Gee, ya think?
As Microsoft Corp. makes a $44.6 billion bet on Internet advertising with its unsolicited offer for Yahoo Inc., there are signs that some of the biggest new places where consumers are flocking on the Web -- social networking and video-sharing sites -- are yielding advertising revenue slower than some Internet companies had hoped.
The latest warning that the hottest Web properties are proving difficult to make money from came from Internet giant Google Inc. While announcing disappointing fourth-quarter earnings Thursday, Google executives said the company was having a harder time than it expected generating ad revenue on social-networking sites and figuring out the best ad formats for its YouTube video-sharing service. Social-networking phenomenon Facebook Inc. also has been publicly grappling with how to make money amid its massive spurt in usage. Microsoft, which owns a 1.6% stake in Facebook, has a long-term deal to sell ads that appear on the site -- and analysts estimate that arrangement is losing money for Microsoft.
The challenges of making money from social networking and user-submitted videos are potentially significant for Microsoft as it pursues Yahoo. A central focus of Microsoft's efforts is to access Yahoo's 500 million-strong global user base and combine the online ad systems of the two companies.
[From Social Sites Don't Deliver Big Ad Gains - WSJ.com]
Is the dot-bomb really so long ago?
(Digg-enabled full link)
Facebook had 2007 revenue of about $150 million, half of it from its deal with Microsoft. Facebook also sold its own ads to companies; advertisers have reported mixed results. "The approach to advertising for social media is going to need to be different than it has been for other sites," says Owen Van Natta, Facebook's chief revenue officer.
Google sells advertising that appears on News Corp.'s MySpace.com social-networking site as part of a three-year contract under which it guaranteed $900 million in payments to News Corp. Google declined to comment on MySpace specifically last week, but hinted the revenue from such an arrangement wasn't covering the guaranteed payments. Google co-founder Sergey Brin told analysts, "We have had a challenge with social networking inventory as a whole and some of the monetization work we were doing there didn't pan out as well as we had hoped." On its earnings call yesterday, News Corp. executives said they were pleased with revenue growth for the fiscal second quarter at Fox Interactive Media, MySpace's parent division, which rose 87% from the year-earlier period, to $233 million.
