Articles of the Day


Analysts Question Google’s Strategy — Following Google’s announcement last week that its stake in AOL had significantly lost value, analysts were left pondering Google’s strategy beyond search. In an SEC filing, Google acknowledged that AOL was probably worth closer to $10 billion than the $20 billion valuation the search giant placed on the Time Warner company when it bought a five percent stake in 2005. Trip Chowdhry of Global Equities Research said Google has shown a knack for overpaying for its investments, citing the Web giant’s AOL stake, its YouTube purchase, and the recent acquisition of DoubleClick. Meanwhile, Chowdhry noted that internal projects like green energy, space exploration, and a new mobile operating system have also failed to bear fruit. “Other than search, what has Google done right? They have 1,001 products in beta, but what’s been successful?” Chowdhry asked. “There has been a sequence of missteps and failures, and this is not the end. They miscalculated the valuation of AOL, and this is the first time they’re admitting to it.”

Buyers Not Supporting Google-Yahoo Deal — In the next month, the Department of Justice will decide whether to block the search advertising deal Google struck with Yahoo in June. If everything goes according to plan, Google will begin selling ads on Yahoo Search in early October. In the meantime, the DoJ is soliciting input on what the deal would mean for the ad industry, and while Microsoft’s stance is well-known, it’s more notable-and perhaps, more surprising-that many big advertisers do not support the deal, either. “We’re concerned about the Yahoo! deal,” said Rob Norman, CEO of WPP-owned GroupM North America. “For advertisers to prosper, they need competitive markets. We think Google is a fantastic company. Our sense is that if the transaction with Yahoo! proceeds, there’s the potential the development of Panama and other competing systems will atrophy over time.”

Olympics Fuels Ad Spend Boom In China — Thanks to the Beijing Olympics and the growing strength of Chinese consumers, ad spending in China is expected to grow more than 20% this year to $35 billion, according to a new study from GroupM. The Internet–which is expected to command 7.3% of ad investment this year, and 8.5% next year–is China’s fastest-growing medium, and is on track to become the second-largest ad medium after TV within a few years, according to the study.

IAC Spinoff Set For Next Week; Five Companies As Of Aug. 21 — IAC finally has set the date for its long-awaited split into five separate companies to take place: Aug. 21. Before that, the “when-issued” trading period in the common stock of HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. and IAC will happen Tuesday, Aug. 12. The trading will occur on a post-distribution basis and, in the case of IAC, a Board approved post-one-for-two reverse stock split, basis, under the symbols “HSNIV,” “IILGV,” “TKTMV,” “TREEV” and “IACIV,” respectively. The “when-issued” trading period comes following the SEC declaring the S-1 registration statements for each of the spincos effective, and will continue up until the spin-offs. Shares of IAC common stock will also trade on a regular way basis during the period under its existing symbol, “IACI.”

Earnings: Liberty Interactive Q2 Revs Climb 9 Percent; Open To Deal For AOL Access — Liberty Media president and CEO Greg Maffei said that the company sought to “take advantage of market weakness” in Q2 and so repurchased 18.1 million shares of Liberty Capital, reducing outstanding shares by 14 percent. In terms of the company’s Q2 performance, the Interactive group’s revenue increased 9 percent as adjusted OIBDA increased 4 percent. The company cited growth at QVC and Provide Commerce. The acquisitions of Backcountry.com and Bodybuilding.com in June 2007 and December 2007, respectively, also provided a year-over-year boost. Other highlights from the quarter included: Starz Entertainment revenue was up 8 percent to $275 million and adjusted OIBDA increased 24 percent to $68 million. The unit’s operating expenses increased 4 percent due to increased SG&A expenses associated with a new Starz branding campaign. Liberty Capital group’s revenue increased 33 percent to $174 million. Through the DirecTV (NYSE: DTV) share buyback, Liberty’s ownership of DirecTV increased to over 49 percent, though voting control remains at 48 percent per a standstill agreement.

Napster Q2 Revs Fall; Paid Subs Drop Sharply — Struggling online music player Napster has reported Q2 revenue of $30.3 million, a decline of 5.9 percent from $32.2 million a year ago. Net loss was fairly flat at $4.3 million ($.10 per share) compare to a loss of $4.2 million ($.10 per share) a year ago. The company said it had 708,000 paid subs at the end of the quarter, a decline from 760,000 at the end of Q1. The company also touts good results from its new MP3 store, but it’s hard to get a grip on what these numbers actually mean: ”The introduction of MP3’s into our line-up has created positive trends for Napster with increases to visitation and user engagement. In addition, track sales per subscriber were up 10% in July, month over month, with total track sales up 5% during the same period.” For the coming quarter, the company sees revenue of about $30 million again. In its 10-Q filed along with the release, the company explains the declining subscriber rolls (sort of): “Paid subscribers at June 30, 2008 were approximately 708,000 compared to 761,000 at March 31, 2008. This decrease occurred because new added subscribers were not sufficient to offset our normal cancellations during the period.”

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