Reinventing Print Media: IDG’s Online Ad Network Gets its Mojo Going

Everyone knows the print media is in a world of hurt. The more difficult question is this: What do publishers do about it?

Technology publishing giant IDG just may have come up with one killer idea. And no, the answer does not involve scantily clad women or slide shows touting the best nude beaches.

For IDG, the publishers of hundreds of magazines such as PC World and Macworld, the answer was to go against one of the industry’s most sacred notions and create its own online advertising network–with a major twist. Instead of only selling ads for its own properties, IDG would take advantage of the media’s fragmentation and the shift to online advertising by selling ads for other new media properties. In addition, the network also helps IDG Web sites to grow their audience by syndicating their content across the Web to non-IDG properties. (BusinessWeek, for example, syndicates IDG content on its Web site.)

It’s a bold strategy that seems to be paying off. Peter Longo, CEO of IDG Syndication and Networks, says that its network is currently serving ads to a combined total 75 million unique monthly readers, up from 20 million 18 months ago when it launched the group. Currently, IDG works with about 200 Web sites, including GigaOm, Slashgear, and Xconomy.com. All told, those sites serve up nearly 750 million ad impressions per month. Revenue is forecast to grow 100% this year, says Longo. 20 syndication partners have signed on to the program as well.

Check out the rest of the post on BusinessWeek’s TechBeat.

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What the Failure of the Yahoo-Google Deal Means

So the Google-Yahoo search deal finally fell apart. It’s not terribly surprising. From the beginning, I said that this deal was very problematic, probably anti-competitive, and would raise the ire of government regulators.

Google read the handwriting on the wall and realized the deal no longer made sense. So it pulled the plug this morning.

Yahoo! is clearly the big loser here. They don’t get hundreds of millions in additional revenue that the deal would have generated. Once again they do not have a strategy for turning around the company. And with the economy getting worse, the online display ad market is likely to deteriorate for at least a few quarters, and it may even see negative growth.

“Time is not on their side,” says Dave Morgan, the former chairman and CEO of Tacoda, an online ad network that was sold to AOL in September of 2007 for a reported $275 million. “The longer they wait the worse their numbers get.”

So why is Yahoo’s stock up 6% when the stock market is down 3% today?

Clearly, the market thinks that the failure of the Google deal means that Yahoo is takeover bait again. Problem is, they are running out of dance partners. “It’s a game of musical chairs and the music is stopping and there are not many chairs left,” says Morgan, who left AOL in March.

Google can’t acquire them. Microsoft is probably leery of re-engaging with Yahoo as long as Jerry Yang is running the show. That leaves AOL. It wouldn’t be a merger of strength but it may be Yahoo’s only option at this point–unless the board boots Jerry and invites Microsoft back to the table.

And who wins? Microsoft is the big winner here. Either it gets to buy Yahoo on the cheap, or it can steal market share from Yahoo while the company continues to flail and dither.

“All of this stuff creates an extraordinary distraction for people who buy and sell advertising,” says Morgan. “Who wants to cut a big deal with Yahoo if they have to unwind it a few months from now?

Microsoft Walks from Yahoo Deal; Ball’s In Your Court, Jerry

Wow. I can’t believe Microsoft actually walked away from the Yahoo! deal.

But while I am truly surprised, I believe Steve Ballmer made the right call. I’ve said from the beginning that this deal was too big and too risky–I called it a potential merger from hell several times around the office and on TV–especially given the cultural differences between the two companies and the fact that Microsoft had never before pulled off an acquisition of this size.

Now that the tech industry’s biggest soap opera appears to have reached its dramatic conclusion, there are two big questions to answer:

1. Why did Ballmer and the Microsoft board pull a 180 and change their mind?
There’s got to be more to this story. Some people will wonder why Microsoft did not come back with a slightly higher offer, in the $34 to $35 range, which could have sealed the deal.

Something happened during this process that gave Microsoft the willies. Maybe it was the strong negative reaction from their employees that caught management off guard. Or maybe it was Yahoo’s determination to not break. Or maybe Ballmer underestimated the greed and toughness of some major shareholders.

To me, the behavour of the reluctant shareholders is just as surprising as Ballmer’s retreat. Reports have said that some big Yahoo investors such as Legg Mason were holding out for $34 or $35 a share. Given that Microsoft was willing to offer $33 a share, those shareholders will probably live to regret that position.

But while Ballmer ultimately did the right thing for his employees and shareholders, I believe his reputation is going to take a hit in the short term. This was Ballmer’s big first play as CEO of Microsoft and it just looks a bit odd for him to reverse course on such an enormous strategic move.

Now, Microsoft needs to figure out other ways “scale” and go after Google in the online advertising market. Maybe Microsoft will try to cut a deal with AOL or MySpace?

2. What is Yahoo’s next move?
While I admire Yahoo’s toughness and determination to fight off the giant from Redmond, Jerry Yang & Co. have a lot of explaining to do. They just turned down a very handsome offer for their company. Many shareholders are going to be pissed and sell off the stock–while others are likley to launch a raft of lawsuits against Yahoo. My hunch is Yahoo plummets to the low $20s tomorrow morning. (It was around $19 before Microsoft made its $31 offer.)

The only reason it won’t fall further is because Yahoo keeps threatening to outsource part of its search traffic to Google. That could provide a short-term financial boost to Yahoo but it’s a losing long-term strategy as their share of search traffic would continue to decline, and it might even accelerate after such an arrangement. It also may never amount to much because regulators are likely to prevent the companies from cutting a substantial deal.

It will be interesting to see if Yahoo continues its merger talks with AOL, News Corp. or other partners. My hunch is that while they might, nothing is likely to come from it. For Yahoo, the merger talks seemed like more of a manufactured diversion or knee-jerk reaction than a well-considered move of true strategic intent.

So if Yahoo can’t or doesn’t pursue a significant deal with Google, and it doesn’t merge with another company, that still leaves the $44 billion question: What is Jerry Yang & Co. going to do to give Yahoo a better shot at remaining competitive ande lift its slumping stock?

Ball’s in your court, Jerry. Sometimes it’s dangerous to get what you wish for. Good luck.

Digital Dish on the Microsoft-Yahoo Melodrama

The Microsoft-Yahoo merger melodrama makes “As the World Turns” look like a PBS documentary.

Will AOL sneak in the back door and steal Yahoo? Why did Rupert Murdoch get back onto the dance floor? And what in the world is going on with Jerry Yang? BusinessWeek reporters Spencer Ante, Heather Green, Arik Hesseldahl and Catherine Holahan discuss the latest moves in this soap opera. Check out the video by clicking here.

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Merger Madness: Yahoo-Microsoft-AOL-FIM-???

OK, this is getting ridiculous. Today, the race to acquire Yahoo! has become perhaps the weirdest merger contest in the history of the technology industry.

Consider the day’s string of increasingly absurd leaks, er, I mean reports about Yahoo’s activities. First, this afternoon Yahoo! announced it would begin a limited two-week test of Google’s search technology on the U.S. version of Yahoo.com. Then, this evening at 10:35 pm EST, the Wall Street Journal reported that Yahoo and AOL were “closing in on a deal to combine their Internet operations.”

Not be to be outdone, the New York Times reported minutes later that “News Corp. is in talks with Microsoft about joining in its contested bid for Yahoo,” proposing a deal to join Yahoo, Microsoft’s MSN and News Corp’s Fox Interactive Media division, home of the MySpace social network. (If the story wasn’t penned by the usually reliable Andrew Sorkin, it would be laughable.)

Here’s my take: Yahoo is getting increasingly desperate. After Steve Ballmer issued a three-week ultimatum to Yahoo on Sunday April 5, Yahoo realized its needed to break out all the stops to either a) get a sweetened offer from Microsoft or b) strike a deal of comparable value that avoids getting co-opted by the Evil Empire in Redmond.

The announcement to outsource a miniscule amount of its search inventory smacked of last-minute desperation. (I like Silicon Alley Insider but I totally disagree with Henry Blodget that this was a “brilliant move.”) Even if the test improved the effectiveness of Yahoo’s search results (which is no slam dunk), there’s no guarantee Yahoo would outsource enough of its inventory to produce a material return. In its press release Yahoo went out of its way to stress the transient nature of the deal, saying “the testing does not necessarily mean that Yahoo! will join the AdSense for Search program or that any further commercial relationship with Google will result.”

The deal talks are a whole other matter. But let’s be clear: These are not superior proposals. Still, even if the deals are inferior (i.e. Yahoo would be much better off merging with Microsoft than the much smaller and weaker AOL, to say nothing of the deal’s antitrust issues), or just off-the-wall (adding MySpace to an already complicated Microsoft-Yahoo combination seems like a one-way express ticket to merger hell), they give Yahoo leverage in its talks with Microsoft. More suitors, however unattractive they are, create the impression of enhanced value (it would be interesting to know the valuation that these deals give to Yahoo). So give Jerry Yang & Co. credit for being shrewd enough to lure AOL and News Corp onto the dance floor.

I said in the beginning of this process that Microsoft would have to sweeten its offer. Lately, as Ballmer & Co. showed increasing signs of aggressiveness and the unimpressiveness of Yahoo’s future plans began to materialize, I began to question myself. But Yahoo’s shucking and jiving today makes me think it just might happen.

Social Networking Throwdown: AOL Acquires Bebo for $850 Million

Talk about coming out of nowhere. This morning, AOL announced it acquired the social network Bebo.com for $850 million–the most money ever paid for a social networking site (if you don’t count YouTube).

I actually think is a pretty smart strategic bet–though it comes with its share of risks. This is AOL’s boldest move yet as it shifts from selling Internet access to an advertising-based business model on the open Web. It has already spent more than $1 billion scooping up online ad firms such as Quigo, TACODA and Third Screen Media. And it recently appointed the head of Advertising.com, Lynda Clarizio, to run AOL’s broader ad-network group, Platform A. But this puts a large stake in the ground that AOL intends to be a leading player in the global social media market.

It’s also a good tactical move. As Microsoft and Yahoo! do their mating dance, AOL can use the distraction of a merger to steal a beat on its rivals in the online ad market. Lord knows AOL will need it–as Google just closed its acquisition of DoubleClick.

In fact, this deal could make AOL the most popular Web site on the Internet. Right now, AOL claimed about 109 million unique visitors, making it the fourth largest Web property, after Yahoo! (138M), Google Sites (135M) and Microsoft Sites (119M). Add in Bebo.com’s 40 million worldwide users and that puts AOL on the top of the heap.

“Bebo is the perfect complement to AOL’s personal communications network and puts us in a leading position in social media,” said Randy Falco, Chairman and CEO, AOL. “What drew us to Bebo was its substantial and fast-growing worldwide user-base, its vision of a truly social web, and the monetization opportunities that leverage Platform-A across our combined global audience. This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers.”

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Sure, this deal gives AOL scale. And Bebo’s growth will likely pick up as it “will be featured prominently in AOL’s international expansion efforts after the deal is closed,” according to the press release. AOL is in the midst of a big global push right now. Over the last year, AOL has launched 17 international web sites, and it has plans to expand to 30 countries outside the U.S. by the end of 2008, says today’s release.

But the advertising model for social networks is not fully baked. Growth rates on these networks are slowing. The ads suffer from very low click-through rates compared to other parts of the Web. And the current enthusiasm for advertising on social networks may be exaggerated by guaranteed ad deals and hopeful experimentation. Like MySpace and Facebook, AOL must now figure out how to crack the code of social network advertising. That is the Holy Grail of the Internet now. And AOL just announced it is part of the chase.