Display Ad Spending vs. Search

The story of the week has largely been about the growth of online ad spending.  While this seems like a well-trodden, tired conversation,  it got a pretty nice boost this week from Fred Wilson (which was inspired by a presentation posted in The Atlantic here).  In an earlier post I wrote I talked about the semantic web and Facebook’s bold venture into becoming the servers that will deliver relevant advertising based on what we like (here).  I want to continue down this road and talk about content sites and advertising.

Over the past several years,  “clicky” sites have beat out the “sticky” ones because of the economics of intent-driven, performance-based media (Chris Dixon explains this far better than I can).   Content has taken a back seat to sites like Google, which generate a lot of visitors who spend very little time on the site before clicking out to purchase (or to consume content).   This type of behavior generates a lot of revenue, is highly measurable and marketers like it because they can calculate a direct ROI (spend $100 on performance-based media like Google Pay-Per-Click, generate $150 in net income from the refers and you’re just made money) .

This development has been great for growth in the online economy; it has fueled innovation and brought transparency and validity to the space when it needed it.  But, while SEM is a highly efficient means of advertising, it’s a terrible way to create brand equity.  I believe that display will get a shot in the arm from companies like Facebook, who will be able to generate relevant, targeted ads to consumers. I think this will be a good thing for the web because it will likely drive demand for more rich, content-heavy experiences online.  Display advertising (I’m not necessarily talking about IAB ad unit banners) works best in places where a user stays on a page for a while and consumes content (I have no proof of this, but I like associating brands with experiences and I believe that most people feel the same way).

Of course, the real win for online display advertising will be when someone figures out a way to really measure engagement.  The way the system currently works, people see ads everywhere, but when they decide to buy they go to Google, search the keyword and click on a sponsored or organic link.  It’s unfair to credit Google with 100% of any given sale;  a user might have read a review on a blog, viewed a few display ads, or even (say it ain’t so) read an ad in a newspaper.  Right now all of the credit for the sale goes to Google  when in reality the credit should be shared across  the marketing funnel.  Engagement marketing is an important part of the equation and is often ignored by marketers at the risk of brand dilution.  As the web becomes a more personal experience for us all,  I think we’re going to see growth in the engagemnt side of things again.

Bebo & Ning: Second Place In Social Networks

Recent developments surrounding the world of  social networks are consistently pointing to a consolidation of social networks online.  Facebook currently touts over over 400 Million users.  It’s difficult to say how any users Twitter currently has.  The last numbers I saw were about 75 million, but I may be quoting an old stat.  Regardless,  these numbers trump Myspace and every other social network that has hit the web 2.0 scene.  On one hand, this is a story about the emergence of clear winners in the battle for clear market dominance.

The other half of this story is about social networks which are starting to falter, or admitting defeat.  Last week Ning announced that it was getting rid of free services and cutting 40% of it’s staff.  In even bigger new,  AOL has also announced that, two years after buying Bebo for $850 Million, the company will sell or shut down the site.  It’s becoming clear that a lot of second-tier networks are losing their user base and becoming ghost towns.

The emergence of a winner may have been inevitable.  However, I don’t have any interest in criticizing AOL for their acquisition of Bebo.  At the time of this transaction (2008),  social networks were still anybody’ game;  I believe MySpace was just over 100 million users at the time, 25% of where Facebook currently stands. In the social networking world network effects are profound, but as recently as 2008 the space was shaping up to remain fragmented, pulling in users of like interests and/or demographics very much the way forum-based communities still do.  If you were trying to establish a social media presence,  a brand or person used to build profiles on Friendster, MyYearbook Bebo,  Myspace and others.  When I was still working with record labels on social media strategy, we used to recommend web ubiquity, putting a profile on as many as a dozen social networks.  It seems that’s all over for now.

The 2007 social network world was killed largely by the sheer volume of consumers that poured into Facebook.   400 million active accounts is pretty much everyone when we’re talking about a place to put profiles.   But I’m not sure the world was a better place with the fragmented network system that we had before (the world of MySpace, Facebook, Bebo, NING, MyYearbook, Friendster, etc.). Yes, there were more choices and less restrictions for users, but all of these options are free for individuals so there’s not a price problem for consumers.  I think this presents some challenges for advertisers and I think this presents some serious challenges for developers.  Everything is platform dependent now and I’m not convinced that this is a good thing when it comes to Facebook.    Every time you get a clear market leader like Facebook, consumers and suppliers lose choice and the world becomes (just a little) less interesting.

Locking on Strategy: Apple & Twitter

I’ve been trying to identify a trend I’ve seen this week in my RSS feeds, told through the story of Apple changing rules on iPhone application analytics (Venture Beat), the much-discussed HTML5 vs. Adobe battle (I like this Scobleizer read which discusses it)  and  Twitter developing 3rd party applications for mobile applications and acquiring Tweetie (I downloaded the Twitter application for Blackberry yesterday and it’s excellent). It seems that the biggest innovators in technology are integrating and consolidating their channels.

It’s been interesting watching these companies shift strategies and jockey for space.  Apple has always kept a somewhat closed shop.  The recent exclusion of Adobe Flash from the iPad was a bold move on Apple’s part, but not entirely surprising considering the company’s history of being a vertically integrated firm that does not like becoming dependent on channel partners.

Watching Twitter and Facebook move around has been the more interesting story.  For the past year, Facebook has been redesigning it’s user experience to mimic Twitter’s model.  Status updates and tweets are a very similar now, and this is most likely the result of these platforms focusing exclusively on gaining advantage through network effects.   Twitter and Facebook have been dependent on content and users first, revenue second.   Now that they have both gained massive user bases and rapid adoption growth; the focus is turning towards revenue generation.

Facebook generated over $500 million in 2009 revenue, which came thorough display and performance-based advertising.   Let’s assume that Twitter is moving into third party applications in order to serve up mobile ads; is it enough to match the revenue levels that Facebook has generated?  The picture gets cloudier when you consider  the fact that Facebook made the majority of their ad revenue through 3rd party application advertisiers like Zynga.  The platform has already chalked up some revenue by licensing their search results to Bing & Google, and I believe there is more revenue down this path in the form  of brands looking for in-depth market research along the lines of what BuzzMetrics offers.

Another route is the sponsored tweet.  I’m not a huge fan of this model as a user or as a marketer–  I just think earned media should stay earned and buying people’s twitter feeds doesn’t seem like a scalable, sustainable model to me.  The fact is that Twitter is an unbelievably useful, intriguing and transformative technology. While I’m not certain what their revenue model is going to ultimately be, I imagine it will be a combination of the revenue models that we’re seeing now (some search, some mobile ads, some sponsored tweets). Regardless what their ultimate revenue solution is,  the platform is undeniably here to stay.

UPDATE: Twitter announced it’s model for rolling out sponsored tweets yesterday , and will discuss them in greater detail ad the AdAge Digital Conference, here in New York, next week.    I’m looking forward to seeing how these perform.  Clearly, opening a channel for  more mobile advertising is a big opportunity.

The Media Generation (M2) Means CPMs will Change

I really enjoyed checking out this writeup on Silicon Alley Insider about the media habits of 8-18 year-old American kids.  The study was released a few months ago by the Kaiser Family Foundation (you can see the full study here).

There are a few choice statistics in this report.  The most interesting piece to me is the amount of media exposure that tweens are exposed to today, and the exponential growth rate that they’ve experienced.  At 10.5 hours in 2009,  kids are essentially spending every waking moment consuming media.  What’s more, this represents an increase of 43% from media consumption levels from just ten years ago.  I’m unsure how kids can find this kind of time in their days.  It would seem to leave little time for anything else.

Studying is wasting XBox time (teen interviewee)

In most interviews taken, kids are talking about texting, listening to iPods, watching TV and playing video games, often at the same time.    Social networking takes up over 2.5 hours per day.  Other top time-consuming activities include playing video games and watching online videos:

I propose that this level of media exposure greatly lowers the value of advertising, in general.  Let’s look a t a 30 second television advertisement.  In a 10.5 hours media consumption day, that’s 1/1,260th of the media “real estate” that a kid is consuming today; is that worth the price of admission?

Additionally, it seems that kids are multitasking more than ever; which lowers the amount of attention an advertiser gets with their spot.  I believe this is why media buying will move further towards measuring interactions instead of impressions.  The value of simple impressions has dropped significantly in the past few years, and probably with good reason (CPMs can be purchased for less than $2 in some networks).  How can advertisers be certain anyone is even exposed to their ads if  they take up such a small piece of the attention pie?  The only answer seems to be inserting an interaction qualifier:  using QR codes, measuring clicks, using tracking URLS and other interaction-based measurements are going to increasingly become the standard.  The downside of this, as Chris Dixon points out, is that buying performance tends to rewards content light sites where users go often, and click through quickly (at least for any cost-per-click or affiliate marketing programs).  This creates new challenges for the media industry as a whole, as advertisers will continue to search for ways to become signal in an increasingly noisy environment.

Twitter Ad Networks: Paid-Earned Media

A Friend of mine sent me a link to 140 Proof, an ad network that serves up sponsored ads in Twitter and asked me for my onion on the network. I’m not going to link out to the network, but I would like to talk about my thoughts on this approach as a business model.

I went on the site to find out a bit more information on the company. It was interesting to click on either the “Publishers” or “Advertisers” links on the site, because they both attempted to access and update my Twitter account. I find this unusual behavior for a company who is trying to sell me ad inventory on Twitter, while simultaneously asking to borrow mine without offering any value first. Anyway, here was the email I replied with:

Hi!

Quick response:
* I don’t know anything about this specific agency, but I’ve spoken to others
* I’ve never run a paid media campaign in Twitter
* I find these networks somewhat objectionable and annoying because it’s interference marketing with very little value (I may change my opinion on this, but Twitter is so self-promotional as it is that it seems ridiculous to purchase tweets). With that said, it’s certainly gaining popularity.
* A colleague of mine purchased this type of media for {a client} and reported that it didn’t perform.

If you want to purchase this type of media, make sure it can be performance-based (number of clicks or registrations- not CPM) and understand that you will not be able to target it very well.

That about sums up my opinion of buying earned media. This type of advertising strikes me as being no different from advertorials, and brands wishing to establish relationships and drive beyond a click should be careful when purchasing media like this. Duping someone into clicking on your ad is not advertising.

Facebook Leads Sharing, So Content Changes Forever

As someone who works in social media, our biggest driver for success is organic sharing of information and content. The chart below from Silicon Alley Insider shows what many of us already know on an intuitive level. Facebook is the epicenter of all things social:

I’m fascinated that sharing on Facebook is higher than email, although I guess we shouldn’t be surprised. The sharing function on Facebook is so easily integrated into the experience, it’s a natural evolution that it should become a center for sharing, seeing as how everyone, even my grandma, seems to have embraced it. But what are people sharing, really? I think it’s safe to say (in a broad-stroke kind of way) that people are sharing some type of content with one another. Whether it’s a video, an interactive application, a photo or an article- it all comes down to content being shared, and becoming more (or less) valuable as a result of that sharing. Which brings me to another point: as social networks become the drivers for content consumption and sharing, communication will change forever.

In the past, content consumption and advertising communication was a one-to-one communications strategy. Advertisers structured their creative, built out the assets needed for the media channel and disseminated that message to the masses. After the message was distributed, ads had done their job. Marketers would have to wait to see the results of their communications efforts, because people would digest the message, maybe discuss the content at the water cooler, and make a purchasing decision somewhere in the chain. This meant that commercials were designed to speak to the individual. For example, if you wanted to sell beer through television, you needed to create content that would speak to a large number of individuals. Bud Light is talking to me, hoping I didn’t change the channel or go to the bathroom, and measuring their success based on whether or not I buy their beer later on.

With community consumption, the rules are entirely different. Now the messaging is one-to-many, or one-to-community, and we’re all able to consume content together and discuss it in a very public way. The success of your content can now be determined almost immediately, and purchasing decisions will most likely be made not based on the content, but on the public response to the content. This is a totally different scenario– game changing. Think about how you behave as an individual, then think about how you behave in a group. I think Tommy Lee Jones pretty much nails in this scene from Men In Black. This also gave me an excuse to put a movie clip in my blog post:

How can we continue to create the same type of experiences that worked in television, and try to apply them to a socially networked society? The short answer is that we can’t. We need to be creative about the experiences we’re creating, because people are undoubtedly going to talk about it together.

The distance between zero and one

by Christian Brucculeri

A friend of mine once told me that this distance between zero and one is infinitely greater than the distance between one and two. I completely agree and, in homage to this statement, I am filling this space with my first blog post.

I’ve been holding off publishing anything due to the fact that I couldn’t think of a title for this blog, grab a vanity URL or even find a decent graphic to post in the header- all simple tasks, none of which I’ve been able to achieve. I can chalk it up to any number of reasons: I’m too busy, I’m too busy and of course, I’m way too busy to start a blog.  At the end of the day that’s starting to feel like a pretty lame excuse.

I am hoping that this post will serve as a swift kick to get me started. Hello empty space!!

“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that moment one definitely commits oneself, then Providence moves too.

All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in ones favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way.

Whatever you can do, or dream you can, begin it. Boldness has genius, power and magic in it.

Begin it now.”

GOETHE