AllThingsD » buyers

More TV Buyers Look to LED Screens

Lauren Goode — Thu, 23 Feb 2012 21:23:35 +0000

For the first time, more U.S. TV buyers are looking to purchase LED TVs rather than cold cathode fluorescent lamp (CCFL) TVs, according to a new report from IHS iSuppli. Consumers who planned to buy an LED-backlit TV jumped to 54 percent in the last quarter of the year, a 32 percent increase from the third quarter; the share of CCFL-backlit LCD TVs dropped to 25 percent from 56 percent. The report comes just a couple days after Samsung, the world’s largest LCD-panel maker, said it would spin off its LCD business to focus more on higher-margin OLED screens.

Twitter Tells Advertisers to Dig Deeper: "Promoted Trends" Get a Price Hike

Peter Kafka — Fri, 11 Feb 2011 11:30:11 +0000

Twitter’s “promoted trends” ads may be the company’s most consistent source of revenue. Now the company wants to wring more money out of them: It has told buyers to expect a significant price bump for the ads in the next few months.

Twitter doesn’t have a formal rate card, but ad industry sources say the going price for a one-day promoted trends purchase has settled between $70,000 and $80,000, after starting out as high as $100,000 a day.

Now Twitter has started telling buyers the coming price hike will consistently push the ads into the $100,000 to $120,000 range.

Promoted trends give an advertiser a chance to essentially purchase a small sliver of Twitter’s site, by inserting their message at the top of the “trends” section of users’ pages. For now, Twitter sells only one per day, and has been selling the slot out with some frequency.

And promoted trends could become even more valuable for Twitter CEO Dick Costolo and his company if they start carving the ads up into different geographies, giving them the ability to sell more than one per day.

If, say, Twitter could sell at least two different promoted trends, in two different territories each week, at $100,000 a pop, those ads alone could generate $20.8 million a year. Play around with those assumptions, and you can quite easily bite off a big chunk of the $100 million-plus ad revenue estimates we’ve seen floated.

Ad buyers also tell me Twitter has been bullish about its “Promoted Accounts” product, which it rolled out toward the end of last year.

When I first wrote about the concept last summer, and described it as a way to let marketers (or anyone) “buy” followers, the concept upset some Twitter traditionalists.

But they’re going to have to get over it, because it’s exactly what Twitter is selling: It prices the ads, which show up on users “Who to follow” list, on a “cost per follow” basis. Buyers pay between $1 to $3 for every new account that follows them.

The one Twitter ad product I haven’t heard buyers talk that much about is the first one Twitter rolled out. “Promoted Tweets” were supposed to work like Google’s AdWords–”organic” tweets, tied to keywords, that showed up in search results, and later in users’ regular streams.

That seemed like a promising tactic at first. But I’ve never seen a promoted tweet “in the wild”; the only time I’ve seen them is when they’re attached to the promoted trends.

But perhaps I’m just missing them. If you’ve bought one, or if you see one, please pass drop me a line (peter@allthingsd.com) and let me know.

Stock Trades Near 52-week High on Message That It's an All "New eBay"

Tricia Duryee — Thu, 10 Feb 2011 21:28:40 +0000

Two years ago, eBay’s CEO John Donahoe promised Wall Street analysts massive changes to improve the company’s e-commerce experience.

Today, he says it’s all “new eBay.”

At the company’s analyst meeting at its headquarters, the company demonstrated the major changes made over the past couple of years and laid out plans for how local, mobile and social will lead the next wave of commerce.

In the afternoon, Bob Swan, eBay’s CFO, took the stage to give the financial rundown that everyone had been waiting for since the morning.

Swan highlighted PayPal’s growth trajectory by saying that it expects to double revenues over the next three years to between $6 billion and $7 billion, compared with $3.4 billion in 2010.

He also talked up how mobile was gaining speed by saying that PayPal mobile transactions were estimated to double to $2 billion in total payment volume, and that mobile on marketplaces will double to $4 billion in gross merchandise volume.

Meanwhile, when looking at the company’s gross merchandise volume, he sees the business increasing from $60 billion in 2010 to $75 billion in 2013. And, to support the strength of the business, the company anticipates generating $7.5 to $8 billion in free cash flow by 2013.

Swan wants to stress that these growth rates are being driven from the company’s core businesses, and not from the more innovative stuff eBay is working on in local, mobile and social. “We are in a different state than we were in March 2009, where the crystal ball was murky and full of potholes. Now the crystal ball is full of opportunities. We have unmatched advantages that position us to win.”

That’s possible because of the improvements the company has been making over the past two years.

“We’ve made significant and necessary changes necessary for growth. Two years ago, search was optimized for auctions and suffered. Two years from now, search will be a competitive advantage for eBay,” said Mark Carges,” eBay’s CTO of marketplaces. “We’ve rolled out many tailored experiences and selling on eBay will be vastly simplified.”

To illustrate the change, Carges showed how there’s no more irreverent banner ads on the search results page, and instead of returning up to 19 paid results, it gives shoppers the “best matches” and cuts the time in half that it takes to return results.

The company also launched the buyer protection program, which will return the price of the item and the cost of shipping to customers unhappy with purchases.

Christopher Payne, VP of eBay marketplaces North America, said the company will start to increase marketing spend on these improvements to drive awareness: “We’ve been intentionally quiet as we fixed fundamentals, but starting in the second half, we’ll start marketing this new experience.”

At lunch, analysts were so eager to talk to Donahoe he wasn’t even able to get to his seat. They crowded around him in the lobby to grill him on what impact Facebook, Apple and Google were going to have on the company’s payments aspirations.

Donahoe wasn’t phased, saying that PayPal is technology agnostic. He will support BlackBerry, Google’s Android, Apple’s iPhone — and all of the iterations they produce from phones to tablets. What’s more, he says, the company is building the tools and technology for merchants to keep up in what can be a daunting world.

Analysts appear impressed with the improvements. Today, the company’s shares traded up nearly 8 percent, or $2.57, to $34.53, coming close to marking a 52-week high.

Myspace Plans to Lay Off 550 to 600 Employees Tomorrow

Liz Gannes — Mon, 10 Jan 2011 11:00:39 +0000

Myspace, which has been struggling to revitalize itself, is expected to lay off 550 to 600 of its staff of just over 1,000 tomorrow, according to several sources.

NetworkEffect first reported news of the large-scale cuts at the end of December.

But now, the social-network-turned-entertainment-hub has set a date–January 11–and is working on finalizing the people it will let go, which will likely include a significant number of international employees.

The Beverly Hills, Calif.-based company will be touting the changes as a restructuring to shed “legacy” businesses and products.

Unfortunately, the context for that rationale is that Myspace is shedding a full half of its staff.

After the layoffs, the News Corp.-owned Myspace will turn its sights to sale options, as I also reported.

The company is primarily being shopped to private-equity buyers, although one intriguing possibility currently being raised within News Corp. is to try to sell Myspace to Yahoo.

Internally, Myspace staffers have been expecting layoffs in early January for some time, with the numbers circulating being as high as 70 percent of the company’s staff.

(Disclosure: News Corp. also owns this Web site.)

Update: Myspace did make major layoffs on January 11, though it reduced the number to about 500 staff cut.

Viacom Sold Rock Band for a Song. A Really, Really Cheap Song.

Peter Kafka — Tue, 04 Jan 2011 11:30:34 +0000

Here’s what happens when a red-hot videogame franchise goes cold: You can buy the whole company for the same price as a single copy of the game.

I had a hunch that Viacom sold off Harmonix, which makes the Rock Band games, at a steep discount last month. But I’m still surprised it was this cheap: I’m told that investment group Columbus Nova paid $49.99–the list price for “Rock Band 3″–and got the entire company.

There’s more to the story, of course: People familiar with the transaction tell me Harmonix’s buyers also assumed the game company’s liabilities. That includes expensive music rights fees, and responsibility for lots of unsold games and equipment sitting on warehouse shelves.

And I’m told that the deal is structured in a way that will let Viacom net something like $150 million in tax benefits, similar to the AOL/Bebo fire sale last year. Given that Viacom paid $175 million for Harmonix a few years ago, things could be worse.

[UPDATE: The Los Angeles Times reports that Viacom will actually receive a $50 million tax benefit, and offload $100 million in liabilities. That makes more sense, and I've since confirmed it myself. My apology for the error.]

Still, it’s a fire sale price no matter how you look at it. And that can’t be comforting to Harmonix’s remaining employees, who are likely going to be facing a very serious restructuring.

Columbus Nova’s PR reps wouldn’t comment on the sale terms (neither would Viacom) but pointed me to an earlier statement from the company, which said it was “really excited about backing the world-class team that has consistently produced such great games and helping them grow the company and its brands.”

A Fall Guide: How to Pick Your Next Computer

Walter S. Mossberg — Thu, 04 Nov 2010 02:05:08 +0000

If you’re shopping for a new computer this fall, you won’t find big surprises. But you’ll still have to juggle a lot of technobabble terminology and watch your budget. Perhaps the biggest question for some buyers will be whether to get a tablet or a laptop, now that Apple’s iPad is a proven hit and a flood of competitors is on the way.

[ See post to watch video ]

So, here is my annual fall computer buyers’ guide, a simplified road map to the key decisions shoppers must make. I’ve focused on laptops—the most common purchase—but much of this advice also applies to desktops. As always, these tips are for average users doing the most common tasks. This advice doesn’t apply to businesses, to hard-core gamers, or to serious media producers.

Tablets vs. Laptops: If you’re looking for a light-duty, highly portable computer, it’s worth considering the iPad, which starts at $499, instead of a small laptop. This is especially true if you’re in the market for a secondary computer, or one mainly for use on the go. Many owners of iPads, including me, are finding it handily replaces a laptop for numerous tasks, such as Web browsing, email, social-networking, photos, video and music. It has superior battery life, lighter weight, and it starts instantly. I don’t recommend it for people who are creating long documents, especially spreadsheets and presentations, even though it is capable of those tasks. And I don’t recommend it for users who require, or prefer, a physical keyboard.

If you don’t like the iPad, there will soon be alternatives. For instance, Samsung’s Galaxy Tab, which has a 7-inch screen versus the iPad’s 10-inch display, and runs Google’s Android operating system, will be available this month from major wireless carriers. Sprint, for example, will offer it at $400 with a two-year contract. But some tablet buyers may want to wait till the first half of next year, when many more models will be available, and Apple will likely roll out the second-generation iPad.

Netbooks: These low-cost, low-powered little Windows computers are losing popularity, but are still available, typically for about $350 to $500. They are being hurt by the rise of tablets and by light but larger laptops. Some buyers also find the screens and keyboards are too cramped. But these are evolving. Some now have bigger screens and roomier keyboards. And Dell will soon introduce a sort of hybrid netbook-tablet. Called the Inspiron Duo, this model, starting at $499, has both a regular keyboard and a touch screen that flips around when the lid is closed to act like a tablet.

Windows vs. Mac: Windows laptops can be much less costly—and come in many more styles and varieties—than Mac laptops. The Macs start at $999, versus as little as $500 for a decently equipped Windows portable. Windows laptops are still dominant. But Apple laptops are stylish and reliable, and usually boot much faster than Windows machines, in my tests. Also, Apple scores high on surveys of customer support. Its latest models, like the new, light MacBook Airs, have extraordinarily good battery life. Macs also aren’t affected by the vast majority of malicious software, have much better built-in multimedia software and, at extra cost, can run Windows programs in cases where Mac equivalents aren’t available.

The light but speedy 13-inch Toshiba R705 offers good battery life.

Cost: Most of the popular consumer Windows laptops cost $500 to $800. You can get full-size laptops for as little as $280, but their processors and graphics are weak and some lack webcams. If you can afford it, a light but speedy 13-inch machine like the Toshiba R705 offers very good battery life for just under $800. All-in-one desktops typically cost around $1,000 and some, like the HP TouchSmart, offer touch screens with special touch software. Apple’s popular all-in-one iMac starts at $1,199.

Processors: The most promoted chips are Intel’s i3, i5, and i7 Core models, the latter two of which can turn on and off some of their functions to boost power or save energy. But there is nothing wrong with buying a PC that uses chips from rival AMD, which usually cost less. For average users, Intel’s older Core 2 Duo still works just fine, even with the latest software. Intel’s weaker Atom processor line powers most netbooks.

Graphics: Integrated graphics, which share the computer’s main memory, are fine for most common tasks, but costlier discrete graphics, which have dedicated memory, can speed things up by taking some of the load off the main processor. They also are better for games. Some computers have both and can switch among them.

Wireless: More and more laptops are coming with optional cellular modem chips in addition to Wi-Fi. These can be handy while traveling, but be warned that they require a cellular data contract, which can be costly.

Connections: If you plan to connect your laptop to a TV, look for a connector called an HDMI port, which is used on most high-definition TVs. Some laptops also come with a feature called Wireless Display, or Wi-Di, which, with an extra-cost adapter, can beam your laptop screen to a TV without a cable. There is a new, much faster USB port, called USB 3.0, but, so far, it’s on very few machines.

Memory: Aim for 4 gigabytes of memory, or RAM, on a new computer, and never settle for less than 2 gigabytes.

Hard disks: A 320 gigabyte hard disk should be the minimum on most PCs, though 250 gigabytes is OK if price is key, or if it’s your secondary machine. Solid-state disks, which lack moving parts and use flash memory like smartphones do, are faster and use less battery power. They cost much more, but are coming down in price fast. However, they typically offer much less capacity.

64-bit: Many models now use a 64-bit architecture, which allows properly written software to use more memory and run faster. If possible, buy 64-bit, which will become more and more important.

Touch: Some Windows 7 computers have touch capability built into the screen, though Windows wasn’t designed with touch as a core element and the combination isn’t ideal. Computer makers try to resolve this with special touch software, which you should try in a store. Apple laptops use huge touch pads as the multitouch surface, instead of the screen.

As always, don’t buy more machine than you need.

Find Walt Mossberg’s columns and videos online at the All Things Digital website, walt.allthingsd.com. Email him at mossberg@wsj.com.

2010 Could Be the Year of the Display Ad. Or the Cable TV Ad. Take Your Pick.

Peter Kafka — Fri, 14 May 2010 14:20:06 +0000

There are a whole lot of people–from scrappy start-ups to publishers to Google (GOOG)–betting that display advertising is finally going to start picking up on the Web.

So they’ll be heartened by this table, from a survey of ad buyers conducted by J.P. Morgan’s Imran Khan. It shows display ads picking up 1.5 percent of ad budgets this year (click to enlarge):

Note that comScore (SCOR) says display ad volume (but not overall revenue) jumped 15 percent last quarter, and it’s tempting to believe that this is finally the year when Web advertising really moves beyond search advertising.

Meanwhile, the people who are feeling most confident about their near-term future are the guys selling TV advertising. Broadcast TV is still losing share, but cable TV is up. And most buyers–74 percent–who do pay for spots say they’re spending more than last year.

Harbinger Bets That Palm's Hand Is Better Than You Think

Peter Kafka — Thu, 15 Apr 2010 04:04:59 +0000

Somebody, somewhere is going to buy Palm. And whoever that is will end up paying more for the company than the market thinks it’s worth today.

That’s the thinking behind hedge fund Harbinger Capital’s bet on the troubled smartphone maker: The New York-based investment group disclosed today that it has purchased 16 million shares of Palm (PALM). That’s a little less than 10 percent of the company, which is actively looking for buyers after flailing against Apple’s (AAPL) iPhone, Research in Motion’s (RIMM) BlackBerry and Google’s (GOOG) Android.

The Securities and Exchange Commission filing detailing Harbinger’s investment doesn’t actually have much in the way of details. But it appears that Harbinger purchased its stake on or before April 12, the day news surfaced that Palm had hired bankers to shop the company.

If Harbinger sounds familiar to you, it may be because it’s one of the funds that bet on the New York Times (NYT) a couple years ago. That didn’t work out so well, but Harbinger was still up more than 45 percent last year, Reuters says.

More background on Palm.

Survey: 58 Percent of iPad Owners With Kindles Say iPad Will Replace Amazon's E-Reader

John Paczkowski — Mon, 05 Apr 2010 12:10:58 +0000

An interesting data point from the first of many Monday morning analyst notes on the iPad’s weekend launch. Piper Jaffray’s Gene Munster surveyed 448 iPad buyers Saturday, asking about the size of the device they were purchasing and their reasons for doing so, and found that 13 percent owned a Kindle.

Of those, 58 percent said the iPad would replace Amazon’s (AMZN) device as their e-book reader.

And of the survey’s total respondents, 10 percent said they had considered buying a Kindle, but opted for an iPad instead. And 38 percent said they intended to read books on Apple’s (AAPL) new device (survey results below; click to enlarge).

Obviously, anecdotal information. That said, it would seem that the iPad is already taking e-book reader market share from the Kindle–or mindshare, anyway.

Will Amazon’s big hey-don’t-forget-Kindle homepage ads be enough to temper further cannibalization? Or will the company be forced to take more aggressive measures–a price cut perhaps? One that drops the Kindle to $149 from $259. As I wrote last week:

By widening the pricing gap between the two devices, Amazon might temper the maybe-I-should-just-spend-the-extra-money-and-get-the-iPad hesitancy that, let’s face it, a lot of potential Kindle buyers are probably already experiencing.

At $149, the Kindle as single-purpose reading device is a pretty compelling proposition, particularly given the selection advantage the Kindle store has over the iBook store. It’s an impulse buy.

At $259, it starts to become “half the money I need to buy an iPad.”

Kindle's Killer App: A Price Cut

John Paczkowski — Thu, 01 Apr 2010 22:01:41 +0000

Remarking on the iPad iBooks application in January, Apple CEO Steve Jobs said, “Amazon’s done a great job of pioneering [e-book] functionality with the Kindle. We’re going to stand on their shoulders and go a little further.”

It was a backhanded compliment, but also a threat. What will Amazon (AMZN) do if Apple (AAPL) delivers on it, as early reviews of the iPad suggest it might? If the iPad succeeds in capturing e-reader mindshare, and the market decides the iPad is indeed a direct competitor to Kindle, how should the retailer respond?

Simple: With a price cut. Piper Jaffray analyst Gene Munster suggests that Amazon drop Kindle’s price to $149 from $259, which seems reasonable (manufacturing costs permitting).

By widening the pricing gap between the two devices, Amazon might temper the maybe-I-should-just-spend-the-extra-money-and-get-the-iPad hesitancy that, let’s face it, a lot of potential Kindle buyers are probably already experiencing.

At $149, the Kindle as single-purpose reading device is a pretty compelling proposition, particularly given the selection advantage the Kindle store has over the iBook store. It’s an impulse buy.

At $259, it starts to become “half the money I need to buy an iPad.”

Initial iPad Demand Greater Than Initial iPhone Demand

John Paczkowski — Tue, 23 Feb 2010 16:24:58 +0000

Given the years of speculation and hype that led up to its announcement, it’s not at all surprising that there is significant pent-up demand for Apple’s iPad. But that it exceeds demand estimates for the original iPhone, as a new survey from RBC/ChangeWave suggests, is a bit unexpected. The iPad is, after all, an entirely new device category between the laptop computer and the smartphone. And unlike the iPhone, its market is unproven.

Still, RBC/ChangeWave found that 13 percent of the 3,200 respondents who participated in its iPad survey were either somewhat or very likely to purchase the device, compared with the nine percent who gave the same reply for the original iPhone in a similar survey conducted prior to its launch (see chart below; click on charts to enlarge). Said RBC analyst Mike Abramsky: “While we do not expect feverish initial launch lines like iPhone, the data portends well for healthy initial iPad uptake.”

The reason? The iPad’s unexpectedly low price point. Starting at $499, it is significantly below the $999 price expected. “Only 8 percent (of respondents) appear unwilling to pay Apple’s indicated iPad prices,” Abramsky notes. “That’s below the 28 percent who balked at initial iPhone pricing. Interest appears strongest with both Entry-Level and Tech-Savvy Buyers; 19 percent of declared iPad buyers indicated interest in the $499 16GB WiFi-only iPad, and 19 percent in the $829 64GB 3G iPad.”

Top planned uses for the device among both groups of buyers: Surfing the Internet (68 percent), checking e-mail (44 percent), and reading e-books (37 percent).

Evidently, Apple (AAPL) has managed to hit the pricing sweet spot at both the high and low ends of the market, which, as Abramsky observes, bodes well for its chances for success. “This data, while preliminary, suggests iPad may have greater potential than expected, to expand Apple’s addressable PC, iPod markets and to capture a segment of the home PC market (est. 35M+ units/yr),” he writes.

Abramsky’s estimate for iPad sales in CY 2010: Five million units, for revenue of $2.4 billion and earnings per share of 33 cents.

FriendFinder Cancels the World's First Web Porn IPO After Investors Yawn

Peter Kafka — Fri, 05 Feb 2010 12:03:57 +0000

Last month, we posed this question in a headline about FriendFinder Networks: “Are Investors Finally Ready for an Internet Porn IPO?” Today we know the answer: No.

FriendFinder, a collection of porn sites and niche social networks, was supposed to start trading this week, after filing for a public offering more than a year ago. But this morning, the company pulled its IPO, citing “market conditions.”

I’m assuming this is not a euphemism for the Dow’s plunge yesterday, but instead a polite way of saying “we couldn’t find buyers.” The AP reports that FriendFinder, which was trying to sell some 20 million shares for $10 to $12, sold 15 million shares at $7 each earlier this week in pre-IPO trading.

Now FriendFinder will have to find some other way to resolve its massive debt issues. The company throws off a lot of cash, but all of that–and more–is getting hoovered up by loan payments. It reported $45 million in income from operations in the first nine months of last year and spent $75.3 million on interest payments in the same period.

Meanwhile, if you’re in the market for a high-end sports car, this may be the time to make the FriendFinder team an offer. The company has yet to sell the Ferrari 360 Modena it bought from its founder for $125,000 in 2006. FriendFinder is carrying the car on its books at $95,000, but I’ll bet it’s willing to negotiate.

Nokia Slashes Prices

John Paczkowski — Mon, 01 Feb 2010 19:00:03 +0000

[ See post to watch video ]

Microsoft Sticks a Cautious Toe Into the Ad Exchange Business

Peter Kafka — Mon, 01 Feb 2010 11:45:17 +0000

Is Microsoft is finally ready to a launch its long-delayed advertising exchange? Just barely.

Redmond is set to roll out AdECN, the “real-time” ad exchange it bought in 2007, within the next two weeks. But only in the most cautious of tests: Microsoft (MSFT) will open up AdECN to a handful of ad buyers and says it will only allow them to purchase a “select, limited amount of Microsoft inventory.”

Which means that even as Google’s AdX exchange, relaunched last fall, continues to gather momentum, Microsoft will still be dabbling around the edges. And some industry sources tell me they’re not sure that Microsoft is convinced it wants to launch an exchange at all.

The promise of the exchanges is that they allow ad sellers and buyers to haggle over specific pieces of inventory at the moment Web surfers are engaged with them.

That’s theoretically important because it means an ad buyer can determine if a visitor who is, say, looking at this Web page at this very second is worth more or less than the one who was looking at it just before. Or after. Etc.

Entrepreneurs and investors in ad technology think this is a big deal, because it will allow dollars to flow into online display ads much more efficiently. Traditional publishers, though, fear that the exchanges will simply function as more traditional ad networks do–that is, they will commodify most of their ad inventory and push prices even lower.

Microsoft itself is having that debate about its own exchange, sources familiar with the company tell me. They tell me that some executives in Redmond are desperate to launch AdECN in order to compete with Google (GOOG)–and likely, Yahoo (YHOO), which is testing its own real-time platform. But others aren’t eager to launch a product that may end up pushing down prices on Microsoft properties like MSN.

That would explain the long delay in launching AdECN, which has been promised for many months. Most recently, industry sources were telling me that Microsoft would launch the exchange in January.

It appears they’ll be off by a few days. Here’s Microsoft’s statement to me in response to a question about AdECN’s launch date and plans:

To date, we’ve been piloting the AdECN Federated exchange system internally with Microsoft Content Ads and through the Microsoft Media Network. In the next two weeks, we are extending it to a select group of advertising network partners in a test phase, which will enable participants to bid for media in real-time across a select, limited amount of Microsoft inventory. We’ve been intentional in our launch approach–by initiating this test with a small group we believe that will help us to refine and build future functionality. We expect to share more details about this test and our strategy in the coming months.

Amazon Gives In to Macmillan and Apple, and E-Book Prices Will Go Up

Peter Kafka — Mon, 01 Feb 2010 06:00:39 +0000

That was fast.

Less than two days after pulling books published by Macmillan in a dispute over e-book pricing, Amazon has conceded.

The world’s dominant e-commerce company says it has agreed to Macmillan’s demands to sell its e-books at a higher price–and in doing so, has made a tacit admission that e-book prices will rise across the board.

That’s because most of the industry’s big players have embraced a similar plan, advanced by Apple (AAPL) to support its iPad launch, to sell e-books for $12.99 and $14.99 instead of the $9.99 Amazon (AMZN) had been pushing.

In an extraordinary statement published on Amazon’s site, the retailer says that it “will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.”

No word yet from the other big publishers that have sided with Apple in the e-book pricing war–Pearson’s Penguin Group, News Corp.’s (NWS) HarperCollins, Hachette Book Group and CBS’s (CBS) Simon & Schuster. But keep in mind Steve Jobs’s all-knowing pronouncement about Amazon and Apple e-books: “The prices will be the same.”

Also bear in mind that publishers will actually make less money with the Apple pricing plan. Under the old plan, they sold books to Amazon for around $15 wholesale, and Amazon took a loss in order to retail them for $9.99. Under the new plan, the publishers will get closer to $10 per book.

But the publishers are so freaked out by the parable of the music labels, in which Apple replaced $15 CDs with $1 songs, that they are willing to take the hit in order to maintain some control of their digital pricing.

Odd as this sounds, there’s logic to it, since e-book sales will be small for some time and publishers think that this strategy will help keep the prices up when buyers really do embrace digital.

(Aside: The notion that digital pricing should be dirt cheap simply because it doesn’t cost publishers–or music labels, or Hollywood studios, or whatever–very much to distribute bits, is facile. If you don’t believe me, try ordering a vegetarian entree the next time you go out to dinner, and then tell your waiter you refuse to pay full price because you know that vegetables cost much less than meat. It may be dumb for publishers to try to keep digital prices high, but it’s equally stupid to demand that they lower them on principle.)

It will be interesting to see what Kindle buyers make of the impending price hike, particularly since so many of them are price-conscious consumers who prefer to pay nothing at all for their books.

Apple's Tablet: A $2.8 Billion Business?

John Paczkowski — Mon, 25 Jan 2010 13:20:02 +0000

We’re still a few days away from the presumed unveiling of Apple’s mythical tablet computer and already, analysts are trying to divine the impact the new device will have on the company’s bottom line.

RBC Capital Markets analyst Mike Abramsky expects Apple (AAPL) to sell five million tablets in the product’s first year at market. At a retail price of $600 and a 30 percent gross margin, that would generate about $2.8 billion in revenue and add 30 cents to earnings per share. This assumes the tablet is neither a hit (iPhone) nor a niche product (MacBook Air), but ends up somewhere in between, the scenario Abramsky believes most likely.

As Abramsky cautions, nailing the sweet spot on price is crucial to the device’s success. “Pricing is key….Significant demand exists at $500-799, narrowing at $1000 at which level subsidies may be needed (assuming a mobile data version) for mass acceptance, suggesting both retail and carrier marketing/distribution similar to iPhone.”

The analyst asserts that “An Apple tablet priced at $500-700 unsubsidized ($200-300 subsidized) strikes squarely at heart of the entry level laptop and Netbook markets. Although the tablet would not offer the breadth of features or raw performance of traditional laptops, it would deliver an optimal experience for buyers looking for user-friendly, media-centric computing at entry-level price points.”

As for the effect of the tablet on other Apple products, “The tablet may cannibalize some Mac and iPod Touch buyers (est. 2-5% in scenario analysis), but the lack of Mac OS X compatibility (and emulated Windows) reduces the appeal of the tablet as a Mac replacement for Apple’s traditional premium Mac buyers.”

PREVIOUSLY:

Google CEO Eric Schmidt: "I Have a Special Spot for Apple in My Heart"

Peter Kafka — Thu, 21 Jan 2010 21:46:14 +0000

A first peek at Google’s Q4 earnings report: Revenue in line and a nice earnings bump. The search giant reported revenue of $4.95 billion and earnings of $6.79 per share. The Street was looking for revenue of $4.9 billion and $6.50 in earnings per share, per Yahoo (YHOO). (I’ve also seen lower “consensus” numbers for EPS in the $6.45-$6.48 range).

Google (GOOG) stock has lurched five percent lower in the first few minutes of after-hours trading, as investors digest the news. If you want to anthropomorphize the market, you might speculate that it’s bummed that CEO Eric Schmidt and company didn’t show a higher revenue lift. But if you’re keeping track, revenue is up 17 percent compared with last year, and up 12 percent from the previous quarter.

Here is Citigroup (C) analyst Mark Mahaney’s “cheatsheet” for those playing at home (click to enlarge):

And you can see the company’s profit and loss and balance sheet here.

Google will be using YouTube to livestream its earnings call, but I’ll be providing some annotation here starting at 4:30 pm Eastern. You can also check out the company’s accompanying slide presentation here, and here’s a chart it’s particularly proud of (click to enlarge):

I’m trying out a promising new liveblog tool, but please bear with me if there are bumps along the way.

On the call: CEO Eric Schmidt, CFO Patrick Pichette, product guy Jonathan Rosenberg, sales boss Nikesh Arora. No Larry or Sergey.

Schmidt declares that he’s very pleased with Q4: “An extraordinary end to a roller coaster year.”

Schmidt: Clearly, we were right to start ramping up investments and will continue to do so. We’re investing in people and investing in tech based on our “70/20/10″ rule: 70 percent in core products, 20 percent in new business like mobile/Android, and 10 percent in “long view” initiatives like commerce and social.

And of course, more mergers and acquisitions. We’re continuing on a pace of roughly one M&A per month, some small, some big.

Pichette runs through the numbers in the release above. He reiterates Schmidt’s line about continuing investments.

Jonathan Rosenberg has a cold, but gets his message across: “We made some very hard decisions” to shut down some products to focus on winners. It’s our “more wood behind fewer arrows approach.” We’re focusing on DoubleClick integration, Android expansion and the Chrome OS. “YouTube, is in fact, monetizing well,” and we hope our partners make money, too.

Obviously, going forward, we’re going to plow resources into search. But other stuff too. Social, for instance. Not just social networking, but all of our products should be “social.” This can apply to search, local search, etc. We’re also focusing on commerce, whether people are making their purchases online or offline.

More Rosenberg: Mobile is important, and so is moving enterprise to the cloud.

Arora: We improved throughout the year, and Q4 was strong. Large companies like Staples (SPLS) and Volvo are directing an increasing portion of spending online [as they're supposed to do].

Arora: Search ads are always a value in December! Costs go up but they get more effective because people buy more.

Arora: Brand marketers are increasing their spending too. YouTube has had many successful brand campaigns. Have you seen Fox’s “Avatar” ads? They’re great. Other shoutouts for Sony (SNE) and American Express (AXP).

Arora: Most of the top networks have signed onto AdX ad exchange since we launched it in the fall.

Time for Q&A.

Google’s U.S. revenue had a big jump, but international revenue did not accelerate as quickly. What gives?

Arora: In the U.S., we saw large advertisers shifting offline to online. Other markets have different issues; hence, the different growth rates.

Are we back to normal in regard to seasonal patterns? Also, can you talk about “materiality” of mobile?

Pichette: We won’t talk about mobile revenue in any concrete way.

Arora: There is some different performance by vertical. Finance, obviously, isn’t as strong as it used to be.

Another question about mobile: Is Google trying to push revenue? Profitability? Also, please talk about China.

Rosenberg: Advertisers are starting to figure out what works on mobile. For instance, adding a phone number or an offer for mobile helps a lot.

Pichette: Regarding mobile, we want to drive innovation that in turn drives people to the Web, which is better for us. That’s the core engine of mobile.

Schmidt: “China stuff has been well-covered in the press,” the CEO notes before recounting the China story. “We’re in conversations with the Chinese government,” and our business has remained unchanged. “But in a reasonably short time, we’ll be making some changes there.” That said, we’d still like to be in China.

Missed a question. Apologies.

Please talk about outperformance of network business vs. owned and operated. Also, what accounts for higher marketing costs?

Pichette: Nothing to talk about re: network versus O&O. Re expenses, we said we were going to ramp up investment and we put in more there because we can track the results and the return on investment.

Arora: Yep, some of that money was to support consumer launches.

You said search increased five times on mobile. So what does that mean for revenue per search? Also, please talk more about increased spending on marketing.

Pichette: We’re really pleased with the marketing experiments we’re running.

Rosenberg: Regarding mobile, the new formats, targeting tools and reporting we’re giving mobile advertisers is making a huge difference. But I won’t answer your question about revenue.

Missed another question here.

YouTube monetization: Can you give us some metrics on how much inventory you’re selling?

Arora: Nope. But it has “gone from being a nice-to-have” to essential.

Pichette: The Youtube homepage nearly sold out in Q4. Hope that’s useful.

Can you break out ad spending by advertiser size?

Arora: Large advertisers are moving online, which is good. Retail was strong in Q4. We’re working with smaller advertisers to “bring them into the fray.” But the discrepancy so far has been mainly seasonal.

Can you rank your core businesses in terms of growth potential? Also, what’s up with you and Apple (AAPL)?

Schmidt: We’ve been saying for a while that display is a big opportunity. One story you haven’t seen so far is how successful we’ve been in display, but that will come out in 2010. [Note to PR staff: Start pitching!]

And obviously, mobile is small now but will grow quickly.

“With respect to Apple, it’s probably better to say”…that as a former board member “I have a special spot for Apple in my heart.” They’re a very well run company and “they have some very good stuff coming” strong competitor, etc.

Schmidt on Nexus One: What it is really about is a new way of buying a phone. Nexus One itself is the first in a series of examples where you can buy the phone online and pick your carrier.

Is Bing having an impact on cost per click?

Rosenberg: We think out CPCs are generally not affected by competitors. Prices are set by buyers.

Can you talk about Nexus One’s impact on margin?

Pichette. Not really. We want to innovate, etc. Nexus One will have its own margin and that’s how we’re focused on building the business.

We’ve seen third-party data on mobile projecting that iPhone could account for 50 percent of mobile traffic. Does that make sense to you? Also, you have said that the Apple relationship is “stable.” So what are the odds that you’re going to continue to provide search on the iPhone?

Schmidt: We won’t talk about the market share of Apple. And we won’t “speculate about any deals of any kind–true, not true, rumored, not rumored.”

Given that new display products are so great, is there any notion that people are moving dollars from search to display?

Schmidt: Advertisers “don’t shift, they add.” They might maximize search to maximize revenue and they might spend on display for long-term growth, branding, etc.

Pichette thanks Googlers listening for all their hard work. There’s an auxilary call at 6 pm Eastern with Pichette and Rosenberg, but I won’t be able to cover that one.

Decent Nexus One Customer Support Apparently Not on List of Things Google Makes Universally Accessible and Useful

John Paczkowski — Tue, 12 Jan 2010 08:03:47 +0000

With Android and Nexus One, Google claims to have “improved” the rate and pace of innovation in mobile phones and the manner in which they are distributed. Sadly, the search giant doesn’t seem to have done much for the way in which they are supported.

Not a week after the device’s debut, Google’s support forums are rife with complaints from Nexus One owners who are clearly not getting the level of customer support they expect.

Like most other Google (GOOG) offerings, Nexus One support is self-help driven–FAQs, troubleshooting guides and email forms offered with this earnest caveat: “in most cases you won’t receive a personal response.”

That might fly with folks availing themselves of free Google services like search and email, but it doesn’t with those who’ve just spent between $179 and $529 on a new superphone. Buyers expect their devices to work properly out of the box, and if they don’t, they expect their complaints to be approached with at least a modicum of urgency, preferably by a human.

But that’s not the experience Google is currently offering Nexus One users. As PC World pointed out earlier today:

If you buy a Nexus One manufactured by HTC, directly from Google’s Web site, and use it with T-Mobile’s wireless network–who do you call when you have a problem? Google is only accepting support requests via e-mail, and users are getting bounced between T-Mobile and HTC as neither seems equipped to answer complaints, or willing to accept responsibility for supporting the Nexus One.

So while Google’s new Nexus One distribution paradigm might excel in versatility and simplicity, it fails when it comes to support. Which isn’t all that surprising, I suppose. Google was never really set up to provide customer service. That said, you’d think that a company that takes great pride in improving things and making them accessible and useful, would have made more of an effort to do the same for Nexus One customer service.

Did Google launch the Nexus One with a half-assed customer-service solution? I put a variation of this question to the company and here’s what I was told:

What, exactly, was your customer support solution at launch? I’d assumed that you would initially pay the carriers to handle support, but that doesn’t seem to be the case.
We developed a dedicated, comprehensive Google customer support team for the Nexus One. Our support site can be found at google.com/phone/support, which has pointers to our help center, where there is lots of troubleshooting information. HTC provides telephone support for device troubleshooting and warranty, repairs, and returns. Google also offers self-help through our help center, user-to-user help through forums, and email support to customers who are unable to find answers to their questions online. We promise to answer email inquiries within 48 hours. T-Mobile USA fields calls regarding their service (including service billing inquiries).

Why was this solution chosen?
Solving customer support issues is extremely important to us, because we want people to have a positive Nexus One experience. Therefore, we felt this was the best approach to quickly resolve any customer support inquiries.

We felt this was the best approach to quickly resolve any customer support inquiries.

Really? Hard to believe that “we promise to answer email inquiries within 48 hours” is “the best approach.” Clearly, it’s not.

Google VP of Engineering Andy Rubin conceded as much during an onstage interview with Walt Mossberg last Friday at the Consumer Electronics Show: “We have to get better at customer service,” Rubin said. “We have to close that three-day gap [in response time] to a couple of hours.”

[ See post to watch video ]

Video clip: Andy Rubin on Nexus One customer service issues.

That’s great to hear, but it doesn’t really explain why the gap exists in the first place or why Google felt comfortable launching with it.

So what’s the plan going forward? Says a Google spokesperson: “We are working quickly to solve any customer support issues as they come up, and we are trying to be as open and transparent as possible through our online customer help forums. We’ll continue to address all issues in as timely of a manner as possible, and we’re flexible and prepared to make changes to our processes and tools, as necessary, for an optimal customer support experience.”

Doesn’t sound like much of a plan to me. You?

The Secret Behind the Kindle's Best-Selling E-Books: They're Not for Sale

Peter Kafka — Tue, 29 Dec 2009 11:00:58 +0000

One big reason readers choose e-books over ink and paper versions: The digital ones are cheaper.

This wasn’t the case when e-books first appeared a decade ago. But Amazon (AMZN) has made a point of selling its Kindle titles at a discount compared with physical editions, even if it means losing money.

And then there are the titles that Kindle owners really, really love–the ones they get for nothing. As the Washington Post noted earlier this week, the list of best-selling Kindle titles is dominated by free books:

Amazon’s customers have made it clear that $9.99 is still too high for their taste. Most titles in the company’s list of top 100 Kindle bestsellers are priced below $9.99, and the most popular price point is $0.00.

The good folks at MediaBistro have gone ahead and counted, so you don’t have to. As of a day ago, 64 of Amazon’s top 100 Kindle titles cost nada.

How exactly does that work? I understand why Amazon is able to hand out public domain works like “The Adventure of Sherlock Holmes” and “Pride and Prejudice” for free. But I’m not sure what’s going on with titles like Noel Hynd’s “Midnight In Madrid” (No. 1 on the Kindle charts) or Beth Hensperger’s “Not Your Mother’s Slow Cooker Recipes for Entertaining” (No. 9). Anyone want to weigh in?

I’m also not sure what conclusions we can draw from the dominance of freebies on the Kindle charts. I’m tempted to say that Kindle buyers are rabid but indiscriminate readers, and they’ll lap up whatever you put in front of them.

But without a real sense of the numbers, which Amazon is never going to cough up, it’s hard to tell what the sales patterns really look like.

I suspect, for instance, that a lot of the freebies are picked up by readers in the first few weeks they own a Kindle when they’re looking to download something simply for the sake of downloading something.

I also assume that the Kindle charts are skewed by hardcore early adopters’ reading habits. And that the patterns will start changing now that more casual users are picking up the Kindle for the first time.

And in case you were wondering–because I was–Amazon says it is not counting free book downloads when it releases sales statistics like the one it put out on Saturday, when it said more customers had purchased Kindle titles than physical books on Christmas day.

[Image credit: lordcolus]

CBS Tells Ad Networks It's Going Cold Turkey

Peter Kafka — Mon, 14 Dec 2009 11:00:32 +0000

Here’s a blast from the pre-Lehman past: A big Web publisher that says it is going to dump ad networks and sell every piece of inventory itself.

CBS (CBS) says it will stop doing business with the ad networks, which are ubiquitous on the Web, and will offer access to its audience of 60 million unique visitors solely via its own salesforce.

AdAge’s Michael Learmonth says CBS, bolstered by its 2008 purchase of CNET, is the biggest publisher on the Web to cut off the hundreds of networks that try to match publishers and ad buyers.

Sounds right to me. Because while lots of people like to complain about ad networks, almost everyone uses them.

Other big publishers that have cut off ad networks entirely include Time Warner’s (TWX) Turner Networks, the Gawker Media blog network and…not many others.

The ad network debate in a nutshell: Anti-ad network types argue that handing over inventory to the networks gives publishers a short-term boost because it allows them to sell ads they wouldn’t move on their own. But doing so trains buyers to avoid buying higher-priced inventory from the publishers themselves, which means that stuff gets harder to sell in the long run.

The counterargument: What are you people smoking? Ad buyers should be trying to reach their target audience at the lowest possible price. And trying to fight that impulse is like fighting gravity.

Still, there is a larger movement afoot to try to at least sell some inventory at higher prices, even if that means leaving dollars (or pennies) on the table.

That’s one of the cornerstones of Aol CEO Tim Armstrong’s strategy, and it’s what Yahoo (YHOO) is trying to do as it reshapes its Right Media platform. See also: Firms like 5to1, which say they can turn publishers’ low-rent “remnant” ads into more valuable stuff.

The countermovement, though, is at least as strong, as ad buyers and brokers use technology to move more and more inventory at ever-more “efficient”–i.e., cheap–prices. See: Google’s (GOOG) relaunched DoubleClick exchange and the one that Microsoft (MSFT) intends to roll out next month.

Was It All a Bad Dream? Ad Business Optimism at 2007 Levels.

Peter Kafka — Mon, 30 Nov 2009 15:30:35 +0000

Your semidaily dose of advertiser pulse-taking: People who plan to spend money on ads seem more chipper than they have been in two years.

The summary, via MediaPost:

The optimism of ad executives to boost their advertising budgets has risen to its highest point in two years, and is now at pre-recessionary levels, according to the most recent in a series of periodic surveys gauging the long-term confidence of advertisers and agency media-buying executives. The study, which is based on an index of executives who plan to boost their ad spending over the next 12-months vs. those who plan to decrease it, currently stands at a positive difference of four percentage points, the highest level since the fall of 2007, when the index stood at positive eight percentage points.

And a chart! (Click to enlarge.)

That data point comes from Advertiser Perceptions Inc., which periodically polls ad buyers about their moods–and more practically, whether they intend to spend more or less in the future.

This tracks with the last report we saw from the firm back in May. And more generally, with anecdotal stuff publishers and ad types tell us.

The usual caveats: Things are getting better, but that doesn’t mean they’re good. And online growth is good, but it’s best if you’re Google (GOOG); everyone else is going to see much smaller gains. Or, at least as likely, smaller declines.

Meta Men: Yahoo Advertises Advertising to Advertisers

Peter Kafka — Tue, 24 Nov 2009 17:00:41 +0000

What if somebody made a version of “Mad Men,” but replaced the nostalgia and sex appeal with timeliness and accuracy? It would be sort of amusing, in small doses. Like this clip Yahoo (YHOO) made with other pitchmen in mind:

Personally, I think this stuff needs to be a lot shorter, like the industry satire that CollegeHumor put together a while back. But whatever. It’s amusing enough, and it’s not aimed at me, anyway.

Which is a good reminder that despite what armchair ad critics like me have to say, a lot of the rebranding efforts that Yahoo, and now, AOL, have underway aren’t aimed at us anyway: They’re aimed at a relatively small number of ad buyers, planners and other pros who decide where marketing money goes. But we’re still going to enjoy assessing them.

And yes, while we’re at it, let’s note that this video is running on YouTube, which is owned by Google (GOOG). What does Carol Bartz plan to do about video, anyway?

More Money for "Real Time" Ad Tech: AppNexus Raises $5 Million

Peter Kafka — Tue, 10 Nov 2009 13:11:16 +0000

More money for ad technology: AppNexus, an ad-buying “platform,” has raised $5 million in a round led by Kodiak Venture Partners, along with Venrock and First Round Capital. The company is one of many trying to take advantage of “real-time” bidding for Web display ad inventory.

The funding is an “inside round”–only existing investors participated in the funding–which sometimes, but not always, raises a red flag. In this case, AppNexus says the funding is also an “up round”–its existing investors now think the start-up is worth more than they did the last time they bought in–but didn’t disclose a valuation.

There’s also a bit of fuzziness, still, about what exactly AppNexus does. The company says it provides a “gateway” to ad buyers who want access to ad exchanges like the ones operated by Google (GOOG) and Yahoo (YHOO)–Microsoft (MSFT) will launch its exchange next year–though many industry types think that AppNexus is itself an ad exchange.

The company certainly boasts lots of ad exchange bona fides. Co-founders Brian O’Kelley and Mike Nolet are both veterans of Right Media, the ad exchange Yahoo bought in 2007. And in September, the company brought on Michael Rubenstein, who had been running Google’s exchange.

CBS Digital Boss Quincy Smith's Not-Quite Exit Interview: "Hulu's a Great Service. That's Part of the Problem."

Peter Kafka — Wed, 28 Oct 2009 20:31:56 +0000

Quincy Smith has finally announced that he’s sort of leaving CBS but will stay on as an adviser on its Web video strategy. So it seems like a good time for him to explain just what CBS’s Web video strategy is.

The short version is that unlike its broadcast peers, CBS (CBS) has been reluctant to make many of its shows available on the Web because it worries that doing so cuts into its core TV business.

So while GE’s (GE) NBC Universal and News Corp.’s (NWS) Fox put Hulu together, CBS stayed away. And when Disney (DIS) decided to join the joint venture earlier this year, CBS executives argued strenuously against the deal. Instead, CBS has been content to use the Web as a promotional tool for TV via outlets like Google’s (GOOG) YouTube.

The longer version is below, via the transcript of a brief chat I had with Smith this afternoon to discuss his plans and the network’s. This is stuff he’s talked about before–to reporters, in industry forums, and even via emails he wishes he hadn’t written–but I’m running it at length here.

Because 1) I think Smith does a good job of explaining the push-and-pull of Web viewership vs. Web economics that everyone in big media is grappling with, and 2) I want people to see just how difficult it is to keep up when Smith talks. He can get out a lot of words in a relatively short time.

I also had a quick chat with CBS CEO Les Moonves, who made many of the points Smith did, but with less verbiage: I’ll get you that transcript shortly, too.

Peter Kafka: Since you’re going to be advising CBS’s Web video strategy, why don’t you lay out, for the record, where things stand?

Quincy Smith:

We recognize that the Web is two things. It’s both a new medium…and there my example has always been, look at fantasy football: When you’re nice enough to watch the Jets just pound the snot out of the Raiders on Sunday, on a CBS channel…on fantasy football on CBSSports.com, you start on the Tuesday before and end the Wednesday after.

And what are you doing? You’re personalizing it, you’re becoming more of a fan of the game [Smith goes on to praise CBSSports.com's feature set]. All of those things are additive, so when Sunday comes in, you’re actually more of a fan, and you’ve even more convinced you’re going to watch that broadcast show.

Now, I realize that sports is reasonably bulletproof, and a good case study to begin with versus some of the other programming, but the fact is, the Web is a new medium. So what do I also mean? Tech reviews on CNET, Money Watch being watched on BNET. GameSpot videogame reviews.

Access to content that CBS didn’t already have, that are additive–both in their own right online, with the margins that the CNET business is used to, and where we’re getting just stronger and stronger from a margin perspective–and potential content that can also be applied to our [local TV stations owned by CBS], our affiliates, our broadcast news, as well as the radio. So that’s the side of our business that is $600 million revenue and $50 million-plus profit on the bottom line.

The other side of the Web, the side that is most thought of by many journalists, is the threat of an IP-deliverer of video. And how you turn that threat into an opportunity.

And so, from that perspective, as you know, we didn’t go ahead and say, “Okay, we’re going to lock down and stream, with all of our other peers in broadcast, and come up with the same rules, and embed and right-click this and go away.” I’ve never had a beef with Hulu. Hulu’s always worked as a great service. That’s part of the problem.

As a network, we need to make sure that our content is being seen where the dollars matter. And right now that’s on air. Opportunities like TV Everywhere–we’re not putting all of our eggs in that basket, though we are big advocates of it–are ones where you can actually take and expand and extend the television market online, so it doesn’t matter what screen you watch “CSI” on; what matters is that you watched it, it counts and you saw the ads.

But until that happens, it’s crazy to just stream the shows for zero economics. When in fact you can make a lot more money doing things that are additive and complementary to the rest of the CBS line. That’s where CBS interactive comes in now.

Kafka: But TV viewers are showing an increasing interest in watching their programs on the Web, whether from legal services like the Web or illegal torrents and pirate sites. Don’t you need to reach them where they are?

Smith:

Now, if you really look at those numbers, what they’ll say is [online and offline video are] both growing, right? We’re having the best year ever as America’s largest broadcast network, and I think that 99.9 percent of that–this is the quote I’ve never been able to get in there–is that’s [because] of the great content that we have. There’s some infinitesimal basis point that’s relevant [to CBS ratings because] we are making sure that when people watch it, they’re more inclined to watch it on television. For now.

Once that solution moves, once those economics move–whether that’s more ads, [higher] CPMs, more ad buyers….You and I can say all day long, “We’re sold out on Web video. That’s going really well. It’s sold out.” Well, no kidding, it’s sold out. It’s a $700 million market. The television market is $120 billion. And of that, $700 million, half of those [ad buyers] are spending 90 percent of their time doing Google keywords, not buying online video.

The key is, how do you turn television buyers into video buyers? And that’s where a solution like TV Everywhere comes into play.

And by the way, looking at [Hulu CEO Jason] Kilar’s comments the other day, in Colorado [at an industry convention], he sees that too. He’s more sophisticated on this stuff than most anybody. From the perspective of, he understands that’s where the big dollars are. And so he probably went at it as, “I’m going to aggregate all the people first, so hopefully things like TV everywhere come to us.” From our perspective at CBS, we’ve got to go to them.

I don’t hate Hulu. Hulu’s world-class video viewing. What I don’t understand is, why license all that content to something that works that well, that seamlessly, yet–without the economic model around it?

Looking for Microsoft's Ad Exchange? Wait Until (Early) Next Year.

Peter Kafka — Wed, 28 Oct 2009 10:01:08 +0000

Microsoft bought ad exchange company AdECN more than two years ago. And unless you’ve been paying very close attention to advertising technology, that’s the last you ever heard of it.

This should finally change next year. People familiar with Microsoft’s (MSFT) plans say the company intends to open the exchange, which will allow online ad buyers and sellers to match up in real time, in January. That will put it several months behind Google (GOOG), which turned on its real-time ad exchange in September.

But on the plus side, AdECN will offer lots of intriguing inventory from the get-go: It will sell space on Microsoft’s giant MSN network, as well as inventory on sites the company reps, like Facebook, Digg and News Corp.’s (NWS) Fox Sports.

Here’s Microsoft’s formal statement about AdECN’s the timeline:

AdECN and Microsoft remain fully committed to the AdECN Exchange and exchange business. AdECN has been running a Pilot of its Federated, real-time bidding technology within Microsoft for the past several months and will be rolling that product out to a select group of participants in the coming months.

Real-time ad exchanges are a big deal for people trying to automate advertising buying and selling. They differ from older ad exchanges, like Yahoo’s (YHOO) Right Media, in that they’re supposed to let buyers and sellers negotiate a price within milliseconds on specific pieces of inventory.

But it’s not clear that buyers and sellers will embrace real-time exchanges. In order to use them, for instance, they’ll have to build, buy or rent technology that allows them to make and process orders at lightning speed.

AdECN manager Jeff Green left Microsoft earlier this month without explaining what he intended to do next. Jed Nahum, Microsoft’s director of network strategy and planning, is running the unit in the interim.

(Disclosure: News Corp. owns Dow Jones, which owns this site.)

[Image credit: rednuht]