Propeller, AOL’s Digg-like news site, launches version 2.0 later this morning. The site sports a new design and logo and now has a mascot - described as “part professor, part citizen journalist” (see image below).
But the biggest feature change is the removal of a pure Digg-like vote count. In its place is an algorithm based popularity ranking of 1-10, which takes into account “many more aspects of participation” when determining popularity. Voting on a story is now called the more nebulous “prop it.” The service has also cut down the number of news categories. Those remaining include Arts & Entertainment, Business & Finance, Family, Humor, News, Science & Technology, Sports and Style.
Taking a page from the Yahoo Buzz playbook, headlines from the service will also be integrated directly into AOL and AOL News.
Propeller has had a rocky history. It first launched in June 2006 under the Netscape.com domain as “a better Digg” in that paid editors chose the top stories from user-submitted and voted links. Soon the site was paying top Digg users to move to them.
As of yesterday afternoon, AOL has implemented Vidoop’s visual authentication system as part of its OpenID initiative, which was formally launched in February 2007.
Vidoop, a startup that replaces usernames and passwords with image grids, partnered with AOL to provide its OpenID users with an extra layer of security. This delivers Vidoop a potential user base of about 100 million users.
Unfortunately, AOL is still just an issuer of OpenID accounts - not a relying party. So users can’t actually use the same Vidoop-protected OpenID accounts that AOL has given them to actually sign into AOL services. AOL and other big internet players have yet to step up and become relying parties, a move that will be necessary to push OpenID into the mainstream.
Vidoop offers an alternative to the traditional username/password login system by displaying images in a grid with associated letters. Upon initial registration, users define 3-5 image categories (cars, dogs, flowers, houses, etc). When they sign into a site, a variety of images appear in a randomly-generated grid, and users enter the corresponding letters to their pre-defined categories. Because this visual system requires a higher level of intelligence, it’s harder to steal someone’s login information and use it to access all OpenID-enabled sites with it.
The implementation of authentication security can be cost-prohibitive, but Vidoop actually tries to help its partners make money. Advertisements are randomly dispersed throughout the image grid, and revenue from them is split in two ways.
Vidoop has also partnered with Charles Schwab Retirement and hopes more financial organizations will follow suit. Clickpass, a popular OpenID initiative covered here, partnered with Vidoop this past March. The startup brought Scott Kveton, the Chairman of the OpenID foundation, onboard in February.
As Yahoo prepares for its upcoming shareholder meeting, it is fighting to convince enough investors that it did the right thing by spurning Microsoft’s various offers, especially the last one which had Microsoft just buying Yahoo’s search business, in favor of doing a search advertising deal with Google. Today, Yahoo filed the slide deck that it will present to shareholders at its annual meeting on August 1 (embedded below). There is a lot of he-said, she-said going on here, and the tone of the presentation is extremely defensive.
The slides go through familiar territory, marshaling Yahoo’s arguments for why Microsoft’s offer would have been bad for shareholders. But Yahoo does make some new points. Namely:
—Microsoft’s proposed $1 billion for Yahoo’s search business would be taxable, so shareholders would see less.
—Microsoft was only offering a 70% rev-share (TAC) for search ads on Yahoo, which is low for such a big deal.
—Cost savings would be no more than $750 million, not the $800 million to $1.5 billion that Microsoft estimates.
—Conveniently, the $750 million in cost savings that Yahoo estimates is equal to the 30% of revenues it would be sharing with Microsoft under the terms of the deal, thus offsetting any impact on operating income.
—Microsoft was only willing to guarantee its price-per-click rates for three of the 10 years of the proposed deal.
Yahoo’s strongest argument is that separating display and search advertising makes little sense strategically in a world where those two forms of advertising are colliding. (The Microsoft deal would have required that Yahoo give up its search advertising business and prevented it from re-entering that market in the future).
Towards the end of the presentation, Yahoo takes on activist investor Carl Icahn (who wants to replace the board with his own slate of directors) by pointing out that his track record with companies he has become actively involved in trying to change (Blockbuster, Motorola, Time Warner) has not been so great in recent years. It also points up the weakness in Icahn’s five-point plan to fix Yahoo.
Meanwhile, investors are not sure that Yahoo has a plan either. In a note today, Citi analyst Mark Mahaney wonders if maybe an AOL-Yahoo merger isn’t the best remaining option. Excerpt:
—Yahoo!-AOL merger possible - Four motivations: 1) $900 million of annual synergies, 2) Yahoo! gains display scale and keep search options open, 3) Time Warner gains Internet scale via a passive equity stake in larger entity, 4) Yahoo!’s clear interest in remaining independent.
The $900 million in “synergies” he sees are mostly from cost savings. But he also thinks there is value in keeping display and search advertising together. In fact, in another note today he made Google his top Internet pick, in part because of “continued marketing budget shifts to Search.”
Now, if Microsoft were to come back to the table with a serious offer for all of Yahoo, many of these objections would go away.
(Disclosure: As a former employee of Time Warner, I own shares in the company).
Even on the Web, radio is local. People still tune into their favorite college or hometown radio station from hundreds of miles away. Today’s relaunch of AOL Radio (in beta) embraces that aspect of radio in many ways. First and foremost is its partnership with CBS Radio, which is replacing XM Satellite as the provider of music for 150 radio stations on AOL Radio (AOL itself continues to program another 200). Along with providing much of the music people can listen to for free, CBS is also taking over selling the ads. CBS sales teams are already selling local radio ads, and now those teams will be selling ads on AOL Radio as well. CBS Radio’s ability to sell local ads was major reason why it won the partnership deal, especially with online music royalties increasing sharply. Lisa Namerow, the general manager of AOL Radio, tells me:
The royalties have gone up significantly. We had to reevaluate our business. We needed to partner in order to monetize radio better. We have grown advertising year-t0-year 100 percent, but with the increasing cost of royalties, we need to do a better job by leveraging local markets and advertisers. CBS has a string foothold in that local sales market, with over 140 sales teams.
That statement is an eye-opener for any music service hoping to make money from advertising. If AOL Radio, with three million unique listeners per month (according to Namerow), is having a hard time, how are smaller ad-supported music startups supposed to survive? And affiliate links are not going to cut it. Every song on AOL Radio has a link to iTunes or Amazon, yet Namerow cautions that “those commerce links are a very minor revenue source.”
So how does the new AOL Radio stack up versus other free music services on the Web? It is not bad for basic radio-listening, but is lacking any social features beyond the ability to share a station via email or AIM. It is definitely a vast improvement over the old AOL Radio, which didn’t really work that well in most browsers other than Internet Explorer. The new AOL Radio pops up in a separate Flash player that works on IE, Firefox, and Safari. There is plenty of music and sub-genres to choose from. Some stations: Rock Anthems, ’80s Alternative, Salsa, Rockabilly, All Stevie Wonder, Sports, and Opera. You can also search stations by city (that local thing again). The player highlights 10 preset stations, but you can manage an unlimited amount of presets and change them around.
AOl has also done a better job of deep linking into AOL Music. If you mouse over any album cover, links to album, artist, and song information appear. The service also keeps a history of every song you listen to so you can learn more at your leisure. There is also a pause and skipping ability. You can skip six songs per hour. And right now there are about four video ads per hour. I don’t mind the ads as long as there aren’t too many. But one suggestion: don’t subject people to an ad at the very beginning before they can even listen to one song.
Two more suggestions: 1) Make personal music recommendations based on my listening habits; 2) Integrate with CBS-owned Last.fm for more music choices and social recommendations.
Update 6/12/08: AOL Radio also designed an app for the new iPhone, which was one of the winners of the Apple Design Awards. The iPhone App notes your location and serves up the nearest CBS tradio stations, so it acts like a regular radio in that regard.
OpenSocial gained a new convert today. AOL is officially joining the initiative to standardize social-networking apps, Google VP of Engineering David Glazer announced today at the Google I/O event. TechCrunch’s Mark Hendrickson liveblogged the entire session, which just ended. From his notes:
AOL joins OpenSocial today. Their suite of products will support the standard.
So is AOL just hedging its bets in the social network wars? Looks like it. With Facebook planning to open-source its platform, it will be interesting to see if AOL shows up as a partner for fbOpen as well.
Update: A post on the official OpenSocial Blog states that AOL’s first steps will be to implement Gadgets on myAOL.com. The post says that Gadgets should help developers create widgets that can be used on myAOL, as well as the web at large.
Howcast, the instructional video site founded by three ex-Googlers, today announced that it has formed distribution agreements with AOL, Metacafe, Bebo, and blip.tv.
Howcast provides professionally produced instructional videos that range from “How to Make Sushi” to “How To Make a Water Gun Alarm Clock“. Many films come from the site’s Directors Program, which pays qualified members a small fee to produce guides that follow a supplied Howcast template. Directors receive increased compensation through a rev-share system for especially popular videos.
Howcast says that the new distribution deals will significantly expand its audience. The site had previously established distribution agreements with Myspace, YouTube, Verizon FiOS TV, Joost, and ROO.
Howcast has a number of competitors in this space, including 5min, Videojug, and to some extent, Instructables.
With Microsoft walking away from the Yahoo deal, there’s been a lot of talk about what it’s next best option would be. Going after AOL is an obvious choice. It has the ad inventory (aka pageviews) Microsoft needs, has its own collection of growing online advertising businesses, and has a very willing seller in parent Time Warner. The Times of London is reporting that Microsoft and AOL are in “preliminary talks” about an acquisition. And AOL isn’t exactly hitting on all cylinders right now, so it could be a much cheaper, cleaner purchase.
Of course, Microsoft is still talking to everybody at this point, except maybe Yahoo. Whether it truly intends to set its sights on AOL is unclear because it needs to talk to AOL at the very least as a strategic ploy to try to thwart any possible deal between Yahoo and AOL (which has always been a possibility in the background). But at least Wall Street doesn’t seem to think that a deal is imminent. Yahoo’s shares are up 4 percent from yesterday to $25 a share right now, while Time Warner’s shares are pretty much flat at $16 after rising about 6 percent last week. Maybe Yahoo’s talks with Google are going better than Microsoft’s talks with AOL.
(Disclosure: As a former employee of Time Warner, I own some shares in the company)
A Federal Court found today that AOL, Real Networks and Yahoo owe $100million to songwriters and composers as back payment for streaming music online.
The court ruled on a request from the American Society of Composers, Authors and Publishers to establish reasonable compensation for the playing of their works. Notably ASCAP represents writers and composers and not the record industry, so the request for money is on top of any existing licensing agreements with the RIAA and its constituent members.
The court found that “reasonable license fees” are owing from AOL, RealNetworks, and Yahoo for the music streamed and distributed from their sites, retrospective to 2002, at a cost ASCAP counts at $100 million.
Unsurprisingly, ASCAP was happy with the decision:
“The Court’s finding represents a major step toward proper valuation of the music contributions of songwriters, composers and publishers to these types of online businesses - many of which have built much of their success on the foundation of the creative works of others,” said ASCAP President and Chairman and Academy Award-winning lyricist, Marilyn Bergman. “It is critical that these organizations share a reasonable portion of their sizable revenues with those of us whose content attracts audiences and, ultimately, helps to make their businesses viable. This decision will go a long way toward protecting the ability of songwriters and composers to be compensated fairly as the use of musical works online continues to grow.”
The Digital Media Association, a trade organization representing online streaming and music providers, said that the are not opposed to compensating composers and writers, but object to the model imposed by the court, with demands companies hand over 2.5% in part of all revenue as compensation, not just revenue from the music services themselves.
AOL may have the widest-reaching advertising network in Platform A, but it is not seeing the financial rewards of that reach. In fact, Time Warner today announced that during the first quarter, AOL’s overall advertising revenues grew just 1 percent. Total revenues at AOL slid 23 percent because the access business continues to go away, but everybody knows that and the focus now is on whether AOL can reinvent itself as a pure Internet advertising company.
AOL spent about $1 billion over the past year on companies like Tacoda and Quigo to buy its ad network market share. Those businesses aren’t quite kicking in yet partly because of delays in integrating their sales forces But the bigger problem was that gains in third-party ads sold on other sites were almost completely offset last quarter by an 18 percent drop in display ads on AOL-owned properties. AOL makes a lot more margin on ads it sells on its own sites than on ads it sells on other sites. That is why it is trying to boost its own pageviews by upgrading its sites and is the reason why it bought Bebo for $850 million earlier this year. The more ad inventory AOL can sell on its own sites, the better its margins will be.
AOL’s deal with Google on paid search advertising, like IAC’s. is also helping to shore up its overall advertising sales. Although, it is not clear what the exact impact was because the company did not break out the numbers.
This guest post about the widget economy was written by Michael Jones, an angel investor, the CEO of Userplane and a Senior Vice President of AOL.
Userplane, which was acquired by AOL in August 2006, is a communications widget provider (add chat and other services to sites) and a large advertising network.
Companies facing a slowing economy are looking for more cost-effective ways to reach customers. Forrester’s recent post on the role of social media during economic recessions supports the idea that social media can help companies survive and thrive in tough economic times. And Josh Bernoff’s full report on the subject calls for an end to “toe-dipping” by interactive marketers and advises a more serious look at cost-effective and measurable social marketing programs. A key take away:
…since interactive marketing programs are now fueled by measurable results, not dot-com madness, we believe that they can thrive in a recession. Social applications in particular, such as communities and social networking sites, are cost-effective and have a measurable impact on prospects’ decisions in the consideration stage, which will be important to companies under recessionary pressures. Interactive marketers should stop toe-dipping and invest only in programs that can deliver on measurable metrics.
Additionally, Forrester analyst Jeremiah Owyang points out that social marketing costs far less than traditional marketing. So when purse strings are tightened, marketing execs will become more excited about social media’s potential of reaching exponentially more people with fewer dollars.
While the recession-proofness of social media is a case study in the making, the idea that social applications can thrive in tight economic times because they are a cost-effective, precise way for companies to interact with customers and prospective customers, is right on the money – quite literally.
But the biggest feature change is the removal of a pure Digg-like vote count. In its place is an algorithm based popularity ranking of 1-10, which takes into account “many more aspects of participation” when determining popularity. Voting on a story is now called the more nebulous “prop it.” The service has also cut down the number of news categories. Those remaining include Arts & Entertainment, Business & Finance, Family, Humor, News, Science & Technology, Sports and Style.
Companies facing a slowing economy are looking for more cost-effective ways to reach customers. Forrester’s 
