AllThingsD » profitable

Talk About Discounting: Groupon Gets a Pre-IPO Smackdown

Kara Swisher — Mon, 13 Jun 2011 13:15:54 +0000

It has only just announced its IPO plans, but Groupon is already getting a bitter taste of the brutality of being more public in an increasing series of negative reports aimed at its business prospects and execs.

That has included a spate of posts after it filed to go public last week about the unusual accounting treatment in an S-1 regulatory filing for the offering, which also showed a large outflow of its venture funding to the pockets of the Chicago-based social buying site’s founders.

Since then, though, the gloves seem to be off for Groupon, just as it starts to market itself to Wall Street investors.

Perhaps the toughest so far has been one written by Fortune’s Kevin Kelleher, painting a very sketchy investing portrait of the company’s Chairman and co-founder Eric Lefkofsky.

Wrote Kelleher in a piece titled “The Checkered Past of Groupon’s Chairman”:

But Groupon’s IPO has brought an uncomfortable spotlight onto Lefkofsky. While some attention focuses on his ambitions as an investor in tech start-ups, others see a “spotty history” and draw parallels between the past and the present. Lefkofsky’s track record, reflecting failures and successes, bears certain hallmarks: Rapid revenue growth accompanied by big losses, a penchant to sell stock early on, and lawsuits filed by investors, lenders or customers who feel they have been wronged.

Ouch.

While one of the lawsuits mentioned in the piece was dismissed with prejudice, it did not help that the piece included an early email used in the case, written by Lefkofsky in the Web 1.0 era, that read in part:

“Lets start having fun…lets get funky…let’s announce everything…let’s be WILDLY positive in our forecasts…lets take this thing to the extreme…if we get wacked [sic] on the ride down-who gives a shit…THE TIME TO GET RADICAL IS NOW…WE HAVE NOTHING TO LOSE…”

Double ouch, even if it is probably a bit unfair to use such rookie remarks from a young entrepreneur back then to reflect on him today.

Still, Lefkofsky — whom I met with recently at Groupon’s HQ and found as whip-smart and savvy as any Silicon Valley sharpie — does seem to need to be more circumspect in his utterances today.

Most specifically, the day after its IPO filing, he told Bloomberg in an interview that Groupon will be “wildly profitable,” referencing worries about losses unveiled in its financial statements and his past record of start-ups.

Said Lefkofsky on June 3:

“I’m going to be in technology for a long time. I’m going to start a lot of companies. These are not sham companies. These are great businesses. InnerWorkings is profitable. Echo is profitable. Groupon is going to be wildly profitable.”

While sources said it is unlikely that Groupon will be forced by the Securities and Exchange Commission to make a new filing due to the remarks, it’s just the kind of mistake the typically voluble company needs to avoid going forward.

In other words, no more words from Groupon.

Video: After Cisco Sacrifices His Baby to the Gods of Wall Street, Flip Founder Jon Kaplan Speaks!

Kara Swisher — Tue, 12 Apr 2011 20:08:28 +0000

Right after BoomTown heard the sad news this morning that Cisco was jettisoning its Flip digital video camera division–part of a transparent effort to assure Wall Street that it was no longer serious about its wacky foray into the consumer market–I lobbed in a call to its founder Jonathan Kaplan to get him on video talking about the loss.

The Flip, of course, has been my go-to tool to harass and annoy Silicon Valley moguls, since it appeared on the scene many years ago. The technique for the simple device was to essentially stick it up someone’s nose until they cried “Uncle!” and told me what I wanted to know.

It’s not entirely clear why Cisco didn’t make more of an effort to sell Flip–I got three calls from big consumer Internet and electronics companies that would have been logical buyers this morning alone, all of whom said they would have seriously considered purchasing the iconic brand. It remains the top-selling camcorder in the U.S., with 21.6 percent of the market.

Cisco bought the start-up behind Flip, Pure Digital, in March of 2009 for $590 million in stock, and the product has sold many millions of units in its short and cruelly ended life.

The first commercially-branded Flips were, in fact, introduced at the third D: All Things Digital conference in 2005 by Kaplan, and he first talked with Cisco CEO John Chambers about selling the innovative Flip at D4 in 2008.

While Wall Street has been worried about the impact of smartphones, especially the iPhone, on Flip’s business–helped in part by Apple CEO Steve Jobs making that point in the photo here at a music event in the fall of 2009 (after which, Cisco defended Flip on Twitter)–it still boggles the mind why Cisco could not have found a new home for it, rather than lopping off all those jobs.

Flip has reportedly been profitable on a standalone basis, several sources said, although probably not when you glom all those shared Cisco corporate costs on top of its puny shoulders.

Flip’s axing, in fact, is clearly a lame attempt to get serious by Cisco–whose shares have been suffering of late–in order to assuage investors that it was focusing on its core business of networking after a series of consumer-facing experiments. While these consumer efforts were but a drop in the giant Cisco revenue bucket, killing them gets lot of ink.

Expect more such “We’re back!” announcements from Chambers and Cisco in the coming months, as it is part of the classic CEO Playbook 101.

Kaplan remained mum on all that in our chat in the Noe Valley Starbucks, which you can see below, along with my favorite Flip moment, where I got all up into Facebook co-founder and CEO Mark Zuckerberg’s business. I also added two other videos I did when my various Flip cameras met new versions in 2008 and in 2010.

Big single tear–it’s just not the same with an iPhone:

[ See post to watch video ]

Kayak's IPO Filing: We Don't Depend on Search Engines

Liz Gannes — Wed, 17 Nov 2010 16:48:05 +0000

Travel search provider Kayak today filed with the SEC for an IPO worth $50 million, with no price per share specified. But it did specify a bunch of stuff about its business in its S-1.

The Kayak iPad app

Kayak had revenue of $128 million for net income of $6.2 million through Sept. 30 of this year, up from $86.6 million in revenue and net income of $10.4 million last year. The company significantly increased its marketing spending in that period to $69.1 million from $36.0 million. It has been profitable since 2008.

Kayak is in a bit of a precarious position, since it licenses fare information from ITA Software, which Google has agreed to buy. This is a significant expense; Kayak said in the filing it expects to pay ITA $21 million from the beginning of 2010 to the end of 2012. The company admitted that Google messing with ITA could have a “significant negative effect” on its business.

However, Kayak sought to declare its independence from search, saying very little of its traffic comes from Google and the like. The company contended this is because its users are loyal to its brand. So far this year, 72 percent of Kayak queries came from direct visitors to its site, 15 percent from advertising and only eight percent from users referred by search engines. Kayak had 469 million user queries through Sept. 30, with year-over-year growth of 37 percent.

Kayak also has a contract to show Google ads. The filing reports that 15 percent of Kayak advertising revenue so far this year has come from Google, and eight percent of total revenue (the other source of Kayak revenues is referrals).

Kayak is trying to push itself as a mobile growth story, with four million downloads of its mobile apps so far. The company had joked earlier this month that it was putting out its own phone (riffing on rumors of a “Facebook phone”) called the KPHONE and including features like an “actual igniting signal flare” and automatically dialing of your mom every 15 minutes “because you are a terrible person and seriously you never call.” Obviously that sense of humor doesn’t come through in the S-1.

Google's Victory Dance: Check Out Our Go-Go Numbers!

Peter Kafka — Thu, 14 Oct 2010 22:45:28 +0000

After showing off financial numbers that blew away Wall Street’s earnings estimates, what could Google do for an encore? Trot out even more numbers, via a tantalizing but not-that-revealing striptease.

Here are the three data points that the search giant showed off during its earnings call this afternoon. All of them “begin with the letter B,” as product SVP Google Jonathan Rosenberg noted, and all of them come with caveats:

$2.5 billion: Non-text display ad revenue run rate. That number includes ads from its DoubleClick unit as well as YouTube.
2 billion: YouTube monetized views per week.
$1 billion: Mobile annualized revenue run rate.

All of those seem big–and they are! But they’re also deliberately fuzzy enough that it’s hard to tell exactly what they mean.

For instance: As Henry Blodget notes, those display-ad dollars are gross revenue, which means that Google only keeps a portion of them. And while that two billion YouTube views number is up from a billion a year ago, it’s proportionally the same: A year ago YouTube said it was monetizing a billion views a week while serving up a billion views a day; now the video site says two billion views a week and two billion a day.

Meanwhile Google officials, who routinely announce that YouTube is close to profitability, refused to tell analysts whether YouTube is actually profitable.

No matter! The point of b-as-in-big numbers was to impress Wall Street with Google’s ability to create new revenue streams beyond its core search ads. And the data, along with the company’s impressive Q3 performance, seems to have worked: Shares are up nine percent in after-hours trading.

——————

EARLIER

There’s the beat Wall Street was looking for. Google reports earnings of $7.67 a share and net revenues of $5.48 billion. The consensus was for $6.67 and $5.25 billion. GAAP EPS was $6.72.

Google (GOOG) has been plowing money into capital expenditures and people–it now has 23,300 employees, up from 21,800 months ago, a 6.8 percent increase–but it has been able to keep operating income quite healthy, anyway. Adjusted operating income was $2.93 billion, well above the $2.77 billion consensus.

GOOG is up considerably, now seven percent, in after-hours trading. Robot cars for all!

You can listen to (and watch) Google’s 4:30 pm ET earnings call by clicking on this YouTube link. I’ll add updates from the earnings call occasionally starting here:

As in recent quarters, CEO Eric Schmidt is sitting this one out.

CFO Patrick Pichette starts off. Aha! Teases that “we may have” Schmidt available for the first 30 minutes of Q&A before he gets on a GooglePlane.

300 of those new 1,500 employees came from acquisitions.

Discussion of “long-term” growth–”the next 5 to 10 years.” “Simply put, we’re on this growth agenda at full throttle…investing heavily in people and in product.”

There’s a “war for talent” in our industry, which is “out of synch” with the broader economy. Currently exploring how to attract and retain people. Winners and losers determined by this battle.

Re: Product investment, which you’ll hear about from product SVP Jonathan Rosenberg. He’s going to tell you about some numbers, but don’t expect to hear an update on these–they’re merely “proof points” about Google’s success.

Here’s Rosenberg, teasing new previously unreleased numbers.

Here they come. Starting with search and Google Instant:

Impact has been “very minimal” on revenue and “quite expensive” from a resource perspective.

But! “We launched it because we could.”

As search gets better, ads have to keep pace. Great momentum with AdWords.

New ad formats appear on more than 10 percent of query. Some formats show clickthrough rates as much as 10 percent on some, up 30 percent in others.

Big numbers, “which all begin with the letter B.”

$2.5 billion: Non-text display ad revenue run rate. That includes DoubleClick, YouTube.

2 billion: YouTube monetized views per week

$1 billion: Mobile annualized run rate

Mobile search queries up 5 times in the last few years.

Back to Pichette, to tamp down numbers.

In some cases, there is overlap with numbers. For instance, with AdMob, numbers counted in both display and mobile.

Time for Q&A, Schmidt is now on the line.

Schmidt says query growth is pushing click growth, and so are new ad formats. Ads are more compelling, etc.

Pichette notes that AdX numbers are included in the $2.5B display total.

Q: Please talk about YouTube. Of the two billion monetized views, what percent is that of total views? And are you profitable yet?

Pichette: Re: Profitability, “We have not made any comments on it.” [Except of course when they do, over and over.]

Rosenberg: Note that we’ve said we do two billion views per day–that will give you context.

Sorry, missed a Q.

Schmidt says growth of Android is “well past what I had ever hoped for.”

90,000 apps on Android “and growing very fast.”

Question about “proprietary benefits” of Android.

Schmidt: Android is the “largest single platform play” in mobile today.

We’re growing it by giving software away. How does that help us? Well, for starters, people who use Android search two times more than anyone else. Obvious benefit for us there, and search is more lucrative for us there as well, and that makes Android “hugely profitable.”

And we can add other value-added services to Android, but that’s not the focus right now.

Questions on cost: Cost per employee has declined. Can you continue that? And on mobile, will you stay with the “indirect monetization” Android strategy?

Pichette: Wouldn’t read anything into the cost-per-employee numbers. But we’re continuing to be frugal and generous.

Ad boss Nikesh Arora: We’re excited about the revenue model we have. We have no reason to change the model we have with Android.

Schmidt: And display will become a very big component of mobile.

Q: On display, can you break out YouTube and AdX numbers? And what do you think of competitive Android marketplaces?

Pichette: No breakout of numbers. [Duh.]

Schmidt: Goal of the app store is to make money for developers. Not a revenue goal for Google. More stores are a “win for everybody.”

Question about CPC on mobile devices. Rosenberg: They’re lower than desktop, because there aren’t many practical ways to consumate transaction. But on the iPad, activity looks a little bit more like it does on a PC, because there’s more room to enter credit card numbers, etc.

Q: Please discuss cannibalization between smartphone and PC–are iPad and tablet searches incremental or cannibalization? And can you give us color on international 26 percent growth?

Rosenberg: We don’t see cannibalization. We see mobile as complimentary to desktop. Different use patterns–mobile search is on weekends, during lunchtime, etc.

Arora: Generally, trend positive across the board. U.K. a bit weaker, but some of that is FX. Southern Europe way better than Northern. Asian markets robust.

Q: Competitors make $300 profit per handset sold over the lifetime of a device.You’re approaching this with a different model, but do you think that’s an upper limit on that number?

Schmidt: Our model is that handset makers and manufacturers make a lot of money from the phone, and we make money from advertising. So can’t compare the two, and premature for us to guess what we can do. “It should be highly lucrative” and a “very very strong revenue stream compared to a PC.”

Q: On social search. How do you “capture the signal” without access to the data feeds, as you have with Twitter.

Schmidt: “There are some ways we can do that” now, and we’re working on new ways.

Sorry, stepped out. Back now.

Q: TAC rate seems to be lowest since IPO. Sustainable? Growth has been driven by volume, not price. Sustainable, and/or will pricing increase going forward?

Pichette: MySpace deal is now over. That saved us a bunch of money. And mix of our partners will effect our TAC. That’s about it.

Rosenberg: Can’t answer volume/price question without “being forward-looking.” [Heh]

Q: Microsoft/Facebook deal was exclusive. But do you think you’ll see exclusive data deals? And what about Groupon, etc.? Can you compete there?

A: Value of exclusive data is “swamped” by “vastness” of the Web. So no concern there.

Schmidt: Always a concern that large chunks of data are not accessible to search engines….long pause… up to the content owner to decide how much to expose. We believe the world is better off if more information is searchable. “We fundamentally believe that.”

Rosenberg: Daily deals are very exciting. “A lot of small companies doing a fabulous job there.” We participate a little bit via sitelinks. But no question “that’s a very exciting and hot space.”

Q: When will Google Instant be on the BlackBerry or iPhone? What’s Android activation rate? And why not let advertisers bid directly on mobile inventory?

Rosenberg: Instant availability on other platforms “relatively soon”–probably this fall.

Not updating Android activation numbers.

Q: Given that non-core search is more material, do you think you’ll keep allocating resources with your 70-10-10 model? And when do you anticipate mobile overtaking desktop?

Schmidt: On mobile vs. display: Even if we knew I don’t think we’d talk about it.

On core vs. emergent: We talk about this all the time. Depends. Android is very small, and growing fast, so they get all the resources they need. We end up still at 70-10-10, but that’s not really a formula for us.

Pichette: What really matters the most to us is as Eric says, “When you see a hockey stick, pour gasoline on that fire.”

Q: Big-picture data question: What does Google think about leveraging user data to better target ads (see Facebook, Yahoo, etc.)–particularly with search data and display?

Schmidt: “We have a pretty strong opinion that we’re not going to do very much of it.” We’re intensely serious about privacy.

So “we’re not going to do the kinds of things that we could do with it… without your explicit permission. And in many cases we probably won’t do it forever.”

A question on display, which I’ve missed but will have to return to.

Pichette wraps things up. Today’s data points “are not about giving you information” for coming quarters, but to give you confidence that we’re building long-term businesses.

Call ends.

Mark Mahaney’s cheat sheet will help you decipher the numbers:

Zillow's COO Rascoff Becomes CEO; Co-Founder Barton to Exec Chairman

Kara Swisher — Tue, 14 Sep 2010 19:00:33 +0000

In an interesting corporate move, the COO of online real-estate site Zillow, Spencer Rascoff (pictured here), has been promoted to CEO, replacing founding CEO Rich Barton.

Barton–who is also venture partner at Benchmark Capital and on the board of Netflix (NFLX)–will remain executive chairman of Zillow.

He co-founded it in 2005 after founding the Expedia travel site in 1994, while an exec at Microsoft (MSFT) and spinning it out in 1999.

After Expedia, Barton moved on to Zillow, also based in Seattle, which has raised $87 million in funding.

“Zillow is in a fantastic spot on many metrics, so it was ready for a new leader for the next phase,” said Barton, who said he would still remain very involved in the company.

One of the reasons Barton said he felt he could move on: Zillow is now profitable on a cash-flow basis via local and national advertising and referral fees. And it had 12.5 million unique users in August, up 41 percent year over year, despite an economic downturn.

Zillow has been focusing a lot on mobile apps, which now represents 15 to 20 percent of Zillow traffic on weekends.

Rascoff said he will focus on further growing reach and revenue on the Web and via mobile. “It’s a priority to grow the size of our audience,” he said.

The overall goal? Unlike a lot of start-up heads who are wary of IPOs, Rascoff said a public offering was the likely path for Zillow.

“I would like us to be public and we intend to be,” he said.

Here is the official Zillow press release:

Zillow Appoints Spencer Rascoff CEO

Co-founder Rich Barton Remains Executive Chairman

SEATTLE–September 14, 2010–Zillow, Inc., which operates leading real estate website Zillow.com®, Zillow® Mortgage Marketplace, and the industry’s largest mobile real estate platform, today announced Spencer Rascoff has been named chief executive officer. Co-founder Rich Barton, who has been the company’s CEO since it was founded in 2005, will continue to be actively involved in Zillow as executive chairman of the board of directors. Fellow co-founder Lloyd Frink will move from president to the new full-time role of chief strategy officer.

Rascoff joined Zillow in 2005 as one of the original executive team members and has been serving as chief operating officer since October 2008. Previously he was chief financial officer and vice president of marketing. As COO, Rascoff has been responsible for the majority of Zillow’s day-to-day operations for the past two years, overseeing marketing, finance, partner relations, legal and human resources as well as the execution of the company’s recent partnership with Yahoo! He is also a frequent housing market commentator on CNBC, CNN, FOX and Bloomberg TV.

“Spencer is an immensely capable and energetic leader who has been a driving force at Zillow from the beginning, helping to grow the company from a spark of an idea into a profitable industry leader. This promotion is well-deserved and reflects the leadership responsibility he’s been carrying for a while,” said Rich Barton, co-founder and executive chairman of Zillow, Inc. “As executive chairman, I look forward to continuing to work with Spencer and the entire team to extend Zillow’s leadership position in online and mobile real estate.”

“Working with Rich, Lloyd and the entire Zillow team has been the most exciting and rewarding period of my career,” said Spencer Rascoff, chief executive officer of Zillow, Inc. “I am extremely proud of our progress to date and even more excited about the opportunities ahead.”

Prior to Zillow, Rascoff served as vice president of lodging at Expedia, which he joined after InterActiveCorp’s $675 million acquisition of discount travel site Hotwire.com in 2003. Rascoff co-founded Hotwire in 1999 and helped grow the company from an idea to a leading online travel company in just four years. Previously, he was an investment banker in the merger and acquisitions group at Goldman Sachs and held other investment-related positions at TPG Capital, Bear Stearns and Allen & Co. He graduated cum laude from Harvard University, and he serves on Harvard’s Digital Community & Social Networking Advisory Group.

As one of the most-visited real estate sites on the web, Zillow has broken multiple records in operating and financial metrics in the past year and is profitable. In August, 12.5 million unique users visited Zillow.com, up 41 percent year over year. Zillow Mortgage Marketplace logged a record 314,000 loan requests in August, up six-fold from a year ago. National and local advertising sales, including sales through the company’s location-based mobile apps, are also accelerating. Total downloads of Zillow’s mobile apps have surpassed 2 million, making Zillow the most popular real estate app on iPhone®, iPadTM, Android® and Windows® Mobile devices. As previously announced, Zillow recently teamed with Yahoo! Real Estate to create the largest real estate ad network, for which Zillow coordinates sales across the two platforms. Later this fall, Zillow will power all for-sale listings on Yahoo!, bringing more than 4 million home listings to Yahoo! users.

The Profits Will Come Out Tomorrow? Ning CEO Rosenthal Talks About Premium Changeover

Kara Swisher — Mon, 19 Jul 2010 12:15:31 +0000

Last week, BoomTown moseyed on down to the Palo Alto, Calif., HQ of Ning–the high-profile social networking platform co-founded by Silicon Valley icon Marc Andreessen–to talk to CEO Jason Rosenthal (pictured here) about a dramatic shift in the start-up’s business plan tomorrow.

As in, go all-premium, trying to find a way to turn the start-up–which has raised $120 million in venture funding since its late 2004 founding–into a profitable enterprise.

Translation for Web 2.0: Profits are when you make more money than you spend.

Moving Ning to that cogent realization has been the unenviable task that has fallen to Rosenthal, who had been COO of Ning until he replaced its founding CEO, Gina Bianchini, in March.

Within a month, Rosenthal had whacked 40 percent of the staff, as well as the free, advertising-based Ning product.

In its place: A paid version that formally starts for the 300,000 active networks on its service tomorrow. While there is a 60-day free window, it’s all premium from here on out.

Wrote Rosenthal, in part, in a memo to staff in April:

“When I became CEO 30 days ago, I told you I would take a hard look at our business. This process has brought real clarity to what’s working, what’s not, and what we need to do now to make Ning a big success. My main conclusion is that we need to double down on our premium services business.”

There will also be cases of sponsored communities, such as a partnership announced today around healthcare, in which WEGO Health will provide Ning Plus service to the many health-related networks for free for one year.

Ning has also struck sponsorship relationship with Pearson Publishing on education-focused networks, for example.

We’ll see how it all goes, but it’s a true and much-needed shift from the growth-over-profits mentality that has seeped too deeply into the Web 2.0 ethos.

Now, it seems, it’s time to pay the piper, at least at Ning.

Here’s the video of my interview with Rosenthal about all this, as well as short tour on Ning’s HQ:

[ See post to watch video ]

What's Up With Foursquare, Doc? Try a Bridge Investment, Facebook Talks and More!

Kara Swisher — Fri, 11 Jun 2010 12:10:39 +0000

Memo to Dennis Crowley: BoomTown has not forgotten you!

In fact, I have been tracking the popular social location service he helms the way Elmer Fudd chases Bugs Bunny, since my last update in April.

That was in the midst of a flurry of talks the New York-based start-up was engaged in with a series of Silicon Valley venture firms; it was also entertaining a serious $120 million acquisition offer from Yahoo (YHOO).

But because Foursquare had gotten so much media attention as the next big thing, the situation quickly became complicated and confused.

So much so, in fact, that one firm, Andreessen Horowitz, said publicly that it had pulled out of the funding talks due to the confusion and, well, hype, around Foursquare.

Things then quickly settled down, as the company and its investors went quiet.

Actually, not as quiet as they thought, said a range of sources close to the situation, with some under-the-radar activity of late from the innovative company.

Here’s the deal right now:

The current plan is for Foursquare’s original investors to do a “bridge” investment for a smaller sum, because the original $1.35 million raised from Union Square Ventures and O’Reilly AlphaTech Ventures, as well as some well-known angel investors, has been spent.

The valuation for the king of “check in,” said several people, is hovering at about $80 million.

Meanwhile, talks with new VCs have been tabled for now, said several sources, as several firms, such as Accel Partners, have decided not to move forward at this point.

But that could change quickly. In particular, Khosla Ventures’ Gideon Yu has reportedly been keen to invest, along with other firms.

While many in Silicon Valley feel Crowley mucked up the first round of talks, that will not matter if investors feel the company is on a strong growth path.

Also in the mix: Foursquare’s talks with social networking giant Facebook about a possible acquisition or investment.

Those discussions, said several sources, have gone from nonserious to serious, but have also not been conclusive.

Facebook execs have been trying to sort out their location strategy, which might involve more federation than the backing of one single service.

Interestingly, Foursquare CEO and founder Crowley has been burning up the tech conference circuit of late, dropping vague hints and making leading jokes about what’s next, even as he touts his company’s growth in an increasingly competitive space.

At the Mashable Media Summit in New York this past week, for example, he noted that Foursquare had almost 1.6 million users and is growing fast.

Crowley noted that more partnerships and features are coming, as the company tries to figure out a reliable monetization plan.

But this does not mean it is profitable and, thus, all that growth needs investments, which Crowley coyly referenced in his interview.

But the peek-a-boo is unnecessary, since what Foursquare needs to do is obvious, sometimes painfully so.

But, as always, it’s also entertaining.

Speaking of which, here is Crowley talking about Foursquare in a backstage interview at the Mashable event, as well as some Bugs and Elmer.

But, be vewy, vewy quiet–he’s hunting wabbits:

Blip.TV Raises $10 Million for More Web Video You (Probably) Won't See on Hulu

Peter Kafka — Wed, 19 May 2010 12:00:35 +0000

YouTube isn’t the only Web video company celebrating its fifth anniversary. Blip.TV doesn’t have a celebratory channel, but it is marking the occasion in style: The New York-based company has raised $10 million in a C round led by Canaan Partners and Bain Capital.

Blip doesn’t make Web video–almost none of the Web video companies that survived the last bubble do that. Instead, Blip helps distribute clips, generally made by small-time producers, and sells ads against them. It splits the proceeds with the producers.

And like many other Web video outfits, Blip still isn’t profitable, though I’m told that could change by the end of the year. But Blip has a modest burn rate and has been steadily ramping up its list of big brand advertisers. Which is why it has been able to get away with raising only $8 million prior to its newest round.

Here’s an interview I shot with CEO Mike Hudack yesterday, in which he explains how a Web video company can survive without the backing of Google (GOOG) or big media companies. And he sketches out his vision for Web video’s future: Lots of people spending very little to make interesting stuff, and making enough money to keep on doing it.

Following that, a clip of Nostalgia Critic, one of Blip’s most successful shows. I don’t get it, but plenty of people do.

[ See post to watch video ]

BLIP.TV RAISES $10.1 MILLION IN FUNDING

Online Media Company Secures Capital from Canaan Partners and Bain Capital Ventures.

NEW YORK, NY – May 19, 2010 — Next generation television network blip.tv today announced the closing of its third round of institutional capital, led by Canaan Partners and existing investors Bain Capital Ventures. The company will use its new funding to accelerate the growth of the independent Web shows that blip.tv hosts and distributes, expand its content services team, continue to grow its international advertising sales force and develop new products for viewers and producers.

“Blip.tv turns five this year, and I couldn’t be happier with our success to date and our growth plans for the future,” said blip.tv CEO and co-founder Mike Hudack. “We started in 2005 with a simple mission: to change the entertainment industry by making independent show production sustainable and scalable. We’re moving on to the next phase of executing against that mission, and with help from both Canaan Partners and Bain Capital Ventures I’m confident that we’ll be successful. We’re making more shows sustainable every single day, and now we’re going to accelerate that change even faster. This is an extremely exciting time.”

More than 44,000 independent show producers visit the blip.tv show creator dashboard every day to review statistics, engage with their communities of viewers, manage their shows, and release new episodes across blip.tv’s extensive distribution network. Together these shows attract more than 90 million video views a month. Eighty-five percent of those views are paired with targeted, direct-sold advertising from brands such as PepsiCo, Chevrolet, Samsung, Starbucks, AT&T and Scion.

“We’ve been following blip.tv’s growth for years, and we’re excited to invest in the company as it continues to change the entertainment industry,” said Warren Lee, Venture Partner at Canaan Partners. “Blip.tv has executed on its vision, and the company is creating a new Web television industry that is drawing top talent from traditional television networks, the film industry and garages across America. We look forward to working with Mike and his team to continue transforming entertainment together.”

Washington Post Announces a One-Time Fire Sale for Newsweek

Peter Kafka — Wed, 05 May 2010 14:54:22 +0000

This is how bad things are at Newsweek: Not only has owner Washington Post Co. (WPO) hired Allen & Company to sell the magazine, but it’s not pretending otherwise.

From the release:

“The losses at Newsweek in 2007-2009 are a matter of record. Despite heroic efforts on the part of Newsweek’s management and staff, we expect it to still lose money in 2010. We are exploring all options to fix that problem,” said Donald E. Graham, chairman of The Washington Post Company. “Newsweek is a lively, important magazine and website, and in the current climate, it might be a better fit elsewhere.”

In corporatespeak, this is equivalent to hastily scrawling out a “Going Out of Business–Name Your Price” sign and plastering it on the front window.

Anyone want to make a bid? Newsweek saw revenue decline 29 percent last year and ended up losing $29.3 million on sales of $184 million.

Meanwhile, it’s worth noting that things are comparatively awesome for rival Time Magazine: Owner Time Warner’s (TWX) Time Inc. just reported that ad sales are up (unit-wide) for the first time in two years.

Ah. Here’s Time’s grave-dancing statement right now, via a press release: “TIME continues to be healthy and profitable, and a trusted source of news, reporting and analysis for millions of people in America and around the world in print, online and on the iPad. We had a highly profitable year last year and will have an even more profitable one this year.”

Twitter Turns Fire Hose on Little Guys

John Paczkowski — Tue, 02 Mar 2010 13:19:16 +0000

Google, Microsoft and Yahoo (YHOO) are no longer the only ones drinking from Twitter’s fire hose of real-time data. On Monday, the company granted seven real-time search and discovery ventures access to the data as well: Ellerdale, Collecta, Kosmix, Scoopler, twazzup, CrowdEye, and Chainn Search. Each will be able to tap into the totality of Twitter’s data stream, sifting and indexing it and using it to further build out their services.

The price of that access? Unknown, but I can’t imagine it’s much. Twitter says it’s charging companies according to an as yet undisclosed scalable licensing scheme. For the likes of Google (GOOG) and Microsoft (MSFT), that means millions of dollars–enough to make Twitter profitable. For these seven upstarts, the fee is substantially less, at least until they evolve into more high-volume users.

In any event, it seems Twitter is finally pushing ahead with a business plan that could begin to justify the venture capital investment it has attracted.

Is YouTube Finally Ready to Turn a Profit This Year?

Peter Kafka — Thu, 14 Jan 2010 16:19:55 +0000

Starting last summer, Google executives have consistently promised that YouTube was close to becoming profitable. When will that finally happen?

This year, says Barclays analyst Douglas Anmuth. He predicts that the video site will see revenue jump 55 percent, to $700 million, in 2010, and that it will “start contributing positively” to the Google’s earnings.

Why? Because YouTube is ginormous, of course. But also because the company has become more sophisticated about advertising. (Note that Google content guru David Eun said much the same thing when I talked to him last month, specifically citing the Google’s integration of DoubleClick).

Here’s the relevant part of Anmuth’s note:

Perhaps the main take-away for Google’s display business is that in 2010 we believe YouTube will start contributing positively to EPS. An improving advertising environment certainly helps, but with YouTube monetizing more than 1 billion video views every week, and with strong sell-out rates on its home-page from larger advertisers–we note 90% of the top 50 Ad Age have advertised on YouTube–we believe the site can profitably take share of the branded display & video market. We project YouTube to generate $700 million in revenue in 2010, up 55% Y/Y. Usage continues to grow. In November the total number of YouTube’s videos viewed grew 139% to 12.2 billion in November and unique visitors grew 32% Y/Y to 129 million. As a comparison, Hulu, the second most popular video site by videos viewed according to comScore, recording 923 million videos viewed.

Of course, the standard caveats that Google (GOOG) uses when people generate less flattering estimates for YouTube also apply here. It’s very difficult to get a handle on how many pages/views Google is selling and how much it gets for each one. It’s also tricky to guesstimate how much Google is spending to serve more than a billion video streams a day. So at best, this is an educated guess.

Still, it will be interesting to see if Google concurs with Anmuth. We’ll hear from Eric Schmidt et al in a week when the company reports fourth-quarter earnings.

HP Buys 3Com

John Paczkowski — Wed, 11 Nov 2009 21:00:17 +0000

[ See post to watch video ]

How to Make Money With Web Video: Books and DVDs

Peter Kafka — Thu, 17 Sep 2009 13:28:16 +0000

Eric Spiegelman has a Web video hit on his hands. “Old Jews Telling Jokes,” a series of short clips featuring exactly what the name suggests, is popular, viral and cheap to make.

Alas, it’s not profitable. Spiegelman says he spends considerably less than $1,000 for each one-minute episode, and the 50 episodes he’s made so far have generated some four million views since February. But advertising for the series, sold via Web video distributor blip.tv, doesn’t cover his costs.

Spiegelman is pretty sanguine about this, but I find it a bit frustrating. We’re several years into the Web video era–almost three years after Google (GOOG) bought YouTube–and this is the kind of stuff that should work by now. It’s original, ad-friendly, and made on a shoestring budget. If that can’t work, what will?

In any case, Spiegelman can afford to wait a bit for things to right themselves. His company, Jetpack Media, is a unit of indie movie studio Greenstreet Films, so he has a bit of a cushion while he figures out how to crack the code.

And in the meantime, he’s hedging his bets by using his Web series as a way to get back into old media, where you can actually get paid for stuff you make, in advance.

Spiegelman has repackaged the first season of his clips into DVD form, which will be sold by First Run Features (you can pre-order the first disc for $19.95).

Next up: A book deal with Bertelsmann’s Random House, via its Villard imprint, with photos from Gawker contributor Nikola Tamindzic (anyone who follows the blog-to-book minimarket will not be surprised to learn that ICM agent Kate Lee brokered the deal).

And Spiegelman can imagine other ancillary products down the line. Perhaps an audio show based on jokes that people submit via a hotline. Use your imagination. Which I guess is what you have to do if you want to make a living making Web video in 2009.

Oh, the videos themselves? They’re a lot of fun. You may have heard of a few of the joke-tellers–former New York City Mayor Ed Koch is a contributor/performer, as is real estate mogul Harry Macklowe–but the rest are fairly anonymous types who have a way with a story and a punch line. Below, a quick interview I taped with Spiegelman last week, and below that, a few of the joke-tellers themselves (Warning! These feature a couple of judiciously chosen curses).

[ See post to watch video ]

Another Bet on Video: How-To Start-Up 5min Raises $7.5 Million

Peter Kafka — Thu, 23 Jul 2009 13:43:19 +0000

Web video companies that wanted to take on Google’s (GOOG) YouTube are having a very hard time. But Web video isn’t going away, either, and there has to be some way to make it work for users, publishers and investors. Right?

Hence, another round of funding for 5min, a video start-up that just raised a $7.5 million B round. New investor Globespan Capital Partners led the round, and Spark Capital, the VC shop that has made several video bets (along with a big one in Twitter) made a second investment.

5min has now raised $12.5 million since 2007. Co-founder Ran Harnevo won’t discuss valuation, though I’m told it’s up from its A round, which is an accomplishment in and of itself.

“People do understand that video is the next thing. They just don’t see reasonable business models,” Harnevo says. “That’s the next thing that you have to do. You have to go into VCs and say, “I know how to do this.”

The company, which is based in New York City but has its roots in Israel, takes a different tack toward video than the would-be YouTubes: Rather than serving as a portal for user-generated clips or movies and TV shows, it cobbles together a library of how-to videos and distributes them to sites that don’t have any videos of their own. It now claims to reach 14 million video views across 200 sites.

There’s plenty of competition for how-to sites and videos, too, of course. But Harnevo claims that he’s been able to sell all of his inventory so far, and predicts he’ll be profitable in the next 18 months.

He was similarly optimistic six months ago, when he let me try my hand at conducting an interview with a Flip Mino. I never ended up publishing the clip, but now seems like a good time to do so–as long as you’re willing to put up with crummy sound, shaky camerawork and a stretched image. As I said, I was trying this stuff out.

Just about every thing we discussed in this interview still holds up, except that 5min now boasts 100,000 videos, up from 50,000 in December.

[ See post to watch video ]

Waiting for the Economy to Bounce Back? So Is Google.

Peter Kafka — Thu, 16 Jul 2009 20:45:43 +0000

Waiting for the economy to come roaring back? So is Google. The search giant had a decent quarter, but not one that’s going to blow away Wall Street, or convince anyone that the economy is roaring back. But it’s an okay performance for a media company in a recession.

Top line for Google’s Q2 earnings: Net revenue of $4.07 billion and earnings of $5.36. The Street was looking for net revenue of $4.05 billion and earnings of $5.05.

CEO Eric Schmidt isn’t overly effusive: “Google had a very good quarter, especially given the continued macro-economic downturn. While most of the world’s largest economies shrank, Google’s year-over-year revenues were up 3%. These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs.”

Meanwhile paid-click growth was up 15 percent, and the company continues to clamp down on expenses: Google’s headcount actually shrank in the last three months, from 20,164 to 19,786 full-time employees.

I’ll be listening in on the call and occasionally updating here.

Schmidt: “Youtube is now on a trajectory we’re very pleased with.”
“Too early to tell when the recovery will materialize.”
CFO Patrick Pichette: Still hiring, but decrease in headcount came from previously announced layoffs.
Product SVP Jonathan Rosenberg: We’re focusing more than ever on power users.
Mobile monetization picked up, driven by smart phones. YouTube’s monetized views have tripled in the last year.
Sales boss Nikesh Arora: Small advertisers have stayed consistent during downturn, and larger advertisers who have been on sidelines are coming back.
Schmidt on Chrome OS: We’re talking to manufacturers about designing “products that are very, very exciting.” Will Chrome run on existing hardware? Available for download? Still to be worked out.
Was June soft? Schmidt: We generally don’t parse interquarter trends. On YouTube: Monetizing “billions of views” per months. [Nothing approaching real numbers or real context].
Arora: “Significant sellthrough” in markets where Google has YouTube homepage for sale. Next phase of YouTube sales emphasis will be preroll ads on short-form videos.
Arora on YouTube “trajectory” comment: We’re excited about getting pieces in place to drive this forward [i.e., not talking about numbers]. Customers accepting YouTube ads: “It’s becoming accepted user behavior where they’re going to watch premium content that people have invested in, they’re going to watch pre-roll ads.”
Is YouTube profitable? Pichette: We don’t give out economics. But in the not-too-distant future, we see it being very profitable.

Here again, per Citigroup’s Mark Mahaney, is a crib sheet for interpreting the results (click to enlarge):

And here are the slides from Google’s investor presentation:

2009Q2_google_earnings_slides –

If Yahoo's Going Social, Is Demand Media Back on Its Dance List?

Kara Swisher — Thu, 09 Apr 2009 10:10:31 +0000

Last year, Yahoo EVP Hilary Schneider and then-Media Group head Scott Moore had a summery seaside dinner with Demand Media co-founder and CEO Richard Rosenblatt (pictured here) in Santa Monica, Calif., right around the corner from the online publishing company’s HQ.

While many speculated that Yahoo (YHOO) could be doing some friendly kibitzing to get a sense of where the eclectic network of general- and special-interest sites was headed, for a possible acquisition, nothing came of it.

That’s because at the time, Rosenblatt insisted that he was aiming to eventually take his company public and Yahoo was in the midst of ongoing corporate turmoil.

“There is a lot of potential here and I want to build a big company for the long-term,” said Rosenblatt in an interview with BoomTown last July (see video below).

But, as my post noted: “Still, at some point when Yahoo is not in the free fall it is currently in, Demand might make a great purchase for Yahoo.”

And now, a year later, as new Yahoo CEO Carol Bartz works to stop that slide, several sources close to the company tell me another look-see at Demand is likelier than ever.

That’s underscored with recent indications that a major strategy will finally follow through on making Yahoo’s massive but disparate service more social, especially its content offerings.

But would Bartz go as far as making a big buy now or would she be more likely to strike a massive partnership with Demand, from which Yahoo could learn a lot?

Such an acquisition could cost anywhere from $1.5 billion to–as was floated last year in better times–$3 billion. In addition, if Demand was to engage in more serious talks with Yahoo, there would likely be other suitors.

As costly as that is, some sort of link-up with Demand is an interesting idea, especially since Yahoo could use a bold and definitive move to signal social goals that play to its strengths and are not a copycat of more powerful social-networking sites now in place.

At a Morgan Stanley (MS) conference last month, Bartz said, for example, that “I do not believe we can invent the next Facebook,” while noting Yahoo still needed to be more social throughout the service, especially in its content.

And, just yesterday, a Reuters article about that focus was titled: “Yahoo’s Plan: Create Community from Isolated Sites.”

Said the article: “If [Yahoo co-founder David] Filo and new CEO Carol Bartz have their way, the kinds of social networking features available on Facebook will become part of many Yahoo websites and allow their users to network with each other without using Facebook. The company hopes the strategy will help link its disparate properties, bringing more advertising dollars and growth.”

And that’s just at the heart of Demand Media, which dubs itself the “leader in social media.”

Demand was founded in 2006 by Rosenblatt and Shawn Colo, who raised a giant pool of funding–$355 million–from gold-plated investors like Goldman Sachs (GS), Oak Investment Partners and even a private investment from major Yahoo investor Gordon Crawford.

Getting that kind of backing was due to Rosenblatt’s entrepreneurial track record.

As founder, chairman and CEO, he sold iMALL to Excite@Home for $425 million in a 1999 stock swap.

And, perhaps most famously, as CEO of Intermix Media, Rosenblatt sold it with the company’s crown jewel, MySpace, to News Corp. (NWS) for $580 million in cash.

Then, Rosenblatt started Demand, which takes user-generated content of all kinds and on all kinds of topics–especially via video–from an army of freelancers and leverages it into massive traffic that it monetizes.

Demand is also the one of the bigger suppliers of video to YouTube, which it also monetizes.

And, through the acquisition of Pluck, the company also laces social-networking tools throughout the sites, as well as for many well-known third parties.

All this has given Demand upward of 70 million unique visitors per month, at sites like eHow and GolfLink.com, with about $150 million in annual revenue.

And–drum roll please–it is reportedly profitable, although how much is not clear.

While he has long maintained a public offering was on the horizon, despite the weak economy, Rosenblatt has also been interested in the idea of how to revive major players like Yahoo and Time Warner (TWX) online unit AOL.

Both have been struggling, but still have massive traffic and brand recognition, along with large advertising businesses.

And in many ways, the energetic Rosenblatt is just the kind of product-centric and visionary exec Yahoo lacks, despite Bartz’s clear ability to get the company’s management ducks in order.

What could be even more interesting, said one source, would be to marry Yahoo and Demand with a lot of what is going on with the publishing of niche sites at AOL’s MediaGlow content unit, in a giant publishing network.

Ironically, AOL was another acquisition target of Yahoo, in yet another deal that did not pan out last year.

Here’s the interview with Rosenblatt at Demand Media HQ last year:

[ See post to watch video ]

Digg to Cut 10 Percent of Employees; Says It Will Try to Be Profitable in 2009 (The Entire Blog Post)

Kara Swisher — Thu, 22 Jan 2009 17:30:40 +0000

Digg, the San Francisco-based news discovery service and one of Silicon Valley’s more prominent start-ups of late, said in its company blog today that it would cut its 75-person workforce.

A company spokeswoman told BoomTown the cut would be about 10 percent, but would not give out a specific number of employees to be let go.

In addition, Digg noted it would be aiming to cut costs and be profitable in 2009. It will also be hiring a direct sales team.

In other words, revenue does matter too, Web 2.0!

Here’s the entire blog post on the layoffs and more, by CEO Jay Adelson:

Brief update on Digg

Hey all,

Wanted to reach out to folks with an update on Digg and our priorities for 2009 as well as address some of the recent speculation about our business.

As we’ve often stated over the past couple of months, given the current economic climate, we’ve made the decision to take a more conservative approach to our expansion plans and aggressively focus on reaching profitability within the year.

This means we’ll be taking proactive measures to manage our costs including a headcount reduction in certain areas that are less core to this year’s objectives while continuing to hire for roles that will help build on our leadership position and get us to profitability faster. This includes hiring a direct sales team, in addition to other targeted hires in 2009.

As part of our aggressive path to profitability within the year, I also wanted to take this opportunity to highlight some of the major priorities for the company:

• Rolling out new features to grow and engage our community
• Building on our advertising infrastructure
• Building on our successful partnership with Microsoft
• Ongoing sponsorship opportunities
• Ongoing publisher and trade partnerships

I’m confident that with commitment and focus on these priorities, Digg will be an even stronger company in 2009 and will continue to create innovative features for our more than 35 million community members. I want to thank you all for your continued support and commitment–helping us achieve our vision of the democratization of media, and revolutionizing the way people consume and discover information online.

Thanks,
Jay

Suntech Shares Plunge on Shockingly Weak Q4 Outlook

Eric Savitz — Thu, 20 Nov 2008 13:03:24 +0000

Suntech (STP) shares are trading dramatically lower–and dragging down the rest of the already battered solar sector–on an extremely weak outlook for Q4 results.

For Q3, the company posted revenue of $594.4 million and non-GAAP profits of 36 cents a share. That beat the Street estimate of $571.7 million at the top line, but fell short of Street estimate of 42 cents at the bottom line.

But what really matters here is the outlook. For Q4, the company now sees revenue of $345 million to $360 million, dramatically below the Street consensus of $614.78 million. Suntech said it expects to be “marginally” profitable or break even in the quarter. The Street had expected 43 cents.

Read the rest of this post