Interpublic: Social Is Fastest Growing Emerging Medium; Search Is Slowing

by Joe Mandese, Tuesday, Jul 8, 2008 12:12 PM ET

Warning that the "hyper acceleration" of some of the fastest growing emerging media platforms - including search, social media, online video, gaming, interactive TV, and digital out-of-home - appear to be slowing, Interpublic's Magna Global unit this morning released an outlook that nonetheless called for a 31.1% rate of growth for emerging media in 2009. While a relative slowdown for the new forms of ad-supported media, it is markedly better than the tepid 4.0% rate of growth another Interpublic unit, Universal McCann, predicts for traditional ad-supported media during 2009. The twin forecasts, which were delivered by Magna's Brian Wieser and Universal McCann's Bob Coen, respectively, were part of Interpublic's so-called "mid-year update" for the advertising industry's economic outlook. In taking his first stab at an outlook for next year, Coen said, "I don't think 2009 is going to be a great year," but added, "It can't get much worse." By much worse, Coen was referring to his revised outlook for U.S. ad spending growth in 2008 and his final estimate for 2007, which he now pegs at +2.0% and -0.7%, respectively. Those estimates are downgrades from slightly more robust projections issued by Coen in December, and the Universal McCann Director of Forecasting attributed the cutbacks to reduced economic expectations. Among the major media, Coen projected Internet display advertising would grow the fastest this year, rising 12.0% over 2007, about three times the rate of all national ad-supported media combined. The Internet's growth, however, will not be coming from its endemic marketers - so-called "dot-com" advertisers - which will actually reduce their total advertising spending this year by 7.1% from 2007, marking the second consecutive year the category has scaled back. While growing of a much smaller base, Magna's Wieser said emerging media nonetheless appear to be slowing down, especially online search, which he projects will grow only 24.0% next year. While still healthy by traditional media ad growth standards, Wieser said it represents a slowdown from 26.5% growth in 2007 and 29.5% in 2006. The fastest growing of the emerging media platforms tracked by Magna, he said, is social media, which includes both social networks and applications like ad-supported widgets. Wieser estimated that social media ad spending would rise 37.4% in 2009, thought that is nearly half the 60.8% rate it is expected to grow in 2008. Copies of both Wieser's and Coen's complete reports can be found here.

Shopatron PATH - Social Shopping 101 (VIP READ MT)

THIS IS AN EXCELLENT POST FROM THE SHOPATRON BLOG ON SOCIAL SHOPPING

Shopatron PATH - Marketing Insight and News for Shopatron Clients and Partners

ISSUE 4, JUNE 2008

Social Shopping 101 (Part 2 of 2)

By Ed Stevens and Greg Squires

How can a manufacturer brand leverage social networks to build its brand and drive online sales?

Provide value to connected consumers in these rapidly growing Internet communities, and you could spark a powerful, self-sustaining marketing force. Jump into social networks halfheartedly in a cynical attempt to take advantage of a trend, and you could find yourself picking up the pieces of a major brand management headache.

Social media marketing has been heralded as “the next big thing” on the Web. Big brands such as Nike, Coca Cola, Adidas, and many others are spending marketing resources on exploring the social networking opportunity. Many corporate Web sites are incorporating social engagement tools, such as blogs, forums, and video/photo uploads. There are literally hundreds of “social networking” sites on the Internet.

In PATH Issue 3, we examined social shopping specifically and outlined some rules of thumb in experimenting with this trend. Social shopping sites, like Kaboodle or Pronto, can benefit branded manufacturers by providing free traffic, facilitating listening to customers, and optimizing for search engine results.

We did not look at MySpace or Facebook, because these two sites are in a class of their own. No social networking sites that specialize in shopping or anything else have the traffic that MySpace or Facebook have.

In this PATH Issue 4, we break down Facebook and MySpace and explain the various marketing opportunities that exist on these sites for consumer goods manufacturers. We conclude with some recommendations as to how a brand might begin using these sites.

Undeniable Traffic Volumes

The traffic volumes to Facebook and MySpace are huge. These major social engagement sites are in the top 10 visited sites across the entire Web, near Google, Yahoo!, YouTube, and Wikipedia. It's a reality that these sites are grabbing the attention of online consumers, so the obvious question that brands must ask is, “How do we tap in?” or maybe, “Is there a way to tap in?”

The first iteration of MySpace was created by employees of eUniverse in August of 2003. The entrepreneurs saw potential in the 2002 launch of Friendster, a social network that is still active today. eUniverse used its 20 million users and email subscribers to quickly move MySpace to the head of the pack of social networking sites.1 In July 2005, eUniverse was bought for $580 million by News Corporation, the parent company of Fox Broadcasting Company. MySpace currently has 68 million unique monthly visitors, according to the latest numbers from compete.com.

Facebook got its start on the Web in early 2004. Mark Zuckerberg, a Harvard student at the time, initially created Facebook as a way for his Harvard friends to interact with each other. It quickly gained traction at Harvard in early 2005 and expanded to other Ivy League schools. By the end of 2005, more than 2,000 colleges and over 25,000 high schools throughout seven countries had networks on Facebook.2 By beginning with a limited release only to high school and college networks, it gained an initial buy-in from teens and twenty-somethings. After opening up to all users in September 2006, the site's growth has been phenomenal. Facebook reports that its "fastest growing demographic is those 25 years old and older."3 Facebook currently has 31 million unique monthly visitors, according to the latest numbers from compete.com.

Alexa shows steep increases in traffic on both Facebook and MySpace over the past 24 months, as displayed in Figure 1 below. Traffic levels to sites like shopping.com, BizRate.com, and PriceGrabber.com – three of the “solo-hunter” sites we reviewed in the last issue of the PATH – are nowhere near that of Facebook and MySpace.

Figure 1

Facebook / MySpace website traffic

Marketing Opportunities on Facebook & MySpace

Facebook and MySpace provide multiple options for brands to engage with their users. Facebook has five marketing programs: Pages, Social Ads, Display Ads, Platform, and Beacon. MySpace provides two consumer-facing initiatives: Profile Pages and Display Ads. These initiatives vary in their setup costs and their efforts to manage, and each of them has a unique purpose for marketers.

Sorting out “Pages” and “Profiles”: the Free Stuff (free?)

Facebook Pages

Any individual who signs up for Facebook gets a user profile. You can post pictures, connect to friends, and see what your friends are doing.

A Facebook Page is similar to a user profile and is what companies set up in Facebook. A Facebook Page can be created for any kind of organization or business: a local restaurant, a TV show, a sports team, or a consumer brand.

* Facebook Pages can have discussion boards, lists of “fans,” image and video channels, events listings, RSS feeds, product reviews, and more. The Page creator controls whether each section of the Page is displayed.
* Individuals with Facebook accounts become “fans” of their favorite brands and products and use this as a way to display their interests to friends and family.
* Facebook Pages are free and allow organizations and brands to connect with consumers.
* A brand's Facebook Page can be promoted on your Web site, by following the instructions on the Facebook Web site.

MySpace Profiles

MySpace does not differentiate between individuals and organizations. Both set up Profiles. A Profile in MySpace behaves like a Profile or a Page in Facebook.

* A brand creates a Profile. Individuals can “add” the brand as a friend.
* Images, videos, contests, featured products, company news, articles, and blogs can be posted.
* Consumers can post comments to the Profile (if enabled), and a conversation between brand and consumer can be established.
* MySpace Profiles are free to set up; the Profile's look and feel can be customized to match brand image using HTML coding.

MySpace Branded Profiles

For marketers with large budgets, MySpace has a relatively new program call Branded Profiles. Like normal MySpace Profiles, the Branded Profiles allow for sharing images, adding friends, adding text, blogging, etc. The primary differences are that visitor demographic information is available for Branded Profiles, and they do not have any display ads from other companies.

* Minimum cost is $10K per month.
* MySpace account manager is available to help target, based on consumer profiles.
* Reports are available on traffic to the profile, including visitor demographics.

Facebook Display Ads

Facebook allows advertisers to purchase digital display advertisements through its site.

* Ad inventory is available exclusively through Microsoft Digital Advertising solutions.
* Display ads can be targeted by geography, schools attended, and age.
* Display ads generate relatively low traffic. Some speculate that social networkers are not usually in buying mode when they connect with friends.

MySpace Display Ads

Advertisers can also purchase display ads through the MySpace site.

* Ad inventory is available through Advertising.com and other ad networks.
* Display ads can be targeted as in Facebook.
* MySpace tends to display more ads per page, creating a more chaotic feel with less brand control than Facebook.

Facebook Social Ads

Facebook Social Ads are one of the newer “social” ways to advertise.

* Display ads are in and around the “News Feed,” a constantly updating list of actions made by friends on Facebook. Social Ads can target specific segments of consumers to promote individual products. For example, a shoe manufacturer can advertise men's skate shoes to men over the age of 18 who have an interest in skateboarding.
* Tracking performance is handled with Facebook Insights, a free metrics solution.
* Can promote a Facebook page, a website page, or a product page.
* Targets consumers by age, gender, interest, location, education level, and more. Estimates the size of the target audience.
* Creates an ad with a picture and text.
* Can pay on a cost-per-click or cost-per-1000-impression basis.

Facebook Beacon

Facebook has a built-in application that enables consumers to share purchasing activities with friends on Facebook.

* A movie rental activity can be shared: Meagan Marks added Top Gun to her favorites on Blockbuster.
* A purchase activity can be shared: Jim Bossler bought an iPod Shuffle at apple.com.
* Very little integration is required for setup. To enable the Facebook Beacon feature, you define the actions to be displayed on Facebook and add a few lines of code to the site.
* A lot of controversy has been raised over Facebook's Beacon for alleged misuse of private information. With the Beacon program, Facebook only allows for opt-out of information sharing, rather than requiring a user opt-in.
* Companies have been slow to adopt Beacon due to privacy concerns and consumer pushback.

Facebook Platform (Applications)

Custom Facebook applications are a flexible marketing tool but also the most difficult to create. Over 20,000 applications have been developed since last May.

* Develops custom applications that allow users to interact/engage with a brand.
* Open platform to integrate data/products into the application.
* Provides product recommendations based on the user's interests and other profile data.
* Can also provide opportunities to sell ad space as a revenue generator.
* Requires development in PHP/JavaScript, integration with Facebook's API, and learning Facebook's proprietary languages.

Figure 2 below outlines each program, comparing its costs and effort to manage.

Figure 2

Figure 2

Facebook / MySpace program comparison

Where to Begin

MySpace and Facebook provide several reasonable marketing opportunities. A good way to test marketing is through the inexpensive or free options available.

* Find out if a page for your brand has already been created; if so, you should definitely create the official branded site.
o One social media marketer, in reference to one of the brands he works with wrote that the “brand was so popular among the demographic that uses MySpace that well-meaning customers were creating profiles that appeared to be the official MySpace of the company. Customers were taking company logos and images off the company Web site, and pasting them on their MySpace profiles. Obviously, this was a problem. Several of the MySpace profiles contained content that the company did not approve of, and did not want associated with the brand. In their case, they needed an official MySpace presence in order to prevent this confusion.” 4
* Create a free Facebook or MySpace page and promote it from your Web site. Spend some extra time at the outset to invite friends, write content, post pictures, and get the ball rolling, until it gains some momentum. Take part in the conversations, and be prepared to honestly represent your brand.
* MySpace tends to be a more open community (chaotic and free form). Facebook is more understated and controlled. Consider which venue is better suited to the brand image you want to portray. Some brands may not have many consumers using either Facebook or MySpace. You can get a good feel for community activity levels by searching for keywords you know.
* Be a legitimate member of the community. Don't be a corporate spammer. If you are a true representative of your brand, hear what consumers have to say.
* Offer something valuable so that the new program launch can be immediately successful. Run a giveaway contest or a promotion through the Facebook Page or MySpace Profile. An attractive deal will create buzz on the Web and draw consumers to the page.
* Build some links pointing to these pages so that they can get ranked on search engines for your brand terms. Link to your new page from your Web site for the SEO benefit.

MySpace and Facebook are so popular today, it is important for brand marketers to stay up with their growing influence. Be sure you know what is happening with your brand, then try something free or low-cost to see if it drives traffic or sales.

Footnotes

1. “MySpace”, Wikipedia
2. “Facebook”, Wikipedia
3. “Press Room”, Facebook
4. “Why Every Business Needs a MySpace and Facebook Profile”, Palmer Web Marketing

Target Social Network Ads To Capture Clicks

58 percent of nearly 800 users of social networking sites say that very few of the ads and offers they're currently seeing on social networking sites match their specific interests and preferences, and another 29 percent say none of them do, as reported in a recently released Prospectiv poll. Only 13 percent say that "most" ads meet their interests and preferences.

56 percent polled said the quality of their online experience would be improved if social networking sites provided more targeted advertisements and offers tailored to their specific interests and preferences.

According to the survey, consumers said the types of tailored ads and offers they would respond to are:

One-off coupons and discount offers from the brands and products they buy (62 percent)
E-newsletters featuring coupons, discounts, news and tips about favorite brands (24 percent)
Invitations to join interactive email groups, online forums and social networks for sharing and communicating (14 percent)
85 percent of consumers said they are more likely to join a free social networking site supported by advertisements and offers targeted to their interests rather than a paid social networking site without commercial advertisements. The report says that:

54 percent of consumers never click on advertisements on social networks
39 percent of consumers occasionally will respond to ads
7 percent will often respond to ads
Jere Doyle, Prospectiv's CEO, concludes that "... members of social networking sites are open to offers and promotions as long as they are targeted to their interests... the web publishing industry seeking to monetize their online communities (needs) to improve ad relevance..."

At the same time, a recent eMarketer study says that "Social networks... show some promise in developing new forms of online advertising. MySpace's HyperTargeting initiative, for example, has helped double CPMs at the site, and 75% of advertisers that have tried it have come back for more, according to News Corp..."

The eMarketer projections say that combined, MySpace and Facebook are expected to account for 72% of the total US social network ad spending pie this year. Spending at all other online social network sites, including general social networks, niche networks and marketer-created networks, is expected to reach $370 million, while widget and application ad spending is projected to rise to $40 million this year.

US Online Social Networking Ad Spending (Billion Dollars)



Social Network Ad Spend

Forrester Report: Global Enterprise Web 2.0 Market Forecast: 2007 To 2013

April 25th, 2008 | Category: Analyst, Forrester, Enterprise Web, Web Industry

In 2008, Business Adoption Of Web 2.0 Tools Is Expected To Grow Strongly

Global Enterprise Web 2.0 Market Forecast
On Monday, colleague Oliver Young (I was involved with the report) published a forward looking report on the growth of Web 2.0 technologies within the enterprise entitled Global Enterprise Web 2.0 Market Forecast: 2007 To 2013. As I mention with every report, you can purchase it directly from the site, or if not satisfied, obtain a refund, as we stand by the quality of our products.

Who should read this report?
Anyone investing in the space such as VCs, leadership at Social Media companies, or those involved in purchasing at corporations for social media tools.

Caveat: Sans services and “organic” sites
It’s important to note that calculations do not include properties such as ‘organic social networks’ like Facebook (which is valued at $15b), nor do they include services (a report I hope to do soon), so the numbers, in our opinion are just a slice of the overall technology sector. For example, in 2008 we project enterprise spending on Web 2.0 technology to account for just 0.2% of the $364bn global corporate spending on software and to barely even register as part of the $1.7 trillion we expect to see spent on technology overall is a useful piece of context. When you think about social media tools for the enterprise, most often, these commodity technologies are cheap, easy to deploy, and often free.

Web 2.0 Expo, a Physical Manifestation
I spent the last two days at the Web 2.0 expo (I was an advisor to the show), where 7000 people from this market assembled into one building. Who are these people? they are the ‘market’;, vendors, clients, analysts, press, media, and users. It was clear to me many mainstream businesses were attending, I’ll take a guess that many early adopters within the enterprise (I was that guy at Hitachi Data Systems) are dragging their boss, and colleagues who were once nay-sayers to the conference to learn. I saw many Fortune 1000 brands there trying to learn and understand how to use these tools for business.

Mainstreaming
To me, last year’s Web 2.0 expo was far different, it was a geek fest, where live streaming was prominent, and there was much more fascination over the tools –rather than the business impact. This year, many of the questions and folks I met were interested in using these tools to improve their business, they weren’t enamored with the latest widget. On the show floor, I spoke to two CEOs who read the report and commented that the numbers looked in par to their expectations.

Technology Infrastructure moves in
SUN (Who’s had the startup essentials program for a few years), HP, NetAPP, EMC were all present on the show room floor. What do they have to do with Web 2.0? In most cases, this is not their core business, but they realize this growing market will need infrastructure and technology to power these websites. I was pushing for this nearly 3 years ago at the data storage level, but I guess I was too early. Another change is the strong presence of an analyst firm, in this case it was Forrester, we were involved with four sessions, hosted a party, and launched a book. I guess this movement really is headed mainstream now.

What others are saying: in agreement and disagreement
Our friends at ZDNet may have misunderstood what we were actually sizing, at first it was assumed it was just “enterprise 2.0″ (internal) purchases, but in reality, this sizing encompasses externally facing (marketing), and is the largest piece of the pie.

The above and following image was posted on many blogs on Monday, where I encourage you to following the conversation and analysis. First, start with Read Write Web (Oilver and I are big fans of this blog), then Andy Beal takes Here’s the Reason Why Small Businesses Won’t Adopt “Enterprise 2.0″, and for a counterpoint, the respected Dennis Howlett The problem with Forrester’s $4.6 billion prediction, I always enjoy Dennis’ contrarion position, it’s needed in the industry. (update: Oliver Young left a comment on his post)

(This post was reviewed by colleague Analyst Oliver Young, who published the report)

Forecast: Global Enterprise Web 2.0 Spend By Technology, 2007 To 2013

Who's Spending on Social Networks?

MARCH 28, 2008

Big spenders may be in the minority.

While social networks are struggling with how best to monetize their millions of users, some marketers have yet to commit major budget to the channel.

One-third of US marketers and agencies surveyed in an iMedia Connection poll in March said that they planned to spend $300,000 or less this year on social network marketing. The poll was conducted among attendees at the recent iMedia Breakthrough Summit.

"At those amounts, social network spending may still be categorized as experimental for many marketers," said Debra Aho Williamson, senior analyst at eMarketer.

To be clear, the poll was not conducted among a representative sample of marketers. However, it is useful in a directional sense. The 29% of marketers polled by iMedia Connection who plan to spend $2 million or more will help social network ad spending add up.

eMarketer predicts that US online social network ad spending will near $1.6 billion this year. The figure includes all forms of advertising appearing on social network sites, including branded campaigns as well as search, video, local advertising and ads delivered via ad networks.

"As in many other developing advertising markets, much of the spending on social networks is driven by leading-edge marketers who are willing to take risks," Ms. Williamson said.

Estimates of the exact percentage of marketers using social networks vary by source and methodology.

October 2007 studies by CoreMetrics, the IAB, Prospero Technologies and others found that anywhere from one-fifth to nearly one-half of marketers used social networks. Differences hinged on whether or not marketers were already using social networks or intended to use them, and if the marketers considered themselves to be digitally savvy or not.

Wagging the Dog: Is 2008 The Year To See Advertising ROI In The Long Tail?

by Rob Crumpler, Wednesday, Feb 6, 2008 7:31 AM ET

Traffic = eyeballs = money. This characterizes the age-old mentality of the online advertising world: the more traffic a site generates, the more potential consumers are viewing - and clicking on - online ads. But has the proliferation of social media turned conventional advertising wisdom on its head? Are the sites with the most traffic necessarily the ones yielding the best advertising performance? This topic has been debated ad nauseam since the explosion of social media has captured a coveted slice of the collective consumer attention span. The concept of advertising on social media, like blogs, is nothing new, but since blog advertising has gone mainstream, the debate has gotten even more heated. To date, many marketing strategists have argued that meaningful advertising ROI can't be found by targeting niche blogs within the proverbial Long Tail -- primarily because the level of traffic required to produce results just doesn't exist. Simply put: for advertisers, the Long Tail does not scale. A month into 2008, it feels like it's time to revisit this assumption. In fact, several trends point to the fact that 2008 may just be the year the Long Tail delivers the kind of performance advertisers are looking for. The Long Tail and the Power of Influence We all know that consumer Web usage patterns have changed. Americans aren't relying on the major "clearinghouse" sites for their daily information fix. Instead, people have become much more familiar with smaller sites housing information on niche interests. There are nearly 113 million blogs in existence, spanning every conceivable, topic, interest and issue, with over 175,000 new blogs appearing each day. About 39% of American adults regularly refer to blogs - that's 57 million eyeballs consuming user generated content instead of mainstream media - and 65% of these folks are explicitly seeking someone's opinion. Niche publishers in the Long Tail tend to hold two powerful characteristics core to attracting - and influencing - an engaged consumer audience: credibility and expertise on specific topics. An individual publisher's ability to exert these traits online - and, as a result, instill trust with their readers - is fueling a growing trend: consumers referring to the Internet before committing to a purchase. About 65% of online "power shoppers" always read consumer reviews and spend more than 10 minutes reading consumer generated media on products and services before they buy. To date, credibility and expertise have been difficult to capture, measure and monetize on the Internet. As an industry, our collective emphasis on qualifying media buys has been a "bigger is better" mentality - the thinking is: if a lot people read it, the publisher must be a credible expert. While not necessarily untrue, we now know this premise is certainly not the case across board. Naturally, brand advertisers will always require volume and scale, but, increasingly, they are looking beyond traditional page view and traffic numbers as a means to inform where to focus their ad budgets. Today's measurement options are inching closer and closer to truly predicting how keen a publisher's audience is to viewing your ad - allowing you to define campaign success by unique users, duration, hits, click-throughs, impressions, queries, sessions, streams, or level of engagement. Factoring the notion of topic-specific influence as a metric to evaluate ad spend - and going deeper in the Tail to find it -- will be key themes in 2008. New Tools Get Tail Content Ready for Prime Time Another key development is the increasing publisher savvy when it comes to generating and maximizing revenue. This is spilling over to Tail publishers who are realizing their advertising power, and playing an active role in connecting Tail content with advertisers' deep pockets via ad networks and other means. Of course, the network players are stepping up to the plate to quickly facilitate this. Firms like Merrill Lynch and JP Morgan forecast that CPM rates are going to shoot up in 2008, in part due to the new and improved, razor sharp targeting technologies empowering the ad networks to slice, dice, aggregate and sell the best Long Tail inventory - all for a price. Like Amazon, umbrella networks' ability to house and sell Tail inventory on the content producers' behalf will spell collective success for everyone involved. The net effect for advertisers? The ability to reach pockets of engaged consumers across thousands of niche content sites - housed under common themes and topics - in one single ad buy. Putting Our Heads - And Tails - Together Another key theme? The integration of popular, mainstream publishing (or "Head" content) with niche content in the Long Tail. Top publishers - everyone from Reuters to WashingtonPost.Newsweek Interactive - are seeing value in offering their readers a comprehensive experience that allows them to navigate between on-topic blog content and the headlines of the day. By shining a very public spotlight on content from the Tail, traditional media companies are catapulting niche players onto the radar screens of the general public - mainstream consumers, and big brand advertisers. In 2008 we'll see additional partner models emerge, enabling the Head and the Tail to band together and leverage each other's strengths - and make it even easier for advertisers to access Long Tail ad buys. Time will tell whether the Tail will spell success in 2008 - or continue to elude advertisers. But for advertisers looking to surface the most engaged consumer possible, getting out of your head and into the Tail might be a good place to start.

CPA and The path to social network riches

By Mason Wiley

More by this Author
Contact Author

Advertising on social networks can be very expensive -- with little payoff. Here's an easy solution to this cost problem.

Social networks are commanding attention -- for good reason. Millions and millions of people visit them daily (and to many an employer's chagrin, hourly). Given the sheer number of users and their length of stay, the big social networking sites like MySpace, Facebook and others should be an advertiser's paradise. But they're not -- yet.

Ironically, the huge number of impressions generated by social networks poses challenges for advertisers. For example, buying all those eyeballs on a cost-per-thousand (CPM) ad model can be prohibitively expensive for many. And unlike sites centered around a specific interest, social networks attract so many different types of people that targeting is difficult. Behavioral targeting offers promise, but hasn't yet evolved to the point at which it can guarantee a positive ROI.

A new ad model has emerged that can. The cost-per-acquisition model (CPA) provides advertisers with a guaranteed way to ensure ad efficiency, while also opening the door for social networks to monetize more of their traffic.

The benefit of CPA for advertisers
The CPA model is ideal for social networking sites because it eliminates virtually all the risk for advertisers of buying on a CPM basis. As a performance-based model, advertisers pay a fee only for the results their CPA campaign generates. That result can be any transaction specified by the advertiser. For example, an advertiser places a CPA campaign on ESPN.com. Rather than paying for all the people who see that ad, the advertiser only pays the publisher for each user that not only clicks on the ad but also follows through and completes the desired action as defined by the advertiser -- anything from an email submit or qualified lead to a sale or paid membership.

Through its 1:1 ratio of pay-per-action, CPA changes the rules for advertisers. The need for narrow targeting to eliminate ad waste becomes irrelevant since there is no waste. Similarly, there's almost no possibility for click fraud since advertisers only pay for results. And unlike CPM, the results of a CPA campaign are directly verifiable through tracking technology, which enables advertisers to determine which ads convert and which do not. For example, an A/B test of landing pages can be measured against the actions completed via any number of creatives or landing pages as well as the conversion processes. The path to purchase is easily tracked back to the source, including the placement of the original creative.

But the single greatest appeal of CPA for advertisers is that it is performance-based. With advertising costs directly tied to results, it provides them a way to advertise with full accountability and control. Advertisers simply establish the actions -- signups, sales, leads, etc. -- they want to reward, and establish how much they're willing to pay. If online publishers think the campaign will generate sufficient response with their audience base to meet revenue goals, they can choose to run the campaign.

Certainly, by running campaigns based on the promise of a potential future reward, publishers are taking a risk. But given that CPA campaigns are more aggressively focused on generating response than the many revenue-sharing campaigns available, it's a gamble that has been paying off for them. Now, social network publishers are finding that CPA can pay off for them, too.

The benefit for social networks
Like any publisher site, social networks want to maximize advertising revenue. Cost-per-thousand is the most prevalent model they use to do it, and it seems to make sense because CPM focuses on the number of impressions generated -- and these sites generate a lot of them. The problem is that these impressions come from an incredibly broad cross-section of the population, many of which can be irrelevant to a given advertiser. As mentioned above, although these sites generate billions of impressions, targeting the right ones is challenging. While targeting users based on where they have clicked (behavioral targeting) can help improve the odds, it is by no means an exact science or a guarantee that a sufficient number of users will perform the desired action.

These inherent challenges under the CPM model have limited the appeal of social networks for advertisers. The result has been a tremendous surplus of excess inventory that despite all best efforts just can't be sold. And a lot of those billions of impressions have gone un-monetized. But now that's changing thanks to CPA.

With CPM, the advertiser assumes the risk by paying the publisher for uncertain potential results. In CPA the publisher assumes the risk by running ads for uncertain potential payments. But when its remnant inventory at issue, the publisher runs no risk; it is inventory that would otherwise go unsold. So it only stands to reason that a social networking site will make more money running CPA ads on remnant inventory than it can just selling space based on CPM alone.

Conclusion
The CPA model is not new, but it has evolved to be a highly cost effective way for advertisers to use social network sites, and an effective way for social networks to generate increased revenue. And new widgets and applications are emerging for social networks that can make CPA even more powerful in the future.

KickApps Extends Partnership with Advertising.com

by Gavin O'Malley, Wednesday, Dec 12, 2007 7:00 AM ET

ON-DEMAND SOCIAL MEDIA PLATFORM KICKAPPS has extended its partnership with AOL's Advertising.com to include its Lightningcast video ad-serving system. The new integrated platform combines KickApps' community-building services with Advertising.com's Lightningcast video ad-serving system in an effort to help publishers serve ads via editorial and user-generated video content on their KickApps-powered social media sites. "Publishers want to co-mingle their professionally produced content with the user-generated video, because it gives them more inventory to run advertising," said KickApps CEO Alex Baum, a former president of JumpTV, who previously spent eight years in a senior programming role at AOL. "What's changing and driving this trend is--user-generated stuff is driving a CPM that is comparable to premium content as long as it's properly targeted." KickApps provides sites of all sizes with a range of building blocks that include user-generated content, social networking, video players, Webcam applications, widget-building, media/member management and reporting. Corporate users and Web masters can mix and match building blocks from the widget library to crate a more customized or branded solution. Advertising.com's Lightningcast platform was designed to help Web publishers insert, manage and track ads that are incorporated within their videos. The new integrated solution will now enable KickApps affiliates large and small to generate their fair share of advertising revenue from their sites. The New York-based KickApps' tools have powered a successful Procter & Gamble Tag Body Spray community effort. Within six weeks of launch, it drove 772,400 page views and 260,000 unique visitors, according to KickApps. My43.net used the tools to raise monthly site traffic by 30% with no on-air promotion. Other companies using it include AFL Network, Cycling.tv, and National Lampoon, Universal Music/Interscope and others. KickApps is also serving targeted ads to relevant audience clusters, allowing for the monetization of sites. KickApps is backed by Spark Capital and Prism VentureWorks. Its board members include former Liberty Digital and E! Entertainment CEO Jarl Mohn and former MTV and NFL President Sara Levinson. Gavin O'Malley can be reached at gavin@mediapost.com

Social Network Aims to Share Ad Revenue with Users

by Tameka Kee, Monday, Dec 10, 2007 7:30 AM ET

THE LUSTER OF FACEBOOK'S BEACON ad program has faded, and News Corp.'s MySpace members have long complained about marketer spam, but entrepreneurs continue go after major advertising dollars with social networks--and Capazoo is the latest entrant in this over-saturated market. While Montreal-based Capazoo officially launched a year ago, the social network got a revamp this October. The community features the necessary tools of profile creation, image and video sharing, and loads of dynamic content--but what makes Capazoo different is its goal to kick back 7% of net profits to its members through a micro-currency called Zoops. With Zoops, members can "tip" each other for posting original images, video clips and other content--and ultimately, Capazoo enables them to cash out those Zoops via a branded ATM card. Of course, users need to purchase Zoops in the first place, so some in the industry have questioned just how the actual profit sharing is accomplished. Although there is a subscription-based membership available, a significant portion of the company's revenue stems from advertising, with contextual, geo- and demographic targeted display inventory, as well as post- and mid-roll video available. There are also the myriad partnerships with companies like Hertz for discounted car rentals, National Lampoon for content distribution and IMERGENZA for band and concert ticket promotions. But according to Matthew Ross, Capazoo's director of communications, the company's model is built to generate revenue without inundating members with ads. "Capazoo is what we call a member-driven economy," Ross said. "They dictate what are the most popular videos and other content, and they tip each other for it. We have a policy of no advertising on personal profiles, blogs or user uploaded video." Members can also earn Zoops by referring new friends to the network. But some in the industry have called Capazoo's operating structure "bloated," noting that for a property with only 13,000 visits in November (as per Compete), 100+ head count and additional offices in Toronto, Atlanta and Miami, the model doesn't seem scalable.

Advertising.com Launches Ad Program For Social Networking Site Applications

by Tanya Irwin, Wednesday, Dec 5, 2007 7:30 AM ET
ADVERTISERS CAN NOW REACH SOCIAL networking audience via popular applications thanks to the launch of Advertising.com's new WIDGNET services program.

The program enables developers of Facebook applications to join the company's massive ad network and earn advertising revenue from their creations. Advertising.com is currently only working with Facebook application developers, but plans to expand to other Web widgets in the future, said Brent Halliburton, director of network strategy for Advertising.com.

"We are continuing to align ourselves with widget infrastructure providers and other platforms to expand the scope of WIDGNET," he told Online Media Daily.

Facebook applications and their equivalents on other social networking sites are often called "widgets" or "gadgets." These mini-applications, which users embed into their personal pages, range from interactive games to stock quote generators to photo manipulation tools. More than 9,900 are currently available to Facebook users alone, representing 453,589,160 individual installs and approximately 600,000,000 page views daily.

By incorporating banner advertisements served by Advertising.com into the application format, the WIDGNET program will provide developers with a way to monetize their creations. Advertisers, in turn, will have new opportunities to target consumers in a social network environment.

Revenue varies depending on the quality and volume of inventory a widget developer is able to make available, Halliburton said. "Typically, we initiate our relationship with application developers on a revenue share basis to ensure our interests are closely aligned," he said. "Generally, we feel that Advertising.com's strong marketplace of advertisers allow us to offer the highest eCPMs in the market."

Through the WIDGNET program, creators of these applications will gain access to Advertising.com's advertiser base. Publishers range from independent developers to established companies such as RockYou, Scrabulous and Fotoflexer whose customizable widgets include photo slideshows, photo and image editing, glitter text, voicemail accessories and games.

EyeWonder Unveils SocialWonder, Partners with Gigya

EyeWonder, Inc., rich media and digital video company just announced the launch of its SocialWonder™ product, an exclusive offering which will allow advertisers to access the power of widgets and social networking communities from within interactive digital advertisements. This offering is a result of the company’s partnership with Gigya, a widget distribution network, and will allow advertisers to distribute widgets within rich media and digital video advertisements. Cheil USA is among the first to use EyeWonder’s SocialWonder feature for Samsung’s Juke campaign.

“As the bridge for online advertising’s key stakeholders, we are constantly looked to by our customers and partners to deliver compelling and meaningful new products and technologies,” said Michael Griffin, Executive Vice President, Marketing and Strategic Development for EyeWonder. “The SocialWonder offering will enable online advertisers to leverage the innovative power of widgets and social networking communities within rich media ads, creating a powerful distribution mechanism for spreading their brand messages in a cost effective manner.”

Facebook Ads: Old, New Or Irrelevant

Facebook Ads: Old, New Or Irrelevant!
The Economist
Everything old is new again: Facebook's advertising system is a new take on an old concept. Paul Lazarsfeld and Elihu Katz, authors of the influential 1955 media classic "Personal Influence" argued that marketers actually target certain individuals in their media messages, called "opinion leaders" rather than mass audiences. These individuals are today referred to as "influentials" because it is they who virally disseminate information.
Social networks now make it possible for these targets to reach larger groups of peers more quickly and easily. However, by putting this kind of control in the hands of persons who are unaffiliated with them, marketers run the risk of their brand being criticized.
Opponents of Facebook's invitation to let consumers spread marketers' messages say the tactic is "creepy." Others claim it will dilute the quality of the social-networking experience for Facebook's users. Paul Martino, an entrepreneur who launched the social network Tribe, says that interpersonal relationships on social networks are of an increasingly poor quality, anyway. "Social graphs degenerate to noise in all cases," he says, which means marketing campaigns could "descend into visual clutter ... rather than being the next big thing in advertising." - Read the whole story...

Leading Websites Offer Facebook Beacon for Social Distribution

Users Gain Ability to Share their Actions from 44 Participating Sites with their Friends on Facebook

NEW YORK — Facebook Social Advertising Event, Nov. 6, 2007 — Facebook announced today that 44 websites are using Facebook Beacon to allow users to share information from other websites for distribution to their friends on Facebook. These sites are participating in the launch of Beacon, a new way to socially distribute information on Facebook. Beacon is a core element of the Facebook Ads system for connecting businesses with users and targeting advertising to the audiences they want.

The websites participating in Beacon can determine the most relevant and appropriate set of actions from their sites that users can distribute on Facebook. These actions can include posting an item for sale, completing a purchase, scoring a high score in an online game or viewing of video. When users who are logged into Facebook visit a participating site, they receive a prompt asking whether to they want to share those activities with their friends on Facebook. If they do, those friends can now view those actions through News Feed or Mini-Feed stories.

eBay plans to use Beacon so eBay.com sellers will be able to choose to include their eBay listings in their Facebook News Feeds. This will allow them to share the items they are selling with their network of friends. In doing so, eBay.com sellers can leverage a new way to drive potential bidders and buyers to their listings. eBay expects to make this feature available to sellers on eBay.com in early 2008.

“Beacon offers an interesting new way for us to deliver on our goal of bringing more bidders and buyers to our sellers’ listings,” said Gary Briggs, senior vice president and chief marketing officer, eBay North America. “In a marketplace where trust and reputation are crucial to success, giving sellers the ability to easily alert their network of friends – the people who already know and trust them – to an item for sale has the potential to be a powerful tool.”

In keeping with Facebook’s philosophy of user control, Facebook Beacon provides advanced privacy controls so Facebook users can decide whether to distribute specific actions from participating sites with their friends.

Fandango, the nation’s leading moviegoer destination, is using Beacon so when Facebook users purchase a movie ticket on Fandango.com, they can share their movie plans with their friends on Facebook. Consumers gain a new way to tell their friends about their movie tastes, while Fandango is able to gain greater social distribution on Facebook.

“People love to share movies with their friends,” said Chuck Davis, CEO of Fandango. “When it comes to movies, everyone has an opinion. Fandango is excited to be selected as one of the first sites to implement Beacon, allowing Facebook users to share the excitement of moviegoing with their friends.”

A number of IAC brands, including CollegeHumor, Busted Tees, iWon, Citysearch, Pronto.com and echomusic will also be using Facebook Beacon to share actions taken on participating IAC sites from concert tickets to restaurant reviews with friends online. The sheer diversity and scale of IAC brands has the potential to enable Facebook friends to share the more interesting parts of their life online.

“IAC brands touch consumers in a multitude of different ways everyday. Bringing together great consumer services and products and the added ability to share individual actions with friends via Facebook can only add value to what we do and who we do it for,” said Doug Lebda, president and chief operating officer of IAC.

As a way to let travelers tell their Facebook friends about upcoming travel plans, Travelocity is implementing Facebook Beacon on its website. When Facebook users book travel on Travelocity, they can choose to share that information with their friends on Facebook.

“Travel is naturally a social activity that travelers enjoy discussing with the people they know,” said Jeff Glueck, chief marketing officer at Travelocity. “Using Beacon, Travelocity users can now easily choose to spread the news of their latest vacation plans on Facebook as a complement to their activities on the Travelocity website.”

Additional websites and companies participating in Beacon at launch include AllPosters.com, Blockbuster, Bluefly.com, CBS Interactive (CBSSports.com & Dotspotter), ExpoTV, Gamefly, Hotwire, Joost, Kiva, Kongregate, LiveJournal, Live Nation, Mercantila, National Basketball Association, NYTimes.com, Overstock.com, (RED), Redlight, SeamlessWeb, Sony Online Entertainment LLC, Sony Pictures, STA Travel, The Knot, TripAdvisor, Travel Ticker, TypePad, viagogo, Vox, Yelp, WeddingChannel.com and Zappos.com.