Our exec editor covers Wednesday morning's opening keynote presentation by Sequoia Capital partner Mark Kvamme.
Early reports are in: this week's ad:tech in San Francisco looks to be the biggest event in the history of the conference. This is just one more indication of something we already know: interactive advertising is back and bigger than ever before!
But the balance of media influence has shifted from the few to the many, and with more people sailing through more media properties -- online and off -- than ever before, navigating these marketing waters has become harder than ever. A new venture seems to be greenlit every time a car horn honks in Union Square, but unlike the bubble, in these days of Web 2.0, the viable business plan is in the ascendant.
With this in mind, it makes sense for the opening keynote to come from a venture capitalist, particularly one with a track record like Mark Kvamme's. With early investments in Google, PayPal, eHarmony, Yahoo!, MP3.com, Zappos, CafePress and, more recently, LinkedIn and YouTube, Kvamme knows why, where and when to sink investment dollars.
Kvamme opened with an amusing PowerPoint slide called "Truth in Advertising," and then he went on to talk about all the failed investments Sequoia has made, particularly in the bubble era when they funded companies like eToys or a company that, they later learned, had a CEO "with a gun in his desk… and who wasn't very nice to his employees."
Nonetheless, with a mission "to be the best investors in technology companies around the world," Sequoia's successes are apparent, and this was particularly clear when Kvamme noted that 10.5 percent of the NASDAQ's current value comes from companies in which Sequoia has invested.
Displaying a 1939 quote from the New York Times that expressed skepticism about whether consumers would take to television in large numbers, Kvamme showed that the rapid adoption of TV has been paralleled -- even dwarfed -- by consumer uptake with the internet. In 1950, TV had a 10 percent penetration in the U.S.; 10 years later it had 90 percent penetration and advertising had exploded, Kvamme said.
The same thing, Kvamme argued, is happening online today. The commercial internet was born on August 16, 1995-- the day Netscape went public. That year, the internet had 10 million users. Today, there are 108 million users. Online ad revenue in 1995 was 66 million dollars; today it's 10 billion dollars, and the internet can boast of creating "real companies" including Yahoo, eBay, Google, Amazon.com, Real Networks, CNET, Netflix and IAC.
Indeed, Kvamme noted, the media landscape has changed so much that 10 of the dominant companies -- including Google, eBay, Yahoo, Sirius, Expedia and Amazon.com -- simply didn't exist in 1990.
Kvamme then quoted-- and agreed with News. Corp. head Rupert Murdoch's recent statement: "We're just now at the very beginning of the shift to digital media."
Dubbing the new age "Modern Media," Kvamme pointed to declining audiences in radio and TV, as well as declining readership in newspapers (which saw a circulation peak way back in 1987), as strong indicators that "we've seen nothing yet." As more and more media goes onto the net, "we are going to the time of the constantly connected consumer."
It's worth noting that Kvamme distinguished between the web and the net. Media is going online to podcasts, RSS and mobile, as well as onto the web.
Yet in spite of the changes in consumer behavior, the media spend still lags behind. Kvamme noted that while average household time spent with TV is 33 percent, the average ad spend on TV is 38 percent. In contrast, average household time spend on the internet is 33 percent, but the ad spend is a "miniscule" five percent.
And, Kvamme said, breaking it down by CPM makes the differences in media weight even more apparent. A $64 CPM on network TV is a bad buy when compared to a premium internet CPM of $30, and it looks downright terrible when compared to an internet ROS CPM of $10.
More significantly, since, "usage doesn't go down; usage goes up" with the internet, "advertisers need to go where consumers are spending time, and they're spending time on the internet."
To show the erosion in the television audience and the corresponding increase in the online audience, Kvamme compared "MASH," "Sex & the City" and Yahoo. The 1983 airdate of the final episode of "MASH" had 106 million viewers. In contrast, the final episode of "Sex & the City" in 2004 had 11 million viewers. Kvamme stacked that against Yahoo's current audience of 45 million viewers per day: five times the size of any of the broadcast TV networks.
The internet, Kvamme argues, has become the de facto remote control for all media. "iTunes is not about tunes anymore. It's about everything." And this includes podcasts, TV, music… "anything that is digital media. It's becoming my remote control for my digital media." From "Lost" to a "local motocross podcast" or the latest Eagles song, "it's about how you get to the media."
Kvamme cited YouTube, one of Sequoia's investments, as a key example. Founded a little over a year ago, in March of this year YouTube saw "more than 30 million videos per day." And an average user spends 30 minutes on the site per day. Moreover, YouTube sees 30,000 uploads each day. "The viewership is phenomenal," Kvamme said, with what is essentially a 4.0 Nielsen rating and a reach that exceeds those of cable TV channels MTV, ESPN and Fox News.
Next: Kvamme sees a rosy future for ecommerce and user-generated content.
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