Good Companies Buy Super Bowl Ads, Bad Companies Buy Oscar Ads

Last year I wrote about the well-propagated myth that over 1 billion people watch the Oscars. Today's ratings numbers show that the billion viewer is way off the mark: US viewership of the Oscars this year came in at 32 million viewers, the lowest number ever. So unless 970 million people outside the US happened to be watching, the real number of viewers was probably less than 100 million.

To make matters worse, many viewers who did watch probably Tivo'd the show, skipping the inane awards like "Best Animated Short Film" or "Best Sound Editing." Indeed, I myself watched "Locked Up" while Tivoing the Oscars and I was able to reduce the entire Oscar experience down to about 25 minutes (no commercials, few actual awards, mostly just watching Jon Stewart's monologues).

Let's face it, movies aren't as all-important as they once were, TV viewership is down, Internet usage is up, and Tivo makes all TV advertising questionable at best. These facts, however, have apparently not deterred advertisers from spending $1.6 million for a 30 second spot this year. That's right $1.6 million for the privilege of having 32 million viewers mostly not watch your ad. And at $.50 a click, you could have instead purchased 3.2 million quality search engine clicks, or at least bought a text link on the Yahoo homepage every day for about a month and a half!

Warren Buffet allegedly said "When my Grandmother tells me to invest in a stock, I know it's time to sell." I wonder if a similar argument could be made for Oscar advertisers: "Any company that advertises during the Oscars is a good pick to sell short."

On the flip side, buying Super Bowl ads might be a good investment. This year's price of a Super Bowl ad was $2.7 million, or about 75% more than an Oscar ad. There are two big differences between a Super Bowl ad and an Oscar ad though. Difference number one is the sheer amount of traffic. This year's Super Bowl had a record 97 million Americans watching - more than three times the traffic of the Oscars. Prorated, that means that Super Bowl advertisers paid about $27.80 for 1000 viewers (cost per thousand, or CPM), versus $50 per 1000 viewers for the Oscars.

Worse still, Super Bowl ads have become a part of American culture. People use Tivo to go back and watch their favorite ads again, rather than skip through them entirely. Pundits write thousands of post-Super Bowl columns dissecting each ad. In a sense, the Super Bowl is the last vestige of TV advertising where the ads still matter.

So compare a $50 CPM for an Oscar ad that no one watches versus $27.80 CPM for an ad that could become a part of American culture and the choice is clear. Now don't get me wrong - I still believe that companies that spend significantly on TV advertising and don't have an equal or stronger commitment to online are mainly dinosaurs waiting to go extinct. But I suppose in the paleontological sense, Oscars advertisers may be T-rexes and Super Bowl advertisers may be Wooly Mammoths - at least the Mammoths made it to the Ice Age.

Terry Semel, You Owe 1000 Yahoo Employees $200 Million

The Yahoo pink slips starting flowing yesterday - a rumored 1000 Yahoos cut. I got a text message from one of my friends at Yahoo with the succinct headline "Laid off."

I've been a Yahoo stockholder for some time, and I'm glad to see the stock price rising back into the $30/share range. And I suppose that laying off 1000 people will only further add momentum to Yahoo's share prices. But as a regular guy who knows regular guys (and gals) who just got laid off by Yahoo, I'm angry.

About two years ago, I wrote a post about then-Yahoo CEO Terry Semel's outrageous $230 million annual paycheck. I noted that for $230 million, Yahoo could buy a lot things, for example:

• 460,000,000 clicks on Yahoo or Google (assuming an average CPC of $.50);
• 2500 experienced Internet employees;
• A major acquisition (for example, about 1/3 the acquisition price for Shopping.com or LowerMyBills);
• The gross domestic production (GDP) of the Solomon Islands;
• $230 million of additional profit!

So now Yahoo has jettisoned 1000 employees. Had Mr. Semel not received that $230 million one year paycheck, those 1000 employees might not be on the street right now. And let's be clear, the 1000 employees getting the ax this week weren't the ones making the business decisions that eventually drove Yahoo to the place it is in today. Again, I wrote about this way back in early 2006:

What's up with the "media strategy" that has been in the works for a few years now? And despite the decent profit and revenue from Overture, how come the online user interface hasn't changed in 4 years (in fact, Overture's name has changed twice now and the UI is almost as slow as it was in the company's beginning). Yahoo has also lost its relationship with MSN for paid search, and lost the bidding war against Google for AOL?

If the buck stops somewhere, it stops with Terry Semel and the other over-paid Yahoo executives. But in the ridiculous corporate world that exists today, Mr. Semel and his cronies reap the rewards and credit when things go well, and don't feel any pain when things don't. Indeed, I predicted in 2006:

If Terry Semel drove Yahoo into the ground for a few years, it's not like his salary would be $25,000. In fact, undoubtedly, his contract has clauses in it that guarantee him big payouts in the event of early termination. So even if he did poorly, he would still likely get a nice windfall.

Well, turns out he didn't get a severance package, per se, but in the last year of his failed regime, he didn't do too badly:

Despite Yahoo's recent struggles, Semel received another big bundle of stock options last year that boosted the value of his 2006 compensation package to $71.7 million. That was more than any other CEO among 386 publicly held companies covered in an Associated Press analysis of executive compensation using new rules dictated by the Securities and Exchange Commission.

Indeed, in total, "The former movie studio executive already has made a fortune since joining Yahoo in May 2001, having realized nearly $450 million in gains by exercising some of the stock options that he received during his tenure."

$450 million dollars for taking a company from a strong first place to a distant second. And now 1000 good people are going to have trouble paying their mortgages. Terry, I know this might cramp your style a bit, but I think this is a perfect opportunity to give back to Yahoo: specifically, give some of that $450 million to those ex-Yahoos who just got axed.

Will that happen? Of course not. But maybe some people in the corporate world will begin to learn from all of this. After all, the business world doesn't suffer fools gladly. I'd like to believe that companies that reward poor management with hundreds of millions of dollars will eventually have to pay the piper. Again, my 2006 thoughts:

So will CEO compensation growth ever end? Ultimately, I think it will. If you continue to have companies paying their top brass $230 million a year, eventually this will create an opportunity for leaner companies without such insane fixed costs to undercut the bloated bigger companies.

Thoughts on Yahoo-Microsoft

I know the Internet world is at a virtual stand-still waiting for yet more commentary on the proposed Yahoo and Microsoft merger, so here I am with my take!

1. It Should Have Been eBay. I still think an eBay-Yahoo merger would have been a better fit. There is a lot of overlap between MSN and Yahoo (search, email, portals) but there's virtually no overlap between eBay and Yahoo. Imagine Yahbay - online auctions, comparison shopping, email, IM, portal and search - all in one company. Now that's a real powerhouse. But MSN and Yahoo - beyond a more powerful force in paid search, I don't really see the synergy.

2. Google's Crocodile Tears. The blog post by Google's chief counsel David Drummond was just plain silly. Google complaining about anti-competitive activity is like Barry Bonds complaining about illegal doping in Major League Baseball.

As I've written in the past, I'm surprised that Google's huge market share, discriminatory pricing, product bundling, and anti-competitive usage terms haven't already triggered anti-trust investigations of Google. Sad but true, but Microsoft is the "little guy" in this fight.

And in the search wars, no one's hands are clean.

3. Please, Please, Please Get New Interfaces. OK, so assuming this acquisition does go through, here's some free advice for MSN and YSM: get rid of your paid search user interfaces and just copy Google! I give Yahoo some credit from updating from the old Overture interface, but the new YSM UI is still miles and miles behind AdWords. And MSN has some neat features (parameters, competitive intent scores), but is just unusable on a daily basis.

Despite FTC Fines & Google's Quality Score, Incentivized Advertising is Alive and Well on Google & Yahoo

Late last year the FTC fined Adteractive over $600,000 for deceptive advertising practices. At issue were advertisements for FreeGiftWorld.com that promised free Ipods and other hot products, but in reality required consumers to fill out offers from advertisers (many of which required paying money) before getting the product.

Long before the FTC settlement, Google aggressively purged such ads (known as “incentivized offers”) from the ranks of the AdWords search results. Adteractive, for example, went from spending hundreds of thousands of dollars a month on incentivized ads on Google to next to nothing. I know this first hand, as I was managing this spend at the time. If you read Google’s AdWords blog postings about Quality Score, the very first sites they list as having bad quality score are “Data collection sites that offer free gifts, subscription services etc., in order to collect private information.”

This decision by Google (and by Yahoo, who actually acted prior to Google) was no doubt based largely on legal liability issues. In a similar situation, both Google and Yahoo agreed to pay over $10 million each to settle claims arising from online gambling revenue (notice that a search for “poker” on Google today brings up zero AdWords results). A good rule of thumb in civil lawsuits is to always go after the “deep pockets” - the companies with lots of money. If the FTC has decided that incentivized advertising is deceptive, you would think then that relatively small companies like Adteractive would only be the tip of the iceberg. Companies like Google and Yahoo could be much more valuable targets. So by preemptively banning incentivized sites, Google could at least argue that it made a good faith effort to close down such deceptive advertising.

Surprisingly, though, a review of the Google ad network shows that - despite the Quality Score penalties established a few years ago - incentivized advertising is not only still on the network, but it appears to be thriving. A search for “free iPod” brought up 15 advertisers; “free Xbox” had 31. Each of the ads is almost identical. Here’s a typical offer for an iPhone:

iPhone 4 Free - No Catch. No Catch New iPhone Free Worth $597 Go Get it Now While Stocks Last. www-iPhone4Free.com

These are exactly the types of ads that the FTC is now fighting (and on top of the deceptive claim, the iPhone is now $399, not $597!). To give you an idea of the type of advertisement we’re talking about here, when you click on the ad, you are redirected to TopConsumerGifts.com. Read the find print and you’ll soon realize that you need to fill out eight offers - two silver, two gold and four platinum to get your free iPhone.

As with all of these programs, prior to getting to any offers, you need to go through a long “survey” which includes around 100 advertisements. Then you get to the silver, gold and platinum offers, which seem innocent enough - in the case of TopConsumerGifts, it’s things like a NetFlix or Columbia House DVD trial. So in theory you could fill out eight trial subscriptions to these various offers and then get your gift, right? Well, not so fast my friend. The small print in the terms and conditions note: “You will not be eligible to receive a Gift in this Promotion if, within 60 days of your Sponsor Offer Initial Transaction Date, you cancel your participation in more than two Sponsor Offers you have completed as a part of the Program Requirements.”

In other words, for at least six of eight offers, you need to get past the 30 day trial and actually pay for the offer. Assuming that the average offer costs about $30 a month, you are basically required to spend $180 ($30 times six) on things you don’t want to get your “free iPod.” If you don’t follow the terms and conditions to the letter, you don’t get your gift, and even if you do follow all the rules precisely, “Company may, at its sole discretion, terminate any account and deny any Gift without prior notice for . . . any other reason at the reasonable discretion of the Company.”

These ads are all over the Google Content (AdSense) Network. And a few days ago I was listening to a sports radio station and I heard an ad for “RadioFreeZone.com” offering a free Xbox. Judging from the timing of the ad (non-drive time, remnant), I wouldn’t be surprised to learn that this ad was served up via Google Audio Ads. I’ve also noticed that whenever I log on to my “My Yahoo” page, I get “targeted” with Free Xbox display ads.

Something is not right here. Either Yahoo and Google’s lawyers have decided that the legal risk of allowing incentivized advertisers is worth the revenue, or a major smackdown from the FTC is around the corner.