October 25, 2006

It's Hard to Pay BIlls With Eyeballs

In the late 1990s, during dot com mania, the Media Metrix rankings ruled the business world. Geocities fought with Yahoo!, AOL, MSN, Excite and others to show they had the most unique visitors, the most click-throughs, and the most eyeballs. Talking heads on CNBC were ecstatic when a company with major eyeball momentum was readying to go public. But, as we know, the only way your eyeballs will see a lot of these dot mania companies now is if you look in the obituaries or in the history books.

So, if you're not yet ready to focus on profit/loss statements, but think your company has some serious wind behind its back, how do you value yourself? Is it done through the number of users, the number of hits on your Web page? The number of units shipped, or megabytes served, and downloads or views?

Robert Scoble says in this new world, a new audience metric is needed, which he terms "engagement", or how actively participatory the audience is. It's not just about the raw number of eyeballs, but how involved they are - does coverage in said media result in click-throughs? Does a post generate comments and further linkage?

In case you think this is a bunch of flim-flammery disguised as new economy logic, the debate over statistics can make or break company valuations. Recently, Digg has been rumored in TechCrunch to be in discussions with News Corporation for a potential acquisition, to the tune of $150 million. But VentureBeat says that conflicting statistics on the site's reach may kill the acquisition altogether. After all, if you can't agree just how many eyeballs are on the site, then how can you decide how much each eyeball is worth, and eventually, what the purchase price should be?

There isn't a quick fix easy answer, but if a business model isn't sustainable to the point of profitability, then regardless of how popular a service is, it may never be worth it to an acquiring company, for whom the newly acquired service will just be a future drag on EPS and P&L. Just look at Time Warner/AOL. AOL had an incredible user base, but there was no synergy there. Time Warner didn't see the popularity of its content skyrocket, but instead, it eroded from within as AOL became a massive boat anchor. Trying to make a business based on click throughs, page views, user count, downloads, video plays and eyeballs doesn't work any better in 2006 than it did in 2001. I thought we had learned this by now.

Listening to ''Never Knew Love'', by Stella Browne (Play Count: 8)