the term “Social Media” has morphed to encompass all kinds of web activity.
He harkens back to a definition of social media that was developed by a group of leading thinkers a couple of years ago. That [...]

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10 years past, 10 years forward

December 23, 2009

10 doesn’t sound like a big number, but when you start looking back over a decade, 10 years of an ever-expanding and innovating world, 10 years feels huge and unwieldy.
At the beginning of this past decade (the first decade of the 21th Century…how cool!) I was working with an Internet company called Themestream, started by [...]

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Why activating News Corp.’s content teams on social media is Murdoch’s only hope

December 8, 2009

Rupert Murdoch has been the poster boy for the frustration legacy content creators have with the current way that content moves around on the web. What Murdoch is missing is that the answer lies not in setting up more barriers, but in getting control of his distribution through more aggressive deployment of social media [...]

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What can you learn from the statement “Facebook is the new AOL?”

December 8, 2009

MarketingProfs today has an interesting post from Leigh Duncan-Durst, a 20-year veteran of internet marketing and e-commerce, about some of the likely challenges Facebook will face as it develops its platform in order to be more relevant for marketers.
Do the math on 20 years: that puts Duncan-Durst in the interactive world in 1989. [...]

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The power of clear communication

September 9, 2009

Regardless of where you stand on the proposed health care legislation (if you can figure it out!), the drama around President Obama’s speech tonight was stirring. A young president with an ambitious agenda, standing before a divided Congress, on national television, laying out the purpose and logic of his proposal. The stakes were [...]

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