SEOmoz Whiteboard Friday – Ignore the Tail at Your Peril! from Scott Willoughby on Vimeo.

SEOmoz Whiteboard Friday – Ignore the Tail at Your Peril!

In this excellent blog post by 37 signals, “The bar set in our industry is too low“, talks about the idea of offering for free and then “hoping and praying” the company will make money later.  People in the Web industry have touted, “success based upon future results” is not sustainable unless there is a real business model behind it.  Too many times I’ve heard at industry events: We can build a huge audience now and we’ll figure out how to make money later.

The first wave of Facebook apps grew huge audiences but saw their online advertising rates erode due to the fact there wasn’t a lot of intent or enough relevance for advertisers built into the apps being built.  The group of savvy second wave of FB app builders borrowed the model of paid virtual goods, popular in Asia, and have built very solid business models.  In the meantime first generation FB app companies such as Slide and RockYou, who have seen sky high valuations, have seen their growth stall since it became impossible to reach the lofty expectations set.

Another example, FreeConferenceCall.com offers simply to host free conference calls.  We use this service in my line of business every day.  Their website’s FAQ states in response to the question, “What’s the catch?”:  “There is no catch! There are no advertisements to listen to, no quality issues, no hidden fees, no sales pitches, no contracts, no purchases required, no privacy problems, no limitations or restrictions, and no surprises.”  I realize they have the ability to upsell more advanced services such as larger packages or voicemail systems but surely the number of people partaking in the free conference calls dwarf any paying customers.  It seems to me their loss leader has more value than their “for pay” services.

Hope and pray is not a new business model solution.

I did a quick query on Quantcast to see which of these sites have the most amount of traffic:

RT Search Engine          Monthly Users
search.twitter.com               688.3K
friendfeed.com                   202.8K
tweetmeme.com                    202.1K
oneriot.com                       28.7K
scoopler.com            not enough data
topsy.com               not enough data
almost.at               not enough data
dailyrt.com             not enough data
twazzup.com             not enough data
collecta.com              just launched

Google’s Larry Page has stated publicly this is an area they are weak in currently, though I’ve been noticing more and more inclusion of real time search results lately.

Also check out a review from Ad Age… here.

With Google making some rumbling about real time search this is going to get really interesting.  Much like SEO is used to drive traffic to web 1.0 websites, social bookmarking and social discovery was used to drive traffic to websites in Web 2.0.  Web 3.0 may be where we see another source of traffic generation through different real time feeds and streams.  An indication of this is Mark Cuban’s recent blog post about how he is getting more and more traffic from twitter and facebook than Google.  In his case it is definitely Streams (Facebook + Twitter) > SEO (Google).

Very intent to see where this leads us.

“…substituting effort for ability turns out to be a winning formula for underdogs in all walks of life…”

Throw out the conventional.  If you are building a startup you have to be willing to go above and beyond what is conventional and disrupt your competition.

A great read.  Check it out here.

Some interesting trends from the report:

• Emergence of Ad Exchanges
• Social Influence Marketing
• Mobile marketing
• and much more…

Well worth the read.

Online advertising is still in its infancy, where the amount of time spent on the Internet is roughly equal to the amount of time spent by the average American watching TV.  However, the amount of money being spent on the Internet is roughly a third of TV.

To bridge the gulf the online advertising spend, the challenge for marketers is to innovate and really bring out what is special and unique about this medium while making it scalable in its reach to touch millions of people who utilize the web.  The company that unlock this potential will be huge.

The industry is still young.  Lots of potential and much opportunity.

• Huge consumer audience – check
• Large advertising base/reach – check
• Number of branded websites – check
• Recognizable Brand Name – check

In short, Yahoo! has all the assets stacked in their favor to succeed. In the end it really boils down to:

Execution, Execution, Execution!

That’s about it. The only “sacred cow” that needs to be sacrificed by Yahoo! is the slow moving, stagnant, execution killing company culture.

Yahoo! reminds me of the classic movie Rocky 3 where Rocky Balboa has become complacent surrounded by yes men. Rocky’s trainer, Mickey, dies and can no longer protect Rocky. The fierce Clubber Lang (Google, Mr. T in the Movie) beats the living crap out of Rocky. Rocky, through the help of Apollo Creed (played by Steve Jobs), regains his confidence and the “Eye of the Tiger” to learn to fight on his own two feet.

Reinventing (or rediscovering) the company’s killer instinct (Eye of the Tiger) begins and ends with the people @ Yahoo! The way to get it back is to go back to the beginning and remember who Yahoo! really is, focus on the consumer, and (re)learn how to WIN.

Update: It is estimated by Mashable.com that Blue Lithium’s revenue for 2006 was $100M+, further evidence that this was a good deal for Yahoo!

Coverage from around the Web:

• Mashable: AD FRENZY: Yahoo Acquires BlueLithium for $300 Million Cash – Estimated Revenues of $100M+ in 2006
• TechCrunch: Yahoo! Acquires Ad Network BlueLithium
• VentureBeat: Yahoo to acquire advertising company, BlueLithium, for $300M – Lists Blue Lithium as #5 in reach with 66%