My apologies for not having everyone’s name for the Q&A. Hard to keep up and type. Sorry!
Panel: Dot Bomb 2.0?
Moderator: Henry Bloget, Silicon Alley Insider
Porter Bibb, MediaTech Capital Partners
Warren Lee, Canaan Partners
Dennis Miller, Spark Capital
Satya Patel, Battery Ventures
Brian Sieser, MAGNA
Q: Was there a bubble?
Lee: Yes and no. If you want to compare the current situation to 2000, that was a funding technology bubble. VCs invested in companies that didn’t have business models. The allocation of dollars to IT companies has remained basically flat.
Q: Estimates are all over the place, and people are saying that “companies are toast.”
A: Anyone who is not making money is “toast.” Look at who has entered and exited the market. There are too many people chasing too few good deals. There is a limited market, and there will be consolidation.
A: you can argue that there is a VC bubble as well as you can argue that it is a VC cycle. There will clearly be a shakeout in the ad network market place. There are too many companies being funded in mobile relative to where the mobile market is. But that is normal for the nature of venture capital.
A: Companies that are fundamentally based on advertising are toast. There are too many companies that ignore growth opportunities from other sectors. Google made it possible for SMB to do things on a national level more efficiently than ever before. You put up a website and grew your business. Instead of hiring another sales person, you invest in SEM.
Q: I couldn’t think of a sector more ripe for being toast than ad networks. Who will admit to investing in ad networks?
Lee: I’m invested in two of them (Editorial Disclusre: Tremor Media is one of them). Today’s ad networks are very different than they were a few years ago. They aren’t just a remnant play for low CPMs. There is a percentage of ad networks that bring true value and technology and benefit to the market. All of the ad networks are making money. The networks that will be ‘toast’ will be the ones with significant overhead and can’t pay the bills and don’t deliver margins.
A: There’s a difference between making money and building equity. In order to survive, you need scale. Scale matters. There may not be any value in these companies other than their ability to sell in the short term. Networks need to ad more value than just an incremental penny on the eCPMs. The companies that have all the pieces in place will survive. The others will make money in the short term but not may build long term equity to justify venture capital.
Q: Is twitter hype?
A: (Spark, investor in Twitter) Very few companies have the potential to become a verb. If you look at the behavior of the people who use Twitter, you see a pattern among a certain constituency that strikes you as being remarkably robust. There is something very unique going on there. We’d be arrogant if we said that we fully understood it, but there is an ecosystem being built around it.
Q: How is it going to make money?
A: We didn’t think we were smart enough to determine exactly how to monetize it. But it was very interesting to watch politicians adopting it to monitor what was happening in the world. We didn’t think subscriptions would work. We weren’t arrogant enough to say it was the zeitgeist. We think it has the potential to become a verb, and become part of the vernacular, so we took that bet.
Q: People are blaming advertisers for being slow to realize that advertising revenue is being wasted on newspapers. But people have relationships, want to US Open tickets, want to go golfing. What can we do to break down the resistance to trying new platforms?
A: That notion is a crutch. If Twitter had a salesforce, they’d be buying US Open tickets for people, too. The issues are much deeper, much more systemic, much more rationale why this is the case. Distinguishing between cost and value is nearly impossible for a large advertiser. Also, the process flows for managing media campaigns is critical. You can take $100k and spend it on search, or build a widget, or PR. For a smaller brand, and you need to make an impact nationally, you need to start with the most effective way to reach the largest part of you audience.
A: You don’t get fired for buying advertising on NFL football. You get to talk sports, go to games, go to lunch. The same question was asked when cable TV emerged. People said, “Our brand is showing up on crazy networks like Discovery. Lets just wait.” It takes a long time for people to adopt and adjust to new platforms. Now the same thing is happening for the web. Advertisers have resisted new platforms from Day One. The hypocrisy and slowness that advertisers are moving into the medium is a critical problem.
A: Until someone creates a workflow that allows advertisers to evaluate cross media and figure out which medium works best, then we’ll continue to have these problems.
A: Eyeballs are key, and it is changing. There are enough eyeballs online to rival TV. Google has made online accountable.
A: Do you know how you get an invoice from Google? Fax!
A: Agencies need to go to advertisers and be able to explain to them what is happening in the real world. The second fasted growing ad medium right now is in-store advertising. The Wal-Mart network offers more reach than any cable network, and delivers provable ROI and moves products.
A: There are pockets of people that are taking advantage of what is going on right now. But it is complicated to get your head around everything that is happening online right now. But you still can’t get engagement and interactivity on TV. The brands who want to engage in a conversation with the consumer are the ones leading the way. But there are some inherent flaws in the way business has been done.
Q: Isn’t part of the problem with video that there isn’t a great way to advertise on video?
A: We aren’t going to get stuck with :30 ads. It is very early in the game. There are companies that are solving the problems of video monetization with technology. Freewheel and Tremor are doing very interesting things to address the issues. Way more people watched Sarah Palin and Charlie Gibson on the Web than on TV. There was a $21 difference in CPMs in the medium.
A: (Lee) We’re an investor in Tremor. Too often we see companies with strong technology, but try to forcefit a solution into an advertising model. With Tremor, they are tyring a lot of different things. Some will work better for different advertisers. Tremor doesn’t try to force any one solution. They offer a wide variety of formats and help agencies make the right choices, experiment, and figure out what works for them.
A: It is still the early days. YouTube is a cable channel that people will figure out how to sell.
A: People are also experimenting with other forms of marketing, not just advertising. If you look at the expenditures between the marketing expense line and advertising expense line, you see a dramatic shift in budgets. Money is moving into other vehicles.
