Why Infographics Still Work
This horrible Mashable article reveals why infographics are still such a powerful marketing tool. The author of the article clearly has no idea what any of this means (for example, at one point she seems to think that the amount of money Facebook is raising from the IPO is also somehow an amount they need to earn between now and the IPO. And yet, the article got written, and it included a link to the accounting degree lead-gen site that paid a few hundred dollars, tops, for the graphic in question.
Google made some headlines with Search+, but it was actually a fairly busy week in sub rosa Google news, too.
- The ever-interesting RKG demonstrates that ad auction dynamics mean Google doesn’t lose much revenue from losing any given advertiser. This is a great explanation for their notoriously spotty customer service.
- Google Maps has raised the cost of their API, prompting some users to build their own version.
- Google is modifying page titles in search results, which will marginally benefit sites that don’t optimize very well.
- Google call center employees got caught essentially phishing users of a directory in Kenya. This was not the right week for what was, to all appearances, a small-scale (albeit serious) mistake.
- Arvind Narayanan speculates on how search plus social will affect Google+’s social graph.
What, Exactly, Happened between Facebook, Twitter, and Google?
Google wanted to buy rather than build their social data. But this week brought a flurry of conflicting reports, mostly driven by Search+. Since Search+ will take clicks from other social networking sites, and use them to make Google+ more of a destination, it’s worthwhile to consider why we don’t just see Facebook likes in Google (as we do in Bing), or Tweets (as we did in Bing and Google, and still do in Bing).
- In a lengthy piece—skip to the closing footnote—John Battelle claims that the Google/Facebook deal fell apart over privacy concerns.
- Luigi Montanez argues that Google is merely respecting Twitter’s code when it ignores Twitter as a social signal. Perhaps.
- Eric Eldon thinks this is an incredibly gutsy way for Google to get Facebook in trouble for antitrust issues, which is an elaborate theory if true.
- And Josh Constine says that Twitter demanded a ridiculously high price for licensing Google data, since Twitter Search was their key monetization plan.
- Kara Swisher has heard rumors confirming the rumors that Facebook will go public in May.
- A small music app company slams Facebook for favoring Spotify and other partners. But given the tactical considerations behind every Facebook move, they can’t afford not to play favorites—minimizing the number of companies that know what they’re launching next minimizes the number of companies that will tell Google and Twitter about it.
The Latest in Price Discrimination
One of the perennial themes of Digital DD is the importance of price discrimination on the web. Most of what’s paid for on the web has an effectively zero marginal cost (the vast majority of online transactions are real-time ad purchases, and consumer-facing digital products are growing fast). Being good at price discrimination has rarely been the difference between success and failure as a company, but it has had a multiplicative effect on eventual valuations. Sadly, many people just don’t get price discrimination:
- Fred Wilson laments the fact that movie producers don’t just set a flat price of $5 per view. Instead of ~$30 per view in theaters (with 3D glasses and popcorn), or $10-$15 for DVD or Blu-Ray, or $4 on Amazon instant video. It’s obviously superior to charge someone $30 if they’re willing to pay it; losing one prospective $5 system to keep alive the $30 price point sounds like a reasonable sacrifice.
- And Kickstarter (incidentally, a Fred Wilson investee) is getting flack for highly marking up the “raw materials” it bundles and sells—a bit of hosting, some promotion, payments plumbing, and a trusted brand name. This would be a great explanation for why roll-your-own solutions were grabbing market share from Kickstarter, but it’s Kickstarter that’s seeing growth. If a theory is a perfect explanation for the opposite of reality, that theory is perfectly wrong.
- Amazon has created a cheap way to charge for the sort of low-quality stories people used to give away for free. One result: people charging for free stories. Plagiarism detection is a lot easier when the capital cost plus marginal cost means that everyone who prints a book is rich enough to be worth suing; when all it takes is an email address, the incentives push plagiarism.
Gilt Slightly Restructures
Flash-sale site turned e-commerce conglomerate Gilt Groupe has denied rumors that it’s mass-firing employees. The CEO lists a few categories where they need fewer employees—some businesses have high startup costs, and the fire sale of BuyWithMe gave them a few more people than they needed.
Meanwhile, Rue La La really is firing people. The group-buying business is, as always, far more complicated and hard to execute on than Groupon’s critics tend to think.
D&B Selling its Content Farm?
AllBusiness is suspending operations and consider a sale. The site, owned by D&B, was essentially a content farm—they lost the vast majority of their organic traffic after the first Panda update.
The $500mm Facebook Gaming Acquisition
Double Down Interactive has been bought by IGT for $500mm. Which is odd, since the company appears to have just one game, with under five million monthly actives. $100 per monthly active user is a fairly steep price, although converting those users into video poker fans would be lucrative, indeed.
WebMD Abandons Sale Plan, CEO
WebMD has dropped its plan to sell itself, and CEO William Gattinella is resigning. The stock is down substantially—from the high 30′s to the mid 20′s—knocking it down to a price where perhaps itshould be in play.
The Economics of Roomkey
Hotel lead generation has been a perennially profitable part of the online travel space. Some hotel companies want to fix that with their new joint room-searching site, Roomkey. It might capture an audience by offering agreeable rates, but the hotel search field is very tough to break into; lead generation sites in that space either build a massive library of user reviews (e.g. TripAdvisor), or they add hotel selection to the flight-selection workflow (as Hipmunk just did).
BuzzFeed Rebuilds News
BuzzFeed got it right: they basically used their site to learn everything there is to know about viral conversion optimization in fairly viral topics (funny pictures, celebrity gossip). Now they’ve raised $15.5mm to apply the same model to news, technology news, and other fields that get far higher CPMs. Watch out.
What’s Wrong with Super Pro-Rata Rights?
There are a few VC terms that have gone from standard to anathema in the last two cycles, when both should be closer to the middle. One is liquidation preferences on preferred stock, and another is super pro-rata rights. In both cases, the standard argument is that 1X is fair, and anything higher than that is terrible. But in both cases, 1X is a totally arbitrary cutoff. What’s wrong with giving someone a slightly lower valuation, and .5X pro-rata rights (for example, for an investor who can make some useful introductions early on, but whose services won’t scale?). And what’s wrong with something similar for liquidation multiples. If 1X is better than 2X, why isn’t .5X an option?
Both of these terms have their uses, because they both help resolve short-term disputes about valuation and growth. A liquidation multiple allows a VC to take a lower stake up-front in exchange for a bigger piece of a small sale. And super pro-rata rights could work for strategic investors who can’t afford to lose control of a runaway success of an investee. Both sem to have clear uses, and the 1X rule looks suspiciously like an arbitrary compromise masquerading as the golden mean.
InfoSpace Suddenly Gets into Taxes
InfoSpace has purchased TaxAct for $288mm, or roughly two thirds of its own market cap. It’s a strange deal; there isn’t a strong strategic fit, but appears to trade at a low multiple (InfoSpace says it will be accretive). This looks less like a company that got “bought” and more like an asset that got “sold.” TaxAct’s PE backers needed an exit, and InfoSpace got a deal that should polish their near-term numbers.
Digital Due Diligence Weekly