After, almost 4 years working on various aspects of a growing Search Business – the time has come to take on some new challenges. Over the next few weeks, I’ll transition into a more strategic role in the Online Consumer Marketing space.
It’s been fun to learn about Search – and work with some very smart, very passionate people. Now, it’s time to close this chapter and open a new one.
Peace…….
Aug 20, 2008
SES San Jose - My Recap of a few key sessions..
Universal (Blended) Search This session was very popular last year – this time around, it seemed a little boring. I’m tired of hearing people say that the “10 blue link” search experience, is dead. I’ve spent many years in the online services industry, so I fully understand the value of a blended search interface – I think it’s great, however I don’t believe it will replace the simple SERP experience which made Google and other Search Engines so popular. I can only imagine how the SEO folks in these sessions, must feel. Each year they go to these sessions hoping to gleam some insights on how Search Engines trigger blended search results. The truth is, even the Search Engines are still figuring things out - and as they do so – traditional SEO tactics will not yield the expected results for certain types of keywords. The Product Mgr from Google provided some interesting insight: “Blended Search is great for advertisers – it drives more traffic and offers opportunities to present new ad types”. Someone else mentioned that paid listings as they exist today, will have to evolve. What’s interesting about all of this is that we all assume that the blended search experience is truly vastly better than the plain blue links with 2 or 3 lines of supporting text. If you show me a SERP which blends search results from video’s, Images, Blog Post and Maps and then show me another with just 10 blue links – I’m going to tell you that I love the blended search approach. I’ll say it’s more relevant, I like the value added content and I’m really loving all the bright colors.
However, If I'm searching for very specific information - my mind has already been conditioned to believe that 10 blue links with some accompanying text, is all I need. The problem with the Blended Search experience is that it starts to resemble a portal home page experience - which users can get from Yahoo, MSN, AOL or any general interest portal.
The key benefit of the traditional 10 blue link user experience - is that it's simple, easy to navigate and informative as well. Search Engines can present useful, relevant algorithmic results along with Sponsored links. Creating compelling advertising links over a blended search interface, will be challenging. There's so much great content available, that users are unlikely to actively engage with sponsored link placements.
This goes back to my central argument about the Search Landscape. In order for a Search Engine to be successful – it must serve 3 distinct customer segments, very well.
è Online Users – who generate the search queries and click on the sponsored links
è Website Owners/Keyword Buyers: Website Owners, Retailers/Wholesalers, Companies of all shapes and sizes – looking to profit from Search Engines
è SEM/SEO Players: Those who make a career out of helping Keyword Buyers & Website Owners – to gain exposure to the Online Users
Google is the only Search Engine which services the 3 customer segments very successfully – Blended Search hasn’t really taken off because – although it certainly provides some great value to Online Users, the rich results page experience presents challenges for SEOs and Keyword Buyers alike. Perhaps most significantly – users seem very content with the 10 blue link experience – ask.com can testify to that…….
However, If I'm searching for very specific information - my mind has already been conditioned to believe that 10 blue links with some accompanying text, is all I need. The problem with the Blended Search experience is that it starts to resemble a portal home page experience - which users can get from Yahoo, MSN, AOL or any general interest portal.
The key benefit of the traditional 10 blue link user experience - is that it's simple, easy to navigate and informative as well. Search Engines can present useful, relevant algorithmic results along with Sponsored links. Creating compelling advertising links over a blended search interface, will be challenging. There's so much great content available, that users are unlikely to actively engage with sponsored link placements.
This goes back to my central argument about the Search Landscape. In order for a Search Engine to be successful – it must serve 3 distinct customer segments, very well.
è Online Users – who generate the search queries and click on the sponsored links
è Website Owners/Keyword Buyers: Website Owners, Retailers/Wholesalers, Companies of all shapes and sizes – looking to profit from Search Engines
è SEM/SEO Players: Those who make a career out of helping Keyword Buyers & Website Owners – to gain exposure to the Online Users
Google is the only Search Engine which services the 3 customer segments very successfully – Blended Search hasn’t really taken off because – although it certainly provides some great value to Online Users, the rich results page experience presents challenges for SEOs and Keyword Buyers alike. Perhaps most significantly – users seem very content with the 10 blue link experience – ask.com can testify to that…….
SES San Jose - Day 1 - The Global Search Landscape
I noticed that the SES folks introduced a track called World View - on day 1 of this event. The first session focussed on Asia Pacific & Latin America - Part 2 centered on European Markets. I've summarized my learnings and takeaways below.
Latin American Market
The Hispanic Community is a rapidly growing, but largely underserved Market. There are over 44 Million Hispanics online, they’re young, highly engaged, spend plenty of time online. Spanish-dominant users are the fastest-growing online segment. The purchasing power of U.S. Hispanics is growing faster than many other segments; It is currently more than $750 billion and will likely exceed $1 trillion by 2010
While the U.S. Hispanic market is just 2 percent of the total search market worldwide, they are growing by 5% YoY. Hispanics are great Internet Explorers – and are known to use Google: 87%; Yahoo! Search 68%; MSN Search: 40%; Ask Jeeves: 32% and Altavista: 12%; amongst other Search Engines.
-> The average Latin American Internet user spends 29 hours online during the month –more than the global average of 25 hours
-> Video Search has a high penetration with the U.S. Hispanic market and Latin America
-> Search Engagement is especially high in 3 major Latin American countries - Colombia, Brazil, and Argentina
The key takeaway here is that the U.S. Hispanic and Latin American markets present huge opportunity for sustainable online advertising growth. Hispanics are very engaged and will likely be included to respond to targeted SEM Campaigns
Asia Pacific Region
The Internet is increasingly popular on a global scale: The most popular languages used on the Internet include English, Spanish, Japanese, French and Chinese. Internet penetration remains strongest in N/America and Europe, Latin America, Asia Pacific and the Middle East regions are growing very fast.
Japan is one of the most prominent Internet Markets – with over 89M people online and 85% broadband penetration. Online advertising spend topped $4.6B in ’07 and is projected to hit $7.6B by 2011. Japanese Internet Users are very engaged individuals, online video players, blogs, Mobile services and QnA features – remain very popular. The social networking phenomenon, epitomized by services such as Mixi, has really taken off in Japan - as is the case in China and South Korea. Google and Yahoo are both very strong local players – however Yahoo has an edge because it’s portal content and communication services are very popular with users.
Chinese users are relatively more turned on, tuned in versus their western counterparts. Given fewer media choices, much of China’s public Internet companies value are based on entertainment and communication.
The most popular online activities amongst the 250M Chinese Internet Users – are: (Online Music: 86%,Search: 72.%,News: 72%Instant Messenger: 81%, Online Games: 59%). This actually makes sense – given the peoples’ love of Music and thirst for information. The online advertising landscape is growing fast – approximately $961M was generated in ’07, this amounted to about 7% of total ad spend in China. Search alone, accounted for $309M / 32% of total online ad spend. Current forecasts indicate that China will generate over $1.38B from Search advertising – by the year 2010. That estimate is not very far fetched given the fact that less than 50% of the Chinese population is online.
The sheer number of web sites and web pages continues to grow at a very high rate.
Baidu remains the strongest Search Engine in China – with over 71% Query share and revenue of $234M in ’07. Google has approx 23% query share and Microsoft, Yahoo and a string of 2nd tier players – share the remaining 9% query share. In addition to its Search Engine, Baidu has its own monetization platform and a growing list of online services & features
Europe
As Yahoo struggles across Europe – Google has grown even stronger. A recent report by “relevant traffic” indicates that Google gets over 80% of the Search advertising spend across all key European markets – including UK: 80%, France:75%, Germany:95%, Italy:95% and Spain:95%.
In France, broadband penetration is very high (94%). Much of the online advertising spend is driven through Media Agencies – so Search Engines without their own monetization platforms (like Microsoft and Ask) are at a distinct disadvantage. Add to this, the fact that Yahoo is focusing more on display advertising and it’s not difficult to understand why Google has over 75% share of Search advertising spend, in France
One thing European Markets have in common with Asian ones is the growing popularity of Social Network Systems and Video players. In France, Skyrock, Facebook, Spaces and Flickr. In Germany – local social networking players, such as y!gg, Mister Wong and mienVZ are doing much better than facebook, myspace and delicious.
In Germany, enthusiastic Searchers generate over 100M searches daily – 3B/month. Google has over 90% Market share, Yahoo:3%, Live Search:2% and T-online:2%, jointly account for 7% query share. Ultimately – Google is the key driver of traffic to key general interest portals and websites across DE and other key markets across Europe.
Overall, the speakers were okay and the sessions were fairly informative. Many of the key insights are not new - Social Networking is very popular, Google dominates in query volume, share and online advertising revenue - in most markets. One key trend is the Yahoo's query share and Search Revenue continues to decline across Europe and Asia. It does appear that YSM! is de-prioritizing Search in favor of online display advertising and perhaps choosing to stand it's ground in specific markets - such as UK and JP.
Microsoft derives search revenue in UK, France and Canada, through it's own monetization platform - adCentre, but relies on YSM! to help drive revenue throughout the rest of Europe and much of Asia/Americas. Without a truly global monetization platform which can offer formidable competition to both adwords and adsense, neither Live Search nor Yahoo Search - will make any headway against Google......
SES San Jose '08
I arrived in San Francisco this afternoon for what will probably be my last Search Engine Strategies Conference. These events are nice to attend once or twice - after that, the novelty quickly wears off.
Last year, I covered a number of interesting key notes and blogged about a few key sessions. This time around – I’ve decided to focus on specific sessions and spend more time talking to Search Enthusiasts at the Expo Hall.
So, I’ll post a handful of blog entries about my perspectives on a few key sessions. The SES blog does a good job of recapping the key sessions, as does Danny Sullivan’s Search Engine Land
Last year, I covered a number of interesting key notes and blogged about a few key sessions. This time around – I’ve decided to focus on specific sessions and spend more time talking to Search Enthusiasts at the Expo Hall.
So, I’ll post a handful of blog entries about my perspectives on a few key sessions. The SES blog does a good job of recapping the key sessions, as does Danny Sullivan’s Search Engine Land
Aug 5, 2008
Does Microsoft Have A Search Engine?
Last weekend, I took my daughter to a birthday party. As the event got started, I met the celebrant's Dad, and we started a casual "get to know you" conversation. Once he found out that I worked in the Online field - he was keen to ask me about Google.
He raved about the service and told me all about the leads he was getting from Google. Then he asked what I do, I mentioned Live Search and he had no idea what I was talking about. So I explained that Microsoft has it's own Search Engine - as does Yahoo. And that we both offer a similar offering to Google.
I then proceeded to explain that when MSN users initiate Searches, the results featured are actually served by our very own Search Engine - called Live Search.
He's response was instructive. "Why don't you guys just tell us about your Search Engine - that way I'll know that I can go to Google or whatever your engine is called - for my Search Results".
It's also worth noting that this individual knew nothing about adCentre - even though he leaves in the Seattle area and has been an active user of Google adwords for some time.
He mentioned that he goes to MSN to be entertained and informed. He probably uses our communication tools (hotmail & messenger), as well.
This isn't new - we all know that both Microsoft and Yahoo could do a better job of actively promoting their Search Engines. But that's becoming increasingly difficult because both MSN and Yahoo are known as general interest portals - not destination search engines.
3 Key Customer Segments
Users - like my host, who are oblivious to most search engines and simply associate Search with Google, similar to the way hotmail and Messenger are often associated with MSN or Yahoo.
Customers: Who leverage monetization platforms to drive users to their sites - by buying keyword placements
Influencers/SEO Community: Individuals & Corporations who influence the online habits of both Users & Customers, albeit in different ways.
At core, the Search Engine must deliver very good results and have a reliable platform to monetize those results - not just in the US, but Globally. Only Google does this today - only Google consistently delivers strong ROI to each of the customer groups outlined above - on a Global Scale.
That's the enormity of the task facing both MSFT and Yahoo and for that matter - Mahalo, Cuil, Ask and the other niche engines. I have yet to see a Google TV, Radio or Newspaper ad - So this is not all about Marketing & P.R campaigns, although that certainly helps.
So, after listening to my host rave about the leads he gets through Google - I politely mentioned that Live Search is a great engine and we have a great monetization platform in adCentre. Hopefully, he'll take the time to check out our Search offering, and see for himself.....
He raved about the service and told me all about the leads he was getting from Google. Then he asked what I do, I mentioned Live Search and he had no idea what I was talking about. So I explained that Microsoft has it's own Search Engine - as does Yahoo. And that we both offer a similar offering to Google.
I then proceeded to explain that when MSN users initiate Searches, the results featured are actually served by our very own Search Engine - called Live Search.
He's response was instructive. "Why don't you guys just tell us about your Search Engine - that way I'll know that I can go to Google or whatever your engine is called - for my Search Results".
It's also worth noting that this individual knew nothing about adCentre - even though he leaves in the Seattle area and has been an active user of Google adwords for some time.
He mentioned that he goes to MSN to be entertained and informed. He probably uses our communication tools (hotmail & messenger), as well.
This isn't new - we all know that both Microsoft and Yahoo could do a better job of actively promoting their Search Engines. But that's becoming increasingly difficult because both MSN and Yahoo are known as general interest portals - not destination search engines.
3 Key Customer Segments
Users - like my host, who are oblivious to most search engines and simply associate Search with Google, similar to the way hotmail and Messenger are often associated with MSN or Yahoo.
Customers: Who leverage monetization platforms to drive users to their sites - by buying keyword placements
Influencers/SEO Community: Individuals & Corporations who influence the online habits of both Users & Customers, albeit in different ways.
At core, the Search Engine must deliver very good results and have a reliable platform to monetize those results - not just in the US, but Globally. Only Google does this today - only Google consistently delivers strong ROI to each of the customer groups outlined above - on a Global Scale.
That's the enormity of the task facing both MSFT and Yahoo and for that matter - Mahalo, Cuil, Ask and the other niche engines. I have yet to see a Google TV, Radio or Newspaper ad - So this is not all about Marketing & P.R campaigns, although that certainly helps.
So, after listening to my host rave about the leads he gets through Google - I politely mentioned that Live Search is a great engine and we have a great monetization platform in adCentre. Hopefully, he'll take the time to check out our Search offering, and see for himself.....
Jul 30, 2008
Musing On The Concept of Customer Loyalty
The Notion of Customer Loyalty certainly varies from one industry to the next. It becomes evident when customers make specific decisions about the products or services they choose. It’s rarely about what they say in survey’s or feedback sessions – it’s about what they do, what actions they actually take. I don’t consider myself a loyal customer of Coke – I know it’s not particularly healthy and I have lots of other options, but when I’m out to lunch or dinner, I often drink coke. I’m comfortable with the brand and what it represents – but I wouldn’t necessarily chose it over Pepsi. So, I guess, customers can be very satisfied and still not be loyal.
So in essence, loyalty is always action oriented, retaining customers is all about seeking behavioral drivers which can trigger specific actions – on a regular basis.
So, how does an organization build customer loyalty? It starts with the value proposition – what does the product offering or service do for the customer? How does the company outline its value proposition to potential customers, such that the average individual can clearly see the ROI in buying a specific product or using a service.
Once your initial Consumer Marketing Campaigns, promo offers and free giveaways – have turned potential customers into actual ones, how do you turn first timers or occasional customers – into loyal ones? It’s all about building relationships, communicating a consistent value proposition through different channels and finding ways to maintain that dialogue with your customers in different forums. It’s about making the customer feel that your product or service is useful – even integral to some aspect of their well being. One thing that most successful Global Brands have in common – is a strong Customer Base.
In many cases, customer loyalty is the result of well-managed customer retention programs; customers who are targeted by a retention program, generally tend to be more loyal to a brand, product or service. The process and forum through which one communicates with potential or existing customers is key to retaining them and building customer loyalty.
I recently had a conversation with a colleague who asked – how I would define and measure customer loyalty in the Online Business. Web Analytics tools can tell slice and dice user demographics & trends in many different ways. One can always find data on what types of products or services your users are interested in – so various online customer engagement metrics, could be a measure of loyalty. Certainly, Internet users response to specific Online Marketing Campaigns could provide some indication of how a specific brand is perceived. Especially if the campaigns have strong interactive elements and feedback channels which enable potential customers to maintain a dialogue with a company, about its value proposition.
I don’t believe it’s possible to measure and manager customer loyalty using two or 3 specific metrics – especially in the online realm. One needs to review a number of different indicators providing different perspectives on how visitors and customers think about their relationship with your brand. It's not just about how they behave, but also about what they think. The emphasis between the two will depend on the specific products, services or value proposition which the company presents.
Web analytics tools will track online behavioral trends, specific actions which can serve as indicators of customer loyalty. It's also important to take into account what visitors do when they get to the site. Someone who visits a site three times and spends five minutes there each time is considered more loyal than someone who visits once and spends half an hour on the site. A frequency metric is useful, but does not necessarily serve as a strong indicator of Customer engagement or Loyalty.
If a person visits a site often and spends time interacting with features, tools and proprietary content – that person is displaying strong engagement and certainly has the potential to be a loyal customer.
Clearly, there are several factors which may be considered, when measuring customer loyalty, what’s key though is that turning potential customers into loyal ones – is a function of a number of key initiatives, which every company must take note of.
ð Customer Awareness: Knowing the core set of consumers who would most value your products or services and creating awareness amongst the core set - about your products/services
ð Customer Acquisition: Companies need to quickly determine how to engage with and acquire potential customers. start the dialogue and acquire them
ð Customer Service: Continuing the dialogue with customers, delivering a consistent message, creating and maintaining brand awareness, providing value added services
ð Customer Retention: Initiating programs, campaigns and support services to help retain your core group of customers – and turn them into raving fans
Ultimately, Customer Loyalty is primarily driven by the value proposition to the user, as well as the means by which that value prop is communicated to the user. It's made manifest by the types of actions and behavioural tendencies which the customer displays.
So in essence, loyalty is always action oriented, retaining customers is all about seeking behavioral drivers which can trigger specific actions – on a regular basis.
So, how does an organization build customer loyalty? It starts with the value proposition – what does the product offering or service do for the customer? How does the company outline its value proposition to potential customers, such that the average individual can clearly see the ROI in buying a specific product or using a service.
Once your initial Consumer Marketing Campaigns, promo offers and free giveaways – have turned potential customers into actual ones, how do you turn first timers or occasional customers – into loyal ones? It’s all about building relationships, communicating a consistent value proposition through different channels and finding ways to maintain that dialogue with your customers in different forums. It’s about making the customer feel that your product or service is useful – even integral to some aspect of their well being. One thing that most successful Global Brands have in common – is a strong Customer Base.
In many cases, customer loyalty is the result of well-managed customer retention programs; customers who are targeted by a retention program, generally tend to be more loyal to a brand, product or service. The process and forum through which one communicates with potential or existing customers is key to retaining them and building customer loyalty.
I recently had a conversation with a colleague who asked – how I would define and measure customer loyalty in the Online Business. Web Analytics tools can tell slice and dice user demographics & trends in many different ways. One can always find data on what types of products or services your users are interested in – so various online customer engagement metrics, could be a measure of loyalty. Certainly, Internet users response to specific Online Marketing Campaigns could provide some indication of how a specific brand is perceived. Especially if the campaigns have strong interactive elements and feedback channels which enable potential customers to maintain a dialogue with a company, about its value proposition.
I don’t believe it’s possible to measure and manager customer loyalty using two or 3 specific metrics – especially in the online realm. One needs to review a number of different indicators providing different perspectives on how visitors and customers think about their relationship with your brand. It's not just about how they behave, but also about what they think. The emphasis between the two will depend on the specific products, services or value proposition which the company presents.
Web analytics tools will track online behavioral trends, specific actions which can serve as indicators of customer loyalty. It's also important to take into account what visitors do when they get to the site. Someone who visits a site three times and spends five minutes there each time is considered more loyal than someone who visits once and spends half an hour on the site. A frequency metric is useful, but does not necessarily serve as a strong indicator of Customer engagement or Loyalty.
If a person visits a site often and spends time interacting with features, tools and proprietary content – that person is displaying strong engagement and certainly has the potential to be a loyal customer.
Clearly, there are several factors which may be considered, when measuring customer loyalty, what’s key though is that turning potential customers into loyal ones – is a function of a number of key initiatives, which every company must take note of.
ð Customer Awareness: Knowing the core set of consumers who would most value your products or services and creating awareness amongst the core set - about your products/services
ð Customer Acquisition: Companies need to quickly determine how to engage with and acquire potential customers. start the dialogue and acquire them
ð Customer Service: Continuing the dialogue with customers, delivering a consistent message, creating and maintaining brand awareness, providing value added services
ð Customer Retention: Initiating programs, campaigns and support services to help retain your core group of customers – and turn them into raving fans
Ultimately, Customer Loyalty is primarily driven by the value proposition to the user, as well as the means by which that value prop is communicated to the user. It's made manifest by the types of actions and behavioural tendencies which the customer displays.
Jul 22, 2008
Customer Loyalty
Times are hard - bankruptcy levels continue to rise and spend levels are down across the US in several key sectors. Consumers are grappling with +$100/barrel oil prices and the resulting impact on the gas prices, air fares, groceries and just about everything else. It's at times like this - when every dollar counts, that we learn the true meaning of Customer Loyalty. Why is it that some companies are able to maintain and even thrive during economic downturns, while others are going out of business? I believe Customer Loyalty plays a key role in this trend. Over the past month, I've researched a number of companies across very different industries with a view to understanding what type of dialogue they're having with their customers and to what degree, they're maintaining or improving Customer Loyalty. The term customer loyalty is used to describe the behavior of repeat customers, as well as those that offer good ratings, reviews, or testimonials. Some customers serve as advocates for specific companies, telling friends and family about products offerings and services. This word of mouth buzz is a very potent means of creating awareness about a company’s value proposition & driving customer loyalty. Google is one company that has benefited immensely from the loyal behavior of it's user base.
However, customer loyalty includes much more. It is a process, a program, or a group of programs geared toward keeping a client happy so he or she will provide more business. Customer loyalty can be achieved in some cases by offering a quality product with a firm guarantee. Organizations often use special offers, gifts and promotional campaigns coupons, low interest rates on financing, high value trade-ins, extended warranties, rebates, and other rewards and incentive programs to drive customer loyalty. The ultimate goal of customer loyalty programs is to create happy customers who will return to purchase again and persuade others to use that company's products or services.
The Dialogue
I believe it's important for companies to maintain an ongoing relationship with existing customers and start one with potential customers. Good customer relationships are driven by having a meaningful dialogue on an ongoing basis. One which highlights the strong value proposition which the company provides as well as the value added services which are available to users.
The theme, tone and key underlying message should be conveyed through every level of the customers experience. So Marketing Campaigns should push a consistent, integrated message - through various mediums. Sales, support services and strong customer relationship management are amongst the key drivers of customer loyalty because of the constant, high-level interaction with customers. If a client has a problem, the company must be very responsive and should strive to address it in a timely fashion.
This should be standard procedure for any reputable business, but those who wish to develop customer loyalty on a large-scale basis may also go above and beyond the standard. In an upcoming post, I'll review the Customer Loyalty Initiatives of a handful of well known companies........
However, customer loyalty includes much more. It is a process, a program, or a group of programs geared toward keeping a client happy so he or she will provide more business. Customer loyalty can be achieved in some cases by offering a quality product with a firm guarantee. Organizations often use special offers, gifts and promotional campaigns coupons, low interest rates on financing, high value trade-ins, extended warranties, rebates, and other rewards and incentive programs to drive customer loyalty. The ultimate goal of customer loyalty programs is to create happy customers who will return to purchase again and persuade others to use that company's products or services.
The Dialogue
I believe it's important for companies to maintain an ongoing relationship with existing customers and start one with potential customers. Good customer relationships are driven by having a meaningful dialogue on an ongoing basis. One which highlights the strong value proposition which the company provides as well as the value added services which are available to users.
The theme, tone and key underlying message should be conveyed through every level of the customers experience. So Marketing Campaigns should push a consistent, integrated message - through various mediums. Sales, support services and strong customer relationship management are amongst the key drivers of customer loyalty because of the constant, high-level interaction with customers. If a client has a problem, the company must be very responsive and should strive to address it in a timely fashion.
This should be standard procedure for any reputable business, but those who wish to develop customer loyalty on a large-scale basis may also go above and beyond the standard. In an upcoming post, I'll review the Customer Loyalty Initiatives of a handful of well known companies........
Jul 19, 2008
My Take On MSFT's Earnings Report
Micrsoft reported it's earnings earlier this week - and for the most part, results were in line with estimates. Q4 revenue was up 18%, but losses hit $1.2B - primarily driven by investments in it's Online Services Group.
"Revenue growth was primarily driven by increased Windows Server / SQL Server revenue, increased licensing of the 2007 Microsoft Office system and Windows Vista, and increased Xbox 360 platform sales." Favrourable foreign exchange rates were responsible for an incremental $542 million in revenue. Here's a transcript from Microsoft's earnings call, key Metrics Below.
Since the earnings report was released - MSFT has dropped below $26 and will likely decline futher, next week. Clearly, investors & analysts remain concerned that the company is spending too much time and resources trying to grow it's Online Services Business. I reviewed the comments which the Microsoft CFO made - addressing concerns about the Online Spend in FY08 and guidance for FY09.
Transcript From The Earnings Call - & Insights/Inline
”I will start with an overview of our broad strategy and then provide details into the additional investments. With the online ad spending expected to reach $80 billion by 2012, this area represents one of the largest growth opportunities for the company. We segment the market for online advertising in four distinct categories -- Search, Advertising Platforms, Information Content, and Communication/Social networking. For search, we’re focused on driving query share improvements and business model innovation, specifically in the area of high value commercial search. Our recent release of Cashback is a good example of executing on our strategy, which combines innovation in the shopping experience with a shift in the distribution of advertiser economic towards the end users. Additionally, we also [seek to win] targeted distribution through OEMs, ISPs, ISVs, and retailers. The recently announced deal with HP in the U.S. is an example of [this].”
WC: Although the online advertising market has slowed in recent months - as evidenced by Google’s results, there’s still plenty of potential for online advertising to snatch a larger share of Billions spent on global advertising WW. Search Advertising remains one of the most cost effective online advertising mediums so the top search engines are positioned to continue to grow revenue. However, building, maintaining and constantly improving a Search Engine is a very expensive endeavor. In Microsoft’s case, it’s made even more so, because the company doesn’t yet have the scale to challenge Google on Syndication/Distribution deals. (Recap: Search is key to driving online advertising revenue – which is forecasted to continue to grow rapidly and take share from the traditional $100B Global advertising Market. There are no half measures with Search – if you’re in, expect to spend billions developing global data centers, hiring talented technologists and improving core features & functionality).
“Turning to the ad platform, our strategy can be summarized as consolidate [when in] display, and there we are focused on integrating our advertising assets into a single comprehensive system that can deliver our publishing partners’ industry leading yields and our advertisers optimal return on their ad spend.”
WC: The purchase of aQuantive helps make the Microsoft ad platform offering – even more robust. Once the various systems have been integrated with one another – the Online Services Group will be well positioned strong reporting functionality to its clients. This helps optimize campaigns, improve overall ROI and drive customer loyalty/ retention. (Recap: Strong ad Platforms are the backbone of any Global Online Advertising Business. Key Investments in reporting infrastructure, will help drive online advertising revenue World Wide and provide Microsoft with a distinct competitive advantage in the online advertising space)
“In the area of communication and social networking, which includes our mail, messenger, and social networking assets, such as Spaces, we’ll deliver the leading end-to-end experiences across the PC, phone, and web. And finally, in the category of information content, we plan to invigorate our MSN portal experience with improvements in user experience, social media consumption, and premium content.”
WC: As an avid MSN User, I’m happy to hear that the company plans to improve the overall user experience of the portal and closely integrate its communication tools (messenger/hotmail), with useful, relevant, proprietary content. I’m not sold on the whole concept of Social Networking – as a revenue generating medium, however I believe it’s a key piece of the puzzle. There are only 2 global general interest portals – Yahoo & MSN. Both have similar features – and though Yahoo has been the stronger portal in the US, it’s been losing volume & reach lately. If MSN can become the undisputable Top Portal, it will draw even more Display Advertising revenue – especially from Large Companies – looking to build brand awareness online or start an interactive dialogue with Internet Users. Google can’t offer this type of value proposition through its Search Engine – so it’s a distinct opportunity for Microsoft, one the company should certainly invest in.
“So about two-thirds of the incremental spend that we are planning is related to investments to drive usage of our search offering. We’re dialing up our search distribution initiatives with targeted OEM toolbar [alt] search deals, scaling search globally with investments in localized engineering and data centers, pursuing acquisitions and partnerships to build vertical content to support our commercial strategy, accelerating the rollout of our Cashback program, and increasing marketing in the business to grow awareness and drive traffic. Second, we are upping the investments in our ad platform and increasing the number of advertisers and high quality inventory on that platform. Specifically, these investments are in the area of accelerating the integration of our ad platform assets, expanding our sales and service capabilities, small acquisitions to enhance the platform technology, and investments in strategic partnerships to increase third-party inventory available to advertisers on our ad platform. “
WC: I don’t know how much money Microsoft may have to spend in order to reach competitive relevance parity with Google. I’m not sure how many Syndication and/or Distribution deals would be required to help drive query share growth – or how long it will take. I do know that the Online Advertising Business worth Billions of dollars & it’s still growing. There are only two Global Players – Microsoft is one of them and the other is Investing as much, perhaps even more – in its Online Services and Offerings.
Key Metrics:Revenue:
-> Client: $4.37 billion vs. $4.19 billion est.
-> Server/Tools: $3.74 billion vs. $3.67 billion est.
-> Online Services: $838 million vs. $949 million est.
-> MBD: $5.26 billion vs. $5.37 billion est.
-> Entertainment/Devices: $1.58 billion vs. $1.55 billion est.
"Revenue growth was primarily driven by increased Windows Server / SQL Server revenue, increased licensing of the 2007 Microsoft Office system and Windows Vista, and increased Xbox 360 platform sales." Favrourable foreign exchange rates were responsible for an incremental $542 million in revenue. Here's a transcript from Microsoft's earnings call, key Metrics Below.
Since the earnings report was released - MSFT has dropped below $26 and will likely decline futher, next week. Clearly, investors & analysts remain concerned that the company is spending too much time and resources trying to grow it's Online Services Business. I reviewed the comments which the Microsoft CFO made - addressing concerns about the Online Spend in FY08 and guidance for FY09.
Transcript From The Earnings Call - & Insights/Inline
”I will start with an overview of our broad strategy and then provide details into the additional investments. With the online ad spending expected to reach $80 billion by 2012, this area represents one of the largest growth opportunities for the company. We segment the market for online advertising in four distinct categories -- Search, Advertising Platforms, Information Content, and Communication/Social networking. For search, we’re focused on driving query share improvements and business model innovation, specifically in the area of high value commercial search. Our recent release of Cashback is a good example of executing on our strategy, which combines innovation in the shopping experience with a shift in the distribution of advertiser economic towards the end users. Additionally, we also [seek to win] targeted distribution through OEMs, ISPs, ISVs, and retailers. The recently announced deal with HP in the U.S. is an example of [this].”
WC: Although the online advertising market has slowed in recent months - as evidenced by Google’s results, there’s still plenty of potential for online advertising to snatch a larger share of Billions spent on global advertising WW. Search Advertising remains one of the most cost effective online advertising mediums so the top search engines are positioned to continue to grow revenue. However, building, maintaining and constantly improving a Search Engine is a very expensive endeavor. In Microsoft’s case, it’s made even more so, because the company doesn’t yet have the scale to challenge Google on Syndication/Distribution deals. (Recap: Search is key to driving online advertising revenue – which is forecasted to continue to grow rapidly and take share from the traditional $100B Global advertising Market. There are no half measures with Search – if you’re in, expect to spend billions developing global data centers, hiring talented technologists and improving core features & functionality).
“Turning to the ad platform, our strategy can be summarized as consolidate [when in] display, and there we are focused on integrating our advertising assets into a single comprehensive system that can deliver our publishing partners’ industry leading yields and our advertisers optimal return on their ad spend.”
WC: The purchase of aQuantive helps make the Microsoft ad platform offering – even more robust. Once the various systems have been integrated with one another – the Online Services Group will be well positioned strong reporting functionality to its clients. This helps optimize campaigns, improve overall ROI and drive customer loyalty/ retention. (Recap: Strong ad Platforms are the backbone of any Global Online Advertising Business. Key Investments in reporting infrastructure, will help drive online advertising revenue World Wide and provide Microsoft with a distinct competitive advantage in the online advertising space)
“In the area of communication and social networking, which includes our mail, messenger, and social networking assets, such as Spaces, we’ll deliver the leading end-to-end experiences across the PC, phone, and web. And finally, in the category of information content, we plan to invigorate our MSN portal experience with improvements in user experience, social media consumption, and premium content.”
WC: As an avid MSN User, I’m happy to hear that the company plans to improve the overall user experience of the portal and closely integrate its communication tools (messenger/hotmail), with useful, relevant, proprietary content. I’m not sold on the whole concept of Social Networking – as a revenue generating medium, however I believe it’s a key piece of the puzzle. There are only 2 global general interest portals – Yahoo & MSN. Both have similar features – and though Yahoo has been the stronger portal in the US, it’s been losing volume & reach lately. If MSN can become the undisputable Top Portal, it will draw even more Display Advertising revenue – especially from Large Companies – looking to build brand awareness online or start an interactive dialogue with Internet Users. Google can’t offer this type of value proposition through its Search Engine – so it’s a distinct opportunity for Microsoft, one the company should certainly invest in.
“So about two-thirds of the incremental spend that we are planning is related to investments to drive usage of our search offering. We’re dialing up our search distribution initiatives with targeted OEM toolbar [alt] search deals, scaling search globally with investments in localized engineering and data centers, pursuing acquisitions and partnerships to build vertical content to support our commercial strategy, accelerating the rollout of our Cashback program, and increasing marketing in the business to grow awareness and drive traffic. Second, we are upping the investments in our ad platform and increasing the number of advertisers and high quality inventory on that platform. Specifically, these investments are in the area of accelerating the integration of our ad platform assets, expanding our sales and service capabilities, small acquisitions to enhance the platform technology, and investments in strategic partnerships to increase third-party inventory available to advertisers on our ad platform. “
WC: I don’t know how much money Microsoft may have to spend in order to reach competitive relevance parity with Google. I’m not sure how many Syndication and/or Distribution deals would be required to help drive query share growth – or how long it will take. I do know that the Online Advertising Business worth Billions of dollars & it’s still growing. There are only two Global Players – Microsoft is one of them and the other is Investing as much, perhaps even more – in its Online Services and Offerings.
Key Metrics:Revenue:
- $15.84 vs. 15.65 billion consensus
- EPS: $0.46 cents vs. $0.47 consensus
- Operating Income: $5.684 vs. $5.8-$6.2 billion guidance
- Q1 Revenue Guidance: $14.7 billion - $14.9 billion
- Q1 EPS Guidance:$0.47 or $0.48 vs. $0.49 consensus
- 2009 Revenue Guidance: $67.3 b - $68.1b vs. $67.29 billion consensus, $66.9-$68.0 billion prior guidance
- 2009 EPS Guidance: $2.12 to $2.18 vs. $2.16 consensus
- 2009 Operating Income Guidance: $26.3 billion to $26.9 billion vs. $26.7-$27.4
-> Client: $4.37 billion vs. $4.19 billion est.
-> Server/Tools: $3.74 billion vs. $3.67 billion est.
-> Online Services: $838 million vs. $949 million est.
-> MBD: $5.26 billion vs. $5.37 billion est.
-> Entertainment/Devices: $1.58 billion vs. $1.55 billion est.
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