I can’t remember the last time I saw viagra/cialis/offtopic spam appear in Google’s SERPs. Just a fluke or a sign of things to come?

One of the ways internet business owners get rich is through IPOs. Recent internet company IPOs include Quinstreet and Demand Media. Meanwhile, Facebook and Groupon get all of the press. Neither has had an IPO. Based on recent private transactions of ownership, Facebook is worth over $70 billion and Groupon over $5 billion. Of course, the owners of both have what amounts to a piece of paper which is worth whatever someone will pay for it. Wonder why Mark Zuckerberg still rents? He doesn’t have $1 billion in the bank.

The recent real estate bubble in the United States left a lot of people wondered where all of the money went. How can the economy crash, the dollars just changed hands, right?

If your property triples in value, and you sold it, you made a lot of money, right? If you took out a home equity loan, and bought a boat, someone made money selling you the boat?

When the stock tech bubble was at its peak over a decade ago, some entrepreneurs were feeling very comfortable looking at a net worth of hundreds of millions to billions of dollars. At least that was what formulas told them their net worth was.

In this case net worth was calculated by taking how much ownership I have multiplied by what someone would pay for a fraction of it based on how much of that fraction was available for sale today. That is not really a good way to look at the valuation of anything (and it goes both ways.)

A similar thing happened during the real estate bubble. A lot of people thought they got rich, and really didn’t. Those home equity loans are still on someone’s balance sheet. That is why the US Federal Reserve and Treasury have been doing all kinds of weird things since the 2008 stock market implosion — basically changing the rules to keep bankrupt companies afloat. This is a way to prevent a short term economic collapse but it comes at a very expensive long term cost. Either the banks become zombie institutions or the US government and all that benefit from its spending absorb those losses.

In the end, is everyone as a whole richer?

No. The people that got richer are the ones who cashed out. If your purchasing power is greater now, post-bubble, because of the bubble, you got rich from it. In fact, the very act of cashing out involves taking liquidity from someone else — just like what will happen when Mark Zuckerberg and friends begin trading their Facebook ownership for cash.

If you want to get rich from stock and real estate bubbles you need to have equity early and cash out on the ride up. By the late peak it is too late to cash out because you simply do not have enough time or enough buyers. Alternatively you can arbitrage yourself through a bubble buying early on and selling as much as possible toward the end. That is what “flippers” do with real estate. If you buy from a flipper to flip for yourself, good luck.

A lot of discussion is going on about a new tech bubble. This started years ago, but Groupon’s recent rejection of Google’s $5 billion+ offer has brought the web 2.0 bubble (or whatever we are calling it) to the top front of web entrepreneur’s minds.

There damn well may be a new web tech bubble right now. Is hopping on Second Market and buying up Facebook stock a good idea? Make your own decision. One thing is clear, your going to have to put mid nine-figures in to it if you want to become another Facebook billionaire.

Over the past six years it has been very disappointing seeing other website publishers fail to take their company seriously. When you build something online that works, and you have your shit together, it grows fast. If you are an innovator let the people who read the how to get rich online blogs fight over the tiny markets.

We are hardly 15 years in to the internet being a mass market medium. Imagine the first oil boom, only 15 years in. Unlike oil, this industry will still be around in 100 years. Buckle your set belts, if your smart you don’t need a stock or real estate bubble to become wealthy.

When you own a contextual advertising network the most important thing is the content of a page rather than the details of its users.

So, if one of your biggest competitors is about to launch a demographically targeted display ad network why not make it easy for your user base to cripple their tracking methods?

The change in Google CEO’s triggers the beginning of an escalating war between the web’s largest giants..

Is your audience dumber than a pile of bricks? Google’s new reading level results give publishers and online advertisers a glimpse in to whether readers struggled through 4th grade English class or polished off textbooks for dinner in college.

I ran a few popular news websites through Google and came up with some interesting data points. Perhaps the secret to Gawker’s successful blogging empire is that their audience isn’t even as sophisticated as Sarah Palin? After all, FoxNews.com has even more intermediate and advanced text content than NPR.

Future ideas for Google’s rating tools: estimating individual users’ IQ based on public social network profile content, gmail reading level, and demographics.

I through in a science site as a baseline to “higher end” content:

Intentional focus, exceptional management, and robust balance can go a long way to keeping you in business. Often what appears to be a dead end is simply a navigable roadblock.

Curiously since entering the industry full time around 6 years ago I’ve seen a lot of different people share in the same small pool of mistakes. Most of these mistakes are the result of a complete lack of focus, exceptional mis-management, and a total personal life imbalance.

Cynicism aside, the industry is only getting more interesting, not less. I thoroughly enjoy the dynamic of a rapidly evolving environment that makes the “veterans” heads spin. These mean more opportunities not less. When markets have big shakeups it becomes evident who are the innovative thinkers, and who just got lucky and followed somebody elses’ instructions. If you don’t find innovation fascinating, your in the wrong industry.

Here is a way to practice innovative thinking over the holidays: take the Groupon challenge and think about how you could re-invent your business model so it could reach a $1 billion valuation in the next 16 months. And for 2011, don’t forget what I wrote in this post.

What is Yahoo anyways? Apparently little more than a content farm spewing out cheap low quality articles for display advertising revenue. That is pretty sad for a company that was once the most serious competitor to Google, one of the most valuable companies in the world.

I think you could earn an MBA’s worth of knowledge just studying the management, operational, and financial differences between Yahoo and Google. The saddest part of this whole story is just how many opportunities Yahoo threw away. Yahoo has well earned the name as the place start ups go to die.

Even grimmer news came for Yahoo this week with Facebook’s announcement of their new messaging platform, as Yahoo Mail is responsible for a huge chunk of Yahoo’s user base.

Yahoo as a search engine company: dead. Yahoo as a pay per click company: dead. Yahoo as a webmail platform: at risk. Yahoo as a content farm: alive and well.

News to content farms and investors thinking of putting their money in content farms that do not return a profit immediately: Google is addicting you to their traffic. Then they are going to pull it, and then you are going to pay for it. And if it really is a good business model it won’t be long before Google brings it in house (take a look at how many media farms are in the top 100 US websites list — thats a Google business model.)

From the reflections of Randy Farmer in his blog post I linked to above: “..When those personalities leave, their projects immediately get transferred to Bangalore for end-of-life support” The future of Yahoo: a content farm run on life support.

Today Google closed up 11.19%. Three days ago Chris over at WebsitePublisher.net reported making a record breaking amount of money off of Adsense this past September and had this to say:

What I’m curious about is if others have noticed significant revenue increases thanks to Google’s 728×90 redesign, and if so, I wonder if it is enough to move Google’s quarterly results. They report this week, it could be a good time to buy Google stock. I know in the past, being someone who pays attention to these things, when Adsense has done well for me Google has always reported a blowout quarter, so maybe my sample size is enough to show overall trends. I don’t know, but things are definitely looking up.

This is a very good indicator of the health of this industry.

The domain name business is very different today than it was in the 90s, 2000, or even 2005. It is very possible that a shift in value away from domain names is underway (but there is still incredible value to be found by people who understand traffic value and excel at marketing.)

Why is a domain name worth anything? Because a domain name, specifically from a recognizable extension, is an internet address — a destination — that consumers understand. I know that I can type in whatever I am looking for .com and find it. Unfortunately for domainers the tide has begun to shift, both as major traffic players begin to wage a war on direct navigation and as major brands shift to alternative internet communication streams (how many of Zynga’s 200 million+ active users do you think have actually visited zynga.com?)

One thing the top domain name investors got right was understanding that this business is about traffic. Quality, targeted, internet traffic delivers many billions of dollars in value every single year. Capturing even a small portion of that flow easily results in a multimillion dollar cash flow. It would seem that a mere 5 years ago the majority of internet entrepreneurs had substantial difficulty understanding this.

From my observations there is no shortage of D list domain names priced in the high five figure and six figure price range. A D list domain name is a domain name in which the end buyer has to add immense value in order to come out ahead. Often an individual marketplace can only support a handful of serious contenders while there may be hundreds or thousands of D list domain names for sale.

D list domain names require an end user to utilize additional ad dollars and know how in order to leverage the value out of the domain name (generally that means spending millions of dollars on advertising over the course of a year or two.)

Unlike the D list, generic domain names produce a value stream on their own. As of today, search engines still disproportionately value generic keyword domain names over many other factors. Not only does this mean free organic search traffic (with a little SEO effort) it also means an edge over competitors in the pay per click marketplace thanks to a higher ad clickthrough rate. The same can not be said of D list domain names.

To me, the domain name marketplace resembles a landscape that was once overflowing with natural resources that has now been ravaged bare. The sharp eye can still find a few remnants of value but the novice is overwhelmed by hucksters marketing worthless rocks as gold. As for the real gems, on occasion they surface, such as at auction (Moniker’s are fairly good.)

So what is your domain worth? If its a single word or phrase found in the dictionary, probably a fair amount. Anything else, and its probably not worth a whole lot on its own.

The business model of the traditional domainer is crumbling. Google and now Microsoft control how much money you make from parked pay per click revenues. Google and Microsoft control how many people get to your domain name through the web browser (and Firefox and Apple and at an increasing rate your telecom provider, more on them at another time.) Google and Microsoft control the marketplace for how you receive traffic through the search engines.

Microsoft’s takeover of Yahoo’s search has an extraordinary implication to domainers. The companies that control the platform visitors use to get to your website now control how much money you make from your parked domain. Don’t want to let these companies monetize your traffic? Then why should they send their valuable visitors to you at all?

By the way, I’m spending more money on domain names than I ever have before. Why? Because I understand how to extract their value. If you don’t, I would suggest learning how. Personally I prefer the environment we have now. The harder things are, the more they change, the better off I am because its that much harder for everyone else. Adaptive learners thrive in this environment because new opportunities appear (and vanish) daily.

Internet Brands, the owner of vBulletin, is being taken private for $640 million.

Besides vBulletin, Internet Brands owns a bunch of message boards and websites across different categories. Back before their 2007 IPO it appears they dealt primarily with vehicle and mortgage verticals. After their IPO they expanded to new categories such as careers and travel, using the IPO money to buy up lots of developed websites and domain names.

The exact benefits or reasons for going private are hard to tell. I would suspect it may have to do with the current availability of cheap credit and the owners/directors not having a very positive outlook on their long term future. On the other hand it eliminates the costs of regulatory compliance being a public company and allows a company to operate without making all their business activities public via SEC filings (its easy to demand more money when you know exactly what your prospective buyer has been paying out to everyone else.)

There are several other companies like Internet Brands that have a strong track record of purchasing the type of websites developed by self employed website publishers. The biggest mistakes I see publishers make are building out sites in the wrong vertical and treating their business activities as a part time hobby.

Even though companies such as Demand Media are heading the other direction and seeking an IPO, both events are good for website publishers because they publicly establish financial valuations that allow more investors to “understand” the business. Publishing content is very much a hot area and you can count on more copycat acquirers to help drive up the valuations of your internet properties. Also don’t be afraid to use your knowledge of how the business works to purchase, or short sell, companies that make money from content publishing (however understanding how to read company financials is just as important.)

My competitor has one product that is not free and can’t be given away for free. This single product is so profitable that my competitor uses it to fund development of a copy of my main revenue driving product (that they give away for free) just to fuck with me.

My first business model is in a lot of danger. I already make some money from my competitor’s main market, but there aren’t a whole lot of my companies resources dedicated to that market and we spend a bunch of money on other random crazy shit.

My competitor is Google and my company is Microsoft (not really, its a story.)

Microsoft’s complete takeover of Yahoo search business is imminent. The organic listings have already transitioned and paid search results will come shortly.

Big problem for Microsoft, its not a seamless transition. Each Yahoo advertiser will need to manually move their campaigns from their Yahoo account in to Microsoft’s Bing Adcenter. Account limitations and set up on Yahoo are very different than Microsoft’s Adcenter. So different that some people are recommend you take your Google Adwords campaigns and migrate them to Bing! Guess what, a lot of advertisers will not be able to fully make the transition. Some will make it, but with a struggle. In the meantime, Microsoft is not going to make as much as they expect to (hopefully Yahoo got a flat rate guarantee.)

I feel bad for Microsoft. When big industries change, and they have poor leadership, your good employees go work for your competitors and make them better companies. The people that are left aren’t the visionaries. They may be bright, they may be sharp, but they weren’t sharp enough to see bigger opportunities for themselves, and they certainly won’t be able to take advantage of those opportunities for their employer.

I hope I’m wrong. Google needs strong competitors. It means a better environment for advertisers and stronger payouts for web publishers.

Update 10/30/10: Looks like I was right, to some degree. Yesterday Search Engine Roundtable reports on advertisers seeing a “major” drop in traffic in their Microsoft Adcenter accounts (which is how you buy advertising on Bing.) I can confirm this first hand as its happened to us as well.

What I reported in this post earlier was an early sign, to me, of potential problems. While they finally did come out with an account migration its likely that this transition was not well prepared. That is not a good sign for Yahoo or Microsoft shareholders.