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Advertising - Wednesday, May 23, 2007

Why Would Feedburner Be Worth $100M To Google? 10 Reasons.

Techcrunch and Valleywag say they have confirmed a report that Google has acquired Feedburner. There is no confirmation yet that the deal is done but these sites are putting their necks on the line on the story posting that Google has agreed to pay $100M and that the deal will be announced in 2-3 weeks. We have heard other indications that the story is indeed right this time around.

If true, the a:c thinks it a great deal for both companies:

1) Analytics roll-up. We would guess that Google is more interested in Feedburner's analytics side than its RSS ad server or revenue potential. As a publisher, we know its a pain to daily combine your web site numbers with your RSS, email (plus maybe mobile numbers). We want one place to give us our numbers and aggregate growth. Google + Feedburner analytics would be a big step forward.

The real value in Feedburner is in the analytics and data.

2) Install base. With Feedburner rep'ing feeds from 400K+ publishers and mounting, Google + Feedburner would make it very difficult for the Google wary to opt out of working with Google. Google will have so many touch points on so many publishers it may become pointless to even try to keep Google at arm's length. Same goes for advertisers, where Google would now have another channel to sell.

3) RSS is not simple as advertised. Google will gain knowledge on how to manage RSS from a handful of people who get it and know how to manage the RSS feeds for thousands of publishers.

4) Sector dominance. Feedburner dominates RSS feed management and has a hugely loyal audience. These are attributes that are worth paying a premium for. Unlike game or mobile advertising where there are multiple players, it is unlikely that anybody is going to topple Feedburner from its dominant position. Feedburner's subscriber number chicklet has become a de-facto industry standard for measuring RSS and Google ownership would likely lock that down.

The ubiquitous Feedburner subscriber number, found here on valuable TechCrunch home page real estate.

5) Tier A to the long tail. In other channels, startups tend to focus on either the long tail or the top tier publishers. Feedburner has both.

6) Google knows publishers better than they know themselves. Google's data mining reach gives it a great understanding of traffic across the Internet. By adding data from RSS feeds, Google gains another key layer of data.

7) For Feedburner, it will gain advertising expertise. The company was staffed by tech pros, not ad jockeys.

8) While Google and Yahoo have largely stood on the sidelines in RSS advertising, other online ad networks have started to add RSS ads as a module: Quigo, Textlink Ads, etc. The timing is right to get in front of that wave by building a bigger brand presence with Google and Feedburner.

9) On the finance side, $100M is a rounding error for Google, while it would be a sweet payday for Feedburner and investors (who only put in $10M. ) Feedburner is reported to have done $10M in revenues, so a 10x valuation for the industry leader is on par with what Google paid for Doubleclick. One blogger noted that Google would be paying $243 per publisher, but that logic doesn't account for that fact that Feedburner manages feeds for huge sites like USA Today, IDG Publications, and Reuters. $243 for a big account like USA Today! Forget it.

10) Oh yeah, and Feedburner is also powering a lot of podcast sites, so Google would get entree to two channels in one deal.

Hazards
+ Feedburner is a relatively open system. A publisher could run ads through while managing their feeds in Feedburner, without running Feedburner ads or Adsense. If Google + Feedburner tries to crack down on that, they may see a revolt from users.

What other sites are saying:

Techcrunch is claiming to confirm the deal. Techcrunch post as did Valleywag.

Hipmojo has a nice summary of Feedburner's publisher users and lists additional hazards: "Feedburner is increasingly popping up as a search result high on Google. Google will now effectively be sending traffic, lots of it, to its own pages (indirectly). People cried foul when Google began to link as “shortcuts” links to Google Video, Maps, etc."

Read/Write Web says: "The price itself seems like a steal to me. Feedburner's 422,000 publishers may not seem like a lot for a $100 million investment, but that 422,000 publishers actually translates into access to many millions of readers that Google can push advertising to."

Techfold: "As is mentioned more and more, Google’s reach is sort of creeping me out. The Internet is increasingly at the mercy of Google’s “Don’t be Evil” motto - here’s hoping they stick to it."