Technik

MySpace Math Does Not Compute

The New York Times ran a piece on MySpace generating $200M revenues this year (an estimate from an outside analyst) with 1B page views a day at a "slightly over" 10c CPM.  Now, 10c CPM * 1B page views * 365 days = $36.5M, not $200M.  So a better current estimate of MySpace revenues is $40M annualized, based on 'slightly over' 10c CPM.   Ross Levinsohn thinks he may be able to double the CPM, and MySpace looks to double over the year in members, and page views may grow faster than members, so perhaps at year-end they could be at a $200M run rate.  No way would their year be $200M.  And even the $200M run rate seems a stretch.  The 10c CPM is a lot lower than even the normal remnant ad rates of 50c on the web, and as members increase there may be more a regression to the mean (fewer page views per member) than the other way around.  A phenomenal success, certainly, but not yet the money engine of Google. 

The Flickrs For Video - Why YouTube?

YouTube has been in the press recently.  It has taken off in the last three months to take a commanding lead in the Flickr For Video sites, including catching up to Google Video.  Flickr itself set off the Web 2.0 craze, encouraging a legion of other Flippr companies, designed to get bought.  YouTube was able to grab Web 2.0 frothy values in its funding.   It has spawned its own legions of video Flipprs.   And they keep coming.  What was it about YouTube that led it to take off?

Web 2.0 Is Over - Did You Miss It?

For many of you, Web 2.0 never really hit your awareness, but out here in Silicon Valley, it has been all the rage.  As reported six months ago, it led to frothy valuations from eager investors.  The dream was that a few engineers, a set of cheap servers, a viral customer-acquisition model, and a clever use of mashing together web services, could lead to rapid riches!  Sounds like the dot-com bubble?  This was even better, since it required so little capital to get going! 

The poster child was Flickr, which got sold to Yahoo for $25M plus an earnout of another 50% on around $1M invested capital. Soon dozens then hundreds of Flipprs got started.  Their model: advertising!

Flickr as a flip was followed by Fox buying MySpace for $580M, and (although not part of Web 2.0) Skype selling to eBay for $2.6B with a $1.5B earn out. Now we're talking real money!  With a deal-or-no-deal mentality, and visions of Skype dancing in their heads, Facebook.com turned down $750M, and is holding out for $2B exit, even in the face of flattening traffic.   Check out the chart: is Facebook worth more than MySpace?

But now the hangover is setting in.  The problem:  the ad models don't hold together.  These little frothy companies are in the bargain basement of remnant ads, and the numbers don't work.  Venture capitalists are pulling back from a momentary irrational enthusiasm.  Now they are investing in either traffic or technology.  Sic transit gloria 2.0.

(Of course, hope springs eternal.  The latest phenom is YouTube, a Flickr for Video. which popped into popular awareness in the last three months, and now has a MySpacian trajectory of growth.  Watch this space for developments .. video at 11 pm.)