Content Matters

Identity resolution technologies are used in various industries to help match people across multiple databases.  Initially deployed in the government / intelligence space, identity resolution has migrated to the retail market for fraud detection and even for cleaning CRM databases.  Various approaches are used, but the goal is to leverage available information to identify possible matches while minimizing false positives.

Certain fields present greater challenges for identity resolution.  One such market is anti-money laundering.
Financial institutions are required to follow "know-your-customer" regulations in order to comply with anti-money laundering and terrorist financing rules.  But while credit card companies get detailed addresses, date-of-birth and social security numbers from their applicants, terrorist watch lists have no such data.  Typically, it's just a name and, perhaps, a country.

Alacra has recently been working with Infoglide Software, a leader in the identity resolution space, to determine how to best apply these capabilities to the AML industry.  They've asked me to share some thoughts on the challenge, which they have posted to their Identity Resolution Daily blog.

Via PaidContent comes news that Answers.com has reached preliminary agreement to acquire Lexico Publishing, parent of Dictionary.com, Thesaurus.com and Reference.com for $100 million.

From a content standpoint, the deal makes a lot of sense.  Answers.com is effective at converting traffic to ad revenue and the acquisition would double its monthly page views.  According to its press release, the combined entity would rank 28th in comScore's rankings of U.S. sites.  Similarly, the combined company would rank second only to Wikipedia in terms of reference information sites, according to Hitwise statistics.

The price of $100 million would be roughly 14x 2007 revenues of $7 million and 35x earnings of $2.8 million.

As Staci points out, the deal would require Answers.com to raise substantial funds, likely through an additional stock offering, diluting the value of current shares.

This week I created a Content Industry group on Facebook.  My goal is to provide a forum for business networking as well as a venue for sharing information.

Facebook users, just click here to join.  If you don't have a Facebook account, take a minute to create one then join.

In the past week I’ve gotten a handful of questions (both in the comments here and face-to-face) about how Facebook applications will be monetized.  I’ll provide some initial thoughts here and welcome your comments.

First, we need to acknowledge that it’s early in the process.  The Facebook API was launched May 25 – exactly seven weeks ago today.  So, while there are some fairly obvious methods of monetizing Facebook traffic today, we can be sure that more interesting models will emerge in the months to come.

The second acknowledgement is that Facebook is a platform; it does not come with a built-in monetization mechanism.  Let’s remember how long it took before Google monetized its traffic, and then again before it provided the mechanisms (via AdSense) for others to do the same.

What the Facebook platform does provide is a distribution vehicle, enabling you access to a rapidly growing addressable market that already exceeds 24 million users.  The platform also lends itself well to two well-established Internet monetization methods: advertising and eCommerce.

• Advertising: While other social networks have restricted the ability for 3rd party developers to run ads on their “widgets”, Facebook places no such restrictions.  So, the most obvious method of monetizing a Facebook app is through development of an app that generates a lot of traffic and can serve ads.  This model should work for traditional media businesses.
• ECommerce: The second method for generating revenue is through eCommerce.  Today’s top Facebook app is iLike.  iLike is a simple application that allows users to indicate their favorite music.  iLike is positioned as a music discovery service in the same vein as Last.fm or Pandora.    The iLike app for Facebook includes a link next to each song title, allowing users to buy that song, generating eCommerce transactions.  They also have a concert tour module where you can see which performers are on tour, then purchase tickets.  Developers could easily leverage existing affiliate marketing platforms (such as Amazon) to monetize traffic for books, movies or any other products.

So, is Facebook a cash machine for developers?  Hardly.  Building a business on the Facebook platform requires development of a compelling application that remains useful to the user over time.  It will require tapping into viral markets, but also providing underlying marketing and PR to drive usage.  The Field of Dreams approach will not work in this competitive landscape.

It’s also important to understand that generating traffic on Facebook is slightly different than that on other social networks.  Most social network apps get viral by having users post a widget to their page, then having other users interact with it.  As Lance Tokuda, CEO of RockYou points out in this VentureBeat article,

“...the viral loops for Facebook (there are several) revolve around the news feed, the mini feed and the invite request.  Not around people coming to your page and interacting with it.”

Meanwhile, Lightspeed Venture Partners' Jeremy Liew provides a better sense of how Facebook apps are valued.  To Jeremy, there are four metrics that will determine the value of a Facebook app:
1. RPM (revenue per thousand page views (technically iframe views)).  This metric captures the revenue, whether it’s driven by a CPM, CPC or CPA (cost-per-action) model.
2. Page views per  user per month: many apps don’t generate many pageviews, as they simply display in a single iframe (such as a daily horoscope).  Those that generate interaction with multiple pages will have higher value.
3. Monthly churn: the stickier the app, the more likely it will be retained over time.
4. Virality of the app (as described in the Lance Tokuda interview).

I also see opportunities to make money in serving the emerging Facebook ecosystem.  In the first few weeks since the platform was announced, more than a thousand apps have been launched and tens of thousands of developer keys have been distributed by Facebook.  As more and more apps emerge, there’s a need for a more comprehensive directory for users to find the apps they need.  The existing “Top 10” list and broad categories are OK for starters, but they will always be dominated by large consumer apps.  There’s a tremendous opportunity for someone to launch a more navigable app directory that connects users with the more specialized apps they require.

Of course, there will be companies who specialize in app development (as already exist for developing MySpace widgets) and for marketing of your apps, just as the SEO/SEM market has emerged around Google.

So what’s the best way to monetize Facebook?  I think that Charlie O’Donnell says it best.

“It shouldn't be up to Facebook to figure out your business model”. 

The Facebook platform can dramatically shorten time-to-market of new applications, and help drive traffic.  But, it’s up to us to develop the applications and supporting business models to turn it into a business.

Alacra launched the Alacra Wiki about two years ago.  The wiki provides detailed information on the companies, people and products that make up the business infromation and content industry.

Recently, Alacra added two new categories of content to the wiki: Recruiters and Consultants.  I get asked regularly for referrals in both of these areas.  Both segments are led by boutique firms, often sole practitioners, who have unique industry experience.  By adding these to the Alacra Wiki, it will make it easier to identify these niche providers (though I'm still happy to provide referrals to those who ask).

The People section of the Alacra Wiki is a "who's who" of the content industry, profiling key leaders from all aspects of the media and publishing community.  If you're not listed on the Wiki (check here), all it takes is a minute to register and add your information.   Or, if you'd rather have Alacra add your details, just drop a note to and they'll post the info to the Wiki for you.

The Alacra Blog has more details on the new categories and the Alacra Wiki in general.

Via TechCrunch comes news of the next step in the emergence of Facebook: a VC fund offering seed investments only in companies developing Facebook apps.

Valley VC Bay Partners has launched a new program called AppFactory, targeting developers of Facebook apps.  The investments will be small – typically in the $50k - $250k range, according to Bay partner Salil Deshpande, and is designed as a "fast-track" program with few investment hurdles.  Interested parties can find out all the details on the AppFactory FAQ.

While some will question the idea of betting on a platform that’s less than two months old, the concept has merit in my opinion.  By leveraging the Facebook platform, the time (and cost) to get to market is minimized.  And while it’s possible that Facebook is a fad, more and more serious players in the industry see it as the new dominant social media platform. 

The Facebook apps that have been launched to-date are little more than eye candy, allowing users to share their preferences (whether music, movies or political causes).  Of course, as Marc Andreesen points out in his “Five f__ weeks” post, the Facebook platform has been out for less than two months.  That’s not a lot of time to conceive and launch meaningful software.  He predicts that by September, when students go back to school and business people finish vacations, we’ll see strong adoption of a compelling group of Facebook apps.  Betting against Marc in the past has not been a rewarding endeavor, so I’m going along with him on this call.

Many in the content business read John Blossom’s Content Blogger religiously.  The blog includes a daily recap of “must read” articles along with his own highly insightful takes on issues in the content industry.

A few weeks ago, John added a daily vlog to the mix – the ShoreViews Video blog.  While video blogging isn’t new, its use has been limited.  Video can be a compelling format.  In this case, it gives John the opportunity to get his personality into the posts.  Those who know John (or who have attended a content industry conference in recent years) know him to be smart and thoughtful with a somewhat wry sense of humor.  That personality doesn’t always translate in print, but on the video it comes through.

I had the chance to catch up with John last week to learn more about his experiences with video. 

Content Matters: John, you’re the first blogger in the content space to try video blogging.  What’s the response been so far?

John Blossom: Pretty good response so far, but it’s not yet clear to me that it’s a traffic builder.

CM: Which is faster for you to create, the video or written content?

JB: Overall, I think that writing is about as fast as video.  I can do most of the video in a single take but it takes a few minutes more to do the post-production work.

CM: How do you plan to integrate the video with the traditional text?  Are you planning to use audio for short posts, then expand in text?

JB: I did one video where I talk about some of the weblog posts.  I think that it works out pretty well that way, but it also works to talk about headlines that I wouldn’t necessarily write about, where some simple show-and-tell just works better.

CM: Any other thoughts for those who might consider video blogging?

JB: It’s a time-eater, but less so as I get the hang of the process.  I’m not sure whether I’ll continue to do a daily video.  I may switch to a weekly or event-driven format, such as for interviews.

CM: Thanks, John.  We’ll be watching the blog to see where you take it next.

My take: I think that vlogs are interesting, but I’m not yet convinced that they’re compelling in the business market.  In speaking with clients in the financial markets, they seem to have no appetite for video; it’s quicker to skim or to search text than to watch video, and the open and noisy trading floor environment is not quite a home theater setting.  I think that we’ll need to see improved video searching before Wall Street accepts video.  However, the corporate market is probably more ready for video today.  Meanwhile, entertaining video, such as that of Wallstrip or Rocketboom has already demonstrated the ability to attract an audience.  For those who have the time to experiment, I think it's smart to get out ahead of the technology and play with video now.

Those interested in seeing John’s vlog can find it on the Content Blogger site or on Robin Good’s MasterNewMedia site.

American Lawyer Media ("ALM") has been acquired by UK's Incisive Media for $630 million.

ALM is the publisher of American Lawyer, National Law Journal and law.com, among other media properties.  ALM was previously owned by private equity firm Wasserstein & Co, which acquired the company in 1997.  While other publishers like West and Lexis focus on the research needs of the legal market, ALM is the leading provider of information about the business side of law.  ALM generated revenues of approximately $200 million in 2006.

Incisive, which is owned by private equity firm APAX Partners, purchased VNU's European trade publication business earlier this year and bought web marketing publisher ClickZ and Search Engine Strategies in 2005.  Incisive Media's revenues, $140 million in 2006, will more than double in the deal.

This week, Yahoo announced the launch of a new graphical ad format it calls SmartAds.  SmartAds look to blend behavioral targeting with geographic and demographic information.

What's unique about SmartAds is the technology platform behind them, for which Yahoo has applied for a patent.  SmartAds are template-based, so that an advertiser can assemble, on-the-fly, a "custom" ad based upon the user.  Depending upon the ad, there could be thousands of combinations fed through the template, so each user will receive what appears to be a custom ad.

For example, a user browsing pages about hybrid vehicles, who has selected San Jose as their default city for Yahoo! weather might see a SmartAd for the Toyota Prius, along with links to dealers in the San Jose area.

Yahoo has done limited testing of SmartAds on their FareChase portal, reporting click-through rates of 2-3x that of non-targeted display ads.  They will now roll out SmartAds across all Yahoo properties, and will also deliver them through the Right Media platform once that acquisition is finalized.

Behavioral advertising is not new.  TACODA and Revenue Science offer behavioral ad placement today, while e-commerce sites like Amazon deploy similar capabilities within their site.  However, the combination of demographic plus behavioral, driven by this template-based system could give Yahoo an advantage, at least in the near-term.

One short-term challenge, as Scott Karp points out, is that there are no ad agencies today which are ready to deliver ad materials with this level of complexity.  That said, I think that Yahoo will hand-hold the early adopters here and if they can show success, the agencies will adapt.  Even more interesting might be whether the political campaigns look to use SmartAds to do targeted advertising.  While serving up the wrong ad could backfire, few businesses leverage demographic targeting the way the campaigns do.

While Google continues to dominate the search advertising market, Yahoo remains a key player in display advertising.  While that market has been flat recently, Yahoo's hoping that SmartAds can drive new growth through improved relevancy and higher click-throughs.

For more insights on Yahoo SmartAds, check these posts from SearchEngineLand and ClickZ.