Layoffs at AOL - Advertising gold rush continues

Some bad news at AOL - they are laying off 2000 of its 10,000 employees. CEO Randy Falco sent out a letter this morning, explaining the reasons behind the cutback. Kara Swisher at All Things Digital, published the layoff letter.

Dear AOL colleague,

Just over a year ago, AOL embarked on an incredibly complex and significant transformation as we fundamentally shifted our business model from a subscription-based ISP to an advertising-supported Web company.

We aggressively expanded our advertising capabilities, building on the strength of and our premium ad sales force.

Clearly, the big gold rush for the major online companies are the ad dollars, and shoring up the advertising networks has become priority #1. Google has a clear lead in the ad race with 56% of all searches in the US, followed by Yahoo at 23%, and Microsoft with 11%. AOL is bringing up the rear with 5%.

Google, acquired DoubleClick earlier this year, for a resounding $1.3 billion. Google is also making definite forays into the mobile advertising market.

Microsoft bought aQuantive, a digital marketing company for $6 billion, making aQuantive the largest acquisition for Microsoft. AQuantive is the parent of Razorfish, the marketing company that was the darling of the last boom, along with DRIVEpm and Atlas.

On the heels of Google’s acquisition of DoubleClick, Yahoo acquired Right media for $680 million.

AOL acquired a controlling stake in the German ad company, ADTECH AG.

From the AOL layoff letter:

We aggressively expanded our advertising capabilities, building on the strength of and our premium ad sales force. We acquired three leading-edge advertising companies–ADTECH, Third Screen Media and TACODA–and formed Platform-A. AOL now has one of the largest and most sophisticated ad networks in the world, and we’re well positioned to compete where the ad market is heading.

AOL’s current strategy will be geared towards “three core areas–Platform-A, Publishing and Access” according to CEO Randy Falco. Platform-A will enable AOL to serve ads over their own as well as third party sites. Content (publishing) sites provide the basis for the ad network, which the Access platform (AOL’s traditional and highly profitable ISP business) will provide the cash to build the other businesses.

In spite of the impending layoffs, some credit should go to AOL for building, and articulating a clear vision of where it sees itself in the future.

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Spyfu: Spying on the competition

spyfu logo

Spyfu is a company that lets you spy on your competitors site - you can find out how much they are spending on paid advertising per day. You go to their website and enter a domain name, and you get back the online advertising budget numbers for the site, along with the tool clicks per day and the average cost per click.

The free site provides limited content, but the subscription site promises tools to track and analyze a site’s paid keywords, average rank, number of clicks per day, number of CPC ads etc.

spyfuHere are daily budgets of some high rollers in the online advertising world, from the Spyfu site. $124k - $452k $12k - $362k $84k - $336k

The spread in the numbers is rather large. To make this more useful, the site needs to publish the numbers within some tighter tolerances.

In general, when advertisers sign on to place paid ads on a search engine, most of the click and keyword average pricing data are made available to them. It is possible to get statistics on the number of times a particular keyword is being searched, and how many clicks you are likely to get at a particular cost per click (CPC), so Spyfu is probably just aggregating data, and presenting it conveniently in one place, along with some estimates.

Overture (Yahoo) freely publishes click costs and traffic estimates, but Google adwords has a strict policy of not allowing advertisers to see what other merchants are bidding on a particular keyword. So it is not clear if Spyfu is getting any data from Google at all, or just making educated guesses based upon Yahoo cost estimates.

Here are the most expensive keywords - yes that is the max price the merchants have bid for every click to their site, for those keywords!
spyfu top 100 most expensive keywords

We tried Spyfu on some domains and the results were reasonable. However, for domains that did not advertise on the big three search engines (Google, Yahoo, MSN), we could not get any advertising numbers even though the sites are advertising on several smaller search engines.

At first pass, this seems like a very useful tool for online merchants to use. Here are some of the features Spyfu needs to add to its offerings.

1. Add tier II search engines into its estimates
2. Use better filtering for their search terms (they list words such as “a”, “www” etc. which google and other search engines remove as they are very common terms)
3. Get a faster server - the queries are very slow 50% of the time
4. Either get more precise numbers for the ad budgets, or label the numbers as “estimates”.

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