sutton049

Advertisers are significantly concerned about the value of digital advertising and that concern is leading them to question whether and the extent to which digital advertising will remain in the marketing and advertising mix of their companies. 3 factors are central to the discontent: suspicions about the effectiveness of digital advertising, large amounts of fake traffic, and concerns about the returns on advertising investments. Media companies, platforms, and others providing digital advertising must address these issues if digital advertising is to remain viable. Much of the concern about poor effectiveness of digital advertising is due to poor ad formats, lack of audience attention to ads, and high rates of ad blocking—currently about 40% in U.S. on computers and tablets. Such concerns have forced digital advertising prices downward for the past decade because those factors have reduced demand and because there has been a dramatic increase in advertising inventory that is making...

Twitter is one of the best known social media services, but it is suffering from its inability to provide sufficient value to consumers, advertisers, and investors. The firm has 316 million users, a respectable figure—but 80% smaller than Facebook. Its share price has dropped below the level set when it became a publicly traded company in 2013. The company has lost about $30 billion in market value in the past two years and is now valued at $15 billion. It continues to experience negative operating and profit margins and negative return on assets, despite about $2 billion in revenue. Twitter is suffering from two fundamental business problems. First, the lack of an effective value proposition that makes it attractive to larger numbers of users. Second, lack of vision and direction. The latter led to the departure of its CEO in June 2015 and he has still not been replaced. A significant value problem for Twitter has been that it is primarily configured for short, one-way communicati...

Early in the rollout of the Internet, leaders of the emerging online companies described it as an immaterial world of virtual objects and virtual activity that was not subject to the economics, financing, laws, or business arrangements of the material world. They portrayed it is as world without structure in which informality and collaboration among users would guide its operation. They described it as global phenomenon beyond the reach of governments. Many expressed highly utopian visions of the internet. Most embraced a highly libertarian philosophy; some an anarchistic one. These leaders primary interacted with each other and deluded themselves into believing what they were doing was unique, hallowed, and beyond worldly oversight. Internet service providers saw themselves as facilitators without responsibility for who used them or for what purposes. Companies such as Google, Yahoo, and Huffington Post created value extracting models in which they expropriated the work of others as p...

Facebook is wrestling with a business challenge more traditionally found in legacy media: how do you translate consumers that don’t think they have a commercial relationship with you into relationships that that other firms will pay for? Despite 955 million active users and increasing revenues, the company has lost a third of its share value since its IPO in the spring.   The exuberance that surrounded its IPO and overpriced its shares has worn off and investors are realizing that being big isn’t enough to ensure business success. Its latest earnings reports show the firm lost money, $157 million, in the second quarter on income of $1.18 billion. Facebook’s challenges are symptomatic of a long line of “successful” digital firms that are experiencing monetization problems, including Yahoo, You Tube, AOL, and Twitter. Despite large numbers of users globally, they still lack effective business models to generate revenue levels congruous with their size. They may provide...

Serving and satisfying customers is a crucial part of  value creation in any business,but U.S. communication firms continue to struggle with the very basics and are being heavily criticized for poor service, price gouging, billing problems, and generally poor customer relations. 40 percent of the top 15 companies that most dissatisfy customers are communications firms, according to the latest data from the American Consumer Satisfaction Index. The companies American most dislike include Facebook and cable systems, which operate as near monopolies and consumerss have no real competitors to turn to for better service. The scores for the companies are: Direct TV: 68/100 Facebook: 66/100 Comcast: 61/100 Time Warner: 63/100 Cox Communications: 63/100 Charter Communications: 59/100 These are failing scores on any grading system. The companies have little incentive to spend time and money to improve service and relations with customers b ecause there is no real competition that can discip...

Making small digital news providers sustainable has become the holy grail of journalists and the search continues for workable business models and revenue streams. Advertising may produce some revenue, but it will never generate sufficient resources to support digital journalism because so little advertising money is available for sites with small audiences. About three-quarters of all online advertising goes to the top 10 sites and Google, Facebook, Microsoft, and Yahoo account for about 60 percent of all online revenue. This leaves very little advertising expenditures to be contested among all other players--of which news providers are only a small fraction. At the same time, the prices paid for online advertising are falling because there are so many sites offering advertising, the advertising inventory is nearly infinite, and audiences continue fragmenting. This means the majority of funding for start-up digital journalism must come from elsewhere and online news sites—especially s...

The decision by News Corp. to dump MySpace once again reveals the risks of over exuberance toward digital companies that do not have a proven business model or long-term customer loyalty. There are plenty of digital investments that meet those requirements, but a number of the most hyped firms moving toward IPOs and acquisitions do not. They need to be considered with hard headed pragmatism. MySpace was launched 2003 and rapidly became the toast of the digital world as a social networking site and “the place” for musical stars and fans to connect. By 2005 it was the fifth most visited site on the Internet. New Corp., which was anxious to benefit from growth in digital media, jumped at the opportunity to acquire the service and paid $580 million in 2005. It was an enormous price for a company with an unclear revenue potential. Within two years MySpace had grown to be the world’s number one social networking site and was receiving 100 million unique monthly visitors. But it still had rev...

Editors matter. The March 28-April 4, 2011, edition of the struggling news magazine Newsweek —which I admittedly have not read in years— provides some of the finest articles I have read in many months, illustrates the limits of online and social media, and shows why editors matter. There is great benefit from both edited and unedited media and I don’t believe they have to be seen in dichotomous choices for the future of media. But I believe those who argue they don’t need to edited media doom themselves to narrowness and ignorance. If I relied only on the links I receive daily from colleagues on Facebook, my news alerts for topics of interest, or digital listings of stories, I would miss the most important contribution of edited media—the service editors provide by reviewing and thinking about the world and putting journalists to work to provide a coordinated understanding of the available information. This week’s Newsweek epitomises that reality. Although I often have my attentio...

The high hopes that News Corp. had for MySpace when it paid $580 million in for the social networking site in 2005 have never been realized and appear more elusive than ever. Consequently, MySpace co-founders Chris DeWolfe (who is CEO) and Tom Anderson (who is President) are being pushed out of their management roles in major shakeup of the company's leadership. The move is signals News Corp’s concern over the site’s declining market share and poor returns. In the past three years Facebook has surpassed MySpace in total number of users worldwide, but MySpace has managed to remain the largest site in the U.S. and has 130 million users globally. In 2008 the company had estimated advertising revues of $585 million, with the bulk coming from its ad-sharing deal with Google. But it will take a long, long time for News Corp. to recoup its investment at that pace. That revenue problem is compounded because Google has been unhappy with its MySpace deal and is unlikely to continue it at pre...