Although numerous activities are available to get Americans off the couch, they still prefer to be there, a report from the NPD Group has found.
When asked how they'd spent their leisure-time hours in the past week, a whopping 81 percent of the 10,281 respondents had watched television, for about 10 hours on average for the week. It was the top leisure-time activity in the study, which covered people ages 13 and above. And that figure didn't even include watching movies on TV. It only included shows, news, and sports.
"There's a perception that families spending time in front of a glowing TV hearth has been replaced by glowing laptop or iPod displays," Russ Crupnick, entertainment industry analyst for NPD, said Tuesday in a statement. "And while that's true for some families, TV remains the top entertainment choice by far in the United States."
The NPD Group also found that traditional radio shouldn't be dismissed quite yet. Radio listening came in second place behind watching TV. A total of 78 percent of Americans listened to traditional radio, for more than five hours a week on average.
E-mail and instant messaging are also quite popular, with 70 percent taking part in those activities, for about four hours per week. The research firm also found that 60 percent of people still listen to music on CD.
About 47 percent of respondents said they visit social networks, for an average of five hours per week. And 11 percent of those surveyed said they tweet, for about three hours per week.
But it was the television that took the top spot for leisure activities. It seems that, when given the chance, most Americans choose the couch over anything else. Does that include you?
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
Hotmail users aren't the only ones who've been hit by a phishing scheme over the past week. Google told BBC News on Tuesday that Gmail users have also been affected by the hackers who posted passwords online.
The problem is far more widespread than was disclosed on Monday, possibly affecting Yahoo and AOL e-mail accounts as well, according to BBC News.
Google described the issue as an "industrywide phishing scheme." BBC News said it has seen two lists posted online with "more than 30,000 names and passwords" from Gmail, Yahoo, AOL, Microsoft's Windows Live Hotmail, and other service providers.
"We recently became aware of an industrywide phishing scheme through which hackers gained user credentials for Web-based mail accounts including Gmail accounts," a Google representative told me in an e-mail.
The representative said that Google immediately "forced passwords resets on the affected accounts."
In an e-mail to CNET, a Google representative said that the company had to reset the passwords on fewer than 500 Gmail accounts so far. However, that figure could change.
Despite Google's and Microsoft's awareness of the problem, it doesn't seem that users are out of the woods just yet. Google's representative told CNET that it will continue to force password resets on any newly affected user accounts.
Like Microsoft, Google was quick to point out to the BBC that the phishing scheme was a "scam to get users to give away their personal information to hackers" and not an internal security issue. It didn't say how users fell victim to the scheme.
Google's admission that Gmail users were affected by the phishing scheme comes on the heels of Microsoft acknowledging that over 10,000 Live Hotmail accounts were compromised by the scam. The passwords apparently first hit the Internet on October 1.
Updated at 9:10 a.m. PDT to include Google's comments.
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
Ever since ad-supported music service SpiralFrog shut its doors in March, former users have complained about receiving a glut of spam.
"SpiralFrog seems to have sold their members' e-mail (addresses) to spammers," a CNET reader commented in response to a May story about some of the company's struggles. "I signed up for the service with a unique e-mail address. As soon as the service shut down, I started getting massive amounts of spam sent to that address. Anyone else have this problem? Pretty slimy."
It's still unclear how many spammers obtained a list of e-mail addresses belonging to about 2.5 million registered users of the now-defunct service, as well as how they all obtained the addresses. But it is clear that at least one company obtained the e-mails by paying a former SpiralFrog salesman $8,500, CNET News has learned.
SpiralFrog CEO Joe Mohen authorized former employee Tim Bieber to sell customer e-mails with no privacy restrictions. Bieber's address has been redacted from this document.
(Credit: Greg Sandoval/CNET)A review of SpiralFrog's documents provided by a start-up that purchased the e-mail list shows that SpiralFrog's founder and CEO, Joe Mohen, authorized the sale days before creditors took control of the company's assets on March 13, 2009. Leading up to the sale, Mohen gave the list to Tim Bieber, a former SpiralFrog salesman, as compensation for back wages the company owed him, records show. Mohen did this despite SpiralFrog's promise to protect users' privacy.
"SpiralFrog will not share, sell, or trade personally identifiable information collected at the site with third parties, except as described in this privacy policy," the company said in its privacy agreement. "On a confidential basis only, SpiralFrog may share personally identifiable information collected at the site with corporate affiliates, consultants, or third parties performing a specific service or function on our behalf."
Documents show the sale of the addresses had nothing to do with a company working on SpiralFrog's behalf. Indeed, the sale took place weeks after the music service shut down. Mohen acknowledged to CNET News that there wasn't anything in his agreement with Bieber to prevent the former salesman from selling the list as many times as he wanted, to whomever he wanted. Bieber did not respond to numerous interview requests.
"The users who signed up with SpiralFrog were given the clear impression that their e-mail addresses would not end up in the hands of spammers," according to a former SpiralFrog employee with knowledge of the sale, who spoke on condition of anonymity. "Companies routinely promise to protect privacy and very rarely break it. SpiralFrog kept its promise until the day before shutting down."
In 2000, Arizona Sen. John McCain called for legislation that would prevent bankrupt Web stores from selling their customers' personal information without their knowledge.
(Credit: Greg Sandoval/CNET Networks)In two interviews with CNET, Mohen acknowledged that in March, he "licensed" the user data. Mohen told CNET in June that to the "best of my recollection," the licensing deals complied with SpiralFrog's privacy agreement. Last week, however, Mohen said the agreement he had with Bieber, based in Vancouver, British Columbia, did not go far enough to protect customer privacy.
"In retrospect, I should have added tighter language to that agreement," Mohen said a week ago. "In the later days of the company, Tim Bieber was owed money by the company, and I struck an agreement with Tim to avoid litigation. To satisfy the liability, I licensed to Tim the user database."
Plenty of consumers suspect retailers of secretly sharing their information, but because of the shadowy way in which spammers conduct their business, tracking down the responsible party is nearly impossible. And once an e-mail list falls into the hands of spammers, it can be sold and resold.
Internet users often go to great lengths to protect their e-mail addresses from spammers. The history of the Web, however, shows that for dying start-ups, the temptation is to look upon the data as just another asset to be liquidated. The situation at SpiralFrog is similar to one that occurred when the dot-com bubble burst in 2000.
Nine years ago, CNET News reported that three dot-com failures, including Disney-backed Web store Toysmart.com, tried to auction off customer data the companies once promised never to share, such as credit card data and phone numbers. Members of Congress, including Arizona Sen. John McCain, argued that bankruptcy didn't give companies the right to break promises to consumers.
The Federal Trade Commission sued Toysmart and eventually blocked the sale. As part of a settlement, Disney agreed to purchase Toysmart's customer information for $50,000 and then destroy it.
Authorizing the sale
The sale of SpiralFrog's user data began sometime around March 27, when Bieber approached executives at the start-up that purchased the list, according to that company's attorney.
The start-up's lawyer, who has asked to remain anonymous, said that after wiring $8,500 to Bieber on March 31 to obtain the user e-mail list, the company has not shared or sold SpiralFrog's user information with anyone, and it has obeyed all laws in acquiring the list. To prove his point, the attorney said that when Bieber first approached the start-up about selling SpiralFrog's user addresses, executives there wanted proof that he was authorized to sell the list.
That wasn't a problem. Bieber had asked Mohen for written authorization two weeks earlier, documents show.
"Joe, I'll be needing something simple in writing from you authorizing me to (be) selling this database as part of remuneration," Bieber wrote in an e-mail dated March 12, the day before creditors took control of SpiralFrog. "So far, the list is useless without some paper authorizing its resale--even loose paper explaining the nature of how I came across the list...You dig. Let me know ASAP."
Click the image above to read our story on how a fractured management hurt SpiralFrog
Mohen then gave him rights to use the list "for commercial purposes on a nonexclusive basis" for six months. Bieber forwarded the document to the start-up that purchased the list. In addition, the start-up's executives met in New York with Mohen, who confirmed that Bieber had the right to sell the list, the start-up's attorney said.
It is unclear whether Bieber distributed the list to anyone else.
Mohen said SpiralFrog had stopped paying employees sometime in November 2008 and that Bieber had worked for an extended period without receiving compensation. On February 26, 2009, Bieber wrote Mohen that he was prepared to take legal action, if he wasn't paid.
"Joe, hope (you) got good news from your conference call last night. I file a lawsuit next week naming (SpiralFrog) and 3V (the hedge fund that loaned SpiralFrog money for nearly two years), unless you provide me with funds and a payment schedule by end of week...I'm hanging by (the) ends of my fingernails."
Editors' note: Go here to read some copies of SpiralFrog's correspondence.
Below are several e-mail exchanges that were obtained by CNET News during a review of SpiralFrog's rapid rise and fall. For the complete series about SpiralFrog's collapse, please go here and here.
The first chain focuses on Amir Khan, one of SpiralFrog's financial backers, and his skepticism about SpiralFrog's marketing strategy in the summer of 2008. The second thread is a debate between Vesa Suomalainen, SpiralFrog's former chief technology officer, and Joe Mohen, the company's founder and chairman that occurred last fall.
It should be noted that the e-mail exchanges were originally forwarded to multiple people, and copies were subsequently forwarded to CNET from multiple sources. E-mail addresses, phone numbers, and other personal information were removed. Grammar was not corrected. The e-mails were placed in chronological order to make them easier to read.
Editors' note: In the first exchange, the recipients were members of SpiralFrog's board. Orville Hagler, a SpiralFrog employee, was CC'd.
From: Mel Schrieberg
Date: Sun, 13 Jul 2008 09:53:05 -0700
To: Hughes, Al; Amir Khan; Gordon, Bob; Preston, Frances; Gold, Jerry; Joe Mohen; Levin, Jordan; Hutchens, Mark; Strama, Mark; Stagg, Scott; Norcia, Steve; Mackell, Thomas Mackell.
CC: Orville Hagler
Subject: Traffic AnalysisThe board committee on traffic analysis that includes Scott Stagg, Amir Kahn, Jerry Gold, Steve Norcia and me, met on the afternoon of Wednesday, July 9th. It was a very productive meeting given the complexity of the topic. As a result of our discussion, the consensus was that we serve two constituencies, that being strategic alliances and the advertising community, and our hypothesis is that these two entities have different criteria on how they view the company. To gain further insight with respect to strategic alliances, we developed a series of questions that I will pose to Jimmy Barge to better clarify Viacom's position. At this point, we believe that we need to grow our monthly uniques while migrating to quality visits.
From a tactical perspective, last Thursday, July 10th, the company achieved its highest daily uniques at 295,228, and we are pacing at 7,615,277. Our current spend is the same as last month, thus we are proportionately gaining traffic virally. I plan to decrease our spend towards the latter part of the month, which will result in approximately 7.1 million monthly uniques. Concurrent to this, I will start migrating to our Phase II quality traffic programs.
Thank you,
Mel----- Original Message -----
From: Amir Khan
Sent: Sunday, July 13, 2008 4:20 PM
To: Mel Schrieberg
Cc: Orville Hagler
Subject: Re: Traffic AnalysisI am having 2nd thoughts. My friend came to visit the company on friday and he asked very pointed questions to which we had no answers about refresh rate and pages per visit compared to facebook etc., which we keep comparing ourselves to. If u look deeper our traffic numbers are a house of cards. I know him for 20+ years and there is no way he will invest in the company with such metrics. We need to discuss this again.
Amir Khan
Portfolio Manager
3V Capital Management----- Original Message -----
From: Mel Schrieberg
Date: Sun, 13 Jul 2008 20:15:52 -0700
To: Amir Khan; Hughes, Al; Gordon, Bob; Preston, Frances; Gold, Jerry; Joe Mohen; Levin, Jordan; Hutchens, Mark; Strama, Mark; Stagg, Scott; Norcia, Steve; Mackell, Thomas J.
CC: Orville Hagler
Subject: Traffic AnalysisAmir
To your point we do know what our page views and refresh rates are but you are right we do not know how they compare to Facebook etc, - we are not comparing ourselves to social network sites in that they are not the model we are following - our site does not have any objectable content and therefore we are able to attract the Tier I advertisers where your social network sites can only obtain a CPM of $1;50 and we have averaged $14-16 and recently have an ad campaign with AT&T - their "blue room promotion" where we obtained a $26.00 CPM.
The reason we have compared ourselves to Facebook is strictly one of gross traffic and I strongly believe if we were to make ourselves more of a social network site our traffic would be larger but it would defeat our economic model
I do not think our traffic is a house of cards - our phase one approach was to build traffic as quickly as we could, so that we could attract strategic partners and tier one advertisers and then migrate this traffic which we have stated to do, to enhanced quality programs. There are many sites Rhapsody being one that spends considerably more money on traffic enhanced programs and don't come close to our results. To expand upon this I have spent a considerable amount of time with AOL and Advertising .com executives, (recently a two day meeting in Baltimore with 14 of their executives in attendance) many of which have spent ten years on growing website traffic and they have not seen a site grow so fast. - the key to this is we have been able to converge the discovery and acquisition of music on our site - our pre -qualitative market research determined that this would be critical to our success. Yes, I would like to see greater stickiness to the site but please remember that up until now we have had only one music major. We have conducted three post launch focus groups and the main reason they have not come back to our site was not having a greater selection of music - this is now changing with the ingestion of EMI.
Amir, I would be happy to met with your friends again and clear up any miscommunications, I found them to be very bright and articulate and we might have not made ourselves clear on our business model; Your point is well taken on better site metrics, we are working on improving this area but as I stated at out committee meeting we can only determine the number of clicks for each of our programs (receive these from the vendors - Google, Yahoo, MSN, Advertising ,com etc.) but we cannot measure these as accurately as would like to with respect to the method Nielsen measure uniques - would take additional funding to outsource this capability
Thank you
Mel
----- Original Message -----
From: Scott Stagg
Sent: Sunday, July 13, 2008 11:54 PM
To: Mel Schrieberg; Amir Khan; Hughes, Al; Gordon, Bob; Preston, Frances; Gold, Jerry; Joe Mohen; Levin, Jordan; Hutchens, Mark; Strama, Mark; Scott Stagg; Norcia, Steve; Mackell, Thomas J.
Cc: Orville Hagler
Subject: Re: Traffic AnalysisI agree with mel and disagree with amir. We all are in agreement that our first objective was to grow uniques which we have done and there is clearly some disagreement about what our next step is, whether to continue growing uniques which the advitisers seem to want, or slow the unique growth and increase quality. To me, it is all about impressions and if the choice is to get there with more uniques and less pages turned vs less uniques and more pages turned, with both equaling the same amount of impressions, then I would choose the higher uniques.
Mel, could you please try to find out how many pages visitors average on facebook to potentially answer amirs friends concerns.
And amir, could you tell us exactly what you and your friends concerns are and what info you need from mel. Many people have put in an extraordinary effort to get where we are and this is far from a house of cards. Sent via BlackBerry by AT&T
----- Original Message -----
From: Amir Khan
Sent: Monday, July 14, 2008 2:19 AM
To: Scott Stagg; Mel Schrieberg; Hughes, Al; Gordon, Bob; Preston, Frances; Gold, Jerry; Joe Mohen; Levin, Jordan; Hutchens, Mark; Strama, Mark; Norcia, Steve; Mackell, Thomas J.
Cc: Orville Hagler
Subject: RE: Traffic AnalysisMel & Scott,
My concerns stem from the following:
1. We are embarking on a massive capital raise. The investors we are and will be encountering for this round will be more sophisticated and we are having a hard time convincing people of the valuation of the company even after signing 2 majors and all the independents. If we are discussing raising money using the same instrument as our round last may, then clearly something is wrong.
2. Our entire financial model is based on a steady state mid teens pages turned per visit out in the future. While we are managing our uniques per month number pretty well, we are currently running at 2.6-2.9 pages per visit (public info as per alexa) instead of our presentation predicting 6-7 in July to Dec phase, with correspondingly low time spent on site. Therefore our available impressions are running at 40-50% of the model we are showing to investors. Just as we seem to be targeting uniques, we need to manage the pages per visit as well otherwise it will call into question the entire financial model. If we keep growing uniques per month but pages per visit lags, guess what - impressions served will be well below model projections. To put it bluntly, while we are 15x our Oct 07 uniques, we are just 2.5x Oct 07 impressions served. If I were looking at the company afresh, I would not buy the improvement in uniques quality assumption in our model without assuming a fall in uniques. Its just not possible!
3. The people we seem to be attracting to our site from the affiliate marketing programs are NOT interested in music. Hence the low registration rate, pages per visit, time on our site, high bounce rate. I refuse to believe that people in the advertising world and the potential acquirers will not see this as buying traffic. I remember Jerry on the conf call could not digest that either. When my friend, Jassi, who recently sold his company at a nice price, and understands this space stayed focused on the quality of the uniques and we did not answer his question directly, I got more concerned. If we are going to compare ourselves to facebook, youtube in terms of total traffic, we must expect questions regarding the quality of traffic as well. Anecdotally, Saurabh, our intern last year who was a big facebook user turned probably 25-30 if not more pages per visit. I doubt if facebook, myspace, youtube or any of the beacons of the new internet age have ever relied on affiliate marketing. Their VC sponsors would not have allowed it. Finally I believe its entirely possible that youtube/myspace went to acquirers and told them we don't have a salesforce but you do and you can make this much money from us. By having a salesforce with 4-5 senior guys plus a bunch of juniors and not having a decent pipeline, are we telling the world that perhaps the model is faulty? Even if we assume we get a 15 CPM and myspace gets a 1.50 CPM, and if we have 2.6 pages per unique vs 25 per unique for them, we end up with the same gross revenue with the same uniques but we would have a bloated marketing cost, where they would have none. Add to that the fact that their inventory costs them zip, and we have large upfront acquisition costs and we end up keeping just 33% of our revenue (if we are lucky to use up the recoupable advance) hence on a net revenue basis we would be 1/3rd their net revenue with a bloated marketing expense. So before we start dreaming of youtube valuations, we have to get our perspective straightened out.
4. The investor presentation calls for a 2008 marketing spend of 7.9mm. If last month our total spending was 1.1 or 1.2mm, and we add to that what we spent in the other months so far, we will probably have just 3-4mm left for the rest of the year or 500k-670k per month (and we must include all sorts of marketing in this calc). If we require 1.1-1.2mm to get us from 5mm to 6mm, how come we will require lesser to keep increasing uniques?
5. If we keep buying traffic and we do ramp uniques to 10mm, we will have an even harder time bring up pages per visit from under 3 to plan, as compared to doing it now. We must improve the quality now, and stabilize traffic rather than aim for 7mm+. We can not become uniques addicts at the expense of quality. We got it above 5mm, let's just manage it within a range, all the while replacing affiliate programs for better programs.
6. If spiralfrogclub generated just 10,000 emails, and the Alicia Keys program (from which we expected 4mm new uniques) generated just 3,000 new uniques, we should make sure we don't commit the same mistake again. These viral programs accomplished just 1 thing - they made me sick. I am unwilling to see a single program we have in the works fail. And there have to be accountability and repercussions for any marketing failures going forward. I don't know whether we pulled resources from other projects to work on these as well so besides money; opportunity cost, manpower redeployment etc also need to be accounted for. Did these happen at the expense of release 3.0 or other enhancements which would make new visitors stick to us? And with the affiliate programs, are we doing the same?
7. If google adwords leads to more registrations, these people will probably come back and hence we should look at cost per pages visited by unique per program not just cost per unique. If we did that chances are the 28 cent to 8 cent comparison will look a lot closer. Furthermore don't we think search engine optimization is a better tool to drive people who are actually looking for music than affiliate marketing? I also believe we must do away with the email requirement. We can let the user choose a user name/password and let him decide if he wants to give us his email/tel no for email/text updates etc. That will be a lot more acceptable in the age group we are trying to serve. I remember arguing about this back in Dec with Roger Munford and I still don't think people like to give out email addresses for fear of phishing etc. If we are competing with pirate sites, we must understand the behaviour of our target audience.
8. Whatever happened to alliances with mp3 player manufacturers, cellphone companies, and generally anybody who would benefit by pushing us? Should we not have banners on their sites or make Samsung mention "compatible with spiralfrog.com"?
9. Our first priority has to be content acquisition, at the expense of every single thing including sales, uniques, salaries etc. I also believe we should line up a buyer who would buy us provided we got Sony BMG and WMG. With capital markets being the way they are, we can not rely on the assumption that a 20mm round is definitely going to happen. In my mind, its very hard to justify new hires, more marketing spend as time goes by especially with the markets being the way they are.
Having said all that, its not too late to rectify our message to investors to reflect what we have been doing. Our model needs to be more believable and yet we need to show a better sales pipeline. A 2.4mm pipeline is just not acceptable after having hired so many people in sales lately. Its possible that a strategic out of the 20 possible strategics will value our uniques differently but we cant believe that. We must be able to convince more people - I hv heard too many comments about potential investors peeling back the layers and not being impressed with uniques quality.
AK
Editors' note: The e-mail exchange below occurred last fall between Vesa Suomalainen, SpiralFrog's chief technology officer, Joe Mohen, the company's founder, and Matthew Stern, vice president of marketing. Others who received the e-mail were a combination of managers from SpiralFrog and 3V Capital Management, the start-up's main financial backer.
From: Vesa Suomalainen
Sent: Thursday, September 25, 2008 1:38 AM
To: Jesse Paynter; Matthew Stern
Cc: Joe Mohen; Amir Khan; Michael Puccini; James Campbell
Subject: business case for paid search?I have not seen this written down anywhere, so I thought I'd take the initiative so we can allagree on the numbers before making a decision whether it makes sense to continue spending money on paid search on Google, Yahoo and MSN adwords. Please feel free to correct if I got any of this wrong.
We've been spending up to $600K on paid search per month over the last several months. For the most recent month that I have detailed numbers (June), we paid roughly $530,000 for 2.65 million.adword clicks, resulting in just over 140,000 user registrations. Each click cost us approximately 20 cents, and the regitration rate from paid search was roughly 5.4%.
This means it is costing usabout $3.70 per registered user obtained through paid search. At an average 6.5 pageviews per visit (latest month stats from Google Analytics), we're earning roughly 3.25 cents per user visit in ad revenue (assumptions: 2 ads per page, average $5 CPM, 50% of ad inventory sold each month). It would take 114 visits per user to earn back the money spent on paid search to break even. And that's assuming we'd keep 100% of the revenue - not figuring the 66% royalty due to the music content owners.
It is therefore difficult to arguevia a business case to continue funding paid search. The per-click rate is simply too high for an ad-supported business. Paid search ads are primarily designed for businesses that sell goods for relatively high prices - using paid search as a method to drive traffic for an ad-supported site would be difficult to support even if the conversion rate (from click to registration) would be 100%.
The obvious concern is what would happen to our traffic and ad sales if we stop paying for adwords? For one, our unique visitor numbers would drop by the corresponding number. However, since nearly 95% of paid search clicks end up in just one or two pageviews, our average pageview count would go up dramatically - and the # of total pageviews would drop but not by the same ratio as unique visitors. There's clearly a cost to this, but it's very difficult to argue that the downside is worth the guarantee of losing money on every dollar spent.
The other statistic that ought to dramatize the paid search cost number is this: 12 months after the launch of the site, where one would expect numbers to have stabilizedfrom the early peak in marketing spend and the initial delay in sales revenue, we're still spending upwards of 300% of our revenue in marketing costs (I don't have the latest sales figures so I could be off here a bit) - whereas e.g. Napster which was losing money every quarter due to their high marketing spending was using about 25% of their revenue to drive traffic.
There seems to have been universal agreement that our affiliate marketing program (Platform A) was not appropriate for our site given the high cost and the low conversion ratio - but I'd suggest the paid search is not much different. It will be difficult to defend this amount of sustained marketing spending to a new incoming investor who's going to scrutinize our business model and numbers carefully before making an informed investment decision. There are other, more inexpensive methods to drive traffic that we should pursue - e.g. traffic sharing programs with other sites or lower-cost pad clicks with music discovery sites. Paid search has an obvious cost incompatibility with our pennies-per-visit banner-ad-based business model.
----- Original Message -----
From: Matthew Stern
To: Vesa Suomalainen; Jesse Paynter
Cc: Joe Mohen; Amir Khan; Michael Puccini; James Campbell
Sent: Thursday, September 25, 2008 2:31 PM
Subject: RE: business case for paid search?I agree with the sentiment (decrease dependence on paid methods while searching for alliances - barter or otherwise), however the metrics have been getting better since June. I will do a full reconciliation at the end of the month, but judging on pacing so far, this is what we see:
September will see the highest ever monthly membership total (30% higher than June) yet September versus June member acquisition costs are 63% less expensive September will see the highest ever impressions served (16% higher than June) yet September versus June cost per impression are 58% less expensive Page/visit September versus June are 70% higher (7.45 vs. 4.39) Time on site September versus June are 140% higher (8 minutes vs. 3:20)
NOTE: The improvements are from finding alternative and less expensive banner programs that also deliver better metrics versus Platform A's incentivized traffic. Also, I do not include the NFL costs in September - the $200,000 spend netted 8,175 clicks and 407 registrations.
Finally, to bring this full circle, there have been fruitful discussions with like-music sites to swap traffic and share revenue...stay tuned.
----- Original Message -----
From: Vesa Suomalainen
To: Matthew Stern
Cc: Amir Khan; Peter Desloge; Michael Puccini; James Campbell;
Joe Mohen; Jesse Paynter
Sent: Thu Sep 25 18:21:50 2008
Subject: Re: business case for paid search?I'm afraid you're missing my main point. We must adjust our user aquisition costs and methods to fit our own revenue model for it to make sense. We've now proven that any amount spent on paid search or other cost-per-click advertising is guaranteed to lose us money. The oher point is that the amount spent on marketing in a given month should be a sensible proportion of our own ad revenue - not a multiple of it.
According to a spreadsheet by our SEM vendor Bluemark, we've paid for 15.6M adword clicks across Google, Yahoo and MSN since February 2008 at an average price per click of just under 20 cents. This amounts to a total of $3.12M. This number is astounding - and does not include the other marketing programs (Platform A, Alicia Keys, NFL etc. etc.).
The NFL promo seems to have a set a new record for our user acquisition costs - $491 per registered user. Paid search looks rather attractive in that light....
The other obvious consideration is our present funding situation. When we're having trouble paying emlployee salaries and basic expenses, it is the wrong priority to spend money on marketing programs that can at best be called loss-leaders. In my view, we should hunker down for a while and get our content catalog and site features enhanced, build no-cost traffic sharing partnerships, establish a strategic alliance or two, get more funding and then relaunch.
----- Original Message -----
From: Joe Mohen
To: Vesa Suomalainen; Matthew Stern
Cc: Amir Khan; Peter Desloge; Michael Puccini; James Campbell; Jesse Paynter
Sent: Thursday, September 25, 2008 6:32 PM
Subject: Re: business case for paid search?The only caveat I would throw in here is that paid search would make sense if the acquired users were to return to the site more often. Put another way, if our 2.4MM registered users came back twice a week, then we might view this differently.
While u r correct with the NFL digitally there were also approx 6 TV spots that went with it, and that mitigates this, although we can't say how much
----- Original Message -----
From: Vesa Suomalainen
Sent: Friday, September 26, 2008 11:48 AM
To: Joe Mohen; Matthew Stern
Cc: Amir Khan; Peter Desloge; Michael Puccini; James Campbell; Jesse Paynter
Subject: Re: business case for paid search?I believe we have established that we end up losing money even if the users acquired through paid search keep returning to the site.
To be fair, let's adjust my calculation below to grant that registered users end up spending more amount of time on the site than the average - which is skewed downward by those paid search users that end up quickly leaving the site. From Google Analytics stats for October 2007 (when we had no paid search programs ongoing), the average pageviews per visit was 14 and # of visits per user per month was 2. These numbers are very close to our original business plan assumptions.
Let's even use an average of 15 cents per paid search click. And a generous conversion rate of 10% to become registered users. And blindly assume all registered users end up becoming permanent members. Each such user would cost us hence $1.50. At 14 pages/visit we'd earn 7 cents per visit in ad revenue (2 ads per page, $5 CPM average, 50% of ad inventory sold). Next, we'll need to adjust this to subtract 66% royalties due to music owners - leaving us 2.38 cents per visit. It would therefore take 63 visits from each such user for us to break even. At an average 2 visits per month, we'd need each user to become an active SpiralFrog member for over 5 years to make this work financially. Our present stats show that a registered user stays active an average of less than 2 months.
We can therefore conclude that paid search and cost-per-click advertising is permanenty incompattible with our business model. Even with the generous assumptions made above, there's no way to make the numbers work in our favor.
It would be helpful if someone could send a note indicating our ad sales per month and % of ad inventory sold each month. For too long, we've lived in an environment where some of this data was kept secret, disallowing us to make rational decisions elsewhere. I've heard that one of the main arguments in favor of continuing with paid search is our ability to earn ad impressions already sold - but if you believe in this logic, it's akin to spening more money so we could keep losing even more.
----- Original Message -----
From: Joe Mohen
To: Vesa Suomalainen; Matthew Stern
Cc: Amir Khan; Peter Desloge; Michael Puccini; James Campbell; Jesse Paynter
Sent: Friday, September 26, 2008 8:54 AM
Subject: RE: business case for paid search?I think it is more complex. While I more or less agree with your points, there are more variables.
First, is our ad sales are in their infancy. It is too soon to judge marketing costs relative to them.
Secondly, it is true that you need a certain amount of "uniques" to get the attention of customers and key industry players. If our uniques fall below a certain level, potential customers will not take our meetings, and partners will not take us seriously; even Viacom might walk away. You will not get into meetings. While most of what Mel did was insane, there is some truth to this point.
Thirdly, the key business variables are how often users come back to our site. We need more data points on this. I think it might make sense for you to go through all the FEEDBACK emails (starting with right after EMI was added), to see what people are telling us about our site, what they like about it, what they do not. You did a good job of this late last year, and it would be interesting to see what they are saying now.
It might also be useful to read the SpiralFrog blogposts, to see what real users are writing.
----- Original Message -----
From: Vesa Suomalainen
To: Joe Mohen; Matthew Stern
Cc: Amir Khan; Peter Desloge; Michael Puccini; James Campbell; Jesse Paynter
Sent: Friday, September 26, 2008 10:02 AM
Subject: Re: business case for paid search?For a while, I guess we all were sold off on the "mometum theory". The belief was that if we demonstrated solid user growth and increased # of uniques, it would open more doors for us at advertisers and music labels and amongst the press and music industry. The cost did not matter since the exposure would be temporary and we would switch from paid to organic growth in a matter of months if not weeks.
I started arguing in late spring that this is, if not outrigth cheating, at least self-deception. We were claiming super unique user growth while we knew we were just getting users to bounce off our site. Our approach was not far from hiring internet users in India to click on our home page to get the uniques # to continue growing. Anyone who'd ask us direct questions about average # of time spent on site or average # of pageviews, or retention of registered users would immediately find out our little secret. And these figures stay permanently in our books for incoming investors to look at and ask us after-the-fact. How do we explain spending $1.5M in marketing in the month of June when our resulting revenue was $69,711? An ooops?
This is our opportunity to start fresh and blame the months passed as a failed experiment. I'd argue that our main problems are lack of music content and lack of site features - fixing these two is key to our future success. If there's one aspect I'd like to emphasize above all is that the unbalanced and incorrect focus on paid marketing is sapping our resources for money, development resources and management attention - besides being counter-productive to our overall goals.
Next week, we hope to add the IODA catalog to our live site - this is 1,081,028 additional tracks, bringing us close to the 3M track marker. And this aggregator catalog is multiple times more relevant than the similar-sized Orchard label which is mostly unknown European music. Do we have a marketing program ready to go when this catalog goes live?
And our main problem in getting these 1M tracks online quicker? Finding a soul in this company who's able and willing to pay for the $2,000 that it cost us to buy the hard drives required to ship the content from Seattle to our production data center in Ashburn. I find it somewhat ironic to be discussing spending priorities of several millions and a few thousands in the same email, but here you go.
With the purchase of the San Francisco-based start-up, Yahoo plans to add new photo features to Yahoo Mail, Yahoo Senior Vice President Bryan Lamkin said on a company blog posting:
Why is this such a big deal? Yahoo Mail is actually home to one of the largest online photo repositories in the world. And every day, millions of you use Yahoo Mail as your primary way to share the photos of important moments in your lives. While social networks and community sites are great for sharing photos with everyone you know, we realize it's not for everyone or every occasion. For many, email is still best for sharing photos among a more select group of friends or family. And now we're making it all that much easier for you.
Financial terms of the deal were not revealed, but earlier reports on the possible deal pegged the value at about $20 million.
In 2008, Xoopit won the Yahoo Open Hack contest for building an app that runs on top of Yahoo Mail. The application digs through a person's in-box to reveal photos and other media lurking within, including both attachments and Web addresses that link to sites such as Flickr or Picasa Web Albums.
Courtesy of Michael Bay, director of such percussive films as "Bad Boys," "The Rock," and "Transformers," comes the latest reminder to read over e-mails before hitting send.
Apparently Bay was disappointed with the way his latest film, "Transformers: Revenge of The Fallen," was being marketed, so he sent a nasty note to Paramount Pictures bosses. Someone leaked the e-mail to gossip hub TMZ and Bay's image has now taken some dings.
First, for a maker of macho-man movies, Bay sounds a tad whiny. Then, there's the problem with the way he writes. One critic at New York magazine called Bay's note "grammatically horrifying."
Here's a sample: (For extra credit, feel free to correct the sentences in the comments section.)
• "I'm sure the Yahoo downloads of the trailer are far lower than last movie--I would of got something saying how we broke download records like last time."• "I still run into so many people even this weekend with kids that ask 'is that movie coming out this year?'"
• "So far our print has been in my opinion and abject failure."
Bay is a college graduate (Wesleyan University), according to his Wikipedia page. His father was an accountant and his mother, ironically, was a book store owner.
I, for one, have left a modifier or two dangling. Who hasn't? But while Bay makes truckloads of cash as a filmmaker, he obviously needs help bumping words together.
No problem. If Bay is like most of Hollywood's elite, he has his own cook, fitness trainer, publicist, and stylist. Why not add a copy editor to the mix?
Zimbra co-founder Satish Dharmaraj will leave Yahoo in March, about a year and a half after the company acquired the open-source and online e-mail service provider.
Jim Morrisroe, a long-time Zimbra executive, will replace Satish as vice president of Zimbra, Yahoo said. He'll report to Scott Dietzen, Zimbra's former president who was promoted to senior vice president of communications products for Yahoo last year.
Kara Swisher at All Things Digital reported the departure earlier today, and now here's Yahoo's official statement:
"Satish Dharmaraj will be leaving Yahoo in March. Satish is a valued member of the Yahoo team and will serve in an advisory role to Zimbra. He leaves behind a dedicated team who will continue to deliver open source, collaborative messaging software, and expand into new markets. Satish's contributions to Zimbra and Yahoo have been invaluable and we look forward to his continued support of the Zimbra project."
Yahoo has been working to combine its Yahoo Mail team with Zimbra's programmers. Some Zimbra features inspired some of the changes in Yahoo Mail, such as Web-based applications, which are now just beginning to arrive with the Yahoo Open Strategy. The revamped Yahoo Calendar, still in beta testing, is based on Zimbra's calendar.
Yahoo acquired Zimbra for $350 million in September 2007. At least so far, though, the Zimbra technology hasn't grown into a full-fledged Google Apps competitor. The technology is available both as open-source software that can be downloaded and run on in-house servers or as an online service.
Yahoo said all of Zimbra's engineering team and the other members of its management team are still working at the company.
Updated 2:56 p.m. PST with further details.
SAN FRANCISCO--After months of preamble, Yahoo on Monday flipped the on switch for a massive project to increase activity--and advertising--on its Internet sites through social connections and online applications.
The company has been working mostly behind the scenes to build what it calls the Yahoo Open Strategy, but now the strategy's changes will become evident to U.S. users of some of Yahoo's main properties such as Yahoo Mail, My Yahoo, and Yahoo's music and TV sites. In addition, the company will begin previewing a new Yahoo Toolbar later this week.
John Kremer, vice president of Yahoo Mail
(Credit: Stephen Shankland/CNET News)"We wanted to establish a social dimension," Ash Patel, executive vice president of Yahoo's audience products division, said of the Yahoo Open Strategy goals. And to attract programmers who can build applications on Yahoo properties, "We wanted to engage with the developer community and to open up the power of Yahoo's products and platforms."
Yahoo Mail, which according to ComScore has about 275 million active users each month, gets some significant changes, with more to come. First is a new welcome page that now spotlights messages from people in a person's Yahoo social network and invitations from others to join their networks. And the in-box page now includes a new "from connections" button that shows e-mail only from those social connections.
Second is the arrival of online applications tied to Yahoo Mail. One inaugural program from Xoopit lets you view all the photos in your e-mail archive, even expanding links to online galleries. Another lets you convert an e-mail message into a WordPress blog post in two clicks.
"The opening of the mail platform is a huge benefit to users in terms of the additional forms of sharing and communication we can build in and to the developers who can build applications," said John Kremer, vice president of Yahoo Mail, speaking to reporters at a launch event here.
More mail changes are coming, he said. Among them will be birthday reminders and the ability to exchange large files, Kremer said.
The new mail abilities require a the cooperation of Yahoo users' contacts: they must agree to be listed as your contact before they can become a part of Yahoo social activities. That's because of privacy considerations, Kremer said. For example, the right-hand side of the new Yahoo Mail welcome page also shows contacts' activity such as photos posted, movies recommended, or applications added, and that's information those people might not want to share with just anyone.
Yahoo Mail's new welcome page spotlights activity from a person's social connections. (Click to enlarge.)
(Credit: Yahoo)
Leapfrogging the Joneses
It's not all fun and games. Building use of Yahoo into members' social lives and letting them use applications housed on Yahoo sites means more advertising for Yahoo. That was important earlier this year when the company was stagnating financially, but it's even more important now that the recession has put extreme pressure on the ad market. And Patel believes the ads that can be delivered with the social context--for example clicking on the Yahoo Music page for an album a friend just rated highly--will provide valuable context for advertisers.
"Targeted (ad) inventory sells better than untargeted inventory," Patel said.
The Yahoo Open Strategy theoretically could help Yahoo not just keep up with the Joneses, but leapfrog them. Although Yahoo capitalized on the first generation of online social activity, e-mail and instant messaging, it lagged rivals such as Facebook when it comes to letting people build online communities of friends and business contacts. Yahoo's new strategy, though, is tuned to its own assets.
Google has got a powerful search engine, but its online community is nascent compared to Yahoo's. Facebook and MySpace have got social ties, but not Yahoo's breadth of finance, sports, entertainment, news, and communications. Yahoo Open Strategy is a recipe not easily reproduced in full by Yahoo competitors.
The hard part will be bringing the transformation to fruition fast enough.
For the Yahoo Open Strategy to pay off, the company must encourage its members to register new profiles and to link their friends into their social network. And it will have to coax a lot of programmers to build good applications then coax Yahoo members to activate them. All this takes time, and Yahoo, with Microsoft and Google breathing down its neck, doesn't have the luxury of time.
Getting people to sign up for yet another social service--Yahoo strenuously objects to calling its work just another social network--is another hurdle.
"There is going to be some fatigue on that process," Kremer said of people getting inundated with a new round of online service invitations. "It may slow down the virality of what we're doing."
But the company believes it will spread because people will find it useful. And unlike some services, Yahoo hopes people only set up their service with a small number of important contacts rather than compete for the biggest networks.
"I don't want my users to sign up for 500 connections," Kremer said. "I want this to be for the tight inner circle--those five or ten or fifteen people they scan for" when checking their in-box.
Yahoo Mail is getting a Flickr application that lets people upload photos from the e-mail application. (Click to enlarge.)
(Credit: Yahoo)
Other changes
The Yahoo Mail change is one of a host announced Monday. Among others:
• Yahoo also announced changes to its customizable home page, My Yahoo, that lets people add applications and customize the page's appearance. For example, Yahoo showed a wine-themed page with its own background and content.
• A new toolbar for Web browsers also gets drop-down interactivity that can show what a person's contacts are doing, what e-mail has been received, and other information. A preview version of the toolbar will be available later this week for download.
• Yahoo's media properties can spotlight contacts' activities, such as when they assign a five-star ranking to a particular song. "Our media properties monetize really well," Patel said.
By now, most of us are used to the ads we see in our Web-based e-mail . But if you are paying for the e-mail service, those ads might be extra annoying.
At least one California man thinks so, enough to sue AOL.
Frank Cecchini claims in his lawsuit, filed in federal court in Los Angeles, that he shouldn't have to see any of the "intrusive and misleading" ads that appear as text in the e-mails because he pays $25.90 a month for his service, according to a MediaPost article.
An AOL spokeswoman said the company does not comment on pending litigation. However, she said AOL subscribers can opt out of receiving the ads and the company tells anyone who complains about the ads exactly how to do it.
The lawsuit seeks class-action status and more than $5 million in damages. It alleges fraud, unjust enrichment, and California business code violations.
AOL has been offering free e-mail for the past two years but still sells dial-up subscriptions that include e-mail and other services.
With the stock market tumbling in what could be a significant downturn, companies will no doubt look for ways to cut costs and save cash.
Outsourcing infrastructure operations could be one way to do that, says Timothy Eades, chief executive of Everyone.net, which provides hosted archiving and synchronization services for small and medium-size businesses. Specifically, paying a monthly subscription for someone else to handle e-mail archiving and other necessary infrastructure operations rather than doing them in-house could be a solution, he argues.
In preparation for the downturn companies will likely restructure their capital expenditures and migrate more to software-as-a-service to cut costs, Eades predicted.
Maybe. And maybe not. One of the first things to go when IT spending gets tight is anything new so it remains to be seen how software services will be impacted.
Everyone.net unveiled on Tuesday a suite of services dubbed "one_business," which includes e-mail and file storage, synchronization of calendar and contact list with Microsoft Outlook and mobile devices.
The services come in different packages ranging from $5 to $14 per user per month and include e-mail and phone support.
"We are a (Microsoft) Exchange replacement but you can actually pick up the phone" to get customer support, Eades said.
Google offers its own hosted e-mail archiving and recently announced a 10-year service for $45 per user per year.
