Digital Talent Agency

Youtube: Flawed Business Model?

While its staggering popularity is without question – some 345 million visitors worldwide descend upon the website every month – it is hemorrhaging cash. The question of exactly how unprofitable it is continues to be the source of fierce debate online; back in April, analysts at Credit Suisse estimated that its operating losses for this year would reach $470m, while San Francisco-based IT consultants RampRate were more optimistic, but still put the figure at just over $174m. Google aren't rushing to put an end to speculation over the scale of the debt. One thing is abundantly clear from both studies: Google isn't making money by letting everyone and their aunt share videos with each other for free.

Music, television, sport, gaming: the flow of free entertainment to our computer screens seems almost the result of a magical process, and there's been little need for us to consider the costs that might have been incurred by those making it all happen. It's broadly accepted that YouTube will receive around $240m of revenue from advertising this year, but that sum doesn't even cover their general overheads and the cost of acquiring premium video content (such as TV shows) from copyright holders. In addition, there are the huge fixed costs from the supply side – data centres, hardware, software and bandwidth – that have to cope with the 20 hours of video clips that we upload to YouTube every minute of every day. Again, no-one knows the true total of these costs – the Credit Suisse and RampRate reports put it between $83m and $380m this year – but Google's Chief Financial Officer, Patrick Pichette, would only reveal one thing: "We know our cost position, but nobody else does." Or, in other words, we're not telling you.

This typifies the slightly secretive but ultimately sanguine position of Google even as phrases like "financial folly" are bandied about to describe the YouTube business model. With Google's overall profits reaching some $1.42bn for the first quarter of this year alone, the king of online search is certainly a position to support a loss-making venture that also happens to be the third-most-popular website on the internet. (Google, naturally, is the first.) But Keith McMahon, senior analyst for the Telco 2.0 Initiative, a research group that studies business models in the digital economy, believes that YouTube is not the albatross around Google's neck that it's widely imagined to be. He sees the search company as deriving massive indirect benefits from operating YouTube and believes that estimates of its losses obscure the true picture.

"There are many urban myths surrounding the way that companies extract value from the internet," he says. "Google's spin-off benefits from owning YouTube include the accumulation of our data and strengthening of their network design – and the more time people spend watching online video, the more advertisers will pour into marketing on the internet as a whole. There's no doubt that Google can afford YouTube."

McMahon also believes that by keeping quiet about YouTube's hidden benefits and by allowing the misconception of it as a deeply unprofitable business to circulate, things work very nicely in Google's favour when it comes to negotiating with copyright holders in the world of TV, movies and music. Copyright holders can't demand money that isn't there, and it would certainly take no more than a hint of profitability at YouTube for lawyers to descend, threatening court cases and demanding higher royalties. In the new, topsy-turvy world of online economics, it seems astonishing that losses on paper have actually made YouTube a more powerful online force.

Here's the complete article.

Top 25 Facebook Games for May, 2009

While the world looks to tweets, companies on Facebook are quietly becoming the future EA's of the internet.  
 

from Celebrity Cafe:

"When Mark Pincus, Michael Luxton, Eric Shiermeyer, Justin Waldron, Andrew Trader, and Steve Schoettler started the development company, Zynga, in 2007, it's doubtful that any expected this type of success in such a brief amount of time. Zynga's games are featured on the popular social networking sites Facebook and Myspace. The company expects to earn $100 million in sales this year . . . proof that all those game credits add up.

According to Silicon Alley Insider, most of that money comes from "the 2% to 10% of users who pay $1 an hour to play premium games or buy virtual goods." Their games, which include "Dope Wars," "Texas Hold 'Em," and "Gang Wars," have an estimated 71 million registered users, with 46 million monthly active users.

BusinessWeek reported that in April, Zynga passed widget maker RockYou to become Facebook's most popular application maker. Their customers make up one-fifth of Facebook's 200 million users.

The San Francisco-based startup company has shaken off the disdain from "real" video game developers, reveling in the success of their simple but addictive games. Said Pincus, "A lot of people come to the game industry who aren't typical developers and they can unleash their creativity on these
massive platforms without the constraints of cost and time to market."

The highlights from the Chart above:

• Zynga and Playfish’s battle for the #1 spot continues between Texas HoldEm Poker and Pet Society, with the latter closing the gap with a gain of 1,348,759 to Zynga’s 1,054,775.
• However, that same growth did not hold true for spots 4 - 6 with Bumper Sticker, Pass A Drink, and Lil Green Patch losing about a million active users each.
• Playfish title Geo Challenge kept it’s #8 spot with 3.97 million active users this past month with Word Challenge coming in behind, but surprisingly enough the other Playfish titles were ousted by MindJolt Games who jumped all the way from #17 to #10.
• Zynga RPGs Vampire Wars and Street Racing increased in popularity with the former coming out on top at #12.
• Behind the major players, new comer Know-It-All-Triva appeared on the scene at #15 with 2,543,557 users, followed by another fresh face, 101 Eggs & More with 2,464,247 users.
• The past month also played host to two other new games for the Top 25 with Bejeweled Blitz from PopCap Games at #21 and Playfish’s newest title Restaurant City at #23.

Top Social Media Sites of 2008 (Facebook Still Rising)

ComScore keeps a list of what it calls “social networking” sites, but these include blogging platforms and other social media sites as well. While the audience for blogs is still showing healthy growth overall, Facebook stands out as the social gorilla taking share from not only other social networks but blogs and other social media as well.

Here's the complete article.

by Erick Schinfeld for TechCrunch

The Burden of Interactivity: Jimmy Fallon uses the latest 2.0 tools.

"For nonreviewing viewers, interactivity is an opportunity for fun, creativity, intimacy with the talent, exposure to advertising and giveaways and community. For talent — for writers, actors, journalists and directors — interactivity often seems like a nightmare: ceding the artistic control (to hordes, no less) that is the whole reason they like this work in the first place. Still, it makes perfect sense that NBC right now would put aside qualms about interactivity to build a better viewertrap."

Here's the complete article.

by Virginia Hefferman for the NY Times.

Web Politics, Viral Candidates.

By Jose Antonio Vargas for the Washington Post



"Obama's unprecedented online success guarantees that there's not a single campaign in 2012, Democratic or Republican, that won't place the Web at the core of its operation. The floodgates are open. This doesn't mean just hiring Web developers, bloggers, videographers -- the works. It also means using the Internet to invite people into the process, giving them something to work for, offering them a stake in victory or defeat. More than any other medium in our history, the Web is by the people, for the people. This new dynamic will transform the way campaigns are run -- and, beyond that, the way the winning candidate governs. Fundamentally, all of this is redefining our relationship with our politics."

Here's the complete article.

5 International Social Networks to Keep an Eye On

by Don Reisinger for Cnet

Facebook and Mypace may reign supreme in North America, but we can't forget that they don't control every country in the world. Simply put, people from around the globe have different tastes and the major U.S. networks barely capture relevant market share in some countries.

It's a big world out there and believe it or not, Facebook and MySpace don't own it.

China: Xiaonei

Xiaonei is basically a Chinese Facebook clone. The site's design is extremely similar to Facebook's layout and profile options are quite similar, as well. But with a reported $430 million in funding raised earlier this year, it's poised to keep its lead across the world's most populated country, regardless of its similarity to the social network giant.

Xiaonei targets college-age Chinese students. According to figures it released earlier this year, the social network currently has 15 million registered users and almost 9 million active users visiting the site each day. Much like Facebook, the service allows users to share photos and videos and connect with friends at school. Xiaonei also provides a platform for users to share music and movies--a practice that shouldn't come as a shock considering China is one of the leading sources of piracy in the world. Much like Japan's top social network, Mixi, no third-party apps are allowed on the service, though.

France: Skyrock

France's leading social network, Skyrock, may surprise you a bit: it never was supposed to be a social network. Skyrock started as a blog in 2002, which was eventually abandoned in 2007 and turned into a social network. It was the right move.

Skyrock dubs itself the "Free People Network" and generally succeeds in making that moniker hold up. User profiles are freely available with site registration and users can create blog entries that are published on the site's main page. The top 100 bloggers are featured under the site's "Blogs" heading, which also includes a blogger "Hall of Fame" and a running tally of articles--656,000 as of this writing. According to the site's figures at the top of its page, there are currently 20 million blogs and 11.3 million profiles on Skyrock. If you want to create a profile--anyone from any country is allowed to do so--the site does require a quick registration. But if you're looking for privacy, you won't find it here--Skyrock is all about being open and hides nothing from site visitors.

Germany: StudiVZ

StudiVZ is, well, an almost exact replica of Facebook, but without the company's signature blue design. Instead, the German firm employs a red palette in an attempt to differentiate itself. Regardless, its profile pages look almost exactly the same as Facebook's and its many features mimic the social network giant. Because of that, Facebook initiated an intellectual property infringement case against StudiVZ back in July. So far, nothing has come out of that lawsuit other than posturing on both sides and much to Facebook's chagrin, StudiVZ's 9 million users haven't stopped using the site.

Once users register for StudiVZ, it allows them to create a profile and interact with others. They can upload photos and videos, share interests, make updates, and post messages on friends' walls. In fact, most Facebook users would feel right at home using StudiVZ. See what I'm getting at?

Japan: Mixi

Say what you will about the prominence of MySpace and Facebook in the U.S., but in Japan, they barely compete. A major social network called Mixi reigns supreme and there's nothing Facebook nor MySpace have been able to do about it.

Mixi controls almost every aspect of the member's profile design and structure and it doesn't even let third-party developers deploy apps on the site. Membership is restricted to users over 18 years of age and requires an invitation from a current user to sign-up. According to the company, just 5 percent of the site's 15 million users provide their real names and photos and every visitor to a person's profile page is recorded so they can see who has been looking them up.

It's difficult to call Mixi a social network considering such a few number of its members really want to be that "social", but it's considered one nonetheless. The company is sitting atop Japan's group of networks, which includes both MySpace and Facebook, and so far, neither can gain significant ground.

South Korea: Cyworld

South Korea's Cyworld has been the de facto leader in that country for years. And although the odds are against it, it recently launched a U.S. site in an attempt to expand globally and take Facebook and MySpace on directly.

Cyworld's success has been astounding. The site currently has more than one-third of South Korea's entire population using its service and 90 percent of all South Koreans in their 20s use the site.

Once users sign up for the service, they can create their own profile and an avatar, which becomes their digital face to the world. That avatar can then be personalized to modify hair color and general look. Once that's complete, Cyworld allows users to upload photos, exchange virtual gifts, or create a club where others who share the same interests can join and interact. According to the company, its intention is to create a "virtual world." So far, that vision has proven relatively successful

Here's the complete post.

Brands face challenges advertising in social networks.

by Randall Stross for the New York Times.

The core of social networks' success: friend referrals and introductions -- doesn't translate easily to traditional online marketing tactics.

"And when they try to take advantage of new “social advertising,” extending their commercial message to a member’s friends, their ads will be noticed, all right, but not necessarily favorably. Members are understandably reluctant to become shills. IDC, the technology research firm, published a study last month that reported that just 3 percent of Internet users in the United States would willingly let publishers use their friends for advertising."

It's hard to think users would become fans or join groups to products that aren't cult status
(i.e. vitamin water, mini cooper. etc).  In cases where they do, usually there is some sort of coercion
involved.

Here's the complete article.

 

All Things Virtual: Marriage, Ice Cream, Elvis, and Barbie.

From the comfort of our homes and computers, life is imitating life online.   

"To many of it's inhabitants, Second Life is much more than just a 3-D online game. It has its own economy and millions of residents who own and create property, make friends and even get married, according to Secondlife.com."

Here's the full article.

A host of brands are jumping in to Home, including British tech site Hexus TV and gaming site Eurogamer, Paramount PIctures, Diesel Jeans, and furniture designer Lignet Roset. More info.

A cooperation of local German banks has set up a presence in Second Life. More info.

Habitat for Humanity is part of a quest in Elf Island. More info.

Seventeen Magazine has partnered with MTV for a virtual issue and more. More info.

Branded goods from Justin Timberlake and Elvis have launched in Gaia. More info.

Owners of Sony's PlayStation 3 get the chance today to download a beta of the console's much-delayed virtual world, PlayStation Home. Sony's answer to 3-D worlds like Second Life includes shopping malls, themed clubs and theaters. It's also designed to compete with the online gaming offered by Microsoft's Xbox 360.  Full article here.

On the legal front, via Virtual Judgement,

Does Worlds.com Hold the Patent for the Virtual World?

Earlier today General Patent Corporation, a Suffern, New York based Intellectual Property licensing and enforcement firm, announced that it has retained the Westfield, New Jersey law firm of Lerner David Littenberg Krumholz & Mentlik LLP to work on behalf of Worlds.com, Inc. in regards to enforcing Worlds.com’s patent portfolio.

According to statements by Alexander Poltorak, General Patent Corporation’s Chairman and CEO, “[t]he Worlds patents represent exceptionally valuable intellectual property,” and “[w]e welcome licensing inquiries from the on-line game industry. Non-exclusive licenses are available on favorable and non-discriminatory terms.”

Worlds.com holds U.S. Patent Nos. 6,219,045 entitled “Scalable Virtual World Chat Client-Server System” and 7,181,690 titled “System and Method for Enabling Users to Interact in a Virtual Space”. Thom Kidrin, the CEO of Worlds.com, stated that “[w]e are pleased to have the expertise and IP experience of General Patent and Lerner David to enforce Worlds’ patent portfolio,” and that “[a]s the number of virtual worlds and MMORG’s continues to grow, Worlds has seen the space we pioneered in 1995 validated in techniques and methodologies we believe are defined in our patents.”

Therefore, it would seem that General Patent Corporation and Worlds.com are taking the position that the above-referenced patents cover the idea of the computer architecture for a three-dimensional graphical multi-user interactive virtual world systems. If so, this announcement is arguably a very thinly veiled notice to the virtual world industry that infringement suits are forthcoming for those companies who do not enter into a licensing deal with General Patent Corporation and Worlds.com.

Virtual Judgment will not comment on the enforceability of World.com’s patents. That being said, the potential impact of this announcement will definitely be worth watching for.

The rapid success of Barbie Girls should be noted:

"Now live, Barbie Girls[TM] V.I.P. - a new, subscription-based version of its BarbieGirls.com virtual world, currently boasting nearly 13 million registered users. The subscription version is designed to give girls more of what they love about the popular virtual world, including a world four times larger than its original size, with new locations to explore, new games and new experiences throughout the site. The V.I.P. membership costs $5.99 for a one-month subscription and provides access to the truly new experience launching today. Barbie Girls[TM] fans can also still play on the site for no cost with a basic version of the virtual world."

"The success of Barbie Girls - particularly among older girls, with 85 percent of our registered users over age eight - demonstrates that girls are looking for a new way to play with the brand they love and grew up with, just in a new format relevant to today's tech-savvy girls," said Chuck Scothon, General Manager and SVP, Girls Division, Mattel Brands. "With the launch of Barbie Girls V.I.P. we're giving girls more content than ever before, including the best fashion, beauty and social play, as well as many new games and an expanded Barbie Girls world. Online content is simply just a new toy, and we believe our quality content is well-valued with this new version of Barbie Girls V.I.P."

Full article here.

Finally, if you don't think the economy for sending facebook gifts or making your avatar look cool is real, think again:

"Gaia Online, a youth world with seven million monthly visitors, sells more than $1 million a month of virtual goods and expects a record month in December, said its chief executive, Craig Sherman. One rival, IMVU, has also had a 15 to 20 percent increase in sales since September.Facebook, the leading social network, allows members to spend real money to send virtual gifts, and it has worked with corporations like Ben & Jerry’s Homemade, which gave away 500,000 virtual ice cream cones in April as part of a Free Cone Day promotion in stores." 

A cooperation of local German banks has set up a presence in Second Life. More info.

Habitat for Humanity is part of a quest in Elf Island. More info.

Seventeen Magazine has partnered with MTV for a virtual issue and more. More info.

Branded goods from Justin Timberlake and Elvis have launched in Gaia. More info.

Widgets: big marketing potential

by Bob Garfield for Ad Age

"Branded widgets are the refrigerator magnets of the Brave New World. These compact, portable little software apps -- from video players to countdown clocks to makeup simulators -- are inexpensive to distribute, free to the user and (often enough) distinctly useful. At a minimum, they carry an ad message wherever they go.

That's at a minimum. At a maximum, the widget is something like the magical connection between marketers and consumers, not only replacing the one-way messaging long dominated by media advertising but vastly outperforming it. Because online the link is literal and direct, and along its path, data of behavior, preference and intention are left at every step. "

"According to Alexa, Apple.com's page views per user are down 9%; Comcast.net is down 1%; Dell.com, down 22%; AT&T.com, down 18%; Xbox.com, down 9% and so on as corporate e-bastions begin to experience the same audience fragmentation that is killing old media. "As popular as your site may be," says Kennedy, the reality is that people are actually visiting Yahoo, MySpace, Google and Facebook thousands of times more than they're visiting you."

Tony Zito of MediaForge, which handles Steep and Cheap, calls this "the slow death of the destination website."

Full story here.

Global Social Trends

Big movement to Facebook, especially in Europe and Latin America. Facebook has 25% of global market.
Charts sent via Noah Koff at MGEN.