Should Microsoft dump Bing? Is frown fraud the new click fraud?

Bing the Albatross?

Today brought a flurry of articles digging into the details of Bing’s business model, and asking about the service’s long-term future. Among them:

• Rimm-Kaufman Group, a PPC agency worth keeping an eye on, picks apart where Bing and Yahoo underperform, noting that the search alliance sites have a declining share of total paid clicks.
• Business Insider runs with that information, chalking the problem up to Bing’s different system for broad-match targeting. (If it’s really that simple, smart agencies like, say, RKG, would have arbitraged it away by now.)
• And not to be outdone, Reuters Breakingviews suggests that Bing should be sold.

When there’s a big, expensive Internet asset that’s clearly very strategic, but only in the distant future, there are two plausible buyers: Microsoft and Google. Facebook has little reason to buy Bing when they can continue to use it instead, and it’s not the kind of acquisition Apple makes, either.

New Frontiers in Eye Tracking, Creepiness

A new startup lets people volunteer for a feed from their webcam to be analyzed while they watch an ad. This is a great way to get a discount on eye-tracking data, but “discount data” is not a commodity in high demand. The demographic that would consent to this is not representative, and that’s ignoring how many people will deliberately toy with the system. Click fraud is bad enough. Welcome to the world of frown fraud.

AirBNB Raises a Huge New Round

AirBNB has raised $112mm from Andreessen Horowitz, DST, General Catalyst, and Jeff Bezos (and very much in that order). This is their second round after raising roughly $8mm from a completely different list of investors. Before that, it was the usual YCombinator round. YC founder Paul Graham has “palpably settled in” to go public. Their usual excellent PR is also on display; this accompanies a glowing NYT profile.

Betabeat claims that AirBNB is spamming Craigslist, as they were accused, a few months ago, of doing, a few years ago. The current “spam” is qualitatively different, and fits in with standard practices on Craigslist. In fact, the current alleged spam is using Craigslist for exactly what it’s for: showing people in the community what they can buy.

Deep Thoughts on Tech P/Es and More

Two great thought pieces today: Felix Salmon has found a Warren Buffett / Bill Gates dialogue on tech stock P/E ratios, in which Buffett points out, and Gates agrees, that technology stocks should trade at a discount because of their inherent uncertainty. That gets into the broader question of whether that’s uncertainty on the upside or uncertainty on the downside. All else being equal, generic variance in return is worth a tiny discount (especially in a low interest rate environment, when it’s cheap to lever up on low-risk assets in order to match a given level of variance).

On a somewhat related note, Roger McNamee of Elevation Partners has some wild opinions on the future returns from the “social” sector (Zero. Not as in “a 0% return on investment,” but as in “That investment is going to $0.”), “non-search search” on sites like Match.com and Reatlor.com, and the effectiveness of HTML5.

LegalZoom Raises $66mm

LegalZoom is in the fairly boring business of automating the easy 80% of the law industry. Now they have a larger war chest. LegalZoom already ranks for an astonishing variety of terms that involve legal actions, including “wills,” “llc,” “patent,” and “divorce process.” They’re also aggressive bidders in the pay-per-click market, but a glance at the average search results page shows that they have room to raise their bids substantially.

Zynga Returns to Social Gamings’ Roots With Tencent Deal

Zynga has adopted CityVille to the Chinese market through a deal with Tencent. It will be interesting to see how Zynga competes with the far more established players in the Chinese virtual products industry. It will also be interesting to see how Facebook responds to this attempt to build a product on a new platform.

Google’s Next AdWords Won’t be AdWords

One of the convenient things about Google is that their successes are really, really massive. But as they’ve grown, they’ve pursued some smaller, less scalable markets, as well. This is a nice way to bump up their returns in the short term, but it’s going to leave them tied to general online ad growth in the longer term. A few recent examples:

• They now have special icons for their ‘click to download’ mobile ads’.
• They rebranded Google Boost as AdWords Express, a very simple way to promote a local business.
• They keep launching new universal search features, like holiday search.

What these features have in common is that they all create new ad markets—with about 1% of the revenue potential of AdWords.

Google+ Gaming Begins

An SEO agency is selling +1s. Any known search signal can be gamed for money, so Google is likely aware of the risks here. One advantage they have is that Google+ was originally tied to Google profiles, so they can safely discount new profiles without losing much of their utility.

Newspapers on the Web: Two Narratives

Did newspapers perform poorly on the web because of a widely misunderstood court ruling in 1995? Or because their print designers have better taste? Neither explanation seems to have as much force as simple economics: when the marginal cost of delivering news drops by orders of magnitude, the economics of every single part of the business should change. But sure, bad design and bad lawyers might have something to do with it, too.

Digital Due Diligence Daily?

When we started Digital Due Diligence, we promised a weekly summary of important developments. That still seems like a worthy goal. But things are changing faster than we expected, and newsletter readers are relying on us for more information. So we’ve decided to try stepping things up for a while.

We’re going to try sending a newsletter every business day this week, and see if we’re able to maintain our usual level of quality in a more manageable format.