Wednesday, October 18, 2006

CNET's Traffic Decline: An Alternate Explanation

There has been a lot of buzz recently about how CNET's traffic numbers are way down year-over-year. By some reports, CNET's traffic has been cut in half in just the last year. By any measure that's a big decline and certainly CNET should be worried, but I'm not yet writing off a company who has stuck around since the earliest days of the web.

CNET's traffic decline has been widely attributed to the upsurge of tech-related bloggers, though no one has given any evidence whatsoever that this is the true cause. Yes, there are more blogs than ever, and yes CNET's traffic has declined, but this doesn't mean one caused the other.

In fact, although CNET's page views have declined in the last year, I have not seen any data that suggests unique users have declined. So the same number of users are viewing fewer pages. Is this cause for worry? Probably not and here's why: CNET is getting more efficient at serving users.

What has been widely overlooked is that CNET's pages have been redesigned, for the better, over the last year. Each of CNET's product reviews - the heart of CNET's business - are now on one page rather than spread over 4 or 5 pages. So the user who goes to CNET researching digital cameras may have been generating 4 or 5 pages views last year, but is now generating one.

Here's why this is actually a good thing:
  • CNET holds on to the user. Keeping all the product review info on one page makes it less likely to lose the user along the way and more likely that a user will click to buy the product from one of the merchant's who advertises on CNET. CNET is a sales lead generating machine and making it faster and easier for users to click through to merchants is only a good thing.
  • A decline in page views does not necessarily mean a decline in revenue. Like almost all online media companies, CNET sells only a fraction of its overall page views at high CPM rates. The rest is excess inventory which is monetized by ad networks and other remnant ads with much, much lower CPMs. I don't know what CNET's advertising sell out rate is, but I would be surprised if it were more than 50% for all their sites combined. So lopping off 50% of CNET's page views only cuts out the remnant ads - not the high CPMs, for which CNET gets some of the highest rates in the industry.
CNET reports quarterly results on October 23. This will be a good opportunity to see how much, if any, declining page views have had on the company's top line. CNET has a lot of challenges ahead of it, but I think it's premature to write off the company's prospects on just one piece of potentially misleading data like page views.

Full disclosure: I am long on CNET. I used to work at CNET several years ago, but have no inside knowledge of the company at this point.

Monday, October 16, 2006

Selling art on the Internet

I come out of both the Internet and art worlds. In '99 I sold my Internet company to CNET. After that I opened an art gallery, first in San Francisco and then in New York.

For quite awhile I've been thinking about why fine art has not taken off as a product category on the Internet. I should specify that by "art" I am referring specifically to contemporary art in a variety of mediums: painting, drawing, sculpture, photography, video, installation, etc., and not to posters or other mass-produced art-related products.

On the face of it, art seems like an ideal candidate for selling via the web:
  • art is a visual medium, making it easy to be displayed on a screen
  • buying art requires a large amount of background information in order to properly value and appreciate it, for which the web is well suited
  • maintaining a retail space is often the single largest cost for a gallery. Certainly galleries would be economically motivated to move their operations out of a brick and morter retail context.
However, after being in the business of selling art (or, more specifically, trying to sell art) for three years, I now have some insights on why art doesn't sell on the Internet:
  • buying art is a social process. Most collectors buy art not for purely aesthetic reasons, but rather for social ones: which artist is "hot"? which artwork did their friend buy? which piece of art will provide the most prestige or avant-garde edge? This may sound cynical, but for many of the biggest collectors there is definitely some social component to why they buy art, and this can't be replicated over the Internet.
  • a gallery provides a necessary context that the Internet cannot. The way a gallery looks, where it is located, what press it has received - all these play into how much a piece of art that the gallery exhibits is valued. With so few widely accepted standards for judging and valuing contemporary art, the physical presence of the gallery becomes paramount. This is why so many dealers go to so much trouble to maintain an aura of exclusivity - it's the only way to make buyers perceive the art as being valuable.
So the very strengths of the Internet - transparency, full information, levelling of the playing field - are what works against it when attempting to sell art.

We'll see if anyone figures out how to bridge this gap and make the Internet a viable way to sell art.

GigaOM picks up on Google/YouTube analysis

GigaOM today published an analysis of Google's acquisition of YouTube that concurs with the article posted here last Thursday, namely that the increase in Google's stock price following announcement of the sale basically paid for the acquisition. I agree. :-)