Lessons from 10 Years on the Web Kevin P. Ryan - Tradedoubler
Lessons from 10 Years on the Web Kevin P. Ryan - Tradedoubler
Lessons from 10 Years on the Web Kevin P. Ryan - Tradedoubler
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<str<strong>on</strong>g>Less<strong>on</strong>s</str<strong>on</strong>g> <str<strong>on</strong>g>from</str<strong>on</strong>g> <str<strong>on</strong>g>10</str<strong>on</strong>g> <str<strong>on</strong>g>Years</str<strong>on</strong>g> <strong>on</strong> <strong>the</strong> <strong>Web</strong><br />
KEYNOTE:<br />
<strong>Kevin</strong> P. <strong>Ryan</strong> CEO, AlleyCorp
My Experience<br />
DoubleClick<br />
President/CEO, 1996-<br />
2005<br />
HotJobs<br />
Investor/Director, 1999-<br />
2002<br />
TheLadders Investor, 2004-<br />
Brandalley Chairman, 2004-
And coming so<strong>on</strong>... Gilt
What People Were Saying in 1997<br />
When are you going to make m<strong>on</strong>ey?<br />
Top companies are making $$; e.g. Google,<br />
$3B+ (£1.57bn) profit in 2006<br />
Advertising will never work.<br />
Online ad revenues for 2006 up 34% to $16.8B in U.S.;<br />
Up 41% to £2.016bn in UK
What People Were Saying in 1997<br />
Why is it all junk <strong>on</strong> <strong>the</strong> Internet?<br />
The Internet changes <strong>the</strong> way we behave today.<br />
Startups can’t break through. The existing<br />
media companies are too powerful.<br />
Yahoo, Amaz<strong>on</strong>, eBay, MySpace, YouTube...
“Advertising will never work.”<br />
Source: PwC/IAB Internet Advertising Revenue Report (www.iab.net)
”The infrastructure will never support <strong>the</strong> load.”<br />
Internet Users 1995-2006<br />
1200<br />
<str<strong>on</strong>g>10</str<strong>on</strong>g>18 <str<strong>on</strong>g>10</str<strong>on</strong>g>93<br />
<str<strong>on</strong>g>10</str<strong>on</strong>g>00<br />
817<br />
Milli<strong>on</strong>s of Users<br />
800<br />
600<br />
400<br />
361<br />
513<br />
587<br />
719<br />
200<br />
16 36<br />
248<br />
147<br />
70<br />
0<br />
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006<br />
Sources: Internet World Stats, IDC, C.I. Almanac, Nua
What Are People Saying in 2007?<br />
• Is <strong>the</strong> Bubble back?<br />
• Advertising will slow down.<br />
• Advertising is too expensive.<br />
• Google is too powerful.<br />
• The IPO market is dead.<br />
• IPTV is coming.<br />
• Too many VCs, too much private equity.
1997 2007<br />
U.S. ad spend $270m<br />
(£8.1m in UK)<br />
U.S. ad spend $12b+<br />
(£2.7B+ in UK)<br />
Bandwidth prices<br />
$<str<strong>on</strong>g>10</str<strong>on</strong>g>00/Mbps<br />
Expensive Software<br />
Expensive Hardware<br />
IPTV is <strong>the</strong> future<br />
Mobile advertising<br />
is <strong>the</strong> future<br />
Bandwidth prices<br />
$20/Mbps<br />
Open source software<br />
Hardware almost free<br />
IPTV is <strong>the</strong> future<br />
Mobile advertising<br />
is <strong>the</strong> future
New Rules in C<strong>on</strong>tent/Services<br />
1. Costs have dropped.<br />
2. Market can always be segmented.<br />
• Very few winner-take-all products.<br />
• There are 250 cereals -- 50 granolas.<br />
3. If it takes me more than 1 minute to solve<br />
my problem <strong>on</strong>line…<br />
4. Changing technology creates<br />
4. Changing technology creates<br />
winner/loser opportunities.
Implicati<strong>on</strong>s of Dropping Costs<br />
• Video business models begin to make sense.<br />
• Easier and cheaper to launch a startup.<br />
• Niche businesses become feasible.<br />
• A sample of “mom” networking sites:
Niche Case Study:<br />
Opportunity:<br />
• Few major players in <str<strong>on</strong>g>10</str<strong>on</strong>g>-year-old CDN space<br />
Soluti<strong>on</strong>:<br />
• Low cost, high performance CDN, flexible<br />
business terms, internati<strong>on</strong>al coverage<br />
Result:<br />
• In <strong>on</strong>e year, 125+ clients throughout Europe and<br />
• In <strong>on</strong>e year, 125+ clients throughout Europe and<br />
<strong>the</strong> U.S.
Threats to Old Media<br />
Year Industry Threat<br />
1997 Magazines,<br />
yellow pages<br />
Internet yellow<br />
pages<br />
2000 Radio Napster<br />
2008? Newspapers Craigslist,<br />
Product is Everything<br />
Product<br />
Old marketing<br />
• Marketing is becoming less important.<br />
• M<strong>on</strong>opoly of distributi<strong>on</strong> is g<strong>on</strong>e <strong>on</strong> <strong>the</strong><br />
Internet.<br />
• Marketers can’t c<strong>on</strong>trol <strong>the</strong> message --<br />
c<strong>on</strong>sumers have too much informati<strong>on</strong>.
Marketing/Agencies<br />
Static C<strong>on</strong>tent<br />
Video<br />
Keyword ads<br />
• Static c<strong>on</strong>tent growth is slowing but will still<br />
outpace all o<strong>the</strong>r media.<br />
• Video c<strong>on</strong>tent will grow <str<strong>on</strong>g>10</str<strong>on</strong>g>x over <strong>the</strong> next few<br />
years.<br />
• Easy m<strong>on</strong>ey is g<strong>on</strong>e in keyword advertising.
Where’s <strong>the</strong> Hype?<br />
Late 1990s --> Internet was over-hyped<br />
Today --> Internet is under-hyped<br />
• Growing faster than any o<strong>the</strong>r media.<br />
• Enormously profitable.<br />
• Huge internati<strong>on</strong>al opportunity -- less<br />
competitive markets.<br />
• Popular percepti<strong>on</strong> of Internet is partly<br />
• Popular percepti<strong>on</strong> of Internet is partly<br />
dictated by IPOs.
The Next <str<strong>on</strong>g>10</str<strong>on</strong>g> <str<strong>on</strong>g>Years</str<strong>on</strong>g> - The Good<br />
• Global Growth<br />
• Ad revenues will grow 2-3x<br />
• Subscripti<strong>on</strong> revenues, 5x<br />
• Mobile revenues, <str<strong>on</strong>g>10</str<strong>on</strong>g>x<br />
→ Growth rates outside U.S. higher than inside<br />
→ Growth rates outside U.S. higher than inside<br />
U.S.
U.S. Will Be Only PC-Dominated Country
The Next <str<strong>on</strong>g>10</str<strong>on</strong>g> <str<strong>on</strong>g>Years</str<strong>on</strong>g> - The Bad<br />
• Profits w<strong>on</strong>’t follow<br />
• Increased competiti<strong>on</strong> will force prices and<br />
profits down across <strong>the</strong> board<br />
• More companies launching every day<br />
• Recently, 68 start-ups debuted at <strong>the</strong><br />
Always On c<strong>on</strong>ference at Stanford
The Next <str<strong>on</strong>g>10</str<strong>on</strong>g> <str<strong>on</strong>g>Years</str<strong>on</strong>g> - The Ugly<br />
• Brutal c<strong>on</strong>solidati<strong>on</strong> in 2008/2009<br />
• Large media companies’ core businesses will<br />
deteriorate<br />
• They will snatch up <strong>on</strong>line assets before it<br />
• They will snatch up <strong>on</strong>line assets before it<br />
is too late
U.S. Media Cos. Are Already <strong>on</strong> a Spree<br />
Atom<br />
$200M<br />
Harm<strong>on</strong>ix<br />
$175M<br />
MySpace IGN<br />
$580M $650M<br />
iFilm Neopets<br />
Photobucket Newroo<br />
$50M $160M $300M ~$<str<strong>on</strong>g>10</str<strong>on</strong>g>M
The Ad Shift - U.S. Ad Revenue Growth<br />
Year-over-Year Q2 Growth<br />
26%<br />
-3%<br />
Online Media Cos.<br />
Google<br />
Yahoo<br />
Microsoft<br />
AOL<br />
Traditi<strong>on</strong>al Media<br />
Viacom<br />
CBS<br />
Time Warner, etc.<br />
Based <strong>on</strong> analysis by Silic<strong>on</strong> Alley Insider
The Ad Shift - U.S. Market Share<br />
• In <strong>on</strong>e year, 5 point shift in market share <str<strong>on</strong>g>from</str<strong>on</strong>g><br />
traditi<strong>on</strong>al media companies to <strong>on</strong>line media<br />
(Google, et al)<br />
Q2 2006<br />
Q2 2007<br />
25%<br />
($3.3B)<br />
30%<br />
($4.2B)<br />
75%<br />
($9.9B)<br />
70%<br />
($9.6B)<br />
Online<br />
Traditi<strong>on</strong>al
How I Find Opportunities<br />
(1) Pursuing innovative technology that can do<br />
something new<br />
(2) Providing lower cost structure<br />
(3) Transporting c<strong>on</strong>cept that has been d<strong>on</strong>e<br />
elsewhere in <strong>the</strong> world<br />
(4) Splitting a market, taking a variati<strong>on</strong> <strong>on</strong> an<br />
existing product<br />
(5) Spinning off a vertical
Opportunity to Innovate<br />
• Build a company around innovative<br />
technology that can do something new<br />
• QuickShop crawler: Finds 12x more stores<br />
than some of its competitors in <strong>the</strong><br />
comparis<strong>on</strong> shopping space
Opportunity to Import a Successful Model<br />
• Replicate c<strong>on</strong>cept that has been d<strong>on</strong>e<br />
somewhere else (e.g. highly successful in U.K.<br />
but hasn’t been d<strong>on</strong>e in <strong>the</strong> U.S., or vice versa)
Opportunity to Split a Market<br />
• Take a slightly different approach, focus <strong>on</strong><br />
• Take a slightly different approach, focus <strong>on</strong><br />
a market subset
Opportunity to Build out a Vertical<br />
• Spin off part of a<br />
successful model into<br />
its own niche offering.
<str<strong>on</strong>g>Less<strong>on</strong>s</str<strong>on</strong>g> <str<strong>on</strong>g>from</str<strong>on</strong>g> <str<strong>on</strong>g>10</str<strong>on</strong>g> <str<strong>on</strong>g>Years</str<strong>on</strong>g> <strong>on</strong> <strong>the</strong> <strong>Web</strong><br />
<strong>Kevin</strong> P. <strong>Ryan</strong><br />
CEO, AlleyCorp<br />
The ecosystem of <strong>the</strong> Internet is in perfect health.<br />
We have years of steady growth ahead of us in<br />
ecommerce, advertising and subscripti<strong>on</strong><br />
services.