Week of October 1, 2007

Adsense For Youtube

Friday, October 5, 2007

The long-rumored merging of Google's Adsense program and Youtube is rumored to launch next week. Advertisers will be allowed to post ads within the context of the video content or the content on the page. Expect ads only to be allowed for content that has signed a partnership with Youtube, allowing Google to continue to use its DMCA defense ("not profiting from illegal content") against its various copyright infringement suits.

Facebook A "Fad?"

Thursday, October 4, 2007

Microsoft CEO Steve Ballmer raised eyebrows this past week by describing social network phenomenon Facebook as having elements of a fad about it. While it is easy to dismiss Ballmer as speaking from jealousy, a deeper look at his comments show some real understanding of the fickle nature of youth culture.

"[There's] a faddish nature about anything that basically appeals to younger people" was Ballmer's exact comment, and a look at the history of social networking illustrates how true it is. When a site becomes big and loses its sheen, young people start to look elsewhere. Facebook's own growth in the face of MySpace becoming older (and less cool) is an illustration of this.

Facebook is in no immediate trouble, but it will undeniably become less cool as time goes on. And at that point youth culture will be looking forward to the next big thing...and fad.

The Economics Of Radiohead

Wednesday, October 3, 2007

Radiohead has received a lot of press recently for their announcment that they will be releasing their new album online, with the price to be determined by the user. If you feel the album is worth 10 dollars, that's what you pay. If you think the album is worth 1 penny, you can pay that. This is actually not a new concept, and the evidence from economic experience present optimistic views of what might happen.

Steven Levitt and Stephen Dubner in the New York Times outlined the story of a man who sold bagels to office parks using an honor system. People who took his bagels paid what they thought they were worth, and it was all based on an honor system. In his home office, "fair" payment rates were 95%, but it was much lower in places who didn't know him personally. This aspect of the Radiohead story could go be good or bad for them. As Dubner & Levitt state: "A broad swath of psychological and economic research has argued that people will pay different amounts for the same item depending on who is providing it."

The implication is that Radiohead fans will pay a fair price (at least in their view), while non-fans will most likely pay less.

The overall payment rate for the bagels was 87%-89%. This is excellent baseline data for the Radiohead experiment. Clearly 9 out of 10 people place enough monetary value on bagels to pay a "fair" price for them. What will this rate be for Radiohead, and what will it mean? If only 7 out of 10 downloads are paid for, is this a success or does this mean that 2 out of 10 people find bagels worth paying for but music not? Or does a lower rate of payment mean that people simply don't like the Radiohead album?

These are the kinds of things that economists salivate over, and they are just part of the fascinating story behind Radiohead's experiment.

Mobile Marketing

Tuesday, October 2, 2007

Mobile marketing is growing faster in Europe than in the US. According to mobile research company M:Metrics, more mobile phone users in Europe report receiving SMS ads on their mobile phones than US users in July. In Spain, 75% of users have received such ads, as have more than half the people in France and Italy.

In the US, only 17.2% of users have received ad via SMS, far and away the lowest percentage of all. But US users were much more responsive than the Europeans. The US response rate to such ads was 12%, well above that of the UK, which came in second at 9.1%. Are U.S. users really more receptive, or are our marketers simply more effective at targeting?

Joost's Launch

Monday, October 1, 2007

Joost, the web-based television service which has been available in beta for months, has officially launched its service, promising improved video quality and a growing library of content. Public downloads of their software began today with a goal of 2-3 million users by the end of the year.

With a broadband connection and a fairly new computer running Windows Vista, the first day's experience has been outstanding. The video was excellent and there was none of the buffering problems that frequently plague web-based video offerings. Registration was easy, requiring just an email address, a username and a password.

There are two key questions about the service. First, the quality is very promising, but what about the quantity? Joost has deals with a number of content providers, including National Geographic, MTV, CNN, CBS, Reuters Comedy Central and others. They even have a deal with Major League Baseball to show postseason action outside of the US and Japan. The second question is about user generated content. The net is aligning itself as a user generated medium, will Joost be able to succeed with something that's more in line with a broadcast model?