Advertising Rules the Web

October 24, 2007

Well, I’ve been blog-tied (that’s like “hog-tied”) because I just have not known what to write about on this blog for the last few weeks. Just when one story seemed more important than Darwinism, along came another, and before I knew it I was struck speechless (much to the pleasure of the creationists).

But one theme seems to keep creeping up on me, relentlessly I’d say, and that theme is what’s happening with advertising on the Web. In a phrase, it’s about the only important development in play right now.

I, perhaps more than some, prefer to perceive the Web as a multi-headed beast, and relegate advertising to but one of its heads. But at this point in Web history, advertising appears to be the thing that matters (if we ignore the ad-laden Web 2.0 social networking sites).

More and more traditional advertisers are either turning the bulk of their budgets to the Web, or all of their budgets to the Web, or making a last brave statement as to why they are not doing so. Each is quotable.

I’m in the midst of a major revision of my Industry section on Advertising. Thus far I’ve added (to me) some fascinating details on who are the major spenders on Web ads (according to NeilsenNetratings). They aren’t your usual suspects.

Let the story unfold.

More on Adobe & Microsoft

October 3, 2007

As I wrote in my blog yesterday,  The Adobe War Against Microsoft,  “I continue to marvel at Adobe’s ‘Mouse That Roared’ approach to the battle: its market cap is slightly less than 10% of Microsoft’s.” I also referred to the “battle between the emerging Adobe and the great Goliath.”

Of course market capitalization, $26 billion for Adobe versus $280 billion for Microsoft, tells only a small part of the story. Adobe’s stock is on a tear. Its price has risen more than 350% in the past five years, against the Dow Jones software industry average of 84%, and against Microsoft’s shall we say more modest 29%.

But other financial indicators reveal the two companies performing quite competitively. While Adobe enjoys more than 13% higher gross margins than Microsoft, its pretax margins differ by less than half of one percent. Adobe has seen some 3.5% higher revenue growth than Microsoft in the last five years, but Microsoft’s earnings per share are nearly 10% higher than Adobe’s. Microsoft has significantly higher revenue per employee and income per employee, which few would suspect considering that sales and income per employee traditionally tend to favor the smaller (though mature) players.

Nonetheless, the blogosphere is rife with criticism of Microsoft (as it so often is). Dave Winer’s October 1st posting is titled “The end of the road for Office?” He’s pretty upset, accusing Microsoft of deliberating avoiding enabling writing capabilities in Internet Explorer to protect its Word (and Office) franchise. If “Microsoft had embraced the web, and with it the shift in their product line and economics, in 1995, we’d have a much richer writing environment today,” he writes. “Blogging would have happened sooner, in a bigger way. It’s hard to imagine how much the sins of Microsoft cost all of us.”

He caps his lament with: “I won’t shed a tear for Office. Good riddance, I say.”

On ZDNet Phil Wainewright paints a more nuanced picture of the conflict, and also provides some excellent insight into the features of Buzzword, the application that Adobe acquired when it bought Virtual Ubiquity.

Robert Scoble, always a good read, titles his blog entry “Adobe joins rest of industry in going for Microsoft’s throat.” He comments however: “Now, is Microsoft in trouble? No. Office is going to sell well for quite a few years still. But there is blood in the water.”

How much blood is in the water remains to be analyzed by CSI’s forensic team.

As noted in Monday’s Wall Street Journal report on the transaction, the trend towards online use of Microsoft’s traditional Office-style tools “has yet to fully take off, said Michael Mace, a principal at technology-consulting firm Rubicon Consulting Inc. In a survey of more than 2,000 adults who have a computer at home, conducted this past summer, Rubicon found that while 34% of computer owners have used Web-based email services and 20% have played games online, Web-based services for word processing and spreadsheets have been used by just 5% and 3% of computer users, respectively.

But there’s clearly a change afoot. How it plays out will make excellent sport for all technology watchers.

The Adobe War Against Microsoft

October 2, 2007

If anyone was wondering whether or not Adobe has declared war against the (ostensibly ailing) Microsoft, the evidence became unmistakable on October 1.

I continue to marvel at Adobe’s “Mouse That Roared” approach to the battle: its market cap is slightly less than 10% of Microsoft’s. But the war has certainly begun.

We can argue about the start date. I don’t think we need to trace it back to early eBook days. I see the beginning as the battle for PDF. In a very confused set of corporate interactions, Adobe refused to allow Microsoft to have an Adobe-endorsed save-to-PDF feature in Vista and Office 2007, forcing Microsoft to make save-to-PDF a separate downloadable “feature.” At the time it seemed to me Adobe was merely being spiteful (although I recognized the beginning of a battle). Microsoft created a separate download for save to PDF or to XPS (its supposed PDF killer), available both for XP and Vista. Battle over?

Hardly.

Adobe soon announced PDF Mars, a version of PDF with some remarkable similarities to XPS. Round two.

Now we’re faced with round three, where Adobe has purchased a Web-enabled word-processing application. By some otherworldly coincidence, on the same day as this announcement (October 1), Microsoft announced its own Web-enabled variation on the Office suite.

Microsoft is perceived by its detractors in retrenched mode, a bit like Napoleon fleeing Moscow. Are we to believe that Microsoft has no troops still ready to fight? I doubt that. But it’s an interesting battle between the emerging Adobe and the great Goliath.