Business

Changes to business digitisation brings

Carphone Warehouse Scoops Up AOL UK
Carphone Warehouse have jumped into the big boy broadband rankings with its acquisition of the UK’s third-largest Internet provider, AOL UK.
Shelling out a cool £370m for the operation, Carphone Warehouse will inherit AOL’s 2.1 million UK customers, of which 600,000 are on dial-up, with the remaining 1.5 million using broadband connections. It’s four years ago that AOL announced their broadband pricing.
Under the deal, AOL will be keeping its (somewhat inappropriate) name – short for ‘America On Line’ – with the new owners retaining the US firm’s pricing policies.
(When AOL first hit the shores of Blighty, we did wonder if they’d change their name for the UK market, but we figured that UK On Line (UOL) sounds like someone being sick, and Britain On Line (BOL) would just invite the addition of ‘LOCKS.’)
Retaining AOL UK’s management and infrastructure, Carphone Warehouse said that it’s funding the acquisition of its shiny new toy through an extension of its existing debt facilities.
Although AOL UK is being sold by its American parent company Time Warner, the deal will see AOL continuing to provide co-branded portal, content and other audience services, as well as taking care of online advertising sales through a revenue-sharing agreement.
Carphone Warehouse head honcho Charles Dunstone announced that the deal was “transformational for our broadband business,” adding that they had “accelerated their customer service recruitment plans and incurred additional wholesale broadband costs.”
“The joint development of AOL’s already successful audience platform will bring us new advertising and content revenues in a proven and low risk manner,” he added.
Ol’Charlie boy’s been getting in the neck recently, after Carphone Warehouse’s TalkTalk service was the subject of a damning expose on the BBC’s Watchdog programme.
The show had been inundated with complaints after the company failed to deliver on its promise on ‘free’ broadband, and Dunstone has claimed that the strong demand has cost the company £20m more than originally expected.
The AOL deal sees the Carphone Warehouse crew slip into third place in the UK league table of residential Internet providers, with NTL the current leaders with 2.9 million home customers, followed by BT on 2.2 million.
Carphone Warehouse
AOL UK
Time Warner
11 October, 2006
Yes, Google Buying YouTube: YouGleTube? GoogleTube?
As we\\’d previously as conjecture, Google has announced that it will be buying YouTube. The price is slightly above the rumours at $1.65Bn (€1.31Bn, £0.88Bn). It\\’s an all stock deal, with no money changing hands.
YouTube has been a fast-growing phenomenon that only started in February 2005, a mere 19 months ago.
Formed by some of the people who were in another similarly sale-price company, PayPal, which went for $1.5Bn to eBay, including Roelof Botha the former CFO of PayPal, who fortunately became a partner at VC company, Sequoia Capital partner. The other two were Chad Hurley and Steve Chen. Not much has been heard about them, so it\\’s worthwhile watching the Charlie Rose interview with them.
History (short)
In the early days, many people couldn\\’t understand how they would survive long-term given the speed that they were burning through money.
Back in November last year, long before their explosion to playing 100m videos a day, YouTube was shifting 8 terabytes a day. That kind of bandwidth is very expensive.
The founders have a fair few quid in their pockets after the PayPal sale, but in November 2005 they raised $3.5m from Sequoia Capital, which was followed up in April 2006 by further funding of $8m was also supplied by Sequoia.
See how Chad and Steve break the news to their users.
Given the sale price (don\\’t forget $1.65Bn), the return for the investors is tremendous. As the company is closely-held, ie it\\’s shares aren\\’t publicly available, we don\\’t know how much was put in by the funders, but taken at face value, the $13.5m that was put in by Sequoia returned upto 100 times their investment. Not bad for 19 months.
Copyright issues
There\\’s been much controversy within media companies as they\\’ve objected to their content being uploaded to YouTube. Given that video has been uploaded at the rate of 65,000 a day, the only way that YouTube has been able to stay on top of new copyrighted material is by removing it when complaints have objected.
Google Video has been less concerned with similar pieces of video, probably due to their financial muscle and less need to feel threatened by the media companies legal departments. Expect a long list of deals like Warner Music\\’s
Of course, most of the material on YouTube is people making their own videos and uploading it, a few of which have become stars on the service and a couple mega-stars being signed by Hollywood agents.
For the latest (brief) views on the deal of Hurley and Chen have just hit Reuters.
10 October, 2006
DiddyTV: YouTube Gains A Paying Partner
In true online video blog style, the announcement was made by Mr Diddy (not one of Ken Dodd’s little friends), but differing from the norm, he’s filmed walking in to a Burger King and happens to drop their catch phrase a couple of times while order his burger to “have it his way”.
Interestingly Mr Diddy says that he’s going to “Buy a channel on YouTube,” so we’re assuming that there’s money involved, especially as Mr Diddy refers to “The Contract” in his video piece.
Also of note, is that Mr Diddy has his own URL on YouTube – YouTube.com/diddyTV – certainly the first that we’ve seen that uses such a short form.
There’s also a great spoof of Mr Diddy’s video by Lisa Nova.
Details of the deal between Mr Diddy and Burger King haven’t been disclosed, but we’d imagine that it’s going to be worth more that a couple of orders at their stores, even if his entourage are ordering large.
Of course, this big step up by Mr Diddy has absolutely nothing to do with the new album that he’s releasing this month and is cunningly blip-cut into his video pieces.
We attribute much of Mr Diddy’s knowledge and acceptance of YouTube down to Ryan Leslie, who is part of Mr Diddy’s posse (which we believe is the common parlance). Ryan has been using MySpace and YouTube for a long time to promote himself, his label Next Selection (for life) and his artists like Cassie. We’ve spoken about his work in many consultancy sessions that we’ve done with media companies – and frankly have great regard for the way he’s used the medium, such as his idea to get people to post their own lip-sync video on YouTube.
The absolute proof of this is Mr Diddy’s message to Ryan saying that he’d “finally talked him into it,” asking him to send over some of his friends to Mr Diddy’s Myspace. To show how these things roll, you’ll note that Mr Diddy doesn’t have Ryan in his Top 16 friends on his MySpace. You may also note that Mr Diddy has had over 10m plays of his tracks – some 4m of which for Come To Me, that was produced by Ryan Leslie. Where’s the friendship?
Google interested in buying YouTube?
Over the weekend there has been much chatter about YouTube being bought by Google, after it was rumoured by the WSJ. The figure banded around was $1.6Bn.
This would be the most expensive purchase that Google has made. Up until now they’ve been very smart and picked up other compaies at early stages for relative small change. The rumored figure for Blogger was $30m.
Google Video hasn’t been the boon that they had hoped it was going to be. Buying YouTube will take Google into the forefront of serving video online and with the $10Bn they’ve got in the bank, not an unfeasible amount for them to pay for it. When put into historical context, it appears a pretty cheap price – don’t forget that Yahoo paid $7.5Bn for broadcast.com back in the Web 1.0 days.
9 October, 2006
Ed Richards Gets Ofcom CEO Job
Ofcom has announced that Ed Richards is taking over the uber-communications agency CEO reigns, effective today.
As we back in January), the then current CEO Stephen Carter was leaving.
Richards name has been in the frame for a long time. He’s politically very well connected, given that he was previously the UK Prime Minister’s Senior Policy Advisor on media matters.
Watchers of all things Ofcom, our good buddies OfcomWatch see the challenges for Richards to be
* Steering Ofcom through its day-to-day implementation of the various strategic reviews. This means real bread-and-butter regulatory work like conducting radio spectrum auctions and supervising BT-Openreach as it starts to deliver on its Sept 2005 undertakings. Gone – for the most part – are the days of strategic thinking combined with predictive statements about the future.
* Ensuring that Ofcom’s voice is heard on key issues. Ofcom to its credit, tend to think and act in an evidence-based manner, but are surrounded by a regulatory environment which is highly politicised. This has been particularly true in both the media and new media, an area where Stephen Carter’s Ofcom often produced good thinking, but was unable to translate that into actual policy (eg, BBC charter review). Richards comes from the political world, and this might benefit Ofcom in that respect.
* Being a champion of ‘better regulation’ in dealing with the European Commission, health advocates, and other populist causes.
Given they spend all of their time studying Ofcom, who are we to argue of them.
5 October, 2006
Catch-A-Perv: IM Paedos Beware
Two UK lads, Gary and Ash, have taken upon themselves to go into Internet chats, posing as a 13 year old girl and converse with various men who happened across them.
Sadly many of the men who chat to them aren’t asking them about their interest in sewing patterns, but do in fact try to engage with them in sexual discussions.
Gary and Ash keep up the 13 year old act, while recording the conversations, they then encourage the (normally) older men to turn on their Web cams, which they also record.
The old boy at the other end of the connection then begs for them to switch on the “13 year old’s” Webcam. Much to their surprise, they see two lads who then inform them that they’ll be featuring on the Catch-A-Perv Website.
While it looks clear that they are exposing people who shouldn’t be discussing such things with those so young, Gary and Ash have given themselves a route out of possible legal problems by stating that “The website does not claim any persons shown on the site are paedophiles – there is no reference that suggests this – it is clear however, that the behaviour demonstrated is unacceptable.”
It’s a pretty distasteful read, so it’s lightened by reading the front page, where perhaps by mistake, or in joking way, they say they’re “raising awareness of the issue in hand.”
via BBC Radio 4: You and Yours
Catch-A-Perv
3 October, 2006
UK Internet Gambling Firms Hit By US Online Betting Ban
Millions of game-toughened poker faces are showing signs of impending blubbering as the US Congress unexpectedly passed anti-online gambling laws last week.
Moreover, the new laws are set to hit Britain’s Internet gambling companies hard, with many of the US big players being based in the UK.
Shares of internet gambling sites like PartyGaming, Sportingbet and 888 plummeted as the new legislation made it unlawful for credit-card companies to collect payments for transactions with online-gaming sites.
The laws – contained in The Safe Port Act – are now just a George W. Bush signature away, with the President expected to put pen to paper within the next two weeks.
The new laws will wipe out US revenue for London-based online-gaming companies, with PartyGaming saying that they’d suspend business with US residents as soon as the law takes effect.
For PartyGaming it’s a calamitous blow. With more than half of the company’s revenue coming from US residents, share prices plummeted by 60 per cent, while 888Holdings – who enjoy a similar percentage of US revenue – saw its share price crash 45 per cent.
In a Stock Market announcement, the company said:
“After taking extensive legal advice, the Board of PartyGaming Plc has concluded that the new legislation, if signed into law, will make it practically impossible to provide US residents with access to its real money poker and other real money gaming sites. As a result of this development, the Board of PartyGaming has determined that if the President signs the Act into law, the Company will suspend all real money gaming business with US residents, and such suspension will continue indefinitely, subject to clarification of the interpretation and enforcement of US law and the impact on financial institutions of this and other related legislation.”
888 Holdings has already suspended its US operations, commenting that, “the board will continue to seek clarification of the overall US legal position to determine whether and to what extent if any resumption of participation by US customers is feasible”.
“At present however no assurance can be given that this will be possible,” they added.
Bizarrely, the anti-gambling legislation has been bundled in with The Safe Port Act, which is all about raising $3.4bn to “make ports safe” from evil terrorists by adding security measures like increased goods containers inspections.
PartyGaming Stock Exchange statement
2 October, 2006
BBC Signs MoU With Microsoft: Disaster For Open Media?
The BBC has signed a Memorandum of Understanding with Microsoft. Areas of the potential investigation and collaboration that the non-exclusive agreement includes, covers “search and navigation, distribution, and content enablement” (what ever that means in English).
It was signed in a meeting that sounds like it was designed to massage the egos of Mark Thompson (BBC Chief) and Ashley Highfield (BBC Head of Tech), held with Bill Gates (queue trumpets) at Microsoft’s office in Seattle.
Highfield is quoted as saying “Microsoft is not just a key supplier to the BBC, it is also a key gateway to audiences that the BBC needs to reach through Web services it runs like MSN and Windows Live Messenger, and hardware such as Xbox® and the Windows Media Center.” Apparently trying to balance this, he continued “The BBC needs to work with all players in this space to make sure our programmes and content are enjoyed by the widest possible audience, without always having to come to bbc.co.uk to find it.”
It’s with horror that we read this news. It’s hard to imagine that the BBC will stay format neutral following a deal like this.
Microsoft has been creeping into the BBC’s online media for a long time now. It first came to light when we broke the story near the start of 2004 that the BBC’s interactive media player trial (as it was then) would be using the Microsoft’s media format and DRM. At that point, the story BBC spun, was that they weren’t committed to using Microsoft’s DRM, but each stage of the trial beyond that, did.
The news today doesn’t go a long way to changing our view that it won’t be a permanent feature.
Of course Gates and Highfield shared a stage at Mix06 back in March this year
Quite why the BBC is tying its colours to the Microsoft mast is beyond us, especially as the announcement focused alot on Web 2.0. It’s widely thought that Microsoft has lost the dominant position it used to hold and is struggling to catchup with the developments that have gone on in the Web 2.0 world – expect bloggers to rip this one apart.
A move like this could take the BBC from an organisation held in high regard with the high tech grass roots, to one of ridicule.
BBC Press release
28 September, 2006
Expanded Euro Regulation Repudiation By UK’s OFCOM: TWF
The UK’s broadcasting and telecommunications regulator OFCOM last week made clear its opposition to potential EU regulation. It fears it will straight-jacket the emerging new wave industries aiming to propel high tech growth in the EU zone over the coming years.
Currently regulation of broadcasting in the EU lies within sovereign states but the overriding policy is subject to the famous 1989, Television Without Frontiers Directive which is likely to be updated and widened in 2007. At the time of the drafting of this legislation, TV was considered as a linear broadcasting method of distribution. The danger is that now the bureaucrats have an inkling of what convergence means, they want to manage its development.
OFCOM commissioned the respected Rand Corporation to look at how the proposed changes would affect Europe’s emerging IPTV networks alongside new-fangled mobile multimedia and online games. The findings mirror the concerns of OFCOM.
The report, “Assessing Indirect Impacts of the EC Proposals for Video Regulation” makes a powerful case for the online games industry to be excluded from the new legislation, seeing a risk of the development of fresh gaming, moving to countries unfettered by cumbersome legislation, ie. Outside the EU.
The study also makes clear its’ worries that excessive regulation could mean that countries outside of the EU would benefit from the expected growth in non traditional delivery of multimedia content, before it has established itself in Europe.
The model of broadcast intervention could impact much of the new wave Internet traffic; judging Youtube and Myspace by similar criteria to traditional linear broadcasters
Lobbying is expected to continue with the entrenched traditional media industry hoping to protect dwindling revenues and state players keen to politicize the situation. Some solace can be taken that the UK regulator has at least identified the danger of over regulation.
27 September, 2006
US Web Half-Yearly Advertising Revenue Hits $8bn
U.S. Internet advertising revenue has hit a new record high of nearly $8 billion for first six months of the year, increasing by a money-spinning 37 per cent, according to a new study.
The figures from a report by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers, suggest Internet advertising revenue has continued to surge, despite a recent warning by Yahoo that new media ad spending could be slowing.
Yahoo pointed to weaknesses in two key sectors in marketing – automobile and financial firms – although some analysts think that the claimed slowdown is more about Yahoo’s own business declining and is not symptomatic of an industry-wide trend.
“The latest results reaffirm the Internet’s growing importance for marketers to integrate online advertising into their overall media plans,” commented David Silverman, Partner, Entertainment & Media Practice, PricewaterhouseCoopers.
“While search advertising remains the largest format in terms of revenues, we expect to see new formats like video ads to continue to emerge as advertisers seek to leverage the branding opportunities afforded by the growing installed base of broadband users,” headded.
The IAB/ PricewaterhouseCoopers figures show that Internet advertising revenue totalled nearly $4.1 billion in the last quarter, representing a thumping a 36 percent increase over the same period last year, and up a healthy 5.5 percent over the first quarter of 2006.
The study also reports that search-related advertising rose 40 percent in the first half of 2006, with classified advertising rising 20 percent.
“With the seventh consecutive quarter of growth behind us we are confident that the Internet will continue to reconcile the imbalances between its share of media consumption versus its relative share of total advertising spend,” enthused Pete Petrusky, director, Entertainment & Media Practice at PricewaterhouseCoopers.
Elsewhere, the Online Publishers Association (which includes CNET, iVillage and Reuters), forecasted a rosy future for its members, saying that it expected online advertising grow about 28 percent for the third quarter, with most of its members “seeing strength in all advertising categories with no areas appearing to slow down.”
[Via Reuters]
26 September, 2006
THUS Preferred Supplier For HSBC
THUS, the communications provider that owns the Demon brand has announced it has become the preferred supplier for HSBC in the UK. The contract is expected to be around £50m plus over 5 years.
The contract covers connectivity for all their branches, ATMs etc (2,200 UK sites).
THUS recently sold off Demon Internet in the Netherlands to KPN, which means they have paid off most, if not all, of their debt and puts them in a very positive position compared to many UK telecoms providers.
THUS also recently acquired Your Comms (a business telco based in the North of England) and Legend, a smallish ISP with a portfolio of VoIP products. Other acquisitions must be on their mind.
Consumer Broadband is free, concentrate on business services
The consumer broadband market is rapidly becoming commoditised, which is good for the customer, though margins are extremely low, so providers need to find other revenue streams to make services pay for themselves.
Though Demon in the past have had lots of consumer customers, they have wisely concentrated on the business markets. Business broadband can still command premiums, as it allows customers to utilise services such as VoIP. Customers who want quality of service can even use broadband to connect to THUS’ backbone MPLS network so allowing teleworking and VPN’s to be securely provisioned.
THUS isn’t as big as several other telcos (in terms of customers or revenue), and in the recent past, they may have looked like a buy-out opportunity, however as they’ve concentrated on services that make them real revenue the tables may have turned with them becoming a threat to other bigger players who could be acquisition targets themselves.
22 September, 2006