Intereconomia, a modern media group placing its bets in convergence and the three screens.

A couple of weeks ago, we had the pleasure of visiting the headquarters of Intereconomia, a medium sized Spanish media group, located in the heart of Madrid's Paseo de la Castellana. It was really interesting to be able to learn more about a company that in only 10 years grew from being a niche radio station to become a media group with relevant voice and notoriety, and companies on the 4 segments of communication (TV, Radio, Print and Internet). I guess this is a sign of the modern times where media groups have to converge in order to survive.

Today, Intereconomia has 2 TV channels, 3 radio stations, 3 magazines, one newspaper and a variety of websites. These products together give them enough scale economies to survive in a market whose income has been hardly hit by the new technologies. After the internet revolution, media companies were forced to rethink the business model, since a lot of the advertising expenses that were used in old media were transfered to online. The issue is that it would not be by simply replicating the old media business model to the online world, as the competition is much tougher now, since the barriers of entry to become a communicator have disappeared, and online advertising expenditure is much more spread out. With this in mind, media groups had to grow not only to reduce theyre cost structures, but also to be able to offer medias that converge at a certain point.

Intereconomia is a great example of this modern conversion since they take advantage of the material recorded for their Business TV and use it simultaneously at Intereconomia Radio and on the web portals. This convergence is a win-win situation since while the company offers 3 medias for the price of one, the audience has more ways of engaging with the network. This engagement also creates a new source of revenue to the media group, beyond advertising: the experience economy. If you want to watch an Intereconomia show being recorded live, you can easily though so while enjoying a delicious paella at El Plató, a restaurant inside the building that has a panoramic view to the studio. Also, Intereconomia leverages its relevant brand in the business world by offering very expensive conferences for business professionals, who besides learning on whatever subject is that day, also get to network with peers from the industry.

We are currently living a "forced revolution" as traditional media as we knew it does not exist anymore. Everything now is about convergence. It is hard to see that independent company on any kind of media today. They have been eaten up by the emerging conglomerates who try to cover the audience's attention wherever they are. One good example on this attempt to cover attention comes from the "three screen theory" and ESPN is a company who have been investing heavily on it. They say that a good percentage of viewers usually also have the computer with them. Instead of having to rival with the internet for the viewers attention, ESPN offers possibilities for the audience to interact, and hence look at ESPN advertisers no matter where they are. With the popularization of smart-phones, the third screen came into place allowing the user to have ESPN with them wherever they go! Intereconomia has also been taking advantage of the new medias, they also have been present in the three screens with live broadcasting, allowing greater user engagement through Facebook interactivity. This model will be the future of the TV stations, and makes a special sense for intereconomia since the kind of content they provide has a very short life value. Theyre target audience is well educated and fully integrated to the digital world. If they don't offer this content at every possible place, someone else might steal the audience.

The process of content creation has also changed a lot. Due to cost reductions, news staff had to suffer heavy cuts, especially for journalists abroad. This posed as a great opportunity for news agencies, which now, more than ever provide the raw content to the newspapers around the globe. The only problem with this new model is that now, the newspapers are providing very similar contents, and it seems like the "breaking news" is not as exclusive anymore. There is though, one interesting trend on the "breaking news" bit: user generated content have been breaking the news faster than news agencies. An interesting case was on the recent Bin Laden killing, where a Pakistani was tweeting everything that was happening around his house, even though he did not know what was going on. Needless to say, he became an instant celebrity and was hired by news agencies to report on what was happening the following days.

Modern communications also offered a great change in the provision of content. While in the traditional media, the medium had all the power, today we see user generated content as an equally relevant form of communication. It is common to see youtube "channels" made by "aumateurs" who have hundreds of thousands, if not millions of viewers. Blogs have also become an important form of communication, and the acquisition of the Huffington Post by AOL at a $315m price tag is a proof of that. In the end of the day, these new forms of communication fight for the same advertising dollars, though with a much smaller cost structure.

Modern media companies must understand the new environment they are at in order to compete accordingly. The key is to leverage on they're best capabilities, which is usually related to the brand and credibility. Anyone can talk about economy, but an opinion emitted at the Financial Times will have much more relevance than that of any business blog, given the credibility the FT earned throughout its years of history.

SINA Weibo: Time to monetize?

Sina Weibo has been one of the greatest success stories of Internet on the past year. Though it is not so well known out of Asia, SINA has recently anounced a registered userbase of 150 million of its Weibo service, after less than two years of launch. This growth becomes even more impressive given that in march 2010 Weibo had only 5 million registered users. The potential growth for this service is also something to pay attention, considering Chinas 1 Billion+ population and a growing online community with already more than 600 million users. This impressive growth has not gone by the eyes of the market either: Since September 2010, SINA stock prices have gone up over 200%, mostly due to Weibo, more than double the price growth of Chinese internet giant Baidu since Google decided to leave China.With Sina's total market cap currently $7.35 Billion, it is estimated that Weibo would be valued at approximately $4 billion. Such a quick growth in Weibo's valuation and with rumors of a possible spin off becoming stronger since the company adopted the weibo.com domain, investor community is expecting Weibo to start generating revenues soon.

While maintaining that his current concern is mainly based on incrementing the user base, SINA's CEO has recently announced six potential method of monetization:
1)   Precision Ads
2)   Instant Search
3)   E-commerce
4)   Social Games
5)   Paid content
6)   Wireless Value-Added services

While many consider Weibo somewhat of a Twitter clone, due to its micro-blogging nature, this comparison is not exactly correct. Weibo is somewhere in-between Twitter and Facebook, and has been posing a huge threat to the Chinese facebook-like platform and leading social network RenRen. If anything, SINA Weibo is best described as an all-around Social Media platform, and the way management is considering monetization makes this even more clear. While SINA is considering all these potential methods, Twitter's solution to the monetization problem has been only in sponsored tweets, promoting trends and data analysis for enterprise accounts.

Being part of the 3rd most important web portal in China (SINA is somewhat of a Chinese Yahoo) has obviously been a great asset to Weibo and allows it to go beyond the typical precision ads and instant searches which could be seen as pretty straightforward models for any social platform that is flooded with so much information of the user everyday. The real interesting thing of how SINA is leveraging its capabilities comes on some of the other kinds of monetization. SINA is already an important platform for e-commerce in China, giving it an experience that Twitter does not have, combined with the fact that they cater mainly one single market, which makes it much easier than the diluted markets for Twitter. One good example of how SINA has managed to seize the oportunity of combining both environments comes from its sucessful launch of a group buying ad-on, probably the first truly social group buying application (It came out before Facebook deals).
Online gaming is also a big thing in China, much bigger than in western countries. While we are more accustomed to the Google model of generally free applications funded by advertising revenues, Chinese companies have been making a lot of money from Online gaming. One good example is Netease, a 6 billion market cap company that has 88% of they're revenues coming from online gaming. To this extent, Sina has recently announced the launch of a Weibo gaming platform where developers will not be charged at all during its first year of operation. Further down the road, SINA will take some part of the revenue to themselves, but the revenue sharing agreement will be at a maximum of 30%, which is the lowest sharing rate in the industry.
Finally, Sina has signed a cooperation agreement with China Mobile in order to expand its mobile service offerings. One of the services that will be offered by this partnership is the ability to access Weibo through China telecoms email service "189 mail". Currently over 50% of the Sina Weibo users access the service through mobile use, and the China mobile agreement together with the location based service launched the last month, this proportion should increase.
Future prospects for Weibo seem to be brighter than that of Twitter. Having most of its clients in one single market is a great advantage for SINA, especially given they are already leaders in this market. It is much easier to segment costumers than on Twitter since the audience is much more homogeneous. Weibo is already a lead platform for entertainment in China. Most of the Chinese celebrities have accounts that are verified, avoiding the typical Twitter problem of fake accounts. Also, the integration of other SINA services allow them not only to leverage Weibo on its own, but also to loop back to other parts of the SINA portal. Finally, a great difference between Twitter and Weibo come from the simple fact that in Chinese, 140 characters can actually say much more!

With all these capabilities, user engagement in Weibo has been far better than that of Twitter. The analysis of a few metrics will show this better than any explanation I can give.


Time on site for Weibo has been more than twice as much as the time spent by twitter users. This could be explained by the greater variety of services offered within the weibo platform.

This other graph also shows that the penetration of Weibo in the Chinese market is much bigger than Twitters in any single market. In fact, weibo has 1 out of every 158 internet visits in China according to Hitwise.

Finally, since the inception of the weibo.com website this past April, SINA's weibo has been catching up with twitter on the number of daily Pageviews. It is estimated that by the end of Summer Weibo should have easily surpassed twitters page views.


Twitters has been recently trading at a valuation of $9B in private capital website Sharespost.com. With an estimated user base of 200 million, Twitter has an implied valuation of $45 per user or $150 per active user assuming an 30% active rate. SINA's Weibo, assuming a valuation of $4 Billion has a registered user value of $28.57 or $95 per active user assuming an active rate similar to the one of Twitter. Given the differences between Twitter and Weibo, it would be fair to estimate that Weibos active user rate would actually be a bit higher, somewhere between 40-50%, this would imply a user valuation ranging from $71 to $57. Whatever it is the metric taken though, it is clear that Weibo is still a bargain compared to Twitter, especially if taken into account its potential.

The market has placed its bets, now its time for SINA to show if Weibo has what it takes when converting all its potential into actual earnings.

You can read more about SINA Weibo on this Forbes article

How the division of TV rights is destroying the Spanish Football League

Real Madrid and Barcelona are the two football clubs with most revenue in the whole world. With total revenues in the 09/10 season of of 439 and 398 million euros respectively, they earn considerably more than other European powerhouses such as Manchester United (3rd with 349M), Juventus (10th with 205) or french  Olympique Lyonnais (14th with 146MM). These numbers seem contradictory, given both clubs are located in Crisis-plagued Spain, where per-capita income is much lower then the countries where these other teams are located. One of the main reasons for this disparity comes from the difference in the negotiations for broadcasting rights.

There are two types of negotiations for broadcasting rights of the national leagues of European football. Collective bargaining is the most widely used in countries such as England, France, Italy and Germany. This kind of negotiation sells the rights to the whole league all in one package, and the proceeds from this contract will be distributed in a somewhat equitable way between the clubs in these leagues. At the English Premiership for example, there are three criteria for the sharing of the pie: 50% is divided equally between all 20 clubs, 25% is divided based on the league standings at the end of the season, and the final 25% partitioned is based on TV audiences. This way, there are not so many discrepancies between what the team that earned the most in the 2010 season, Manchester United, who made 58M on broadcasting rights compared to 10th place Manchester City with 45M or Middlesbrough, which was the team who least received broadcasting rights fee with 35 million Euros.

Out of the Big 4 football leagues, Spain is the only one where clubs negotiate individually. This has allowed for a huge gap  between Real/Barca and the rest of the league. While the top two teams received more than 150 Million Euros each just for broadcasting rights (that is more than the total revenue earned by Atletico de Madrid, the 3rd richest club in Spain, that made 124 million euros in 2010), Atletico and Valencia (3rd and 4th best paid) receive each approximately 50 millions each, and sides like Almeria, which made around 20 Million last season, almost 10 times less than the two giants. This exorbitant difference might explain how a once so competitive league like the Spanish had results like the 8 x 1 Real Madrid  win against poor Almeria this past week. This was not the first time such a diluted result happened this season: Real Madrid had already scored 8 against Levante and 7 against Malaga, while Barcelona also scored 8 against Almeria.

source: futebolfinance.com

Studies have shown that collective bargaining makes the total pie much larger. In fact, despite having the two teams with greatest broadcasting revenue in the world, the Spanish league only ranks 4th in Europe in Broadcasting revenues per season, and that is even after the most recent contract with Media Pro, which considerably increased the revenue on TV rights in relation to past seasons. Even the French League makes more as a whole than La Liga, though no French team has won an Uefa Champions League for almost 20 years.

Perhaps this might actually be the reason why Spanish fans do not seem to be generally concerned with this duopoly of the broadcasting revenues. With 50% of football fans in Spain rooting either for Real Madrid or Barcelona, they are quite happy to see at least one Spanish team going far every year in the European competition. It is clear that this extra boost in cash is necessary for the Spanish teams to maintain squads that are competitive enough with other European sides, especially after Spanish government revoked what was known as "La Ley Beckham" which was nothing more than the Spanish clubs taking advantage of a national law that was designed to bring top paid executive and reserachers to the country, in order to make football starts pay much less tax than they would pay in England or Germany, and thus have a salary that would be attractive enough to play in Spain.  Without this insane income distribution, it would be hard to think Real Madrid would be able to have players worth 30 million euros sitting at their bench.

While indeed it is nice for Spanish Nationalism that the two giants are able to compete in "equality" with other European giants this model is unsustainable in the long run. The Spanish league as we know today is divided into two different tournaments. While Real Madrid and Barcelona fight to see who will lose less points against the smaller teams, the other 18 compete for "The other League". In the past seven seasons there were no other champions except for Real Madrid and Barcelona. On the 2011 season, the 3rd placed Valencia had more than 20 points less than second placed Real. The league is becoming as boring as the Scottish league which also has only two teams (Celtic and Rangers) dueling for the cup. Another important aspect to this flawed model is that in order to compete with the huge investments made by Real and Barcelona, other teams had to incur in huge debts and many clubs are on the verge of bankruptcy. Total debt of first division teams has topped 4.5 billion Euros last year. The funny thing is that despite they're amazing revenues, Real Madrid and Barcelona are actually responsible for a good part of this debt.

It is clear that something must change in this partition, even if this means being less competitive on European competitions, otherwise, Spanish league risks going bankrupt as a whole, which wouldnt be a good business for Barcelona and Real Madrid either. I guess you could say that in this case, Greed is not good! :)

If you like the topic, here is another interesting article about it.

How TV content providers are missing a great opportunity with online distribution

In 2009, at the height of the financial crisis, I was studying Sports and Entertainment Management at the UCLA Anderson Graduate School. Living in the worldwide capital of entertainment, I had the opportunity to chat with several industry executives who had very passionate views in defending the business model used by their companies. TV execs were concerned in bashing streaming of TV shows and how illegal and immoral it is to watch live sports on bootleg online channels while developers of defunct online video site Veoh, among others would prophesize the death of cable television in a only a couple of years. Two years later reality is not as dark as it would seem for broadcasters, though bad enough to demand some attention. While the number of people between ages 18 to 49 watching tv on a tradiotional tv set was down 1.3% on the last quarter of 2010, U.S. consumers have watched approximately 3 billion online videos last year (96% rise YOY)

The truth is that the content developers still have no idea in how to leverage a new digital model without cannibalizing revenues on advertising, subscription and international rights sales. The problem is while these extremely well paid guys cant decide on a way to go, they rather keep the same myopic vision that the music industry had 10 years ago at the rise of Napster. The game has changed and they have to deal with it, especially with so many opportunities that can come from it. As opposed to producing music, developing a quality television content, be it a series or a live sports event is still quite expensive. On one side this means that the producers must find ways to monetize and pay for these expenses, but on the other side it also means that these content providers enjoy high entry barriers to any serious contender. Even though youtube became very popular with homemade videos, there is no comparison with the quality of a real tv series and audiences of these have not been affected by this new element.

Some experiments have been done in the past years in this area, mostly in the United States. Some have been very successful such as MLB.tv, which was developed as a way to sell the “out-of-the-market” games to fans. While deemed unfair by American costumers, the blackout system (some games are not shown in certain regions in order not to rival with TV or ballpark attendance) seems to have been effective in avoiding cannibalization. In fact, MLB.tv became one of the most successful online subscription services in the US, along as the Wall Street Journal, and the most profitable video-streaming service on the web. This service has been so successful that last April, Sony signed with MLB the rights to offer MLB.TV in its Playstation network. MLB.tv has not shown any effects on the MLB television rights negotiations, as these are still very well demanded by networks and prices have still increased in latest contracts.

Hulu however, despite being the 33^rd top accessed site in the United States has only managed to make $226 million in revenue. Not much considering the major networks that are behind the project and the $2.6 billion made by rival Netflix in the same period. Hulu has been very successful in reaching the audience, but owners worry if popularity of online video will cut into their traditional business. In order to attempt a change in this game, Hulu managers are considering moving the business to a subscription model and turn it on the first online “cable” television network. While there is a great potential in increasing revenues with this move, especially if they charge low monthly rates like the ones on Netflix, there is one important factor that Hulu is forgetting about but that MLB did not: International markets!

While Mlb fans around the world are allowed to sign up to mlb.tv and watch they're favorite games from anywhere, Hulu is only accessible in the United States. On my discussions with TV executives, they would argue that they can’t offer this kind of services abroad due to the rights contracts negotiated in each region. While I agree that offering online subscriptions would probably piss off the international networks that buy these rights, as premium content providers, NBC, Newscorp, and Walt Disney are strong enough to enforce on their contracts the availability of online streaming rights, maybe even negotiate them with the local networks.

What happens now with these content providing companies is that they are allowing several pirate websites to offer their content for free and selling local advertising, not making anything out of it. I will take myself as an example. On my first year in Spain, it was clear that Spanish television was not really my thing. At first I had not much of an option, but soon enough I started to download lost to watch it on my computer. For the last three years or so I have been able to watch all of my favorite series on streaming without having to do any downloads. Though the quality of the image is obviously not as good as a regular TV (Despite recent improvements), this on-demand service is much better in several aspects, not only in convenience but also because I can watch the shows on the same day it is released in the US and in English. There are several other people in the same situation as me, who do not want to wait one year to watch a dubbed TV show, this is the niche market that someone in the likes of Hulu could tackle. On the other hand, this service would not cannibalize the business of the Spanish tv stations who bought the rights to the given show, since the people who are interested in watching in English online, already do it anyways!

An ever better example of this myopia comes from my other “online tv” passion. As a Brazilian living abroad, it was very hard not to watch my Brazilian Football matches every Sunday. In fact, I was (and still am) willing to pay for a pay-per-view service that would allow me to watch the games of my team. Gladly, since Sopcast, Justin.tv and other Asian websites came up, I didn’t have this problem anymore. Now I can watch all my favorite games live! If Globo (the rights owner for Brazilian Football) offered some kind of international online service, they would be able to cater to the millions of Brazilians living abroad, making money in foreign currency and selling localized advertising. Actually, on this case, they don’t even have the excuse of the international buyers since no one seems to care much about the Brazilian national league around here. After spending millions in the new rights contracts for the next 3 seasons, I sure hope they look abroad in order to increment they're revenues. This is also a great opportunities for other niche content from any other country.

Personally, I think organizing this distribution could also be a huge opportunity for a big portal with solid international presence such as Google, Facebook or Yahoo, though the actual content providers could take advantage of the premium product and distribute it on their own. I just hope its not too late when they wake up!

If you are liked this article and now want to watch tv online the following links might be of your interest:

www.free-tv-video-online.me - great source for series and movies on streaming

vertvonline.org – for the lovers of Brazilian football

You can also read more about Hulu and its change in strategy on this WSJ article.

Google vs. Facebook: Who will dominate the future of internet?

It's time to place your bets!
After enjoying several years of unrivaled leadership on the online world, Google finally has a contender that might be up for the challenge to be the "synonym to internet". The question now is not only if these two giants will co-exist harmoniously in the digital eco-system but also if this is a battle that needs an undisputed winner. With Facebook's IPO approaching, it seems that Zuckerberg's company will be targeting the latter option.
It is interesting to see how these two websites that took-off with completely different products have so many similarities nowadays. While Google still is known the king of search, they also rule on other areas such as  online advertising, video, email, and several other products. On the other hand, they were never able to succeed on Social Networking, which is Facebook's core strength. Facebook has been so successful in Social Networking to a point gave them enough muscle to fight in other areas such as search (through the Microsoft partnership), advertising, most recently integrating the Facebook messages and chat to SMS and.. email! In sum, Facebook and Google are doing generally the same things, though with a different packaging.
The crucial similarity though comes from the revenue stream. Both companies make their money mainly out of advertising, While Google currently has far more ad revenues than Facebook, the latter has shown higher growth in the recent years. Digging deeper, we can see the explanation for the faster growth in Facebook by considering one important difference between both: while they make so much money out of advertising due to the targeted ads which in turn are enabled by all the information both companies have from the users, the source of this information is completely different. While Google knows a lot about the users based on screening of searches and emails, Facebook knows EVERYTHING about the users simply because these users gave them this information willingly, free of charge.
Another way of analyzing this battle would come from web analytics metrics:
In Alexa, Google is the top ranked site worldwide, followed by Facebook and Youtube.
On Compete.com these metrics are very similar, with Google having a good lead in unique users, though Facebook has been consistently closing the gap, especially after the Social Network film.

This data alone, could give the false impression that Facebook still has a long way to catch up with Google in this competition to become the dominant online platform. There is an important piece of information missing on this puzzle though, and that is the time spent on site. By this metric, we actually have a clear winner, and this would be Facebook!

source: alexa.com

While users spend an average 13 minutes per day at Google, Facebook clients spend almost 3x more of they're time on the website! On the long run, this difference could translate to a major power shift in the advertising revenue.

Even though Facebook has managed to achieve traffic metrics that are comparable to Google (which is very praiseworthy), they still have not been able to monetize as effectively and quickly as the search giant. In fact, as they celebrate the 7th anniversary in 2011, Facebook only makes 2/3 of the revenue that Google had in the 7th year. Several analysts do estimate though, that this might change in the following years and its a generally agreed that Facebook's goldmine is based in the years to come.

All in all, its is still hard to point out who will be the winner in this battle although its clear that it will be a good one! According to Hubspot, Ad-words has lost much of its relevance in advertising compared to social networks. As the market becomes more mature, marketers will end up having to decide on which channel to allocate most of the advertising budgets and this is where blood will start to spill. In the private equity market, many investors are betting that Facebook still has a lot to grow and could have what it takes to at least tie the game. In the beginning of 2011, Goldman Sachs bought a part of the company, valuating it at 50 Billion dollars. Presently, Facebook has been trading at the online private equity site sharespost.com by $33 per share, which translates to amazing $75 Billion, or $115 per user!  Google is valued roughly twice as much, at $167 Billion.

Personally, I think Facebook has what it takes, especially given their loyalty with the younger crowd. I now pose this question to the reader: Who do you think will win this war? Google, Facebook, or a there is still space for a third contender to join the race?