“Google in the Hot Seat”
As Reuters’s Bobbi Rebell reports, a recent comScore study found a 7% decline in the click through rate of Google’s sponsored search ads. CTR is a key indicator of its profit potential so this decline has sparked some questions about how Google can maintain its position as one of the hottest companies on the Web.
Amanda Mooney, i5invest Boston
Alistar Carole writes…
“Does the World Need Another Way to Search?”
” Google’s dominance in online search hasn’t stopped hundreds of startups from trying to build a better mousetrap. Each is trying a new twist on search: geography, crowdsourcing, tags, user annotations, learned hierarchies and timelines. With $20 billion spent on online advertising every year, a killer search application can make a lot of money.
- Some search tools use additional context — such as location, tags or the wisdom of crowds — to find more relevant information. Circos, for example, provides clusters of themes so users can tailor their results easily.
- Some search for new kinds of things, most notably people. Redux helps people find people, and Delver and Streakr tie search results to friends’ relationships. Even e-commerce is changing, with sites like Wize and buzzillions combining search with opinion rankings to recommend purchases.
- Others present the information on a map (like Atlaspost), a timeline (the way Capzles does for photos,) or a dynamic hierarchy (like iLeonardo) to make it easier to understand.
Second, new search is worth more money.
According to the Interactive Advertising Bureau, pay-for-performance advertising overtook impression-based advertising in 2007. Advertisers don’t want to pay for eyeballs anymore; instead, they want results.
Combining ads with search results makes them relevant, encouraging visitors to click on them. The more relevant the results, goes the theory, the more you can charge an advertiser. So the new crop of search tools can command greater revenue for targeted ads.
And if those searches have a social element, they’re even more influential. Word-of-mouth marketing is the basis for most viral marketing campaigns. Peer recommendations cut through our natural spam filters, making us more likely to consider an offer. So social sites don’t just offer more targeted ads — the ads are more likely to be acted upon.
A crowded space
Despite the potential upside, new entrants face significant challenges. Consider recently launched European social search site 123people, started by serial entrepreneur Markus Wagner and backed by incubator i5invest. The company aggregates contact information from a wide range of online sources, including Facebook, Hi5, Xing, YouTube, Last.fm and studiVZ.
Even this can be dangerous. Harvesting data from other sites is common practice online, but some social sites are claiming this is a violation of their terms of use. In a recent, well-publicized example, networking site LinkedIn stopped job site Notchup.com from importing contact and job information.
Fortunately, 123people isn’t just about aggregating social content. The portal also pulls in media, tags and comments from a wide range of sites, and crawls country-specific sources. It then lets users claim, vote and tag profile data.
The site is generating significant attention, with over 100,000 unique visitors in the first 72 hours and over 1,000 searches a minute. That’s great traffic, but people search is already a crowded space. 123people faces a large number of competitors like Spock, Wink and Zoominfo. And with good reason: Social search is a hot sector of the online industry.
Social search gives the big sites an advantage
“I think one way [search] will be better is in understanding more about you and understanding more about your social context: Who your friends are, what you like to do, where you are,” Google VP Marissa Mayer told VentureBeat in a recent interview. “It’s hard to imagine that the search engine 10 years from now isn’t advised by those things.”
With all of this innovation, Google certainly isn’t waiting for someone else to reinvent search. It’s armed with millions of search results a day, a huge amount of computing power, and a promising social model that crawls the Net to discover social relationships.
Google and other Internet giants like Facebook have a big advantage. Future search will depend heavily on what the engine knows about you: Where you live, what your friends like, and what you’ve found useful in the past. It’s unlikely that the average consumer will invest time and effort in building redundant online personas across several search engines in order to improve results.
If we’re going to tell the Internet about ourselves, we’re likely to do it on one of the big sites. They’ll be the ones who can use what they know about us in the ways that are most useful.
If the flurry of search startups can tie into the social graph of Google, Facebook and others without biting the hands that feed them, then they have a chance of succeeding. But if they’re betting their business on changing the way people search, they have a lot of work ahead of them.”
i5invest Team
I have been following the discussion about social lending since reading a November 2006 Center Networks post in which CN blogger Allen Stern called social lending the “next Web 2.0 phenomenon.” I’ve followed Prosper in the US, Zopa in the UK and Kiva’s international philanthropic P2P service.
When I saw that one of my favorite Tech bloggers and Twitterers, Rex Dixon, is working in the social lending space at Lending Club, I told him I’d love to learn more about Lending Club and the unique service it provides. Rex connected me with Lending Club’s Senior Vice President, Patrick Gannon. Patrick worked in traditional financial services at Wells Fargo before joining the P2P lending world. He provided a great roundup of the company and market that attracted him to leave traditional financial services and join Lending Club’s team.
Amanda: Describe the service Lending Club provides for Web users.
Patrick: Lending Club (www.lendingclub.com) is a prime consumer lending platform that brings together creditworthy borrowers and lenders to originate and service person-to-person loans.
Approved borrowers get rates that are 25% lower than those of banks, and lenders can make great risk-adjusted returns. Lenders are currently making 12.3% on average on their loan portfolios.
Lending Club pulls credit bureaus for borrowers and verifies borrower identities. Borrowers have good FICO scores of 640 or higher and have a manageable amount of debt (30% debt-to-income ratio or lower) with no current delinquencies.
Lending Club features a portfolio creation tool called LendingMatch™ that makes diversification across dozens of loans meeting a desired risk tolerance possible at the click of a button.
Amanda: What made you decide to move from traditional financial services at Wells Fargo Bank to work with the team at Lending Club?
Patrick: I was introduced to Lending Club through an early investor and was immediately impressed with the business acumen and technical prowess of the team. I joined the company in May of 2007, only a few months after the company had launched, and the team had already put together a leading-edge underwriting, origination, and servicing system.
I was excited by the potential for Lending Club to transform consumer lending in the United States, and thought that the business model was
excellent. I have been extremely happy here and proud to join such
an excellent and fun team.
Amanda: Who are your primary competitors in the market and how have you differentiated Lending Club’s service?
Patrick: There are a number of companies who are in the social lending market, and a number of others have announced their intentions to join. The potential size of the market is huge – there are trillions of dollars of consumer debt in the United States alone – so we believe the market will support a number of leaders.
Lending Club is differentiating itself from the competition by focusing on the responsible lending and community aspects of social lending. Responsible lending means that we only lend to people who are able to service the debt without running into financial trouble, and at a fair, fixed interest rate that we set. The community aspect of social lending means that we offer our services not only through our website, but also through existing associations – alumni, professional, community, and online – where people can borrow from and lend to each other.
In addition, our track record to date has been excellent. As people can see on our statistics page, we have done a good job of limiting defaults by being very careful about extending credit.
Amanda: How has the impending recession affected Lending Club and its lenders and borrowers? Is the social lending model more or less insulated from recession
Patrick: Lending Club is carefully monitoring economic indicators and adjusting our lending as necessary. Historically speaking, in the past 30 years, default rates in recessions have doubled average default rates. By extending credit carefully, and only to those who we consider to be good credit risks, we seek to limit the possibility of loss for lenders.
We think that as so many banks tighten their credit policies and either turn down loan applicants or offer them very high interest rates on their loans that social lending will become an increasingly attractive alternative to those with good credit.
Amanda: Do you have plans to expand this service to European or other international markets?
Patrick: One of the most common inquiries we get at Lending Club is “when are you coming to my country?”
We do think that Lending Club’s model could work in a wide range of countries, and we know that the market for our service is also very attractive. That being said, we are focusing on building our United States business for the time being and do not expect to expand internationally in 2008.
Amanda Mooney: What Web or business trend are you most excited to watch in 2008?
Patrick: Lending Club is interested in the broadening reach of social networks and the quality of the information that will flow through those networks. We are also interested in social lending, of course, and look forward to seeing significant innovation in the market this year.
Image provided by Patrick Gannon. Logo pulled from company Web site.
Amanda Mooney, i5invest Boston
On Wednesday, we were thrilled to see that Duncan Riley reviewed 123people.com on TechCrunch and made invites for our private beta site available to readers.
“150 Invites to 123people.com for TechCrunch Readers”
Duncan Riley writes: “New comer to the people search game 123people.com is a Austrian based startup that is looking to provide a new take on the competitive people search market with a European focus.
There’s no shortage of wannabes in this space. Spock
, Wink, Zoominfo, WikiYou and PeekYou are a few companies we’ve reviewed previously. 123people.com joins that list, but there are a few differences that are worth mentioning.
123people.com is primarily a data aggregator, but unlike some of its competitors it goes one step further by aggregating publicly available phone numbers and email addresses for every search result. It’s not perfect, and it has better results for European focused searches, but this will improve with time.
In addition 123people also aggregates videos, photos, tags and comments from “hundreds of international sites” including Facebook, Hi5, Xing, YouTube, Last.fm and studiVZ. Users can claim, tag, vote and comment on aggregated profiles on 123people.com.
We have invites to the private beta of 123people.com to give away to TechCrunch readers. The first 150 people to email privatebeta@123people.com will get an invite code in return, and if you are one of the 150, let us know what you think of 123people.com in the comments.”
Images pulled from TechCrunch.
i5invest Team, Europe and the US
After months developing, coding, designing and testing our latest venture, our i5invest team is proud to announce…
So early in our launch, we’ve already had great success. 123people.com:
- Has had 300, 000 visits within the first days since launch and 1.9 million page views.
- 1.500 outgoing search request per minute
- Is the most successful launch of a Web site in Austrian history
[youtube=http://www.youtube.com/watch?v=d1WBKrUQ26M&rel=1]
123people is a people search engine that crawls nearly every corner of the Web to help you find information on everyone you (want to) know. Using our proprietary search algorithm, you can find comprehensive and centralized people profiles consisting of images, videos, phone numbers, email addresses, social networking and Wikipedia profiles and much more. All of this rich media profile content is pulled from an extensive list of international sources like Google, Yahoo, Facebook, LinkedIn, Xing, YouTube and Wikipedia.
What we’re building is more than just a directory of contacts; This is the next generation of people search that includes dynamic tools that allow you to respond and contribute to people profiles on the Web.
For now, we’re in private beta. Web users outside of Europe will have restricted access until our imminent US launch is released. You can join our Facebook page if you would like to receive news as invitations to join our private beta site become available.
i5invest Team, Europe and US
Following the Microhoo Meme
When news broke that Microsoft made an offer to acquire Yahoo, News Corp and Google quickly reacted. News Corp threw its own offer in the ring and Google criticized Microsoft asking, “Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?”
Our i5invest team has been following this meme and thought we’d include a few links to posts you should check out if you haven’t already:
“WOW, Microsoft Offers $44.6 Billion to Acquire Yahoo”
“If Microsoft Buys Yahoo, What Does It Mean for Europe?”
“Ballmer’s Internal E-Mail to The Troops Explaining the Yahoo Acquisition”
Google blog: “Yahoo! and the future of the Internet”
“Microsoft Responds to Google Missive (That Was Quick)”
“Microsoft Wants Yahoo, What do Web Workers Get?”
“Poll: Has Google Lost The Plot By Attacking Microsoft’s Bid for Yahoo?”
“NewsCorp Looking to Bid for Yahoo!? It Can’t Be So.”
“No Super Bowl for Yahoo: Top Brass Weigh Their Limited Options”
What posts are you checking out as this news develops?
Amanda Mooney, i5invest Boston
DLD
We’ve had a really busy month at i5invest but I got the chance to attend DLD a few weeks back and thought I’d share some photos and a bit about my experience.
[slideshow id=1801439850951270170&w=426&h=320]
Munich, widely recognized as Europe’s center for commerce and extravagant capital, was again this year’s host for DLD. Presented by the prestigious Hubert Burda Media Publishing Group, this “Conference for the 21st Century“ did not disappoint. Hubert Burda Media Publishing Group, a traditional printing company, has managed to successfully cross the gap and lead a compelling forum to explore the possibilities of our digital age.
DLD commenced on January 20, bringing together some of the greatest and most diverse minds I’ve personally seen in on space. I can only imagine that TED, where you can see people like Craig Venter, Davide de Rothschild and Erik Wachtmeister sitting down for coffee, is comparable to the experience. Although I didn’t take away any huge insight from the sessions that I can report here, the attendees represented such an incredible cross section of venture capitalists, entrepreneurs, socialites, forward thinkers and academics. It was an amazing experience spending the weekend with this mix of people.
Did you get a chance to attend? What were your thoughts?
Lukas Zinnagl, i5invest Vienna
Here’s a really interesting session from the World Economic Forum in Davos. The rich dialog featured here, including Eric Schmidt’s comments about Google’s plans for mobile advertising makes this a must-watch video.
[youtube=http://www.youtube.com/watch?v=XjjoJjyIngg&rel=1]
Amanda Mooney, i5invest Boston
5 Hot Links
1. TechCrunch reports on a possible deal between Nokia and Facebook. Duncan Riley says, “The investment side isn’t that surprising given how many companies have now bought into the Facebook phenomenon. The remarkable part is how many companies are willing to invest in Facebook at a $15 billion valuation.”
2. A guest-written post on GigaOM by Brian McConnell explores “Social Networks from the 80s to the 00s.” Brian writes, “As Facebook enjoys its moment in the sun, we should take a moment to step back and look at the history of computers and social communication.”
3. “Guitar Hero Drives Digital Song Sales”
4. “iPhone Spurs Web Traffic, If Not Music Sales”
5. BusinessWeek’s Pallavi Gogoi predicts the”Death of Mass Luxury”
Amanda Mooney, i5invest Boston
Social Bookmarking
BusinessWeek has an interesting report asserting that US tech companies with a strong international presence will weather the recession much better than US-centric companies.
As BW’s Olga Kharif, Spencer E. Ante and Roger O. Crockett report:
One key factor in how these companies perform will be geography. While tech spending in the U.S. is expected to slow down with the economy, spending abroad remains relatively healthy. As a result, the tech companies with the most exposure to overseas markets, such as IBM and Hewlett-Packard (HPQ), stand a better chance than those more dependent on U.S. consumers and companies. “Large bellwethers with international exposure will probably fare better in this type of an environment,” says Scott Kessler, head of tech sector equity research at Standard & Poor’s (MHP).
The companies most diversified in international markets include:
BW says:
IBM is among the most diversified abroad, with just 39% of its revenues coming from inside the country. Other companies that get less than half their revenues from home include HP, Oracle (ORCL), and Sun Microsystems (JAVA), according to financial filings. In contrast, AT&T and Yahoo! pull in the majority of their sales from the U.S.
Amanda Mooney, i5invest Boston
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