Netly News

Are we moving to a post-blog world?

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After months of speculation, my old buddy John Battelle confirmed today that his ad-network-for-blogs company, Federated Media Publishing, got a $50 million investment. The Sausalito, CA.-based startup sells ads on behalf of nearly 150 blogs, including such heavy hitters as BoingBoing, TechCrunch, Silicon Alley Insider and GigaOm. This C round of funding reportedly gives FM a $200 million valuation. Way to go, John!

Most people outside of the Bay Area don't realize how big a deal getting funding is these days. But winter is coming—the recession—and startups of a certain maturity are looking to put on a little fat to survive. From the largest to the smallest, this generation of Web 2.0 companies is hunting for cash. I've had conversations with bosses of places that are really profitable now, and still they're trying to lay in some dough...

The end is near

It’s not exactly news that Web has slowly been killing off traditional media. Over the past decade, the music, publishing and video-broadcast industries have been scrambling to find a perch in a new world where consumers expect to get everything for free online.

But here’s an alarming thought for those of us who still draw paychecks from traditional media companies (and hope to send all three kids to college some day) : The end could come much sooner than anyone thinks.

That’s the theory anyway, of a pal I had dinner with last week in Palo Alto He pointed out what should have been obvious to me: That Web 2.0 companies are doing to Web 1.0 companies what Web 1.0 companies are doing to traditional media companies. According to my friend: Think of traditional media as kind of the top layer. The Web came along and settled in just beneath it, where it began to erode old media’s foundations—subscription, pay for play, traditional advertising, etc. But during the last five years, with the rise of the social web and Web 2.0 companies, many of the companies who formed the vanguard of the Web, are themselves at risk. And if they disintegrate, the old media companies that so tenuously rest upon them, could collapse.

Yahoo (YHOO) is a great example, my friend said. Aside from its acquisition of Flickr, in 2005, Yahoo hasn’t adjusted particularly well to the social web. By contrast, everything about Google (GOOG) —from its advertising model to its creation of the OpenSocial alliance, pretty much defines the social web.

It’s telling, actually, that Facebook isn’t gunning for Google so much as it is trying to take out Yahoo, whose search engine has long been sputtering and wheezing. With it’s foray into social ads last week, Facebook may well have jumped the shark, as some are suggesting. But if social ads work and Zuck & Co. harness the power of friend-to-friend recommendation—you can bet that online advertising money will flow like the Nile into Facebook. Why would anyone continue to advertise on Yahoo?

And that’s where the end comes sooner for traditional media companies, who for years have been relying on traffic deals with Yahoo. If the venerable Web 1.0 company collapses, then the old media companies that rest on its seemingly young shoulders, must, too. Unless of course, they start embracing the social web.

Rethinking Online Ads 2.0

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Henry Blodget, who's been truly brilliant at Silicon Alley Insider, posts intelligently about Nielsen's report Wednesday that online advertising fell from August to September.

We continue to believe that we may be in the first stages of a cyclical downturn for advertising and the Internet sector--one that could affect not only start-ups and second-tier players but majors like Google (GOOG), Yahoo (YHOO), AOL, et al.  Such downturns do not begin suddenly, and they are not instantly obvious (except in hindsight).

I see you and raise you one, Henry: I think this could be a particularly nasty downturn in online advertising—very similar to the first time online ads crashed at the high middle of the last bubble. I also think this is the best opportunity for social networks like Facebook because if someone can figure out how to make ads work in that environment, it's game over. Hence the Facebook mania these days. But I'm getting ahead of myself...