Thursday, March 27, 2008

Microhoo's 56% x 49%

After reading Bernard Lunn's piece about Xing and LinkedIn I found another interesting article of his about Google's recent reaction towards a Microsoft Yahoo merger ("it is not good for the Internet"). "What pussies" a friend mine said (sorry;-).

But so far I thought Yahoo's most valuable asset is Yahoo Finance. Of course, they also have, Yahoo Mail. And together with Microsoft that makes 56% market share for the mail market (so they say). And it is kind of a hard question, what conveys more information about you, your web surfing habits or your email exchanges.

Anyway, now comes the other scary number that Bernard Lunn brought up, that email represents 49% of web page impressions! That makes 27% market share of all internet impressions. Wow.

Here is the article: 49% & 56%: Are These What Have Brin Worried?
* Email is 49% of Impressions. Portals and Search Engines is 10% by contrast. This is some free data from Nielsen-Netratings. click on Top Site Genres.
* 56% is Microsoft and Yahoo combined market share of webmail. Gmail is down at 7%. This data is via Fred Wilson’s back of envelope calculations.

Yes both data sets can have a pretty wide margin of error, but even discounting that, this would be cause for worry.

Sure, in the early adopter world we live in, Gmail rocks and who would be seen dead with AOL or Hotmail? But that 50% market share for Microhoo is what you will see in the real world.

Hotmail has lagged terribly. Most people who used it would not return, I cannot imagine who would switch (an AOL user maybe) and most people already have email. So it is a lost cause. One major reason it lagged IMHO was Microsoft fear of cannibalizing Outlook. So they won’t offer the features that users want that both Google and Yahoo have been rushing to fill. Yahoo is reputed to have the most “Outlook-like” interface and that matters massively to people making the switch.

Microsoft will probably do the smart thing and let the Yahoo team run with email. Hotmail will die as a separate brand, eventually.
The real battle of course remains around search within email and thus monetization. Google is better at relevant ads in Gmail because they have a better search engine. But if Microhoo gets its act together in search, they have the bigger content/audience to monetize. Technically improving search is not that hard. Microsoft have all the R&D money they need and, more importantly, every search start-up looking to exit to them. If you really can improve search you have one fat valuation offer coming down the pike!

Here is the really interesting bit. Improving ad relevance within email does not require any searching behavior change. That is worth repeating. Say after me, “if we have 56% of 49% we have something like 25% of ad impressions and all we need to do is serve relevant ads”. Come on developers, you can fix that, right? Page rank is not relevant. Getting people to switch from Google to another search engine is not required.
However email is not just fodder for search it is the key to ad relevance, via the social graph. As Fred Wilson puts it, email is “the biggest social graph“.

Yes, the graph, who is connected to whom, that is indeed valuable. But the content of the mail is also, hmm, private and personal?! Everyone surfs the web, but does everyone publish there? Out in the open? Hardly. Only a minority publishes anything. But every working citizen has an email account and will write job related and private emails. Do people write everything they think in emails. Unlikely, but who would be comfortable if their mailbox would leak to the public:).

Another point, each mail has at least two parties involved. So with 10% market share of mail boxes you might actually cover twice as much percentage wise of the email universe. That doesn't help for serving ads, but, it helps building intelligence about what is going on out there and optimizing the algos. Again, it is a hard question what is more important, knowing what people search and surf on the web, or what they write in their personal email. With 56% email market share, Microhoo might actually know about maybe something like 70-80% of all mails?!

But then, who ever is in second place might just go to the NSA for a flat copy of it all in exchange for potentially better technology to snoop through it all:o).

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