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Archive for September, 2009


Complaining About Comments Yields Comments

Tuesday, September 15th, 2009

22320000_fb685d1750Ever since my “Why Does Everyone Hate Me” Post, my site has gotten more comments.

Not all of them have been here, many have been via my cross-posting to Facebook, but it has made me feel goo-ier.

Here is the chart:


Of course, this does not include Facebook comments, which is where most of the comments have been, and if you look, it really reflects the Lookery discussion (easiest way to get comments on your blog: Talk about Scott Rafer and he will find your blog and comment), the love I got from AdExchanger, and the actual post about how no one wants to post.

Regardless, I think it drove my friends to want me to be happier, which is nice.  Thanks friends!  Amazingly, I didn’t get any comments on articles I thought were awesome.  In a tribute to awesome, here are some of my best posts that maybe you should click and read:

I have also made some interesting, albeit unrecognized news and technology breakthroughs:

3917737704_06419cbfacPat me on the back!  Oh wait, there is no room because my hands are so big and patting so furiously.


Southwest Entrepreneurs Confounded By Survey

Monday, September 14th, 2009

2794376477_ca58bd7938I was reading “Spirit”, the Southwest Airlines magazine on a Southwest flight the other day.  They had a quiz that you could use to tell if you have what it takes to become an entrepreneur.

They thought you should not become an entrepreneur if:

  • You would rather work by yourself than with others.
  • You love to try new things.
  • You will shift gear quickly to solve problems.
  • You don’t pay attention to criticism.

Err, call me crazy, but I think those are all (maybe with the exception of the first), great traits for entrepreneurs.  And the first may or may not be a great trait, but it certainly describes me.

Where do they get this stuff!

Universal Theory of Wide Receivers Are Jerks

Friday, September 11th, 2009

terrell-owens_featureOne theory I share with people frequently is my universal theory of wide receivers are jerks.  Let me talk football for just a second and share this with you.

Maybe you have noticed, but #1 wide receivers in the NFL are basically a bunch of jerks:

  • Randy Moss
  • Chad “Ochocinco” Johnson
  • Terrell Owens
  • Brandon Marshall
  • Plaxico Burress
  • Braylon Edwards
  • Steve Smith

The list goes on.  Why are they such a bunch of jerks?  I will tell you know, there is basically no way to avoid it.  My theory works something like this:

  • Pro-Bowl caliber #1 Wide Receivers are frequently the best athlete on the team.  They are in amazing shape.  Strong to fight off cornerbacks, blazing fast, usually tall, great leaping ability, amazing hand-eye coordination.
  • The typical NFL team hands the ball to a running back 20+ times per game.
  • The typical NFL team throws the ball around 35 times a game.
  • During those 35 throws, the opposing team frequently focuses on defending the Pro-Bowl caliber #1 Wide Receiver, resulting in a relatively even distribution of throws: So maybe 10 throws per game go to the Wide Receiver in question.
  • Of those throws, maybe 7 or 8 are catch-able, resulting in 6 or 7 receptions.  The same typically holds true for the #2 Wide Receiver and TE, who each have 4 to 7 catches in the game.

The result is that a #1 Wide Receiver looks around after the game and says, “Wait a sec, I am better than that Running Back and he got the ball 25 times tonight.  I got it 6 times!  I am way better than that other receiver and I only got the ball one more time than he did.  That is crazy.  I need to get the ball more.  A lot more!

Bottom-line, he will never get the ball as much as he deserves.  It simply isn’t possible to get it in a receivers hands 18+ times per game, even if he deserves it.  The result is that the team and the receiver are actually, at some level, legitimately being short-changed.  Unfortunately, there is little that can be done about it in a modern NFL offense.

Typically, a pro-bowl all-world wide receiver like the people mentioned above have felt like this for years: 4 years of college, several years of the pro’s before becoming all-world when they still felt better than their team peer group.  So they have been getting fewer touches than they deserve for YEARS.  So they eventually act out.

Inevitably, your awesome #1 Wide Receiver will probably become a jerk.

Premium Inventory And RTB/Exchanges Hate Each Other

Thursday, September 10th, 2009

water-fryerI have been working on more provocative blog titles.  Rawr.

I was reading AdExchanger’s interview with Eric Wheeler and I suddenly realized a few things:

  1. Eric is awesome.  Great company name story.  As well-connected, awesome, and likely to be successful a guy as any that you will meet.  Would LOVE to work with him one day.
  2. Despite all this, I think the idea is a bad idea.  I have documented this a ton and continue to be concerned.  And remember, I have every reason for it to be in my best interest to be wrong about this.  Straighten me out somebody!
  3. Premium inventory are to RTB/Exchange concepts as oil is to water.

Specifically what got me thinking was Eric’s comment: “Using 33Across, marketers can use our Social Proximity segments to target users across the web via exchanges, not just within social media.”

Well, you could.  But….

Premium inventory typically costs a lot.  If you are targeting a behavior and OK with social media inventory, you probably aren’t valuing the brand association that comes with premium content.  If you can buy UGC inventory for $1.00 or ESPN for $15.00, is it worth it for a media planner to go get ESPN?

The behavioral data provider doesn’t really care.  He layers on one or two or three dollars in value either way.  But to the media planner, two impressions that had similar value for their behavioral data cost a lot more to buy from the publisher.  Tough.

Also, premium publishers are moving much more slowly to the RTB/Exchange model – and with good reason.  The risk they have of channel conflict is dramatically hire than a social network.  Social networks are monetizing inventory in the $1 – $5 range.  ESPN’s sales force is selling theirs for $15 – $35.  The opportunity cost of liquidating unreserved inventory in a fashion that might lead a marketer to buy using RTB tools rather than premium direct reservation is quite a bit higher.  The sell-through rate for premium content is typically higher than UGC social networks as well.  The result is that the potential percentage of revenue for a social network is a lot higher.

I ran some numbers:

Social Network Site
1,000,000,000 Impressions
$4.00 Premium CPMs
25% Sell-through Rate
$0.50 Unreserved CPMs
$1,000,000.00 Reserved Revenue
$375,000.00 Unreserved Revenue
$1,375,000.00 Total Revenue
1:2.67 Unreserved/Reserved
Premium Content Site
250,000,000 Impressions
$25.00 Premium CPMs
60% Sell-through Rate
$1.00 Unreserved CPMs
$3,750,000.00 Reserved Revenue
$100,000.00 Unreserved Revenue
$3,850,000.00 Total Revenue
1:37.5 Unreserved/Reserved

So you see here that for a social networking site, remnant inventory could easily be more than 25% of their revenue, whereas a premium content site is probably looking at more like 3%.  You could squish the numbers around a bit, but you see the concept: This unreserved stuff doesn’t really move the needle for content guys, but social networks stand to reap huge benefits.  The result is that people like Yahoo, Google, and MySpace: people who could never hope to sell all their impressions, are the first to jump on the RTB bandwagon.  The really good brand inventory is going to take longer to get there.

Also, these numbers highlight that you probably need order of magnitude changes in value to really move the market for these kinds of publishers.

Smartphone Vendor Lock-In Is Not A Risk For 5 Years

Monday, September 7th, 2009

palm_mainTake that to the bank.

There has been a lot of news and a lot of “advice” to Apple that they should be aggressively lowering their prices and partnering with Verizon to maximize distribution of their iPhone platform and achieve “vendor lock-in”.  To those people, I say this:

It is the first out of the first inning of the game.  Just because Apple is winning, doesn’t mean it is a sure thing.  Despite the pure awesome of the iPhone, this technology is still in its infancy.

While everyone talks about the application market as a key to vendor lock-in in the smartphone market, I don’t think there has been a single application that is so insanely differentiated and “must have” (Flight Control?) that people are buying an iPhone for it.  In fact, I suspect that what we are seeing is the long-tail at work and no single application will have some mass market dominance (Facebook?)

smartphone-market-shareFurthermore, the industry is still set to experience massive change.  And I am not just talking about Verizon’s 4G network.  Technology like WiMax could completely devastate the cellular market.

Finally, I think from an application perspective, application vendors are more cognizant of vendor lock-in and making applications available across a range of platforms.  Also, customers remember their Microsoft experience and are pushing open standards.

Imagination Is More Important Than Knowledge

Sunday, September 6th, 2009

imagination_einsteinThat was a sign in front of a Mexican restaurant I passed today.  It was like a call to religious revival in enchiladas, which frankly, is not too far out of line from my interests.  But it did get me thinking: Is that true?

On the one hand, not in the context it was in: A pithy quote in front of a Mexican restaurant probably designed to make ignorant people feel better about ignorance:  I may not know a lot, but I am creative!  That is better!  Go me!

The quote is true, but I think its truth is deeper:

Imagination is not an easily learned trait.  Knowledge is taught.

Our business is complex, but if you are wicked smart, in a few months you will be all over it.  Will you have a break-through idea?  Maybe, however most will not.

Curing cancer is hard.  It probably requires an incredibly imaginative breakthrough to cure.  But I will tell you this: Without incredible knowledge, that breakthrough won’t happen.

The Theory of Relativity required a remarkable mental leap, yet most people could never make that leap because it required an incredible grounding in physics as its starting point.

I did three rounds of flirtation at before I actually got my position.  One time they didn’t make me an offer, one time they did and I passed.  Finally, they made an offer that I accepted.  In between one of those periods, I sent a long email to Steve Root, the COO, asking if a business idea I had involving arbitraging search keywords made sense.  His response was we should discuss this after I start working there, but suffice it to say that within weeks of starting I realized that my idea was incredibly simplistic compared to the state of the industry.  I was just dumb, bottom-line.  I think lots of people would say I am an idea guy and have an active imagination, but without a grounding in a deep understanding of the business, my ideas were useless.

A capacity for rapidly acquiring and assimilating knowledge and turning that into creative thinking is extremely rare.  These are the “A” players that roam the industry and are snatched up by companies the second they hit the market.

Imagination is really only valuable after one has knowledge, as the logical step after knowledge in terms of creating value, of course it is more important.  Should one feel good if one is imaginative?  Nah.  Do I pat myself on the back as an imaginative guy?  Nah.  You have to work hard every day acquiring knowledge to put that imagination to use.  99% perspiration, right?

Daisy Chains For Fun and Profit

Wednesday, September 2nd, 2009


Recently, there has been a lot of discussion of what Real Time Bidding is, but relatively little discussion of its implications – outside of the obvious, obviously.

Now that everyone knows what it is, what does that mean?

Here is my take:  In a world of RTB, there isn’t a lot of need for publisher side optimization technology.  You simply let everyone bid on every impression, maximize the value of that impression, and move on with your life.

Technologies like Rubicon and Pubmatic have focused on helping publishers squeeze value out of their daisy chain via optimization technology that re-orders or aligns the daisy chain more rapidly or efficiently than a human could.  What is a daisy chain?  A daisy chain is industry parlance for the order in which networks look at user information.  For example, I might construct a daisy chain like this:

  • Network A is willing to pay $0.50 for first 3 impressions of a user
  • Network A is willing to pay $0.25 for impressions 4-6 of a user
  • Network A is willing to pay a 50% rev share for all impressions thereafter
  • Network B is willing to pay $0.40 for impressions 1-5 of a user
  • Network B is willing to pay a 60% rev share for all impressions thereafter

Networks typically like to extend reach, so they offer a little bit extra to see people the first few times.  After that, payments get a lot lower.  Building this daisy chain is straightforward to start:

  1. Network A gets impressions 1-3 of a user
  2. Network B gets impressions 4-8 of a user
  3. Network A gets impressions 9-11 of a user

But what about the rev shares?  This is where it gets tricky.  Typically, the publisher side optimizer tries to look at historical payout performance to calculate the real-time value of the rev share and insert it appropriately into a daisy chain.  As RPMs rise, so does their position in the daisy chain.  If RPMs fall, the network slowly slides to the bottom, winning fewer and fewer impressions.

rubicon_projectUnfortunately, I have always found that this has a key shortcoming: absent cookie data, you can never really know how a piece of inventory and/or user is valued.  For example, I will tell you right now that probably isn’t interested in your high-frequency edgy user generated content.  It is a fact.  You will get a couple of sheckels, not much more.  UNLESS…. that user has certain historical behavioral or interest-based attributes that our advertiser base finds attractive.  Then we will pay a ton.  For every single impression of that user.  A ton.  But the only way to know is to decode our cookie, which you can’t do because browsers won’t let your domain look at them, Pubmaticon.

Now, they might claim: If every network we worked with simply shared cookie information with me, by piggybacking cookies or something, then shared bidding information with, I could reconstruct a massive model that predicts these things.  And that is true, but it would be wrong.  Advertisers have things like frequency caps and budgets that artificially constrain campaigns in real-time.  Now, Rubmatic might say, if that information was shared in real-time, then they could schedule it, but really, what we see here is that we should simply bid out every impression, let everyone sniff the cookie and bid, and then you are done.  Once you go there, you do not optimize your daisy chain, the daisy chain simply goes away.

Who needs to optimize a daisy chain if, for every impression, you get the exact amount every network is willing to bid.  You just sell to the highest bidder and move on.

Now, Rubicon has raised $33 million and Pubmatic raised a $7 million Series A and “undisclosed” Series B, so they are counting on exits in the hundreds of millions of dollars.  To get there, they are probably going to transition to more of a network/exchange/ad space aggregation model, leveraging their publisher relationships.  The publisher side optimization opportunity will be short-lived.

Why Scoble is Over-Hyped and Twitter is Worth $4 Billion, Not A Penny More

Tuesday, September 1st, 2009

failwhaleI wrote a post a few months ago soliloquizing that Twitter is more valuable than Bebo, which was apparently worth $750m at one time.

Now Scoble has announced that he thinks it is worth $5 billion, which is apparently VERY CONTROVERSIAL.  This brings us back to an earlier topic: My blog gets little love and has self-esteem issues.

As always, the pride and joy of this blog is to deep dive on something and then point out all the flaws in our data.  Our starting thesis will be this:

  • Bebo is worth less than $750m
  • Facebook is worth ~$6b – $10b

So here is a ton of numbers and here we go:


So if we are just straight up monetizing pageviews, Twitter is worth a tiny fraction of Facebook and growing more slowly.


Twitter users are less engaged.  Scoble opines at length that people who say this don’t get it.


More of same.


Daily reach says the same thing page views do, and this is actually probably a more interesting metric.


Compete data is basically the same.  Twitter is 25% of Facebook but growing fast.  Bye, bye Bebo.

So what conclusions can one reach from the data:

  • Twitter is growing really fast – this is good (although it is not growing much faster than Facebook – albeit it has a smaller base).
  • Twitter has little or no monetization model – this makes it hard for an M&A function to value it – although this could result in making up numbers, which is something M&A functions tend to do a good job of exaggerating – let us say this increases the value.
  • Twitter is 25% of Facebooks size, any way you slice it.

So from this, one could conclude that if Facebook is valued at $8b, Twitter could be worth $4b.  I am ready to give it a $2b premium over the “25% of Facebook” valuation that I would have assigned it by wrote.  The $2b also feels not inappropriate given that it is almost definitely worth 5x Bebo today, so the markup makes it worth 10x.  10x Bebo today feels reasonable to me.