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Technorati Executes a YAAN Strategy that WILL NOT WORK

So everybody knows that Technorati has been flailing around looking for a business model.

Unfortunately, the business model du jour is Yet Another Ad Network.  So of course, Technorati announces they are starting an ad network.  The only thing that could have been more depressing in terms of expressing strategic genius would have been announcing a bidded text link marketplace.  Frankly, this announcement has all the same problems.

What makes business models like Glam have a prayer of success relative to ad networks such as and Yahoo! are that they have a very focused group of inventory and advertisers that they are matching up.  This allows them to have a smaller sales force and publisher services team and still have good coverage in their target market.

Technorati launches an all things to all people strategy and says they will be able to overcome Google/Yahoo/ due to their awesome contextual search technology?  To be able to pay publisher more, I think it is a function of two things: Optimization technology and a strong marketplace of advertisers to bid up inventory opportunities.  Contextual targeting is a tiny part of overall optimization and without the marketplace of advertisers, great optimization doesn’t create huge value because if you are decisioning off of one advertiser, there is only one possible outcome, regardless of how much you optimize.

I can’t see how Technorati overcomes the marketplace building barrier.  For that matter, virtually any company executing a YAAN strategy today puts themselves behind the eight-ball.  To get access to inventory, you have to pay higher than Google and  They are setting the marketplace floor because they have a strong enough market to buy every impression and offer something.  To pay more than Google and, that implies that you have to have some level of optimization and the marketplace.  Glam did this by taking their tens of millions in venture capital and using it as a loss leader to overpay for inventory relative to the value of that inventory to Glam.  Technorati doesn’t have that capital runway, despite the $7.5m in new capital they just raised.

Odds that Technorati can focus on non-premium inventory and build a marketplace fast enough to reach escape velocity: FAIL.

I say all of this in a nice way.  I love Technorati.  Use it all the time.

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