In a move that shocked many B2B media insiders - including Incisive Media CEO Tim Weller - global information provider Reed Elsevier has announced the resignation of their CEO Ian Smith, to be replaced by Erik Engstrom, CEO of their Elsevier division. While early speculation from FT's Alphaville blog depicted the management shift as "a proper executive-level knifing," more considered comments from industry analysts and insiders in The Independent seem to indicate that Smith was falling on his own sword in recognition of some major challenges not easily resolved by someone with limited media experience. Three key factors were arguing strongly for changes at Reed Elsevier sooner rather than later: the selloff of Reed Business Information assets had stalled, pre-tax profits were down 52 percent in half-year results and investors lacked confidence in both projected earnings and Smith's aggressive recapitalization efforts. With Smith's mentor Jan Hommen having departed from Reed Elsevier's board in January to head the ING bank, a graceful exit was probably in order.

Labels: business, Business Information, Deals Partnerships and Sales, Dow Jones, elsevier, engstrom, enterprise, legal, LexisNexis, management, reed elsevier, scientific, technical, thomson reuters

It's a tough market out there for startup companies, much less enterprise-oriented content startups, but LaunchBox Digital is an efficiency-oriented funder of startups that is helping good ideas to get off the ground on a shoestring. One of LaunchBox's newer properties is Legal River, a startup spawned at the University of Maryland that focuses on enabling legal services providers to market their abilities more effectively to small and medium-sized businesses. That business model in and of itself is a tip-off that at least some of today's content-oriented startups are moving towards solutions that focus on solving very specific problems for very specific marketplaces - a refreshing change from "we have a feature, now what's the market for it?" approaches that haunted many of the early waves of content startups.

Labels: Deals Partnerships and Sales, enterprise, lawyers, lead generation, legalriver, marketing, online, services, SMB, SME, startups

I enjoyed this year's SIIA Information Industry Summit and Previews events very much; there were great presentations and great discussions throughout the two-plus days in New York. However, I was a bit disturbed by some of the gossip I heard percolating in the background about the successes of Congressional Quarterly that were highlighted by CQ's president and editor-in-chief Robert Merry in his panel presentation. Under Merry CQ went from being one of many challenged niche Washington print publications into a highly successful for-profit online subscription service with a healthy array of complementary of online and print publications. The undercurrent at the conference was along the lines of "Well, that's easy for him to say, he works for a non-profit." Sorry, folks, while the non-profit Poynter Institute owns CQ as well as The St. Petersburg Times via parent umbrella Times Publishing Co., Merry has had to work towards a profit component as much as any other publication.

Such critiques are especially ironic given the announcement that TPC is now looking to sell CQ in order to raise cash that will allow its beleaguered St. Pete Times to stay afloat. Politico has a particularly meaty take on the proposed sale, with lots of insider quotes. The bottom line of this deal is fairly simple: CQ is a valuable asset, will sell as soon as there's money available to buy it and is the baby being thrown out to rescue the soiled bathwater that is today's consumer newspapers. It is akin to The New York Times' recent decision to lease out real estate from its new building to raise operating cash for its newspaper, but unlike the NYT, TPC has decided that it's better to hang on to a dying publication and to let go a publication that's done its homework on how to survive in a very tough market niche.

At least TPC is making an honest attempt to try to figure out a working business model for newspapers in a post-print era. By contrast, The New York Times went to print with an op-ed piece by David Swensen and Michael Schmidt which claims that today's news organizations should be subsidized as non-profit organizations. The op-ed piece lays out the facts of the news industry's woes objectively enough, but then it adds this nugget:

By endowing our most valued sources of news we would free them from the strictures of an obsolete business model and offer them a permanent place in society, like that of America’s colleges and universities. Endowments would transform newspapers into unshakable fixtures of American life, with greater stability and enhanced independence that would allow them to serve the public good more effectively.

Perhaps with bailout fever in the air news organizations are feeling that they should join the Washington gravy train and try to get a permanent government subsidy. If so, this would be both extremely ironic and highly unlikely, given Washington's relentless cutbacks on public radio and television outlets, which have lost the lion's share of their government subsidization and which do not have the extensive international correspondent networks that Swensen and Schmidt claim are in need of subsidization. From crowing about "cash cow" profits to going hat in hand to governmental organizations seems to be an unlikely transition for most major media companies, especially given their recent tendency to play high stakes M&A games on highly leveraged dealmaking at the expense of staff and product development.

In one sense the concept of endowing consumer news journalism is a sound one; we should be making it easier for good news to be collected in a way that puts less profit pressure on news organizations. The truth of the matter, though, is that this is happening anyway. In addition to some news organizations teaching people in local markets how to help them in collecting news, the marketplace is encouaging startups that are filling the gaps left behind from the media industry's dilution of news coverage. Emma Heald notes at Editorsweblog.org the progress of VoiceofSanDiego.org, an investigative journalism startup funded by contributions from the greater San Diego, California community and from the Knight Foundation. VoSD.org has the flexibility to produce investigative journalism without the pressure of advertising, but that's not the only solution to filling in the revenue gap required to produce important news. More partisan outlets such as The Raw Story have periodic fund drives to help close the gap between modest online ad revenues and what it takes to field journalists who are willing to pursue commercially unpalatable news.

So although it is romantic to think that news organizations that have tried to be blue-chip stock plays can become well-disciplined investigative news organizations at the wave of an endowment wand, the reality is that there is a new generation of investigative news being produced both by professionals and citizen-journalists independent of those media companies. News will survive and thrive in the online world, to borrow from the title of Content Nation, but not necessarily in the hands of organizations that are the product of the era of mass production. Much of it will be produced for free or for the purposes of people who choose to support it either through endowments for through their good will in producing it. But news will continue to be produced for a profit - if its producers can understand that the content industry is entering the post-industrial era. Mass production still has value, but the most value in the publishing marketplace is in the mass-production of highly contextual information and experiences. The key to the survival of publishing is to focus on monetizing the contexts, not the "things."

In some ways the consumer news industry understands this in their improved focus on search engine optimization, contextual ads, better content engagement and better integration of content generated by its communities. But at the heart of the gap between yesterday's more robust revenues and today's more meager online revenues is a failure to monetize contexts efficiently. Some of that gap can be closed by a standardized approach to micropayments, but in large part the proliferation of news on many topics from online sources and independent aggregators of news links means that there will always be fewer contexts that traditional news organizations can monetize. So yes, get those endowments if you can find them, but don't expect that you'll support the same kind of news organization with them.

All of this brings us back to Bob Merry's great historical insights on the news industry. He noted at the SIIA Information Industry Summit that prior to the rise of today's "objective" news gathering organizations in the industrial 19th century there was a robust array of smaller and more partisan news organizations from which people could pick and choose insights on the topics of the day. In this fray, few news rooms would claim to have the "objective" view of the truth: people would have to assemble that on their own through studying the sources and discussing them with others. In Merry's view the industrialization of news to produce a standardized consumer commodity was a relatively brief phenomenon in its long-term history. In other words, perhaps what we are seeing in the news industry is not its undoing but rather its re-doing into its more native form.

CQ can expect to find an eager buyer soon enough, and the consumer news industry as a whole will turn into whatever free markets want it to be soon enough as well. I do believe that it would be a mistake to subsidize today's news organizations as they have existed in recent decades. This would be as large a mistake as countries that have subsidized other inefficient industries in the past. Instead, we need to continue to ask the question of major consumer news publishers, "Which part of the word 'change' is it that do you not understand?" Let's endow new business models for consumer news such as new approaches to micropayments and community-supported news generation methods that serve people as they want to be served. The rest will take care of itself soon enough. In the meantime, the successes of CQ underscores the point that a good publication in a good niche will always have a fighting chance. And in any business it really is all about the fight, after all - isn't it?

Labels: B2b media, congressional quarterly, Deals Partnerships and Sales, newspapers, Robert Merry, subscription, washington

It seems like only a few weeks ago that I was blogging about semantic search startup Powerset's soft-launch beta. In fact, it WAS only six weeks ago that we were covering Poweret's soft launch of new semantic search technology. But in that six weeks Barney Pell's crew got in a ton of good PR and a few meetings that have already resulted in a USD 100 million exit into the hands of Microsoft, according to VentureBeat. It wasn't so many years ago that Barney was a part of the bumpy exit of WhizBang Labs and its Web mining technologies. This time around his team was well ahead of the burn rate and blessed with both a good idea and good timing. With tons of cash on hand after their war chest for a Yahoo acquisition Microsoft was ready to vent by spending some large (or, for them, small) at the deals mall to pump up its search for more advertising revenues.

Given Powerset's ability to parse natural language questions as well as to provide "factz" topic clusters that could draw in related content, the target for Microsoft has to be the revived Ask.com portal as much as Google's leading search engine. Already Microsoft's Live.com search engine provides rich search results that emulate Ask's more user-friendly approach to search-driven content aggregation, but Ask still manages more meaningful responses based on natural language queries. Better front-end parsing and clustering of results terms from Powerset's technologies would certainly help Live to get more relevant and rich results that could help to build a larger audience, though how Powerset's technology will fare in absorbing Web content lacking the encyclopedic style of it's trial Wikipedia content remains to be seen. On most test queries using natural language questions one finds Google to be at least or more relevant in its results than existing major search engines, so even with new semantic technology Microsoft has its work cut out for them.

A better match for Powerset might be found on the enterprise side of Microsoft's offerings, where its recently acquired FAST enterprise search technology may benefit from some extra semantic search and clustering mojo - and find somewhat more structured content sources against which to apply semantic algorithms. That's not to say that Powerset won't succeed with open Web content, but in general semantic search technologies are most easily tuned when they're digesting documents with relatively similar styles. It would seem that this would be easier to tune to an individual enterprise's needs overall than to a world of Web content that could be in any shape at any time.

A better question might be why Microsoft hasn't considered purchasing Answers.com if they are so interested in natural language queries. With millions of pre-formed questions already in its WikiAnswers database many natural language questions map very neatly to its answer sets. In other words, sometimes the best answer to a full-sentence is a person who understood the question in all of its semantic details and has already provided the answer. This is far from a goof-proof solution to semantic search, but it's an approach worth considering as a valuable supplement to semantic document parsing.

In any event the Powerset set now finds itself in the enviable position of having sold their ship before it ever went down the launching track into the waters. That's certainly more than a few publishing portals can say these days. Congratulations to Barney and all of the other rocket scientists at Powerset - it pays to have a technology that solves a problem that companies with deep pockets are ready to get their hands on.

Labels: Deals Partnerships and Sales, Microsoft, powerset, Semantic Web, Wikianswers

In what promises (for now) to be the end of the Silicon Valley soap opera known as the future of Yahoo, AP reports that Yahoo opted to seal a deal with Google for both the use of Google's ad network and enabling the interoperability of their instant messaging networks shortly after having announced the suspension of their attempt to revive talks with Microsoft on a potential acquisition deal. Yahoo shares tumbled immediately afterwards, leaving the long money on Yahoo holding a devalued stock but a deal that is likely to be one of the best ways forward for ensuring a reasonable future for Yahoo.

As noted two months ago in ContentBlogger, a deal with Google seemed to have been the best route for Yahoo all along, promising lots of new Yahoo page inventory for Google's more robust ad inventory and complementary media and technology profiles that were never as much at loggerheads as people made out some years ago. As for Icahn et al., while some may have been looking out for shareholders wanting short-term money out of what they had assumed was a cooked goose they never really seemed to have the goose's best interests in mind - or, for that matter, the best interests of Microsoft shareholders. After Yahoo would have been carved up it would be hard to believe that there would be a whole anything that would be greater than the sum of the parts.

As much as people tried to paint this as a Yahoo desperation deal clearly it was moreso a desperation deal by Microsoft to buy some time to build a broader position in online markets for its faltering ad network, with virtually no apparent upside for Yahoo properties. There was a lot of Ballmer bluster but underneath it all Microsoft was rolling the dice heavily for a very risky deal that had little solid strategy behind it beyond a temporary ad revenue boost from peeling away Yahoo ad accounts.

By contrast the deal consummated by Yahoo with Google is expected to pump in significant new ad revenues to Yahoo from Google's superior ad network, a total win-win any way you look at it. The deal is non-exclusive, so Yahoo can choose a plan "B" any time that it wants. In the meantime the other huge win-win is the promised interoperability of instant messaging networks. Google already has interoperability with AOL's still-popular messaging network, so the stage is set for the next major deal to whisper about - a Twitter acquisition that will provide a unified front end to the world of instant messaging.

With a generation of Web users coming of age focused on IM, Facebook and other platforms, email systems creaking with offensive and virus-laden spam have become a legacy messaging technology that wil die a slow and largely unprofitable death in much the same way that the telegraph lingered well past its prime. We use email because we have to - not because we want to. Focusing on accelerating the growth and usefulness of IM systems while leaving their email services to take their own paths is a smart move for both Google and Yahoo. A merger of Yahoo mail accounts to either Google or Microsoft's mail networks would have been a long, painful and largely unprofitable endeavor.

I felt all along that an independent Yahoo would be better for the content industry as a whole so I am glad that at least tonight we can go to sleep knowing that there will be a wider variety of good platforms through which to publish content than if the Yahoo deal with Microsoft had gone through. Jerry Yang's team still has a lot of challenges ahead of them but with an improving stable of user-friendly destination content properties and a progressive approach to supporting brand advertisers Yahoo promises to have a strong place alongside other major online portals for some time to come. At least I hope so - I really don't relish a deal war as ugly as this one any time soon.

Labels: Deals Partnerships and Sales, Google, Microsoft, Yahoo

The CBS Corporation Web site features photos of their television news staff, most of whom are well into their sixties, or well further in some instances, interspersed with shots of the young stars of some of their entertainment shows. Both motifs show some of the demographic challenges that CBS faces in developing audiences. Having missed largely the shift into cable television news and entertainment and faced with a rapidly aging audience for its news products, CBS has been leapfrogging its marketing strategy into online content development. The latest of these is a fairly "big fish" - CNET Networks, which according to paidContent.org was puchased for USD 1.8 billion, a 44 percent premium above its current share price.

This number may be a little eye-popping for some in the media industry, but this is no mistaken enthusiasm. CNET is one of the oldest commercial Web sites offering news on the technology industry and consumer goods, with a solid top-200 audience and some of the best journalism and analysis on the Web. CNET has always stood for best practices in publishing and site design on the Web, with a solid team of largely Bay Area journalists, analysts and bloggers, a great library of videos on tech and gadget topics, product reviews, well-tracked blogs, strong comments and a great channel strategy. There's not too much not to like. I think the factor that impresses me more, though, is that as a bazillion blogs have sprouted up to talk about topics in CNET's domain it's held on to its audience very nicely through a diverse array of content assets. While its U.S.-centric focus limits some of its appeal for growth in other markets, it's likely to be a good revenue generator for years to come.

More to the point, it begins to round out a portfolio of solid and up-and-coming destination content holdings that CBS has assembled. As CNET's own news blog notes it will make CBS one of the 10 most popular Internet companies in the United States, with a combined 54 million monthly unique visitors and about 200 million users worldwide. While much of the media business focuses on familiar moguls and the battles of print titles to condense into some sort of stable business CBS has become quietly a superstar of destination content the old fashioned way - by building up a portfolio of superstar publishing properties. It makes one wonder what investment bankers were thinking as they continued to spin out questionable multiples on continually sinking print-based news properties.

There are still profitable print titles left to play with, but CBS is reaching for and developing the online brands that will help it to bridge into the next generation of content consumers very aggressively - while milking what it can out of old media channels. Kudos to CBS for a well-timed and solid purchase and for focusing on the properties that will help their shareholders have a brighter future as the next generation bypasses cable television for new forms of news and entertainment.

Labels: CBS, CNET, Deals Partnerships and Sales

Yahoo CEO Jerry Yang adds to his signature in his weblog posts the moniker "Chief Yahoo," a label that seems to be more of an epithet in the mouths of some shareholders and dealmakers disappointed by Yahoo's recent and apparently final rejection of a potential Microsoft takeover. With Yahoo stock plummeting on the first market day after the deal fell through the sore attitudes towards Jerry Yang's rejection of Microsoft's offer claims of needing some Prozac seem to be at least tied with the claimed "high fives" amongst some Yahoo executives when news of the deal failure came through. Even Yang himself on Yahoo's corporate weblog claimed that "No one is celebrating about the outcome of these past three months… and no one should." It was a tough battle with bad blood generated both inside and outside of Yahoo in the process.

But there's no doubt in my mind that Yang made the right decision for Yahoo shareholders as well as for the company itself. While there were some important synergies that would have come out of a Microsoft deal, in general it would have been an acquisition by a company driven by old concepts of intellectual property value of a company that is starting to move far more aggressively into new concepts for realizing the value of intellectual property. CNET News notes that Yang is betting heavily that its more open approach to content integration using its own APIs as well as emerging APIs such as OpenSocial will increase significantly the exposure of Yahoo content to audiences in increasingly valuable contexts. Combine that with a completed deal to use Google's ad networks and to integrate in AOL's user base and you have the makings of a company that will shine in building highly engaged audiences using content from many sources. Think of Yahoo as an enormous warehouse of content, commerce and community that can be rejiggered into countless social media applications. Sounds like the man has a plan to me.

In the meantime Microsoft is left licking its wounds from what was perhaps their last great opportunity to leverage their way into more secure online revenues in the face of stagnating income from its traditional product lines and modest growth from its online ventures. The Yahoo acquisition would have brought them some synergies but at the end of the day it was largely a cash flow fix and an attempt to buy an audience for Microsoft's online tools that may or may not have succeeded, given their history of coming in very strong and proprietary with such efforts. By the time they would have focused on Yahoo's existing efforts to open up their content and to focus on contextualization rather than IP ownership as the key to revenues it's not likely that they would have survived Microsoft's more traditional outlook on IP value generation.

In this parting of the ways Yang will face angry shareholders and some shell-shocked employees for some period of time and softened share prices as the new(er) Yahoo takes shape. It's unclear that he will survive this unsettled environment in his current position but hopefully his vision for a Yahoo more in tune with today's most valuable opportunities for content will continue to move on. In the meantime Microsoft needs to consider both new cash cows and new stars on its matrix of properties to help it make a transition to a future that is moving away steadily from proprietary software on proprietary platforms as the most certain long-term bet for steady and growing revenues.

Labels: Deals Partnerships and Sales, Microsoft, Yahoo

paidContent.org notes the USD 50 million that Austin Ventures has announced that it is pumping into its CEOs-in-residence fund to back Razorfish ex-CEO Jeff Dachis as he explores B2B opportunities for social media. While social media backing for consumer ventures seems to have cooled somewhat there appears to be a rising tide of private equity beginning to back social media plays for business services. Details are highly vague, just the promise of a Software-as-a-Service suite that would be positioned against LinkedIn, Generate, VisualPath, and others already in the social media business information space, according to PCDO.

And there you have it - a quick 50 million infused into a trusted ex-CEO and before you know it there will be another choice in the rapidly expanding market for B2B social media. While it's far from clear where Dachis will take this venture what's already clear is that business information aggregators are going to have more points of potential disintermediation for their services as new forms of content aggregation begin to arise in the space between media, enterprise and personal content services that is neglected oftentimes by traditional database licensors. All this in a year in which many subscription content services are going to be challenged in their renewal cycles as the ROI arguments for their services come under increasing scrutiny.

While some business information services are fairly young and already very promising, I would caution those beginning to put their investment dollars into this space that while there's lots of money to be made in the space there are only so many good tools for managing business conversations that are going to take hold in any particular market sector or for any particular role. This is in part because those services that are already out there have been building a few years' worth of content quality from mined content and socially collected content that is not going to be reproducable from the Web or brand-new social networks - no matter how good one's technology is. This will mean a) licensing content from existing distributors, b) taking more time to build up one's own unique content assets and likely c) needing to position one's services carefully so that they are not trying to reinvent already extant wheels.

So invest on, courageous private equity people, there are indeed great opportunities to create valuable business information services using social media. But be prepared for a lot more careful analysis of what it takes to succeed with business information using social media tools.

Labels: austin ventures, Business Information, Business Intelligence, Deals Partnerships and Sales

I was chatting with someone from Dow Jones' Enteprise Media Group at Buying and Selling eContent exhorting them to get more into virtual aggregation products while noting that folks from Generate were saying that a deal announcement with someone was eminent. This morning the deal news broke - with Dow Jones coming out the victor in a range of financing and exit options that Generate was considering. The Generate team will form the core of a new business unit at Dow Jones to be called Dow Jones Business & Relationship Intelligence, to be headed by Generate President and CEO Tom Aley in a SVP slot with Darr Aley, his twin brother and EVP of Marketing for Generate, taking on a VP of Marketing role in this new business unit.

With a softening economy challenging Generate's value-add strategy for short-term growth, this is one of those win-win deals that you hope for and are glad to see when they come about. Dow Jones' Factiva business unit, the business information backbone for their Enterprise Media Group, has done well enough but had seemed mired in its efforts to move its business intelligence capabilities beyond traditional aggregation of licensed content for most of its clients. The acquisition of Generate provides Dow Jones three critical springboards into a much more robust future based on The New Aggregation concepts that we've advanced here at Shore for many years.

The first springboard is the virtual aggregation capabilities that Generate's web harvesting provides. Generate, unlike some other Web harvesting tools for business information, has focused very heavily on ensuring that harvested data is cleansed and de-duplicated before releasing it into its databases. This doesn't make their data perfect, but with more and more institutions making their own Web publishing the "golden source" for publishing business information it does give them a distinct advantage in both update cycles and overall breadth of content quality that will accrue as more and more data gets released into the Generate/DJ databases. Now Dow Jones has an engine to build an independent and powerful source of business information that will not have to rely as heavily on licensed content sources.

The second springboard is a very robust intelligence front-end in Generate's G2 platform, which combines semantic analysis of incoming content for events that may trigger specific types of deal-oriented activities with a very rich and well-designed business intelligence application and API toolkit that has enabled Generate to build a market very quickly for its high-end business intelligence services. G2's integration of watch lists for both companies and people combined with real-time triggers will give Dow Jones a real-time business intelligence service far more powerful than what is currently in their quiver - with Factiva content helping to add value rapidly to the application.

The third springboard into making virtual aggregation a reality for Dow Jones is Generate's gClick tool, which enables content on people and companies served up from Generate's database to appear in a pop-up window or other Web display with a click of a browser-embedded icon or a Web page link. An entire page or a highlighted section of content can be analyzed by gClick to determine which companies and people are present and a customized dossier is prepared and displayed automatically. While the media applications of this tool have proven to be useful for some of Generate's clients, expect this to be particularly useful in enterprises where it's easier to manage features like this on a standardized basis. With many enterprise Web portals and search engines failing because they don't provide the right content in the right context this capability can help to build a foundation for many virtual aggregation services within the enterprise.

Put these three capabilities together and you have a huge leap forward in Dow Jones' ability to add value through business intelligence services beyond its traditional base of users. While they had been making some new inroads with their Factiva SalesWorks tools into the line managers who need more value from business information the data sets that Factiva alone could provide were not particularly better than any other set - with Web content left to the side in raw form. With its Generate acquisition Dow Jones has set the stage for a new era of growth in business information services based on the real-time, all-the-time world of Web content combined with sophisticated analysis that can transform this information into highly actionable business insights quickly and effectively. My congratulations to all involved: business information just got a lot more fun again.

UPDATE: A couple of extra thoughts that have been rattling around in my head today. The gClick feature will be a very nice proprietary advantage for the WSJ.com site in time, although it's likely that they'll still market the feature to non-competitive media outlets. Also, if you think of how the G2 platform has done well in financial markets to date it makes a wonderful complement to other DJ products in this sector - providing a new real-time oriented service that need not mess with stock exchange market data to make an impact on the markets. Neat.

Labels: Business Information, Business Intelligence, Deals Partnerships and Sales, Dow Jones, Generate

In war it's said sometimes that the enemy of my enemy is my friend. If business deals are a form of warfare then we're seeing some interesting friendships in Silicon Valley these days. The Wall Street Journal covers an emerging wrinkle in the battle for Yahoo as they march closer to a deal to replace their ad network with ads from Google's more powerful stock of advertisers. WSJ speculates that this will make it harder for regulators to approve other acquisition offers from Microsoft and News Corporation to take over Yahoo - or at least slow down a potential re-upping of a bid from them. That may be the case, but it seems as if step by step Yahoo is navigating to a peaceful conclusion to its current woes - and forming a more healthy revenue picture that could help it to define a more comfortable independent future.

With the USD billion -plus boost it's likely to receive from Google's ad networks for ads displayed on its search pages and other page inventory and a potential pickup of already Google-friendly AOL, we're beginning to see the outlines of a duopoly to counterbalance the strong push of Microsoft and News Corp to dominate online media. In broad terms, think of Google as the search, video, database/API and ad backbone for the commercial Web and Yahoo as the media licensing, aggregation and community backbone. Each of these specific domains will overlap, of course, but in broad terms there's a symbiosis between them that offers each a path to revenue growth and the industry as a whole two distinct partners with two distinct strength sets.

This is probably the way that it should have been a while ago. I don't think that there was ever really a strong rivalry in many ways between Yahoo and Google on the product level. Each has always had their specific strengths, and probably both would have benefited greatly for earlier cooperation of this kind. Google was never going to "do media" as well as Yahoo and Yahoo was never going to "do technology" with quite the intensity and neutrality as Google. But between the two of them they both do online content very well indeed. And between the two of them they will have oodles of page inventory for ads to help them weather tougher economic times with fewer concerns - hopefully a key factor that can appeal to Yahoo shareholders being faced with choices.

More to the point, perhaps, such a duopoly would restore some natural balance to the Web that would enable marketers and publishers to understand who to deal with more effectively. There have been too many players with designs to be a "new number one," too much time wasted on kingmaking and not enough time spent on product development. It still leaves Microsoft plenty of room to focus on new and better platforms for content with mobile operators, auto manufacturers and appliance makers and to try to lock up entertainment deals for those platforms. News Corp may prove to be a stepchild in this situation for the moment, but with MySpace still chugging along healthily I doubt that it will be out of the game in any long-term sense.

The key loser in this deal would seem to be not so much Microsoft as Microsoft's strategy of domination by selling intellectual property. Be it software or content, Microsoft's continuing focus on proprietary consumer goods and services is distinct in many ways from the more open and collaborative assembly of value found in many Web-oriented environments. This may work to Microsoft's advantage where they can provide new and powerful platforms for content, such as in their Sync line of automobile communications technologies, but with ownership of content being more at the mercy of companies that own contexts it tends to be a strategy that conflicts with successful online media. It's that conflict that seems to be at the heart of their failure to convince Yahoo that a marriage would be good. At its heart, after more than a decade of online development, Microsoft still doesn't "get" the Web in some fundamental ways - nor does it seem to want to.

I'd be very happy if this path towards collaborative independence for Yahoo works out the way that it's headed currently. None of the acquisition paths for Yahoo were looking very positive for either Yahoo or the industry as a whole, even if they would have been good portfolio matches for potential stockholders. Here's hoping that we can let this deal fracas die off so that we can get back to focusing on the growth of the Web's greatest strengths - great content and powerful contexts.

Labels: AOL, Deals Partnerships and Sales, Google, Microsoft, News Corp, Yahoo

One of the more interesting things about coming back to blogging after a short hiatus is that the Yahoo deal drama has only gotten worse. There's great coverage from many sources, including a good summary of recent analyst takes on paidContent.org, as well as a New York Times story now circulating that News Corp may combine with Microsoft to complete a deal for Yahoo, presumably to combine MySpace's social media strengths with MSN and Yahoo's strengths along with a combined ad network. The counterfoil to this is a possible deal to merge AOL into Yahoo.

Certainly an AOL/Yahoo merger would help Time Warner's plan to get out of the portal business and help Yahoo to grow market share significantly - and certainly working towards one set of user accounts, one messaging network and other combined infrastructure could become very valuable over time. But one wonders how much time and effort would be spent on merging plumbing on these two legacy platforms to get a unified portal business when they could have been focusing on the growth in traffic comes from social media products that operate largely via other platforms.

By contrast the Microsoft/NewsCorp/Yahoo combination may offer a lot more punch for a shareholder's money. Leveraging the power of MySpace, a still-powerful social media platform well-attuned to mass media markets with Yahoo's strength in content aggregation and user accounts and Microsoft's strength in software development, platform strength and ad network brokerage, all in one package, has a lot of interesting parts that could produce more value in the long run. AOL and Yahoo combined, for example, will do little to penetrate mobile markets more effectively. Yahoo, Microsoft and MySpace, by contrast, could make some interesting things happen in mobile between platforms, social media, user accounts and ecommerce.

This is all well and good, but why are we so fixated on this deal, anyway? It's not that it won't create some sea changes over time, but the strengths of a deal with Yahoo come largely from what the partners may offer in combination. Yahoo is big, still powerful - but for the most part in its lifecycle a cash cow with relatively low new product investment waiting to be turned into hamburger. The real issue is what this means in terms of exit plans for online content and technology companies, as pointed out by Fred Wilson over on A VC - that is, if a company with fairly obvious marketable attributes like Yahoo has a hard time cashing in, what does this mean to online plays in general? If there's no exit at the top, what does that say to other players?

Somehow a deal will be forged for Yahoo in the next few months if the company's staff doesn't implode before then from takeover stress. But in the meantime I honestly don't think that it's all that significant a deal to watch from the overall industry's standpoint. Big will get a bit bigger - and that combined entity will still look nothing like Google. I think that we're seeing that overall getting any bigger is not necessarily going to solve anything in online markets. Online publishing is still in its infancy, still requires an enormous amount of investor patience as new ideas face daunting risks and still will have periods of high uncertainty that don't lend themselves to quarterly reports, much less private shareholder reviews. In other words, while some people are still focusing on making larger dinosaurs the long money is still probably in making more and better mammals. Be patient, be foresightful - and don't get too caught up in the scuttlebutt.

Labels: Deals Partnerships and Sales, Google, MSN, MySpace, News Corp, Yahoo

TechCrunch notes along with others the possible bidding war brewing between Google and Microsoft to acquire social bookmarking service Digg, which sounds probable given the relentless march for each of these companies to build market share. I wonder whether the prices will really accelerate that much off of last year's earlier possible bids for Digg, though, given the soft ad economy and the stabilization of Digg's audience. Mind you I am sure that either Google or Microsoft would love to have 20 million monthly visitors but the real issue is how one of these majors can recover from the flattened prospects of a Facebook deal in a down economy.

With Facebook seeming more interested in improving their platform as of late than cashing in their chips perhaps to some degree both Google and Microsoft have been played off against one another by Facebook via their high asking price to keep either of them from getting stronger through another social media property acquisition. Certainly the stock buzz has been off of both of these properties since the Facebook deal went cold, so perhaps with quarterly earnings calls looming around the corner both Google and Microsoft are eager to have at least some social media story to tell.

Google's Orkut platform was always an also-ran in traffic and is suffering from declining traffic, in part perhaps due to losses to new local-market social media platforms in India and other regional markets, so it's about time for Google to pony up for a bona fide social media community. From the Microsoft side its ad deal with Digg would go away in all likelihood with a Google acquisition so a Microsoft deal would help to shore up momentum for its still-young ad network, but with only a tiny finger into social media via MSNBC.com's Newsvine property it has a lot of catching up to do as well

On balance, though, Google's needs would seem to make this deal a "must do" at this point to ensure that it can get some flesh-and-blood "wisdom of the crowds" that's been managed largely through their search algorithms to date. Search is still an important tool, but as the word "curate" begins to trip off more and more tongues this year Google needs to step up its ability to curate content with a human eye as well as through machine intelligence. While its audience doesnt' stretch down deeply into specialty topics Digg's ability to lend weight to what really interests people on the most popular topics for a younger audience that starts and ends their day with social media is an important factor for Google to address. Combine that with the potential to marry Google search algorithms with Digg's increasingly sophisticated curation of bookmarked articles a and there could be some very interesting news products in the offing.

The other factor that Google seems to need to address through such an acquisition is a cultural issue. Google's presence to the world is friendly oftentimes but not very conversational. A brand like Digg is by its very essence a conversational brand, one that creates most of its value through people interacting as a group. Google needs that more open approach to brand building in its DNA more deeply. It's good to at listening to geeks and getting a bit better at listening to real-world people, but folks in the Web 2.0 world like Kevin Rose who are just far more accessible can become effective bridges to that more open collaborative culture. Microsoft could certainly benefit in similar ways, but the cultural divide between most of the Web 2.0 world and the corporate culture of Microsoft would seem to be a pretty wide gap to fill in.

This could be just one more social media deal that goes sour after the earnings calls but somehow this one has a heft to it that may lead it to completion. The prices being bandied about are far less steep than Facebook's earlier numbers - USD 200 million or so - and as fine a job as Digg has done with refining its platform it's not clear that it can go much further as a standalone product. Social bookmarking is still an important social media capability, but the future probably belongs to those services which can blend generic platforms such as Digg with services that can use that technology to build enthusiast communities that may carry a publisher's brand or a product brand. We'll see where this goes but hopefully one of these players finally gets off the dime and starts embracing social media communities more fully in an open Web environment.

Labels: Deals Partnerships and Sales, Digg, Google, Microsoft, Social Media

Reed Elsevier is doubtless looking over its shoulder at the Thomson/Reuters merger as of late and wondering how they can improve shareholder value in troubled times for traditional publishing against this looming B2B database giant already divested of print publications. Well, when the going gets tough, the tough buy databases would seem to be the answer to the wondering.

USD 3.6 billion later Reed finds itself lining up to be the proud owner of ChoicePoint, one the world's leading collectors of data on individuals used by businesses, governments and non-profits for a wide array of marketing, credit scores and background checking functions. Barron's notes that this deal has been in the works for about two years, but clearly the accelerating of scale by other B2B database providers has Reed eager to get some good news on the radar for shareholders. AP notes that ChoicePoint will be merged with Reed's LexisNexis risk business unit, with expected redundancies on tap as a result for LexisNexis employees.

The flip side of this deal is Reed's decision to let go of Reed Business Information, its B2B trade publishing unit that contributes about 20 percent of Reed's overall revenues today. With ChoicePoint's annual revenues a tad higher than RBI's and with considerably better growth prospects from ChoicePoint in the near term this an acquisition that fits in very well on the balance sheet. RBI's strong events production unit will be retained, though, as noted by Bloomberg News. With rapidly softening print ad revenues, a slowing business cycle and a very slow transition to online publishing and advertising as a mainstay, B2B media properties are not going to be the margin-producing machines they once were - a conclusion that Thomson had come to several years ago.

The deal offers Reed a number of great opportunities for revenue growth. With deeper personal profile data LexisNexis could develop more sophisticated analytics tools for the enterprise using data collected from other LexisNexis databases and also begin to widen the array of consumer-oriented information analytics that can help people to assess how the world views them as a risk. In a security-conscious world with lots riding on personal risks the value of these services certainly makes for a good investment. But there's a lot of unexplored territory around the potential for this kind of personal data to drive new types of electronic marketing. Generating marketing lists from a database is one thing: being able to match up online profile data to ChoicePoint profile data could give marketers a far more precise view of who they should be trying to reach online via ads and other marketing services.

This last point is key to the decision to drop the RBI division at this time and to hang on to the events properties. It used to be that magazines drove events: these days it's far more the case that events drive magazines, with the relationships formed in face-to-face events becoming far more important marketing vehicles than ads placed next to editorial content which is increasingly being replicated in a multitude of online content outlets. Overall it's probably better for Reed to focus on high-value human interchanges for B2B marketing and to focus its advertising efforts on helping marketers via personal metadata found in ChoicePoint and other databases to target the right people through any number of online and offline marketing channels.

Most all of this is good news for Reed Elsevier in the short run and even quite good for the long run for shareholders looking for steady returns. With the rise of online publishing one needs to accept that the huge influx of investment into new publishing technologies and business models makes it increasingly untenable to maintain the illusion that you can provide steady cash-cow returns in a sector that has reinvented itself around the long-term payoffs to be gained from risky startups. Apparently unwilling to risk margins on traditional editorial models in this environment and having missed most of the choice opportunities to move aggressively into online publishing Reed is probably best off punting its print-centric properties to those better suited for turning aging cash cows into hamburger.

If there's a potential sticking point in all of these moves it's that Reed Elsevier is moving one very control-oriented database culture into the arms of another control-oriented database culture. That bodes very well for the LexisNexis family of databases itself but not necessarily well for a division which in some ways was having trouble looking beyond traditional I.T. infrastructure and search applications into the markets' broader needs. Many changes have been undertaken already in LexisNexis to deliver more responsive product development but perhaps one of the more interesting aspects of this merger to watch is how ChoicePoint's dual focus on enterprise and consumer database services might influence LexisNexis product development. With more sensitivity to how individuals interact with databases in a public Web environment there may be some interesting product insights working their way into the LexisNexis fold as well.

Labels: ChoicePoint, credit scores, Deals Partnerships and Sales, LexisNexis, personal data, Reed Business Information, reed elsevier, risk

What does it mean when a company announces disappointing earnings and has no strategic plan to move forward? It means that you've been shopping your company like crazy and you're waiting to see what comes out of it. It should come as no major surprise that Microsoft finally made an offer for Yahoo that it will in all likelihood not refuse - USD 44.6 billion to be exact, more than double Yahoo's closing shares value. With an expected 23 percent drop in earnings over Q406, Yahoo's ability to fund a better position in the marketplace in the face of a looming recession was dimming rapidly. Microsoft wisely waited to buy low.

Six months ago I poured cold water on such a merger, seeing News Corp as a far better partner in the long run. I still believe that a News Corp acquisition would have been a great exit for Yahoo in many ways, as the negatives in a Microsoft deal that I pointed out in that earlier post still stand. But at the end of the day this is a merger of necessity, not of opportunity. Neither Microsoft nor Yahoo can compete with Google effectively at this point, a factor that's only going to be exacerbated as Google's mobile strategy begins to unfold this year.

While one can crow about "the merger of content and technology" or some such meme and marvel at the combined online audiences that these two megaportal providers can offer advertisers through the powerful combination of Microsoft's ad-brokeraging system and Yahoo's own ad marketing services there's one key and overarching problem for both companies: they've been slow to bring hit products to the marketplace. Old media and old technology product cycles are not Web product cycles, and neither company has done well in figuring out how to build online hits as effectively as they know how to buy them. Google may not pop out perfectly conceived products and has product issues of its own, but they're constantly letting new things hit the fan to see what new markets they can open up while others spent time trying to build perfect products for old markets.

The big plus of the deal - there is now going to be only one dominant portal for established content brands and marketers looking to position their own brand advertising - is certainly important, but for an upcoming generation of Twitterers who see their own Facebook homepages or newsreaders as the portals that matter most to them it's not clear that this will be a great solution for either company as the new generation of content consumers gains pruchasing power. If you want corporate content and corporate advertising on corporate technology, one certainly knows where to go now. But in three to five years corporations eager to eliminate the "middle man" of media to manage their own market conversations directly may not see as much value in this union as they might today.

The potential feather in the cap for this deal could be the opening of mobile broadband. With a strong position already in mobile devices and now armed with tons of content and a great ad network Microsoft could stake out an early advantage in broadband mobile frequencies now being opened to all devices based on their existing momentum alone. The struggling Vista platform will continue to be refined for enterprise purposes but Microsoft's mobile Windows CE operating system may become instead the default Windows platform for Microsoft's media efforts as home entertainment shifts between mobile gizmos and HDTVs. This is likely to bring strong profits over the next few years and is a very viable strategy overall.

But in the meantime one wonders whether there will be enough focus to make this happen. Having just survived a failed marriage between Hollywood media culture and Silicon Valley culture Yahoo must now adopt to Redmond ways. Microsoft has been redefining its own culture and focus rapidly in postitive directions as the Ballmer period fades away, but the scale of this merger is going to require some major dust settling. All this as a looming recession slows down both enterprise and media markets cannot be helpful.

It's a "Brangelina" marriage that's bound to eat up media cycles, but at the end of the day the fame of these brands is not necessarily going to yield substance out of thin air. This will benefit Microsoft in the short run, to be sure, if it can get to the short run issues in time, but in the long run onie wonders whether two overripe old brands can make a fresh and effective new brand. Time will tell, but at least we can read about this openly now and watch it play out.

Labels: Deals Partnerships and Sales, Google, Microsoft, Yahoo

The buzz is increasing on a potential acquisition of the Plaxo contacts-oriented social networking service by Facebook, as noted by VentureBeat and others, and there are good reasons to think that this would be a good marriage if one can overlook the personality conflicts in the potential deal. Plaxo's new Pulse social networking service is going strong and helping to extend the value of its core contacts synchronization service, but ultimately Pulse is yet another social media login to maintain with features and functionality not terribly different from Facebook itself. At the same time Facebook is becoming an increasingly popular spot for professionals to congregate for networking of both a personal and professional nature, but it lacks gravitas for people trying to keep abreast of changes in people's professional profiles. Backing in Plaxo data and desktop synchronization capabilities into Facebook's infrastructure may offer an interesting marriage of capabilities that may give Facebook a more competitive posture with professionals as LinkedIn continues to gain mojo as a "social inbox" for the professional set.

Rumor squashers are quick to point out historical conflicts between management in these two companies that might squelch such a deal before it's out of the blocks. But with investors from Sequoia who have fingers in both LinkedIn and Plaxo perhaps there's reason to think that there's a priority being placed on getting Plaxo's potential up to speed as soon as possible in comparison to other assets in their portfolio. With reasonably healthy growth there's not an immediate need for Plaxo to pull the string on a deal just yet, but knowing that venture capital may be harder to come by for subsequent funding rounds in 2008 this might be a good point for Plaxo to exit into the hands of a player such as Facebook as it continues to attract professionals rapidly into its multi-faceted social networking portal. Expect an increasing round of high-profile deals for companies such as Plaxo as social media plays begin to consolidate to grow more effectively in a market that is scrambling for revenue-generating capabilities in a softening economy.

Labels: Business Information, Deals Partnerships and Sales, facebook, plaxo, Social Media

Sometimes two distressful situations can combine to create relief, rare though that might be. Such seems to be the lucky break that both Microsoft and FAST Search and Transfer caught in the recent acquisition of FAST by Microsoft. FAST needed fast relief from crippling cash flow problems generated in part from a sales strategy that reached beyond their ability to deliver on ambitious promises. Microsoft on the other hand had failed to create any significant sales momentum behind its own enterprise search efforts, with players such as Google beginning to breathe down their necks more warmly with each passing day. So a mere USD 1.2 billion in cash works quite nicely to bring together two impressive partners that promise to dominate enterprise platforms for some time to come.

FAST's rapid growth over the past few years into an increasingly dominant position in enterprise search markets is just the ticket that Microsoft needs to position itself in increasingly competitive enterprise platform markets. With ever more content being consumed in enterprises via non-Microsoft platforms, domination requires a more agnostic approach to assembling on-demand content than Microsoft has been able to manage recently. FAST offers both solid enterprise search technology and an installed base of global corporate clients that Microsoft can leverage very effectively with the combination of FAST search capabilities to gather content and Microsoft's Sharepoint servers to store and aggregate content.

This last point is especially important for Microsoft's future revenues. With its Vista operating system rendered a ho-hum at best by most enterprise users and panned widely in consumer markets Microsoft needs to shift the center of its profits to platforms sy uch as search engines that are more central to what drives internal publishing in today's enterprises. Each page of search results can become in effect a purpose-built portal: in effect, the database is now, the content that's required to solve immediate business problems. Search technology such as that offered by FAST holds out the promise of search engines becoming the focal point for Microsoft's enterprise publishing strategy, offering Microsoft more opportunity to have offerings that scale effectively to both global and mid-sized corporations. That $1.2 billlion make look like relative pocket change today, but in terms of the market share secured and the future market positioning that will be required to counter slowing sales on its aging operating systems it's a major investment in securing Microsoft's future cash flow.

Labels: Deals Partnerships and Sales, enterprise, FAST Search and Transfer, Microsoft, search

paidContent.org is clucking a bit at the USD 55 million price tag for Dun & Bradstreet's recent acquisition of AllBusiness.com, noting that it's well off the mark of deals from just a few months ago for business media properties. There's certainly a lot of bloom off the rose for online plays trying to find traditional media partners, with the whistling-past-the-graveyard optimism of M&A specialists of this spring giving away to a more sober view of where advertising revenues are headed in the short term. But I think that this negativity tends to bypass the fact that Dun & Bradstreet has found a media outlet that complements its other holdings very well - and promises to help transform them sooner rather than later.

The key issue that D&B needs to address is the declining media audience for its Hoover's business information product, a platform that single-handedly defined the Web business information market a decade ago but which has lost much of its media mojo as it focused on building a stronger presence in enterprise subscription sales. Hoover's online strategy helped it to get a strong base of small and medium sized businesses that it continues to mine. But with an increasing range of online business services gaining audience attention, including business media companies seeking to increase audience engagement through business information services, getting the attention of SMBs is a tougher game.

AllBusiness.com is a good match for helping D&B to address many of these problems. It's a nuts-and-bolts "how to" portal that is designed especially to appeal to the SMB crowd needing practical advice and input on the key challenges facing business professionals. AllBusiness.com also has a core of blog content from leading business experts that helps to give the portal a conversational tone. That's in line with research from Shore and other outlets which shows that business professionals are likely to respond to advice from peers as a key source of business information. Combining this content with Hoover's core business information and analysis tools is likely to increase the engagement of SMB professionals who want both easy-to-use business information and peer advice to solve business problems - engagement which in turn should lead to more successful marketing of their subscription products.

The real question, though, is whether this combination will giveDun & Bradstreet enough online engagement to counter increasingly strong business information media competitors. With Zoominfo growing as a media presence far more rapidly than either Hoover's or AllBusiness.com and traditional business media outlets like Forbes improving its audience share is it enough to marry high quality business information with high quality media content? Perhaps not, but the marriage is nevertheless essential for Dun and Bradstreet to build strong long-term engagement with SMB markets. But the Zoominfo model reminds us that business professionals have come to trust the Web as a key source of business content and look strongly towards companies that can help them to organize unstructured sources of information as data in more useful formats.

I think that we can expect to see many deals that parallel the D&B/AllBusiness paradigm in 2008 but I think that we'll also be on the lookout for transformative plays like Zoominfo that challenge traditional business information suppliers to make sense of the Web as a business information resource. Marrying business information and business media is a hot ticket these days, but make sure that you're looking at its hotness through the perspective of audiences who are more likely to embrace Web-based sources of content as a source of business insight along with traditional information and media content.

Labels: allbusiness.com, Business Information, business media, Deals Partnerships and Sales, dun and bradstreet, Hoover's

TechCrunch picked up over the Thanksgiving holiday on a rumor that Rupert Murdoch is pursuing the acquisition of the LinkedIn social network, a rumor later denied by News Corporation in The Telegraph but which has more than a grain of strategic sense in it nevertheless. [UPDATE: VentureBeat provides comfirmation with details that parallel our original post.] With Fox Interactive Media head Peter Levinsohn confessing in a Reuters interview that he finds Facebook "substantially more entertaining" than their own MySpace, there's an acknowledgement that MySpace is more about traditional media in many ways than it is about the multi-dimensional networking that Facebook enables for adults in professional and personal roles. While MySpace's upcoming personal feeds will no doubt give MySpace a little more boost against the rapidly growing strength of Facebook it's clear that Murdoch has many fish to fry when it comes to attracting adults who are at the core of many of his holdings' revenue streams.

A LinkedIn acquisition would help News Corp to fill in not only dwindling business-oriented classifieds revenues as more jobs and services are posted and found on social media networks but as well give them a well-established network of professionals that could become the focal point of hard-core business information services that bridge media and enterprise markets. It's not likely that Murdoch's Dow Jones division will come up with a social network on its own to compete with financial communities on Bloomberg and Reuters networks, but with LinkedIn they would have the ability to have a key tool to help professionals network and execute enterprise business well beyond investment bank trading floors. That's likely to bolster revenues as Factiva database subscription revenues face tough times in a softening economy.

To some degree this might also help to solve some of the question marks as to how best to leverage the highly valuable network of Wall Street Journal subscribers, many of whom no doubt are LinkedIn members as well. What better way to give this elite business publication a powerful business social network than to equip it with the most popular business networking tool available to date? It's doubtful that the WSJ crowd would ever take MySpace seriously as a social networking environment, no matter how much News Corp tries to re-engineer it, so why waste time building one from scratch as potential rivals gear up their own efforts for business-oriented social networking? All of a sudden the idea of premium content takes on a whole new meaning in this context that can transform the WSJ community into an elite social networking community. In the meantime LinkedIn infrastructure can be repurposed to give MySpace some more adult angles as well for younger people who are looking for a Facebook alternative.

There are realistic options for LinkedIn other than News Corp, but few that would be able to leverage all of LinkedIn's value to its maximum potential. It's a logical and potentially powerful marriage of social media via an organization that understands both media and enterprise content value fluently. Murdoch is one of the few old-line publishers who really understands that the value in publishing is already way beyond the inventory that any one newsroom can create. In an era in which user-defined context is king, consider LinkedIn a key acquisition plum that's likely to be pulled out by a major player like NewsCorp sooner rather than later.

Labels: Deals Partnerships and Sales, Dow Jones, LinkedIn, News Corp

Let's face it, for an enormous company Microsoft is not lining up many hits today. Its Vista operating system has had tepid reception at best, the EU has brought it to its knees on monopolistic practices, its Zune portable is praying for a second life this holiday season and the Xbox's shaky quality record makes a win for the new Halo 3 game a must to be kept in contention with competitive platforms. Ouch. But with oodles of cash and a well-focused online advertising strategy Microsoft is gearing up to exploit the gaps in Google's game plan that will give it a leg up in online content markets.

One of Google's key gaps to date has been social networking. While its Orkut platform has been successful in Brazil and certain other countries and rumblings of a greater social networking plan for Google grow larger, it's Facebook that's attracting both college-age folks and seasoned professionals who are willing to hang their hats up online on Facebook's increasingly robust social media platform. As noted by The New York Times and others, then, Microsoft's USD 240 million investment for a mere 1.6 percent of Facebook ownership is a significant win for Facebook and an opportunity for Microsoft to regain some sorely needed lost ground. The transaction scales Facebook's ultimate market value to a breathtaking but highly speculative USD 15 billion, making Rupert Murdoch's USD 583 million investment in MySpace seem like a bargain basement transaction in retrospect.

The New York Times article notes that the initial investment will secure Microsoft a platform for its ad network's growth, which is certainly a key component of making sure that it can leverage the highly valuable contexts available in social media. With the high level of personal endorsement and interaction available in Facebook Microsoft advertisers will be very pleased to find an alternative to search engine results and typical media outlets through which to build relationships with their markets. But the real underlying move by Microsoft is to have a dibs on Facebook's evolving social media-oriented computer operating system environment, a must-have for Microsoft in light of Google's evolving plans to have a Web-oriented OS of its own that will help drive its social media plans.

With more people than ever using the Web as their primary repository for both personal content and their own publishing endeavors Microsoft is at a dangerous juncture in its evolution, perhaps even more dangerous than when Netscape's browser began to threaten the supremacy of Microsoft's PC platform as a staging ground for content applications. Facebook has demonstrated with its rapidly growing array of embeddable applications that whole classes of content infrastructre that are at the heart of Microsoft's long-term cash flow may be rendered moot by social media environments such as Facebook's that enable people to build and share highly personalized portals with no or limited technical expertise. Applications such as its Business 3.0 module enable B2B communication that may provide a new way for businesses to develop 1-to-1 relationships via Facebook in ways that will make today's B2B advertising and supply chain management seem very ill targeted over time. All in all, Microsoft needs to get a revenue stream from social media badly - far moreso than either Google or Yahoo.

Will Facebook wind up being the dominant social media platform for both personal and business personal publishing? Once people set up shop in a social media environment there's a certain entropy that sets in which is likely to discourage any radical shifts: you want to keep your "peeps" around you as much as possible, and Facebook offers an increasingly compelling environment to enable open publishing and content integration. Most importantly unlike some other social media environments Facebook is designed for people's true identity as opposed to any number of avatars or pseudonyms that they may use in other social media environments. The emphaisis in Facebook is on knowing who you know, not gaming them for PR or other ulterior motives. This makes environments such as Facebook and LinkedIn that enable people to present their real selves the hottest marketing environments available in social media. By contrast, what's the value of selling to someone wearing green wings and fishnet stockings in Second Life? Good for a quick buck, but not relationship selling by any degree.

Realistically Facebook is by far the greater winner in this deal, having established an awesome figure for its market value and strong leverage for any other subsequent deals to help it gain market momentum. It's perhaps not as one-sided as the deal that Bill Gates cut with IBM to get rights to sell Mircosoft's PC operating systems on other platforms, but it's about equally clear who's behind the curve and who is able to help them get back in the game. And like that earlier deal this may be a sign that Microsoft is waning in its ability to influence electronic publishing effectively. But with an advertising strategy that is well-adapted to playing on multiple platforms to service multiple ad networks the Facebook deal is as good a shot a any that Microsoft is likely to have to use social media as a leverage point for future revenues. Don't expect miracles from either partner as a result of this alliance, but to expect their competitors to sweat it a little harder to get a foot in the door of compelling online communities.

Labels: Deals Partnerships and Sales, facebook, media, Microsoft, Social Media, Technology

When Seattle-based Newsvine launched in Beta form last January we documented its promise enthusiastically and kept a close eye on it. Not surprisingly so did a number of hot prospects for financing a profitable exit, including MSNBC, which Newsvine has announced in its own story as its new owner. No details are available at this time about the size of the deal or how Newsvine will be integrated into MSNBC.com, but MSNBC News' estimate of USD 75 million seems about right given Newsvine's position in the social news marketplace and there are promises by MSNBC to keep Newsvine an independent entity for now.

It's a pretty good first acquisition for MSNBC.com, which is a humdrum online news portal that trails major outlets for cable news such as CNN.com and Foxnews.com by significant margins and seems to be caught in a major identity crisis. Unlike the online portals for CNN and Fox News, MSNBC.com is obliged to promote the broadcast NBC news properties more than the MSNBC cable unit, drawing away precious attention span to TV shows that have little to do with core online audience demographics. Add in an alliance with Newsweek magazine for feature content and the marketing muddle for the MSNBC.com brand gets no more clear.

Newsvine itself is not a traffic leader in overall visits amongst social news outlets and struggles to build momentum behind an intensely loyal core of news, opinion and bookmark contributors. But unlike other social news outlets Newsvine features a maturing mix of original content along with links to external news stories, a combination that will help MSNBC.com to build inventories of unique destination content and a network of popular online personalities that could be leveraged via MSNBC's cable outlet to build visibility for the community. Newsvine has had a few minor but noteworthy news scoops of its own - a member on the scene of the Virginia Tech shootings broke the initial details of the event - but the strength of the community tends to be a core of contributors who opine on and spin key topics in politics, religion, world events and popular culture. With a reasonable mix of views across the spectrum and the ability for talented writers to expand on their thoughts in their own pieces Newsvine offers a rich mix of content that's sure to complement any mainstream news outlet's offerings if managed effectively.

What Newsvine gets most out of this deal is a parent who's willing to put a little more muscle behind an organization that's been challenged to keep up with itself. With only a staff of six and an editorial policy that requires regular and timely monitoring and intervention by senior Newsvine staff to keep controversial content and comments from spinning out of control Newsvine suffers from the typical startup myopia that keeps it from looking at larger prizes at its disposal. Newsvine's features generally do a good job of promoting engaging content to the attention of its members and its social networking features were well ahead of other social news outlets but its up-only voting system tends to promote content that echoes much of the same controversy-for-controversy's-sake content that one finds in major media outlets. Ironically this may turn out to be a plus when you have a cable news outlet that focuses on much the same sort of stories.

Most major news outlets have been extremely hesitant to embrace social media too closely, a factor that has benefited portals such as Newsvine along the way: when The New York Times closed down its online comments features a few months back Newsvine picked up a good chunk of NYT commenters. With the acquisition of Newsvine established news media outlets may be beginning to recognize that this uneasy balance between social media and their own news is tipping away from their operations, creating loyalties tied to online communities creating and discussiong news that is likely in time to eclipse loyalties to news brands tied to established media channels. It's hardly a one-for-one swapout at this point in time, so the initial decision of MSNBC to keep the Newsvine brand alive as an independent unit is a wise move for now, especially given the typical sensitivities in online communities to being "sold out."

But as audiences empowered as newshounds create and discover a widening range of content their ability to build quality inventory and insights rapidly will eventually find more of today's journalists and commentators becoming professional members of online communities like Newsvine. Social news communities are accelerating in their ability to get their articles good placement in search engine results, a factor that certainly contributed to The New York Times' decision to open up its prime columnists' content to get our from behind their subscription firewall and into the mix of these communities. This transition is still fairly gradual and generational, but essential for ensuring future revenues amongst news audiences becoming used to having their peers help them select what's newsworthy - and worth their attention.

Labels: Deals Partnerships and Sales, Digg, MSNBC, New York Times, News, Newsvine, Social Media