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Google will sell in-game ad placements directly to top brand advertisers as contextually targeted text and image ads based on content and demographic information.

Adsense for Games: The history

AdSense comes to online games and ultimately will dominate the game-related advertising business although many expected this for the last year, since November 2007. Google first started talking about AdSense for Games at industry events last summer. Throughout last year it was reported that Google acquired an in-game ad provider called AdScape in a moved that was described as Google’s attempt to “cram as many ads into the world as possible.”

Google game partners

Google has partnered with Konami, Playfish, Zynga and Demand Media and advertisers are Esurance, Sprint and Sony Pictures.

Google Adsense Estimates

Google, using comScore estimates, in a press release said that every week, over 25% of Internet users worldwide play online games, which amounts to over 200 million people. This number is growing at a rate of almost 17% each year. Given the partners and the reach of Google, this will become a major profit center for Google and a game changer for monetizing online games.

Making money from ads while gaming: The Technology

At online games most of the monetization is done through one the side bars, away from where most people are focusing their attention. That explains the low ad conversion rates on gaming sites.

The new AdSense units look more or less the same, but they show up in game instead of off to the side. Because the user is already acclimated to bells, whistles, lasers and other noisy what-not, the video ads are allowed to auto play. This turns the gaming experience into something a little closer to television viewing. The ads are likely going to have lower conversion rates than standard AdSense units on a content site because of folks not wanting to leave the experience, but will probably function quite effectively as a sort of brand impression unit, similar to how standard TV works (of course with the added benefit of being clickable).

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yahoo financial news

Yahoo! ad revolution is the most important new from a financial aspect in the internet sector for today.

Yahoo upgraded its online advertising system today with extra help from its newspaper partners in an effort to survive in a very competitive market. Yahoo Chief Executive Jerry Yang introduced the new advertising platform for publishers claiming that this is a “game-changer” that can help Yahoo! speed up its revenue growth.

Yahoo! this year rejected a buyout offer from Microsoft and has lost market share to Google and MySpace. The plan is to sell this technology to a few hundred newspapers by the end of the year and then to media publishers and advertising agencies as a self managed system.

Many financial analysts were cautious to the news as they don’t believe that Yahoo! will see any cash benefits or market share increase based on just that. The Newspaper Consortium, the Yahoo! partner on this project believes that they will be able to manage more advertising and increase their profits from that.

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Yahoo! has been pursuing a broad agreement to carry search ads from Google, which it views as a way to boost its cash flow and bolster its claim to shareholders that it is worth more than Microsoft has offered. Such an agreement could still go forward even if Microsoft announced a hostile takeover effort.

While a broad search-ad pact would likely attract intense antitrust scrutiny, the options Google and Yahoo are discussing include a nonexclusive arrangement that they believe could satisfy regulators, say the people familiar with the matter.

The basis of such an arrangement would be a real-time auction system that would choose the most lucrative ads for any given consumer query from among those sold by Yahoo, Google and any of their competitors, the people say.

Such a system would be designed to allay concerns among regulators that Yahoo’s relying on Google Adwords would be anticompetitive.

Yahoo reported that the recent two-week limited test of carrying Google Adwords was successful, but provided no further details. Fully outsourcing search advertising to Google could increase Yahoo’s cash flow by more than $1 billion a year, according to Citigroup Global Markets analyst Mark Mahaney. The reason is that Google’s system generates significantly more revenue for each search query than Yahoo’s does.

There has been debate at Google about the wisdom of such an arrangement. Some top Google executives have pushed for a Yahoo ads deal as a way to strengthen Yahoo’s hand in the face of its pursuit by Microsoft, Google’s biggest rival, according to people familiar with the matter. But others at Google have questioned the strategy, fearing the potential for negative fallout for its business and consumer image from any regulatory scrutiny of such an arrangement, the people say.

Recent comments by Yahoo executives suggest that it would continue to sell some search advertising on its own, even if it were to carry ads from Google.

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Linden Lab is a privatelly held company and this makes it difficult to answer if they succeeded to make Second Life profitable yet. We explored in the past the  Second Life economics but it’s time to have an update on Linden Lab and Second Life 2008 financial situation.

Linden Lab original funding

Linden Lab is almost 10 years old, being funded in 1999 by Philip Rosedale. Second Life opened to the public in 2003. It had 4 rounds of funding with the most recent one being $19m USD in March 2006, while the current syndicate consists of 6 investors. Linden Lab has Amazon.com’s founder and CEO, Jeff Bezos, as a secondround investor.

Second Life Issues

ginko financial - Second Life’s best-known bank Ginko has received so much press lately, the bank, as well as others, will inevitably become an issue that Linden Lab will have to tackle. That either means self-regulation or more federal intervention.

In the virtual world as much as the real one, the past months have been filled with bleak economic news. Following a federal investigation, Second Life’s parent company, Linden Lab, banned all gambling in the virtual world–a major source of its business. A month later, the collapse of an in-world bank led to a crackdown on all of Second Life’s unregulated financial institutions. Most worryingly, Linden Lab’s sales of Linden Dollars–the world’s currency–trickled off during the second half of 2007, and in February 2008 still stood just below where it did the same time a year before, about $720,000 a month, compared with $800,000 in February 2007.

Employees are leaving, too. Last December, Linden Lab’ chief technology officer and one of its first hires, Cory Ondrejka, walked away from the company. So when Philip Rosedale, the company’s chief executive, announced in mid-March that he’d also be stepping down, a Second Lifer could be forgiven for thinking it was time to pack up and move on.

Not long ago all the world wanted in on virtual worlds - particularly the industry leader Second Life. Firms were piling in to the 3-D universe, setting up stores, opening hotels and offering “free” cars to promote brands. Now, not so much. In reality, Second Life doesn’t work. As the firm itself admits, the system crashes constantly and the steep learning curve for anyone entering Second Life puts off all but the hardcore.

Linden Lab Profitable

Have the 250 Linden Lab employees managed to make Second Life profitable? Well, yes! Linden Labs managed to make Second Life profitable in 2008, something that couldn’t be predicted even in 2006.

We saw a bubble in early 2007. Part of it was an enormous amount of media: We’d routinely have hundreds articles written about us around the world every day.

People were trying to do things that aren’t yet possible in a virtual world, and one was marketing products. In Second Life, it’s not usually possible to pull together a very significant body of eyeballs in any one place.

the number of unique users and the size of the economy continue to grow by between 5% and 10% a month.

Linden Lab future?

The next step for Linden Lab is rather obvious. The venture capitals that supported the business all this years are probably looking for an exit strategy and the change of CEO is a good indication of the intention to take Linden Lab public. The Financial Times agree as well. The paper reported that Linden Lab “is moving closer towards a listing and life as a public company with the replacement of its founder with a new chief executive.” . During an interview, Philip Rosedale said that while there was ”no particular rush” to go for an IPO in the next year, he cited Bill Gurley, venture capitalist and board member, as saying the company would be able to go public on its current financial numbers

The founder denies this.

Virtual Worlds future

Cockrill and Morrison are working with the University of Wales on a 3-D world that will mirror the real one and, they believe, offer scope for distance learning, virtual meetings and other services that could bring a fourth dimension to the internet – touch.

They seem to be on to something. Companies are increasingly turning to virtual worlds not just for brand building, but also to hold meetings and train staff.

Rosedale is stepping down as chief executive of Linden Labs. Competition for Second Life is increasing as media and tech firm rivals build more structured 3-D worlds – so a new chief will have to get more people past those 8ft trannies. If he doesn’t, somebody else will.

Disney CEO Bob Iger is predicting that the company will see $1 billion in online revenue from Virtual worlds this coming year, up from a predicted $700 million for fiscal 2007. The sources include ads, downloads and subscriptions to online games and e-commerce that’s unrelated to the physical parks. Disney has a host of virtual worlds and online games supported by advertising or subscriptions, and it’s looking for more, while Hasbro, considers a site as non revenue generating if it only drives the purchase of toys.

Executive Management

Philip Rosedale | Founder and CEO
Robin Harper | VP Marketing & Community Development
Joe Miller | VP Platform & Technology Development
Marty Roberts | General Counsel
Cyn Skyberg | VP Customer Relations
Ginsu Yoon | VP Business Affairs
John Zdanowski | Chief Financial Officer

Board of Directors

Mitch Kapor | Kapor Enterprises, Inc.
Jed Smith | Managing Partner, Catamount Ventures
Bill Gurley | Partner, Benchmark Capital
James Currier | Founder and President, Tickle, Inc.

Investors of Note:

* Venture Capital: Benchmark Capital; Globespan Capital Partners; Catamount Ventrues
* Individuals: Jeff Bezos; Mitch Kapor
* Corporate: Omidyar Network
* Known Other Equity Holders: Rosedale Phillip, Harper Robin, Miller Joe, Zdanowski John, Yoon Ginsu, Ondrejka Cory, Fleck David, Currier James, Jacobsen Bruce, Yi Gideon, Smith Jed, Laskey Mitch, Lanier Jaron, Traeger Don, Gurley Bill

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Microsoft’s latest acquisition of ad technology firm Rapt follows on the heels of Google formally closing its DoubleClick acquisition, underscoring the search giant’s own ambitious push into display advertising. The ad technology deal strengthens Microsoft adCenter’s (formerly MSN adCenter) set of ad business tools for Web advertisers and publishers.

Microsoft and Yahoo!

Executives of Yahoo and Microsoft had met last week to discuss Microsoft’s proposed takeover of the Web portal. Yahoo’s board in February rejected Microsoft’s bid, valued today at about $42 billion.

Microsoft and digital advertising

The move signals Microsoft’s ongoing push into digital advertising, highlighted most dramatically through its $6 billion purchase of aQuantive last year. Most recently, Microsoft snapped up Israeli startup YaData, whose technology is designed to help advertisers find original customer segments online. The move “puts us way ahead of what other offerings are available in the market,” Howe said in an interview, likening Microsoft plus Rapt to a jet plane — and competitors, including Google Inc., to a bicycle.

Microsoft, for its part, is waiting for Yahoo Inc. to respond to its unsolicited $42-billion buyout offer, which it hopes will help it catch Google in the search ad business.

Rapt’s Future

Rapt has 85 employees and is led by Tom Chavez, who will join Microsoft plans to remain in California. The comppny will become part of Microsoft’s Atlas suite of services for publishers. Rapt’s technology will provide advertising yield and management solutions for users of Microsoft’s Atlas Publisher Suite. The company says it makes the buying and selling of media easier across its network and other participating companies. APS includes Microsoft’s ad properties, including Microsoft adCenter, Atlas, DRIVEpm, Massive Inc. and ScreenTonic — as well as technologies it acquired from its buy of aQuantive.

Rapt’s Technology

Rapt’s “yield management” software helps publishers adjust pricing and inventory for display advertising based on changes in demand. Rapt’s system could be equated to the system that airlines use to set prices and track available seats, says Microsoft. The Redmond company had already been using Rapt’s technology on its MSN network, and it said it saw ad revenue increase by up to 20 percent.

One of the key products that will be offered as a result of the Rapt buy would be an integrated sales workflow solution, which would help sales teams manage ad inventories on top of an Atlas ad serving platform. Scott Howe, a general manager in Microsoft’s Advertiser and Publisher Solutions Group said that the merger would “redefine the ‘table stakes’ for what media publishers in today’s market need to effectively monetize their advertising inventory.”

In addition to its publisher tools, the company also recently launched Rapt Information Services, a research offering for advertisers and agencies. Microsoft hopes the acquisition will add momentum to its publisher tools business. Howe boasted that since Microsoft’s acquisition of aQuantive it won 70 publisher clients, many at the expense of DoubleClick. The technology gives Publicis and other agencies a dashboard-like tool to look across the inventory and pricing strategies of various media sellers they’re negotiating with. Other Rapt clients include CNET Networks, Dow Jones & Company, Fox Interactive Media and MTV Networks.

Display advertising and Google

Display advertising hasn’t gotten as much attention as search ads, thanks to Google’s unparalleled ability to turn search queries into billions of dollars in revenue. The acquisition intensifies the growing competition between Google and Microsoft, as both seek to offer an array of tools (from ad serving, campaign management and ad exchanges and networks) to buyers and sellers of digital advertising. Google, of course, significantly bolstered its standing this week when it completed its acquisition of DoubleClick. But that may be about to change with Google’s first big push this week into display advertising as it closed its $3.1 billion acquisition of online ad services company DoubleClick.

In the estimation of Google and Microsoft, publishers and advertisers will outsource much of the technology needed to manage their online advertising efforts, relying on the wide-ranging platforms the two companies are building. Howe said some publishers would offload nearly all of their operations to Microsoft, while others would only need pieces.

Financial terms of the deal were not disclosed.

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Online-video company Revver Inc., has been sold to online-entertainment network LiveUniverse for less than $5 million. Revver was one of the first video-sharing sites to tout the fact that it shared ad revenue with video creators. Revver does that by attaching advertising to user-submitted video clips. All ad revenue 50/50 with the creators.

While terms of the acquisition were not disclosed, it was reported earlier this month that the struggling Revver — which had seen the departure of all of its founders, and its staff cut in half — was asking for only $300,000 to $500,000, plus the assumption of about $1 million in debt. Talks had stalled last month over the issue of debt.

The sale is a blow to Revver’s investors, who had sunk $12.7 million into the Los Angeles company. The deal demonstrates the difficulty many online-video start-ups are having competing with Google Inc.’s YouTube.

Revver officials and some of its investors, including Draper Fisher Jurvetson and Bessemer Venture Partners, declined to comment or didn’t respond to requests for comment. LiveUniverse, led by former Intermix Media Inc. Chief Executive Brad Greenspan, who helped start MySpace.com, didn’t return a message seeking comment.

Revver’s Investment History

Revver was founded by Steven Starr, Ian Clarke, and Oliver Luckett in 2004, and is currently based in Los Angeles. The company has raised a total of around $12.7 million in venture capital from Comcast, Turner, Draper Fisher Jurvetson, Bessemer Venture Partners, Draper Richards and William Randolph Hearst III.

Since 2002, venture capitalists have poured more than $282 million into at least 27 video-sharing Web sites, according to VentureSource, a research firm owned by Dow Jones & Co., which publishes this newspaper. Some of the most prominent include Revver, Metacafe Inc. and Veoh Networks Inc.

Revver’s Business Model

The company has tried to pioneer a new business model — aimed at more professional video creators, in addition to amateur artists — through which content creators and distributors share revenue with Revver every time a video is downloaded. The company has technology that can track a video’s movement across the Internet.

The company, offered to share advertising revenue with makers of the most popular clips. The thinking at the company was that if Revver could win over the best creators, audiences would follow. That’s not what happened. Revver has yet to draw an audience big enough to make it one of the leading video-sharing sites. What it has done well is attract a small but talented group of video producers.

Negotiotions for Revver

Negotiations with LiveUinverse began to pick up again after a story about Revver’s troubles appeared. That triggered, according to the employee, a flurry of inquiries from other companies. Among those who called was VideoJug, an online video destination and production company.

Doug Kamin, senior vice president of marketing at VideoJug, said that he contacted executives about the possibility of making a bid after reading about Revver’s woes.

“At those prices, we thought Revver would be a good deal,” Kamin said. “I’m betting lots of others thought the same thing.”

Shortly after that, Revver called Kamin to tell him that Revver’s management had decided to go with the “original bidder.”

For a year, the company had weathered management shake-ups that included the departures of all three founders. Employees had witnessed some of the Web’s best-known video producers, such as Ze Frank and Lonelygirl15, abandon the site. Revver’s audience was dwarfed by YouTube’s and other video-sharing front-runners.

More recently, rumors circulated the Web that the company was running short of cash, according to the Revver employees.

Revver’s Future

Revver is expected to operate independently as part of LiveUniverse, with about 25 employees, one person familiar with the deal said. Revver was nominated for a technical Emmy award in 2006 and gained some notoriety for running a quirky video that showed people creating geysers by dropping Mentos candy into soda bottles.

Revver’s Competition

“YouTube is by far the gorilla” in the market. No online-video start-up has managed to attract the number of viewers and amass the content YouTube has. YouTube, which was bought by Google for $1.65 billion in 2006, quickly became a cultural touchstone for its easy-to-use site, which lets people upload videos. In December 2007, YouTube hosted 2.6 billion total video streams, more than seven times the number hosted by the second-biggest video site, run by Yahoo Inc., according to Nielsen Online. The only start-up to make Nielsen’s top-ten list was Veoh, which hosted nearly 58 million. Many advertisers have also balked at running ads on online-video sites for fear of being associated with offensive content.

About LiveUniverse

LiveUniverse was launched by former MySpace parent company Intermix Media’s founder Brad Greenspan. Purchaser LiveUniverse operates multiple sites, including video-sharing service LiveVideo, which about a year ago instigated a scandal on YouTube when it reportedly paid top YouTube users to come to its platform. LiveUniverse founder Brad Greenspan, who was involved with MySpace early on, is perhaps best known for his lawsuits protesting the company’s sale to News Corp.

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• Ease of use
• Robust interface
• Ability to target ads by state and locality
• Improvements on removing several legacy quirks

Yahoo! had to revise it’s ad system so that it could compete better against market leader Google and it spent two years developing the new platform. Still, Yahoo! does not expect the new system to have any impact on financials at least for a few more months. Yahoo! shares went up after these news reached the market, despite the internal management problems, outlined in the “Peanut Butter Manifesto” memo, that leaked earlier this week.

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Banks, universities, retailers, fashion designers, car manufacturers and others have made a great effort and investment in order to establish a presence in this new social network. Linden Lab’s inability to provide stable software, high service availability makes most of these business partners extremely unhappy. Most of the business partners order their own islands and each virtual island is a real life server. Linden Lab is not able to supply all the servers that are on demand and that has created a new market. A good example of how this new market was established is the NBC case: NBC wanted to have several islands but as Linden Lab could not provide the infrastructure that were needed, NBC had to rent the needed land (servers) from the virtual millionaire, property investor Anshe Chung. Even after that, NBC couldn’t reap the benefits of its investment as users could not access it at the launch of the service due to network and software issues.

During the weekend Linden Lab had to disable the search function and the ability to use items from the inventory. Many users also reported wrong amounts appearing in their bank accounts. This caused unhappy faces and concerns for both the creators and the inhabitants of the virtual world.

Such events, forced Linden Lab to publish a new version of the software used by the end users. Still, many problems haven’t been fixed and Linden Lab acknowledges these problems and keeps users informed that they are doing their best to get everything working properly as soon as possible. Everyone is waiting anxiously for stability to be returned in the region but it doesn’t look like it’s going to be any time soon.

Read more on Second Life’s close to collapse status. Find out what it takes to build the Second Life universe.

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Not only the original concept and the subscriber numbers are impressive but the financial transactions taking place every day attract many eyes. More than 10,000 people “live” in the world at any time and they spent 650,000 US dollars every day. Most of the major real life brands have established presence there and those that still do not have presence are moving in soon. These companies hire professional builders for the “Second Life” world and use real life promotions in order to benefit from this, very real, US dollars.

While this niche market looks appealing, many problems come up every day mainly because the creators of Second Life cannot provide the necessary infrastructure in order to keep up with the demand created by the rising number of new subscribers. Linden Lab, the creators and rulers of this world need one server for every 500 subscribers and currently they already have 4,000 servers. Besides the procurement and deployment investment for each server, there are the additional costs of electricity, maintenance and bandwidth without actually providing any new functionality to the end users.

Unfortunately, Linden Lab a company with 100 size employees cannot keep up with this demand of serious and continuous investment, deploying more than 1000 servers a month. As a result new subscribers login into a universe that most of the times is breaking or in the best of the cases, they find it boring and difficult to understand and navigate. All the publicity that Linden Lab has been enjoying hit them back as a boomerang and now they face increased criticism and technical challenges.

Linden Lab is planning to make a series of changes to its operations, mainly adding more personnel in order to assist new users and in the pretty soon, it will offer the software to the open source community. Still, Linden Lab’s ability to scale up its own network is seriously questioned and some believe that their business model is not sustainable.

If you want to find out how this was build and what kind of technical issues it faces, don’t forget to read my “How to build a Second Life universe and make it successful and profitable” recent post.

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