Archive for the ‘advertising’ tag
I was very excited to stumble upon Mike On Ads, a fantastic blog authored by Mike Nolet who was at Right Media before co-founding AppNexus and is currently CTO. I ended up spending a couple of hours today reading through many of his posts and learned a lot.
I really like how Mike dives into topics such as RTB from the various stakeholder’s perspectives and goes deep enough on the tech details to add color to his points. For example, when talking about the cookie-matching challenge between bidder and exchange, he first explains at a high-level why it all matters for RTB and then draws the following diagram to explain exactly how this issue is being addressed:
Some of his recent gems are his series on Real Time Bidding, this post that does a great job of disambiguating ad-exchange/network lingo into functional meaning, and posts like this on industry trends. So many other great posts on ad exchange vs. network, behavioral ad, cookies, etc.
Mike On Ads is an exciting addition to my blogroll and will now be the site I recommend to others who are looking for a primer on online advertising!
For those of you that aren’t familiar, Facebook’s Ads platform allows advertisers to target ads towards users whose profiles include certain keywords. Today, AllFacebook is reporting that facebook will now refer to this keyword targeting not as “keyword” targeting but as “likes and interests”. While a subtle change, this, from a marketing perspective, may actually be pretty brilliant. “Target ads to users who like the Boston Red Sox” sounds a lot sexier than “Target ads to users who have the words boston red sox somewhere in their profile information”. Moreover, the “likes and interests” language is clearly distinct from the “keywords” language that just about every other ad platform on the Internet uses. Furthermore, it’s a language that Google and the other top ad networks can’t speak that fluently.
However, what is most intriguing to me is if and when Facebook will be launching a likes and interests Suggest tool similar to that of Google’s Keyword Suggest Tool. Assuming Facebook is tracking the necessary ad click data+metadata (which I’m all but sure they are given that they seem to track everything), such a tool would be a boon to all advertisers, but especially those (majority) advertisers who are unfamiliar with social advertising.
Hulu, the hit free online video service backed by News Corp and NBC, has been a shining example of how big traditional media companies are finally starting to “get it”. Hulu represents big media company’s recognition that fighting the illegal distribution of their video content by blackmailing ISP’s to curb bittorrent traffic and threatening YouTube (and others) with lawsuits is not a forward-thinking strategy. Via Hulu, big media companies embrace the opportunity to control the delivery of their content and (attempt to) effectively monetize it. The result is a win-win for big media companies and consumers. Not surprisingly, the site’s traffic growth has been staggering:
Enter Boxee. The first time I heard about Boxee, I was excited. Over the past five years or so, there has been an increasing demand by consumers to watch digital video content on their TV. A few years ago, Microsoft proclaimed the future to be a PC hooked up to your HDTV powered by Windows Media Center. I think it’s safe to say that vision didn’t quite pan out. However, we can thank Microsoft for creating the XBox because from that XBMC was born. XBMC was the first powerful glimpse of what a media center should be. It allowed streaming of video content over the network and, being open source, many interesting features, such as web browsing and music players, were integrated into it. The problem with XBMC was that you had to find and hack an XBox to get it. Not mainstream. Apple TV could have been a breakthrough product but, in true Apple fashion, the closed nature of the product and DRM restrictions limited its potential it. XBox360 and PS3 make major leaps by allowing users to stream unlicensed video content, but stop short of really embracing the media center concept. Finally in June of 2008, Boxee releases an Alpha of what eventually could be the first mainstream media center software product.
I’ll let you visit Boxee’s web site and discover all the useful features of the product and how you can obtain it. One of the killer features the Boxee team added was Hulu streaming.
Last week alone, Boxee claims to have streamed over 100k Hulu streams. That’s a huge number considering Boxee’s installed base is still pretty small. At a glance, this would all seem like a win-win-win. Big media companies control content delivery via Hulu and Boxee enables Hulu users to enjoy the flexibility of using the service on their TV. Unfortunately, good things don’t last forever. Somebody was going to get hurt. It turns out, it’s Boxee.
Apparently, the big media guys didn’t like that consumers could watch shows like Lost and 24 on their TV via Hulu. After all, big media makes its money by selling TV ads. If Boxee users could enjoy their favorite shows on their TV via Hulu, then big media sells less ads and earns less from cable providers for channels like FX and USA.
The problem in this logic is that it seems to me that Fox/NBC hasn’t really thought this through. What will these Boxee users do instead of watching on Hulu? My guesses are:
1) Tivo/DVR the shows. Result: Ads are skipped altogether. No cable viewing.
2) BitTorrent. Result: Ads are non-existant. No cable viewing.
3) Doesn’t watch the show. Result: This hurts the media companies in several ways. Ads are not seen and no cable love because the show is not seen. The show ultimately becomes less popular, ad space is less valuable, less DVD box sets are sold, less syndication monies, etc., etc.
See a pattern? =) By blocking Hulu on Boxee, Fox/NBC are simply creeping back into their old-school mentality that is slowly bleeding their ad money dry. My hunch, like many others who have blogged about this story, is that this decision will be overturned. Unfortunately, I wouldn’t be surprised though if there are some restrictions placed on Boxee to encourage Hulu users to watch on their PC. Such restrictions could be no HD content or more annoying ads. We’ll see…
One of the items I put on my to-do list is to do some research on what the ad rates are for Hulu (and others like MTV’s Overdrive) and how that compares to TV on a per impression basis. My hunch is Hulu is way higher…I’ve found myself actually intently watching the 30-second ad spots! That rarely happens on TV. Plus the other side benefits of delivering the ads online like opportunities to interact with the ad. I’ll report my findings in a later post!
Have you ever received an ad that was so relevant to your needs and interests, that you were happy to see it? A Google AdWords ad maybe? Or maybe you saw a discount code for your favorite clothing store? My guess is at some point you have. In fact, a recent study in the UK revealed that 71% of young people surveyed would like to receive advertising messages targeted to their particular interests.
Advertising is everywhere we see. Our brains are trained to automatically ignore much of it. While some ads are so extremely unrelated to our interest that it catches our attention. That’s spam. Yet some minority of ads catch our attention because they’re so interesting as to be highly informative. In this case, the ad is a service to the consumer. Think of it like a continuum where the variable is relevancy.
So what if a publisher served only those ads that were very relevant to each consumer. The consumer is happy. The advertiser is happy because their message is reaching exactly those consumers who are likely to act on that message. Publishers are thrilled because they’re making money by very efficiently connecting advertisers with consumers. Win-Win-Win.
Of course, this “perfect” targeting is the holy grail. It doesn’t really exist in any sort of mass scale. But, what if I told you that a company in the UK is so good at doing this that they claim to generate enough ad-based revenue to pay for your cell phone & service? In fact, that company is Blyk. Blyk offers teenagers and young adults in the UK a phone, and service for free. The recipient agrees to receive occasional ads. About a year ago (the service was quite new back then), they claimed 29% average response rate to ads. How do they get such high response rates?
Are you a UFC fan? [*Y/*N]
XBox360 or PS3? [*X/*P]
Want to hear a sneak peak of the new Radiohead album? [*Y/*N]?
Essentially, Blyk polls the customer to learn about their preferences. They
1) Send a text with content that encourages a simple call to action (“Watch UFC?”)
2) Based on this primary data, they send an ad in the future (“Check out UFC 49 this weekend. $20 on PPV… Call now to order!”).
Blyk’s advertisers and customers are happy. Everybody wins, especially Blyk.
Let’s think about how this might work for a site like Facebook. On Facebook, users are already expressing their interests in a variety of areas. They do this not just statically on their profiles, but constantly via the other social interactions like fan pages, groups, status updates, wall posts, etc, etc.. Fan pages and groups are useful data points but mining user-created content is extremely challenging.
I think a Blyk-inspired system could work on Facebook. I’m curious to know the response rate of the existing Facebook Polls feature. If it’s even somewhat high, and since it’s in the feed I have a hunch it is, Facebook could very easily start to poll users for the purpose of collecting high quality data that makes sense to advertisers. Or, as is suggested in this Telegraph article today (the story is now being denied by Facebook PR), advertisers themselves could poll users via Facebook. Facebook wins two ways. First they earn revenue from the advertiser to run the poll. Secondly, Facebook can charge a very nice premium for enabling advertisers to then deliver ads to specific sets of users (based on their answers to prior polling).
If Facebook executes this well, this may actually improve the user experience. Instead of Facebook being increasingly cluttered with spammy ads, Facebook could serve fewer ads that are, referring back to our earlier continuum, so relevant to the user that the user is happy to see them. Moreover, from a revenue perspective, the rate they could charge for serving a single highly-targeted ad earns orders of magnitude more money than serving hundreds of garbage remnant inventory ads.
Sounds like a plan to me?? Opinions?
Lookery, an ad network for Facebook and other social networks with developer platforms, announced that, as part of their effort to rapidly grow their inventory, they are offering guaranteed minimum of 12.5 cents CPM for the next three months for an exclusive on the application’s traffic. 12.5 cents CPM at first glance seems awfully low but one must consider the alternatives.
Ad rates, in this case we’re talking in terms of CPM, generally correlate directly with context. Stronger context means a more focused audience. Targeted ads for this audience brings in high rates. For Facebook apps that have pages with real context, it’s likely that they can and should do much better than 12.5 cents. Depending on the content genre, it may take a bit more legwork on the part of the developers to find the right advertisers who will pay, but if the volume is there, it shouldn’t be too hard. However, for apps that have no real context (the majority of apps), 12.5 cents CPM may be about as good as they can get. Facebook itself sells its “flyer” ad space (the left column under the nav links) for not much more than this. In fact, I recently paid about 20-25 cents CPM for an ad and that was when I instructed Facebook to serve my ad only to a very precise demographic (matching only ~40k users out of the 50M+ Facebook userbase). Without such targeting, I would have gotten away with paying much less.
From my own experiences, I’ve found SocialMedia to be quite lucrative. SocialMedia advertisers, primarily developers who are buying installs for their own applications, pay 15 cents and upwards for a click. When SocialMedia first launched, when we published their ads prominently at the top of our canvas pages, we saw eCPM as high as $2 or so. Now it’s less, but still is above 50 cents eCPM. My hunch though is that applications which serve massive page views, particularly a large number of page views per user session, will see decreasing eCPM from SocialMedia. There’s only so many ads that each user is going to click in a session, no matter how many page views in length. Again, this is just a hunch though.
So, if you are one of the application developers that has a massively popular application which offers no meaningful context, then Lookery’s offer is probably pretty attractive. And this type of developer is exactly who Lookery wants in order to achieve their goal of adding a billion page views of inventory a month for the next few months.
Google introduces PPA
The big news of the week was that Google released a pay-per-action (PPA) advertising product. This has been hinted to for a while by Google. In fact, during their Q2 ’06 conference call, I noted several references hinting to a future PPA product. Long-term, Google is definately going to increase advertiser’s confidence in Google’s ad networks with PPA. Most importantly, advertisers concerned about click fraud should be very happy about this. I also liked how Google will be ranking ads by profitability per click. It’s a simple and very clever strategy. The big problem with PPA is that you are relying on the advertiser to effectively convert clicks into actions. If Google deliver clicks to the advertiser but the advertiser does a poor job of converting those clicks, then Google would lose. However, by giving advertisers who deliver a higher rate of profitablity to Google, Google, in effect, forces advertisers to focus on conversion.
This focus on ad profitability will also encourage Google AdSense publishers to get on board with PPA ads. With traditional PPC ads, an AdSense publisher depends on Google to deliver relevant ads that will result in good click-thru ratio (CTR). However, with PPA ads, in order for the publisher to get paid, the publisher also depends on the advertiser to convert the click into action. That might be tough to swallow. Ranking ads by profitability should help AdSense publishers trust PPA ads more.
Reduction in the number of ads on search pages
Scoble posted an interesting tidbit about how he had been noticing that search result pages on Google have been showing fewer ads than before. He got confirmation from an unnamed Google employee that Google has in fact reduced the number of ads displayed.
Google has done a lot of research with users and found that fewer ads mean less revenue SHORT TERM. But long term the advertising revenue actually goes up. Why? They found their users started trusting the advertising more and were more likely to click on ads.
Interesting huh? Scoble points out that this change will help users trust ads more. Ads will be seen by users as aiding in their search, rather than introducing noise. As Scoble also points out, it is conceivable that Google’s top-line will take a small hit as a result. However, if you think about it, all they’ve done is set the relevancy bar higher. Only the more relevant ads are being shown. Less relevant ads are simply being removed from the page. Well, by definition, less relevant ads have low CTR, deliver few clicks, and generate small total revenue. I doubt we’ll see an impact at all.
Google (quietly) introduces text link ads
And now for the bad. Along with the announcement of the PPA ad program, Google also slipped in an introduction to a text link ad unit. Text link ads suck on many levels. First of all, they are confusing to the user. Second of all, they encourage publishers to include certain keywords and phrases that would result in lucrative ads. I’m sure Google will take steps to curb this. Plus, if you think about it, if a publisher sticks in random irrelevant words in their copy, users are unlikely to be clicking and the distraction will discourage users from returning to that site. But the real issue is that up until now, Google’s ads have always been clearly separated from page content. With text link ads, this is no longer the case. Ads can now be intertwined with the page content. A couple forum administrators that have implemented text link ads from other ad networks have since removed them due to poor conversion. It’ll be interesting to see how this plays out for Google…
Universal Studios apparently has a large MySpace marketing budget for the upcoming movie Smokin’ Aces. So large that during my last session, I repeatedly got served three Smokin’ Aces ad placements on the same page. Of course, everybody knows that MySpace has a huge ad inventory surplus, so it seems likely to me that Univeral Studios got a pretty sweet deal on such a bulk purchase. The question I ask is whether three ad placements are more effective than one? My first instinct was no, but I must say being bombarded with Smokin’ Aces imagery really did get me to stop and take notice.
UPDATE: Found an article from AdWeek that talks about Universal’s online efforts to market the film. Apparently there is a Smokin’ Aces action game & sweepstakes on Second Life and a widget that allows you to include the Smokin’ Aces trailer on your blog, profile, etc. I love the widget idea. It’s cheap to make and I’ll guess that 1 widget placement by a user brings better conversion than even 100 ad impressions on the same page. I say this because profile pages on social network sites follow a standard layout (except for heavily customized MySpace profile pages), so our eyes are easily trained to focus on the page content and ignore the ads in the layout. However, if a user places the widget on their profile, it’s much more likely to get noticed because it’s in the “line of sight”. Kudos to Universal for experimenting with these new forms of marketing. I’m sure other studios will follow with their own efforts. It’ll be interesting to see what works.
If you haven’t heard of Meebo by now, you’re behind the curve. I’m not suggesting that Meebo is right for everyone, everytime (I use the AIM client on my laptop and Meebo only when on the go), but Meebo is one of the admittedly few “Web 2.0″ companies that has built and refined a product that truly fulfills a need for a lot of people.
Just like the telephone is about talking with people, IM is about chatting with people. The telephone “just works”, IM should too. Yet the major players like AOL and Yahoo! are clouding the IM experience by bloating their clients with whizbang features and add-ons. Meebo, instead, has been committed to ensuring that IM is simple and universally accessible.
A friend of mine, having just discovered Meebo himself, asked me about how the company makes money. He noticed that they do not charge for the service nor serve any ads. I responded to him that as far as I knew they have not made a dime. They have, however, raised plenty of money from top-tier VC’s so they surely will have time to explore various revenue streams. In Meebo’s most recent message to its users, CEO Seth Sternberg, states that:
We’re looking forward to exploring three ways to generate revenue from meebo: advertising (no “punch the monkey” banners), allowing our user community to personalize meebo (similar to Cyworld’s approach in Korea or QQ’s in China), and distributing other services that directly monetize (like sending IMs over the SMS networks).
Let’s review each of these three ideas that Seth states:
Advertising – Contextual advertising is not going to work. Determining what ads are relevant to a conversation is pretty hopeless. Moreover, I think users will find it very creepy if Big Brother is monitoring their conversations and serving up ads in response to the topic. Run a CPM campaign? Sure, but be prepared for abysmal, MySpace-like ad rates. Content is unpredictable, targeting is low, and Meebo often lives in the background of a user’s session. Serve an ad and there’s a good chance the user’s eyeballs never see it. I suppose a solution to this problem would be to serve new ad impressions only when there is a new incoming or outgoing message. Still though, some money can be made through traditional advertising, but not a lot and what’s worse is that it has a negative impact on the user experience.
Allowing users to customize Meebo…for a price – Seth cites CyWorld as an example of where users in a community pay to customize/personalize their profile. CyWorld has been wildly successful in getting its users to pay for all sorts of additions – from clothing to decorations to background music – for their own virtual world (think “The Sims”) called their “minihompy”. Customizing profiles is nothing new. On MySpace, if you haven’t customized your profile, you’re an uncool newbie. Our profile in a social community like CyWorld and MySpace is a direct expression of ourselves. Every one of us wants to express our own uniqueness, and customizations allow us that ability. Just as in real life, plenty of people are happy to open up their wallets in the name of self-expression. On the flip side, all IM clients allow customization to some degree. Few users take advantage of it. Furthermore, even if Meebo allows fancy customizations, they will likely only be viewable by other Meebo users, not users of other IM clients. I can see maybe 5% of users (Meebo addicts) spending on average $10/year to customize their Meebo experience, but, unlike in social networking communities, I just don’t see a big market here.
Distributing other services that directly monetize – I’m not sure exactly what Seth has in mind for this one. He says “like sending IM’s over the SMS network”? Yes, most carriers offer SMS-based IM functionality on their networks. And, yes, the carriers are making lots of money from all the SMS fees incurred by users as a result of their IM usage. So how will Meebo fit into this? I’m not sure. Meebo will not make any money from user’s sending IM’s to mobile users. For example, Teleflip allows you to conveniently send messages to SMS uses for free. Teleflip does not make any money (they receive no kickback from the carrier nor have they chosen to insert ads into messages). I could be wrong here, but I don’t see how Meebo can make money from SMS. What might be interesting is enabling VOIP telephony over Meebo, but while I can think of some use cases for this I think the demand for this would generally be questionable.
To me, the right strategy for Meebo is pretty clear: the desktop. Meebo, and IM clients in general, are very unique in that the user is “stuck” to it for their entire online session. Personally, whenever I’m online, I’m logged into my IM accounts. E-mail clients are probably the only rival in terms of session stickiness. Let’s look at the stats from their recent press release: average session is 70 minutes, users spend a collective total of 165 years on Meebo every single day. Because Meebo is so sticky and because Meebo is one of the cornerstones of a Meebo user’s online experience, Meebo can take control of a user’s online interaction – acting as a gateway to other information and services. In other words, it can become an excellent online desktop (the popular term is “ajax desktop”).
To expand Meebo’s reach, the company has partnered with other companies that have ajax desktop products such as Netvibes and Microsoft Windows Live. While this is certainly a good strategy for Meebo to get more users, I have got to believe that Meebo’s long-term intent is to compete directly with these companies. I expect Meebo to come out with add-on widgets as you would see on any typical ajax desktop product: RSS reader, PIM functions, search, etc. With increased content comes increased advertising opportunities. Not only can Meebo run traditional ads, they will also be able to establish affiliate marketing agreements (e.g. eBay/Shopping.com for shopping).
Beyond simply advertising opportunities, owning the desktop gives immense leveraging power. As Microsoft proved many times over with Windows, companies will pay big bucks to be available by default on new desktops. Netvibes already charges companies to include their widgets in Netvibes.
So where is the billion dollar business in all of this? To be honest, I can’t define it right now. Clearly, though, right now and into the future, companies will increasingly be fighting for eyeballs. Meebo will be able to provide that to other services in spades. More importantly, Meebo has the attention of it’s user’s eyeballs not seconds or even minutes in a session. We’re talking hours. That’s extraordinarily valuable. More valuable than we can even appreciate today.
Back in December, I found a not-so-nice surprise in my Sprint cellular bill. Sprint had quietly raised the cost of an SMS text message from 10 cents to 15 cents per message. I complained to customer service that this was a breach of my original contract. However, after a couple of e-mail exchanges, it was clear that I would be stuck with the rate increase. I later found out that Cingular had also raised their SMS rate to 15 cents. It is also expected that both Verizon and T-Mobile will follow with increases of their own in order to keep their ARPU (Average Revenue Per User) competitive.
So how does this rate increase affect the typical cellular customer? Well, the typical American customer is not affected because he/she does not text much, if at all. Of course, this rate increase will only serve to discourage these users from embracing SMS. For the millions of customers who do use SMS to communicate with friends and colleagues, my hunch is that the 5 cent increase will not result in a significant change in their usage. Let’s face it, most cellular customers will hardly take notice at the extra couple of dollars on their monthly statement. The carriers know this and that’s why they don’t seem to be afraid of customer backlash. The unsympathetic reply I got from Sprint’s customer service supports this.
The real losers of SMS rate increases are companies who provide SMS-based services. One such company is 4INFO. 4INFO provides consumers with easy access to information like stock quotes, sports scores, flight status, and the weather. They utilize a simple, “natural language” query interface (e.g. “weather 94304″ or “49ers nfl”). Very useful. One of the primary challenges 4INFO faces is the lack of SMS adoption here in the US. In foreign markets, SMS is cheap (or even free) compared to voice airtime so it is very popular, even amongst older-age cellular customers. 4INFO is quick to emphasize in their marketing that the service is free. While it is true that 4INFO itself does not charge for their service, the cellular carrier is charging for SMS access. With SMS costing 15 cents per message, a simple roundtrip to 4INFO costs 30 cents. Out to dinner with the girlfriend but want to check the football score every half hour? 4INFO works perfectly for this. The problem is that by the time the game is over, you’ll have paid a couple bucks in SMS fees. That’s pretty expensive. There’s a good chance I would utilize this service if I was in a pinch, but I couldn’t afford this luxury on a daily basis.
What’s the alternative to SMS? Internet access on your mobile device. Carriers have successfully been upselling 2.5G and 3G data plans for the past couple of years. Now we’re seeing devices which support Wi-Fi and Wi-Max isn’t that far away. Combined with the trend in mobile devices of offering ever-more rich display screens and sophisticated Internet software applications, we’re slowly going to see a convergence between the way we access information on our PC’s and the way we access the same information on our mobile devices. As Internet access becomes ubiquitous on mobile devices, services like SMS will quickly becomes extinct. Need to send a quick message to another person? Use IM or e-mail. Need to get alerts? RSS. Etc, etc.
For now, even in light of Sprint’s rate increase, I doubt my SMS behavior will be altered. I will, however, take solace in the expectation that SMS will soon be a distant memory.
Note: I do think there is a future for companies like 4INFO. To be able to understand and satisfy short-hand queries like “UAL SFO JFK” (results in a timetable for United flights from SFO to JFK) is very valuable in the mobile context where keypads and displays are tiny. My expectation, however, is that they will find ultimate success in the future piggybacking off of Internet technologies rather than SMS. Hopefully these companies will manage to stay afloat until then.
Have you ever been browsing around Yahoo! Shopping or Shopping.com clicking on various products. You see a product you like, read about it, click around to some of the merchants that sell it, click on another product, read about it, …. Well, whether you realize it or not, each one of those clicks from the shopping comparison site to the merchant’s web site costs money for that merchant. Brian Smith over at ComparisonEngines.com put together a nice table listing the minimum rates each of four popular shopping comparison sites charge merchants for various product categories.
A few months back when I was shopping for a plasma TV, I spent a long time browsing through various models on Yahoo! Shopping and clicking through to various merchants. There’s a good chance I earned Yahoo! Shopping well over $20. Unfortunately for Y!’s merchant advertisers, I ended up buying the TV through an alternate source. Sorry Y! merchants!!
What surprised me was ink and toner cartridges also tops the list with a minimum of $1/click. I wonder if the high CPC is because of a high gross profit margin in this category (how much profit does a merchant make on a $30 ink cartridge… $1, $5, $10??) and/or high conversion rates amongst users in this category (x?/100 users who click actually follow through with a purchase?) I’ve got a contact who manages SEM at an online office tech retailer so hopefully I can get an answer for this question in a few days.