April 2005 Archives
Amazon posted their quarterly financials. Lots of revenue growth, but lower net income. There were a variety of reasons for the disappointing net income figure. The most interesting reason to me was that Amazon is spending hugely on research and development. Why? Because Amazon faces stiff competition in every phase of its product offerings. Thus Amazon needs to distinguish itself from its competition on the Web. This means more and costly user features.
Also Amazon is still very much like a typical brick and mortar retailer in that it needs warehousing and other distribution services. These are costly in comparison to a business that sells products online that are mere digits (ones and zeros). For example Apple's iTunes requires software and lots of servers, but not much else. Unit revenue sales are tiny for Apple, but so are the infrastructure costs.
Apple too, though, faces another type of competition. The proliferation of music download subscription services might take the wind out of the iTunes model. Also it appears that a price war is looming in the download music space (the same is happening to Netflix in the DVD rental space).
The Internet allows well-financed competition with an evolutionary concept to offer "destructive" services very rapidly. The winner today in many fields can be seriously impacted in a matter of months or a few years. Take a look at Yahoo --- who would have thought that Google, born four years after Yahoo went public, could overtake and pass Yahoo in a few years?
I am not sure how many times Bill Gates has appeared on the cover of FORTUNE magazine? An interesting shot of Bill graces the May 2 issue and the cover story is entitled "Search and Destroy." I suggest anyone in the Internet space should read this piece. It has good historical perspective on a number of Internet issues and there is a terrific graphic on page 74 illustrating Microsoft's many classic battles in taking on and defeating enemy software companies. Of particular interest to me is how Gates and Co. came from way back and destroyed Netscape in the browser wars of the 1990s.
It is rare these days to hear of trade show successes in the IT Enterprise space. I know first hand having been dealt a blow with our launch and crash of cdXpo back in 2003.
Little did I know that while we at Jupitermedia were spending a ton of money on trying to create the next Comdex, that we had our hands on a gem of a trade show called ITSMF USA -- IT Service Management Forum.
The history: ITSM is geared to CIOs and CTOs of large organizations that utilize ITSM theories to run their operations more efficiently and economically. The movement started in England many years ago and has spread around the world. The American chapter decided to start a trade show and seminar on the topic in 2001. Jupitermedia ended up getting the contract to run the event never thinking that the effort would develop into a AAA event. We run the ITSMF every September. The show was slow to percolate. But starting in 2003, progress was apparent. The 2004 show in Long Beach attracted almost 700 paid attendees and 61 exhibiting companies. The 2005 event at McCormick Place in Chicago already has 81 companies under contract and we have five months of sales in front of us!
Take a look at the exhibitor list. These are the very companies that would have been on a "Comdex" floor in days of yore. But now such companies are flocking to this vertically focused show. And along with these companies and their increasing numbers we can most likely count on increasing paid seminar growth.
The point of this post is a theme I have been pushing for several years --- that the days of horizontal trade shows are over. Nothing typifies this fact more than the success of the annual ITSMF event. I will keep you informed about the growth of this show as we approach September.
The previous 18 days were hectic as I visited Jupitermedia operations in Germany, France, Luxembourg, England, Japan and Australia. I also had opportunities to meet with a variety of Internet media professionals around the world.
Optimism for the Internet space is as vibrant as ever. I last felt this way about business Internet opportunities in late 1998 and 1999. Of course today's dreamers and thinkers are sober in comparison to the dreamers of the late 1990s.
Google has taken the world by storm. Every conversation in each country invariably brought Google to the table. And of course Google's financials published last week were almost beyond comprehension in terms of growth and profits.
I also saw that one of our JupiterImage competitors, Getty Images, bought a major image player - Digital Vision (UK based). It was interesting to see Getty Images getting back into the acquisition game and validating our push into the importance of wholly owned images. We have been pushing the importance of having wholly owned images for about 15-months.
I also spent some time reading several of our JupiterResearch analyst blogs. They are all excellent, but I must point out that David Card is a must read for those interested in Internet Media commentary.
My final observation is that consolidation in the Internet space is accelerating. The big Internet players are getting bigger and picking off terrific vertical assets. But there are still enormous opportunities for new and focused vertical enterprises.
The first day of SES Japan was a great success. A standing room only crowd heard a keynote from Yahoo in the morning and Google in the afternoon. Over 2500 people registered for the show and we have about 15 exhibitors. While a small show compared to exhibition space sold for the USA SES shows, the number of exhibitors doubled from last year's inaugural event. There were a number of Japanese SEO companies on the floor which is an indicator that search engine marketing in on the map in Japan.
I have a hunch that SES Japan could possibly double again in size in 2006. The enthusiasm of the attendees was invigorating to me and certainly made me feel better about having traveled so far to see the show.
About to take off for Sydney.
It is near midnight in Tokyo on Tuesday (the posting time of this entry will be incorrect as it is timed with Jupitermedia's servers in Darien, Connecticut USA whereas I am in Tokyo).
I arrived here a few hours ago and had a dinner meeting. Now I am catching up on email and attempting to stay up until 1:00AM so that I can "get onto an Asian sleep pattern." Anyway, I was checking out a bit of history a few minutes ago about the origin of our JupiterWeb properties and came across a 1994 interview in which I believe I created the concept (that is now the rage) of horizontal and vertical Web sites.
The interviewer, one Gordon Cook, was angry with me for killing the original plan of JupiterWeb which was called MecklerWeb. If readers have a few minutes, this interview makes for good reading. I was taken to task by not only Gordon Cook, but also by Jared Sandberg in The Wall Street Journal and Forbes magazine.
Pioneers got shot in the back all the time. I am glad that this pioneer survived and proved to be correct 11 years later!
I leave for Tokyo, Japan and Syndey, Australia on Monday morning. I return home on Friday. Such travel is hectic, but the good thing about such a rapid trip is that you never get whacked by the Asia-Pacific time zones because you get home before you get acclimated to the 14 hours time changes (at least that is my theory and it has worked for me for years).
I will be visiting the SES Japan trade show and working on setting up a variety of Japanese business relationships for our various JupiterImages' subscription operations. In Australia I will be visiting our new Dynamic Graphics office in Sydney and working on establishing a hoped for Australian SES show for 2006.
I hope to write a few blog entries this week, but if you do not hear from me it will probably be because of the hectic travel schedule.
Both The New York Times and The Wall Street Journal are having a rough go with traditional ad space revenues. Both companies blame less tech and financial ad spending. There is truth in this assertion. But the problem is deeper. The Internet is grabbing more and more ad dollars.
Paid Search is draining significant ad dollars from print. Also more and more people are getting their news and information online. This means that erstwhile ad dollars are moving not only to paid search, but also to traditional banner advertising on a variety of Web sites.
Do not be surprised if these venerable newspaper brands start to make certain economies in production to save money and help their respective bottom lines. I have pointed out how The Times of London recently changed to a tabloid format. I am sure this was a painful decision for News Corporation, but most likely Rupert Murdoch saw the reality of a losing battle and moved to cut costs. Thus my guess is that we are only a few years away from both The New York Times and The Wall Street Journal making the same decision as The Times in England.
Newspapers will always be with us, but as more and more people use the Internet, newspapers are going to become smaller and smaller and will have to rely on Web traffic to work in tandem with the print editions in order to be economically viable.
The Wall Street Journal had an interesting article today (April 14) by Kevin J. Delaney entitled "Yahoo 'Hybrid' Now Dominates News Web Sites."
The gist of the story is that Yahoo's news site run with a mere 15 people and Search technology is outdrawing cnn.com in terms of unique visitors in many of the last few month (over 20 million).
This trend is sure to accelerate in coming months and years. As Search technology gets more sophisticated, the ability to ferret out vertical and horizontal news stories with few "people editors" is going to place a great strain on traditional news organizations' print and online assets. And of course we know that where the eyeballs go is where the ad dollars go.
I have written about a niche company that Jupitermedia has an investment in called mdlinx.com. Using a handful of medical editors based in India and Search technology, mdlinx is able to push daily via email newsletters hundreds of pertinent medical articles to over 37,000 physicians (geared to specific specialties)throughout the world. While a tiny operation compared to Yahoo, this specialized site is able to garner CPM's of well over $150! I doubt there are many Web sites that surpass these CPM numbers?
My point is that while the Yahoo news operation story is significant, the opportunity is immense for small verticals such as the mdlinx example. There must be hundreds if not thousands of mdlinx clones that will never be written about in The Wall Street Journal, but which are making great business success stories.
The beauty of the Internet Age is that we are still only at the beginning of the revolution for ecommerce and information business opportunities in almost any interest area.
This trend poses serious problems for large media conglomerates. They should be running around the world buying up these niche players to protect themselves from the certain cannibalization of their "cash cow" properties. There is no stopping the Net.
The SES shows keep rolling. Our German show opened today in Munich. While small by USA standards, our third try in Germany has been a charm.
We moved the show from the fall time period to the spring and also ran the program in German instead of English. Another postiive factor in this year's success is that amongst the exhibitors we have Microsoft, Yahoo and Google. Google ran its Google University program today to a standing room only crowd.
We are tentatively planning a French edition of SES for Paris this fall. We already run SES in Sweden (October), England (June) and Germany (April). Plans are also afoot to run a one-day mini-SES in Milan in the fall.
We had tentatively announced a Beijing, China show in June, but we could not line up all the pieces to run the event this year. However, we have a plan for a new effort for May 2006.
I just returned from 9 days in Europe and leave on Monday for Tokyo, Japan and Sydney, Australia. I will be working on JupiterImage projects in both countries, but will take in the SES Japan show on April 20th. It has been and will be a hectic travel schedule, but "one must strike while the iron is hot".
Many of you are probably aware that the USA took on the twin island nation of Antiqua and Barbuda at a World Trade Organization hearing about whether the United States should drop restrictions on online gambling in America.
Both sides declared victory according to an article I read by The Associated Press in the International Herald Tribune (April 8, 2005).
Regardless of the claims, the United States intends to continue with its restrictions (the actual ruling of the WTO is forthcoming).
I do not endorse online gambling, but I do not see how the United States government can control it. We all know that the Internet knows no boundaries. We know that there is legal gambling in Atlantic City and Nevada and we know that there are some 400 Indian casinos in America (this number is growing rapidly). We also know that there are instances of legal horse racing on the Internet, not to mention the hundreds of horse racing and dog racing tracks in America.
When one adds up all the facts, it seems to me that the American government is fighting a losing battle. At some point online gambling will be legal in America. It might take several more years, but in the meantime this Internet business sector is thriving around the world.
I have been in Europe this week hitting offices in Germany, France, Luxembourg and England. Several of the office visits were first-time hellos to new Dynamic Graphics employees in Germany and England.
One interesting observation: Americans do not realize that Europeans are still very reluctant to provide credit card information online. Listening to our new employees in Germany and England speak about ordering mores in Europe brought back memories of the mid-1990s in America when it was commonplace to read news stories wondering if Americans would ever risk providing credit card information online.
This element is particularly important in understanding the difference in how our JupiterImages operations run in America vs. Europe. In American most orders for images come via credit card online. On the other hand in Europe, we might get a credit card order, but it will be on the telephone with a sales person.
Another example: Our Search Engine Strategies German show takes place next week in Munich. 30% of the seminar attendees have chosen to register via invoice or the transfer of funds directly to a bank. Our experience for SES shows in the United States is that 100% of the attendees register via credit card (mostly online).
And yet another example: In a meeting just completed with JupiterResearch French analyst Thomas Husson, I learned that one of the largest French travel Web sites still gets two-thirds of its payments via the telephone even though the purchaser is finding the desired information online.
I am sure that Europe and the UK will ultimately evolve to complete trust of the Internet, but it is interesting as an American to note the continued reluctance to adopt credit card ordering online.
Andrew Madden, a one-time writer for the "original" RED HERRING magazine is now a full-time blogger. He reminded me of a meeting we had several years ago about a new venture he was working on. I have reproduced his email. It contains a constant theme I have had about print vs. Internet over the previous 10 years. Here it is:
"You and I met several years back...I was trying to get a magazine/web concept off the ground (circa 2000) and you told me (quite nicely) to lose the magazine part of it. Well, I'm now fully converted to the low-cost world of online publishing and have re-launched the idea as a souped-up blog, with the idea of creating a modest network. It's amazing how much the online publishing landscape has changed - in exciting ways - since we met in 2000.
Well, please keep your posts coming - they're great food for thought."
One of the readers of this blog has pointed out to me that Walter Mossberg's columns in the print of edition of the Wall Street Journal can be read online without having to be a paid subscriber to wsj.com. Thus I stand corrected and offer thanks for correcting my mistake.