Google Feeling the Pinch?

Today, Google is set to post its Q1 figures and experts are predicting a sequential drop in revenue for the first time in Google’s history as a public company. And with 3 rounds of redundancies already in the first quarter of 2009, some cracks are starting to show in Google’s bullet proof exterior. The reality of the situation is that Google will still post huge profits and huge revenue and its biggest concern is appeasing investors and maintaining share price, there isn’t much danger of them going out of business any time soon. It does show however the severity of the situation however that it is hitting even the biggest and most profitable of Internet companies.

Ebay Going Back to its Core

Another Internet giant, Ebay, has announced measures this week which suggest they too, are conscious more difficult times may be ahead and they need to focus on their core business. After selling social content discovery website Stumble Upon back to its founders they have also announced they are planning to take Skype public in 2010 due to a realisation of its “limited synergies with Ebay and Paypal”. Ebay bought Stumble Upon just 2 years ago and Skype in 2008, and despite both posting impressive growth Ebay has since decided neither is a close enough fit to their core business. Both these purchases are evidence of a more frivolous time when large Internet companies had deeper pockets and could make $75M purchases (the price paid for Stumble Upon) without worrying too much about how it would fit in with their business. Now the honeymoon period is over, companies are looking harder at their businesses and spotting the need to streamline and maintain a focus on core activities.

Time to Rip up the Script

With Internet giants such as these cutting back, what chance is there for the smaller business? How does the small website owner survive in difficult times? I think it has been proven in the past that those with a solid business model who react to the changing market quickly, will survive. Sure things will become more difficult and margins will be squeezed, but those who remain agile should be able to ride the storm. Companies need to rip up the playbook of 2007-2008 and make sure their strategy for 2009 is in fitting with what the market demands. Make sure you are meeting a market demand and providing something more, or significantly better than, your competition. Be prepared to change in line with the market, stay agile, and keep in touch with customer demands. Hopefully then, you should be able to survive the difficult times and possibly even come out the other side in a stronger position. There will be casualties, no doubt about it, but for the companies which can stay strong and adapt, there could also be huge opportunities.

This announcement worries me, as one of the key beauties of eBay in my opinion is the ability to find a bargain and outbid an opponent at the last minute!  I can see why eBay have done it as they will invariably make more money on a higher cost, fix priced listing but is this at the detriment of what has made eBay so successful to date?   Only time will tell.

The top ten search terms (as tracked by hitwise) for the 4 weeks ending 9/6/2007 are:

1. bebo 1.14% share
2. ebay 1.11% share
3. youtube 0.52% share
4. myspace 0.37% share
5. argos 0.24% share
6. facebook 0.23% share
7. amazon 0.22% share
8. bbc 0.17% share
9. you tube 0.16% share
10. bbc weather 0.15% share

Ok, so it does go a little deeper than that. Ebay are refusing to allow Google Checkout to become used as a payment method on its auction site. According to Ebay their concerns relate to “fraud, security and related concerns” but undoubtedly the underlying fact is that they want to keep Paypal as the monopoly holder for Ebay transactions. Google originally planned the party as a form of protest but have since cancelled after discussions with Ebay officials.

Ebay claim their removal of paid search listings is a mere “experiment” and a process fo assessing the most effective allocation of marketing budget and it wil be interesting what the results of this “experiement” are. With Google accounting for approx. 10% of Ebays traffic and Ebay spending a reported $26 million monthly on Adwords it will be interesting to see who needs who the most!

Myspace founder Chris DeWolfe today hinted (below) at a possible partnerhsip with Ebay as a way to allow its users to trade between themselves. This ties in with the reason social networking is such a growing phenomenon, user interaction. As I have mentioned in the past the key to monetising social networking is to not encroach on the basic model. through genrating a marketplace between users, through ebay or otherwise, and taking a percentage for transactions myspace will be able to earn a large chunk of cash without devalueing their offering. Expect to see other schemes like this appearing soon!

MySpace founder hints at future eBay partnershipby
Charlie McCathie Brand Republic 18-Jun-07, 14:10 LONDON -

Chris DeWolfe, founder of MySpace, has revealed that the site will soon offer user-generated e-commerce transactions through partnerships with online retailers, possibly including the internet auction site eBay. The move comes after several other commercial developments, such as the addition of a classifieds section and the option to buy and sell music via the site. MySpace uses banner advertising and click-throughs to brand profiles to generate revenue, amassing £12.6m each year, and the introduction of e-commerce is likely to generate even more profit. The social networking site is trying fend off the competition from Facebook, which had its traffic grow by 89% last year, compared with 34% growth at MySpace.DeWolfe said: “We will at some point offer user generated e-commerce transactions. So if you’re on your site and you have a line of T-shirts you have designed and you want to sell them to your friends, we want to be able to provide you with the tools you need to do that.”So we could partner certainly with someone like eBay to do that. We haven’t decided yet but it would be probably a good bet that someone like eBay could be a good partner.”DeWolfe also said that another burgeoning market being considered is online video advertising. He suggested that MySpace is currently muting the idea of introducing this element to the site, as it would “definitely be a huge revenue stream”.