It’s all about the eyeballs
Three significant events happened this last week that will shape the social network landscape for the next 12-18 months. Google purchased YouTube and both Yahoo and Google announced Q3 earnings.
The Google/YouTube coverage has focused almost exclusively on the copyright issues that YouTube faces. What the mainstream media has failed to understand is that the YouTube purchase is all about eyeballs (kudos to Jeremy Zadowny for this insight).
Google’s purchase of YouTube is all about acquiring more eyeballs that they can sell ads to. At their most basic levels, Google and Yahoo are simply advertising networks or platforms. The more ads that they can serve the more money that Google and Yahoo can make. There is a limit to how much growth (and revenue) that the search engines can pull from traditional search and this limit is the biggest threat to their continued growth. Google and Yahoo are not worried about Microsoft, they are worried about their ability to find the additional eyeballs they need to continue growing revenue.
Google has responded to this challenge by buying the most visited video site on the market (YouTube), brokered a deal with the biggest social network (MySpace) and partnered with the largest manufacturer of computers (Dell). As a result of this deals Google was able to announce better than expected earnings this week.
Google’s Q3 revenue of 2.69 billion, up 70% from a year earlier exceeded Wall Street’s expectations. Sandwiched in between the YouTube purchase and the Google earnings, was Yahoo’s earnings report which showed a brand in trouble. Yahoo’s Q3 revenue of $1.58 billion only rose 19% from a year earlier
Yahoo Chief executive Terry Semel blamed social media sites for the disappointing results during a conference call when: “he admitted that the company’s display advertising revenue growth was being hurt by the inventory available on rivals such as MySpace and YouTube”
Yahoo’s bad week continued when web traffic research firm Nielsen//NetRatings reported that Google accounted for half of all searches in September and that the number of searches at Google increased 24 percent from a year ago.
So how does all this pertain to social media? Simple, Yahoo has to show Wall Street that it has a plan in place to attract more eyeballs. While the eventual launch of Yahoo new ad platform called Panama will help, what Yahoo needs is more eyeballs outside of traditional search.
That is where the social networks come into play. Yahoo has about $10 billion in cash and still has the opportunity to grab the social mantle back from Google. By buying Facebook, Yahoo adds the 3rd largest social site in the U.S. to its network. The battle for eyeballs is not limited to the U.S. The overseas market continues to grow and the purchase of Bebo would be a bold move by Yahoo. Bebo is bigger than MySpace in the UK and the demographic makeup of Bebo makes it very attractive to advertisers. Thirdly, Yahoo needs a video answer to YouTube and that answer might be Metacafe. A lot of people have never heard of Metacafe but with 525 million pages view in August (according to comScore) and 64.3 average minutes per visitor (YouTube is 66.7 minutes) Metacafe, with Yahoo backing, could easily become the next YouTube.
Will Yahoo be bold and make these purchases? I don’t know but the next twelve weeks will be very interesting in the social media space as Google and Yahoo jockey for eyeballs.
Filed under Social Media Optimization : Comments (2) : Oct 22nd, 2006
October 23rd, 2006 at 9:35 am
Funny that in the internet world that increasing profits by 19% is a major red flag– where in almost any other industry this would be great growth.
November 7th, 2006 at 12:30 pm
[...] ZDNet recently sat down with Metacafe Co-founder and CEO Arik Czerniak. Metacafe, which bills itself now as the ““world’s largest independent video site” is the new YouTube. I am already on record as saying that Metacafe would be the perfect acquisition for Yahoo. [...]