Tag Archives: social networking

May 1, 2009 · 5:08 am

The Social Networking Advertising Play……..Data!

Getting display advertising to perform on social networking sites has always been challenging. There are inherent hurdles of the media including:

1. User-to-User Communication Experience lends itself for users to zone out ads
The next time you see two people having a conversation, try passing them an advertising flyer. They are far from being in a mode that is receptive to marketing communications. Social networking traffic is made up of primarily this type of communication whether it is exchanging messages, reading your friends status or leaving comments for a friend.

2. Not Aggregated around a Purchase Intent
Sites like TheKnot.com or TripAdvisor.com aggregate users around a purchase intent. TheKnot.com‘s audience is in the process of putting together their wedding and are in the market for services like photographers, caterers and florists. And TripAdvisor aggregates travelers who are in the market for flights, hotel rooms and travel insurance. Well, the issue with most social networking sites is that they are not aggregating users around a purchase intent and are not on the site in purchase mode or even research mode. Therefore, social networking sites are not as effective in terms of bringing consumers to advertisers at the right time to effectively market to them.

So the fundamentals of advertising – reaching the right consumer at the right time and at the right place implies that social networking sites are inherently not ad friendly because they are delivering consumers to advertiser at the wrong time and place. However, what social networking sites may have that is unmatched by any other site is the information so marketers can identify the right consumers to target. Social networking sites collect more self identified data than any other type of sites. Think about the data that you provide…..age, gender, location, marital status, occupation, favorite books, music and movies. And then additional data that you provide as you spend time on the site. When you download the Texas Hold’Em app, they know you like poker, when you become a Fan of the Yankees page they know you are a Yankee fan. So with all this data, how do marketers leverage it?

Well, the best advertising play for display may be taking that data and applying it when a user is on another site. Therefore combining the ability to target the right customer at the right place and time. Sound like something that is far away….think again. Look at what is happening:

– LinkedIn.com recently created audience extension targeting by using Collective Media’s Amp platform. LinkedIn allows advertisers to target based on LinkedIn profile information such as Online Marketing professionals on other sites within the Collective Media network which includes most of the Comscore 250 sites.

– Facebook is currently working on an ad network play by using Facebook Connect. Facebook Connect is already getting traction by allowing publishers to grow registrations by using Facebook Connect. Now they are testing an ad network solution which they will be able to sell ads on Facebook Connect sites by leveraging their user data.

– BlueKai has created a data exchange that allow partners to buy and own intent data across any media. Social Networking sites may be the largest data provider on intent data in this type of exchange.

At the end of the day, data may end up really being the fuel that online display advertising needs to grow more explosively. The dirty secret about display advertising is that is for the most part a very poorly optimized and inefficient advertising vehicle. The promise of the online advertising was the ability to deliver the right message via a 1-to-1 basis. However, the lack of the portability of data has been a major roadblock. Looks like those days may be over. Now the next roadblock may be the proper technology to really optimize campaigns using that data. We will save that for another conversation…..

Slow growth of the Internet Display Market because of Social Media

In the JP Morgan Internet Report 2009, they cite that Internet display advertising will grow only 6% while search will grow at 11%. They attribute the slower growth in display to:

– Lower ad budgets given macroeconomic weakness and shift towards performance based advertising
– Continued pressure on non-premium inventory pricing as social networks and other non-traditional sites struggle to find a monetization model that works
– Difficult comps due to the 2008 Olympics and political campaigns
– Continued trouble finding an appropriate way to monetize video inventory without alienating users

The issue of social networking inventory is more complex then what is briefly defined in the report. Social media sites especially social networks have exploded in traffic over the last 5 years. That is no secret. With that being said, the display market has been flooded with billions of additional impressions per month from MySpace, Facebook and the countless social networking sites that emerged on the scene. My guess is that social media now accounts for at least half of the available ad impressions in display. Most of this inventory is sold through ad networks and yield single or teen cent eCPMs. The failure of growth of display is obviously not a supply issue. So why is demand not taking advantage of supply and capitalizing on the this incredibly opportunity of cheap available inventory. Here are some key reasons:

1. Social Media Companies are Not Properly Pricing Inventory
If you called MySpace and tried to buy display, they will quote your prices ranging from an eCPM of $2 to $5 depending on volume, targeting and the placement. However, you can go through other indirect channels (ad network, exchanges, etc.) and pay an eCPM of less than $.20. And what happens is that the high eCPM revenue probably only consumes no more than 20% of their ad inventory. The rest of that inventory gets unloaded through third parties at rock bottom prices. So why the discrepancy? Well, the mindset in these organizations is to price inventory competitively against other sites especially content sites and portals. And they are adamant about it because they feel that pricing their rate card too cheaply will create a negative perception of their site as an advertising platform. They also worried that once advertisers buy inventory at low prices that it will be difficult to get them to pay for high CPMs later.

I find that argument ridiculous and I regret at Community Connect that we didn’t price inventory more efficiently. Whether it is for branding or performance advertising campaigns, advertisers are measuring performance. If you have the available inventory, price that inventory cheaply in order to give advertisers the ROI for them to spend more. Advertisers are complaining about the efficacy of social networking advertising. Of course they are, content sites are naturally better performers on an impression to impression basis because of both the context and the time spent on the page. However, social networking sites have virtually no inventory constraints. So if they can’t beat them by the performance of the impression, beat them in price to get them the ROI that they need.

2. High Engagement is Bad for Advertising IF you Don’t Properly Frequency Cap
Social networking sites have an incredible amount of inventory because there are a core number of users that visit the site regularly and spending an immense amount of time during each visit. Showing that user the same ad too many times is the kiss of death. Most of the remnant ad inventory goes through ad networks which ask for frequency caps but only for their campaign. So let me give you and example:

Advertising.com offer $.40 CPMs and says frequency cap my campaign at 3 per day. Via that campaign they run an ad for Vonage and it is served with the frequency cap. The social networking site then runs ValueClick ads who offer $.35 CPMs with a frequency cap of 2 after they fill the order of Advertising.com (you fill Ad.com b/c of the higher CPM offered). ValueClick doesn’t know that Advertising.com already served the Vonage ad and then serves 2 impressions for the same Vonage campaign to that same user who got 3 impressions from Advertising.com. So imagine if you are the 40th ad network in line and that you are also serving the Vonage campaign. That user may have already gotten 100 impressions that day of Vonage! They are going to completely ignore that ad. Why does this happen – there is no common operating system for the publishers and ad network to know what campaigns are running. The social networking publishers just see a generic ad tag from the ad network and have no idea what ads they are going to run through there and the ad networks have no idea of what campaigns the other ad networks are running and what frequency campaigns. Does this sound efficient to you? This is a disaster that continues to happen in the industry.

3. Not Leveraging the Targeting Capabilities
Tell me of any type of site that collects more individual demographic and psychographic data than social networking sites. You can’t because the amount of data that is collected from users is unsurpassed. Everything from age, gender, location, school, occupation, religion, marital status, music interests, favorite books and movies, and on and on and on. What a treasure trove of data. Yet no one knows how to leverage it. The ideal advertising technology would be able to take a campaign and be able to determine what segments are performing better and weigh those impressions accordingly. It would be able to tell what attributes of that user actually correlate with performance (for example does gender or whether they do yoga effect performance) and then create segments on the fly to optimize against. Now imagine how you can then use this data across other sites to combine with context to further optimize a campaign. Can you imagine if you can run a pharmaceutical campaign on a health site with the additional targeting from the data that was acquired from a social networking site. If you can optimize based on context AND demographic AND psychographic then you would see much stronger ROI from display.

Internet display advertising is not exempt from the basic tenets of effective advertising:

“Delivering the right message to the right person at the right time” (while of course doing it at the right price). This was the promise of internet advertising. I can tell you right now for social media, it is not even close to living up to that promise. They figure this out, you are going to see real growth in social media advertising.

JP Morgan Nothing But Net Report 2009

Q&A About the Future of Social Networking

An ad agency that we have worked with recently asked publishers in the social media space to answer some questions. They are doing a study about the trends in social media. I thought I would at least publish the answers that I came up with here:

1. How do you define social media?
Social Media is content or communication that comes from users/consumers.

2. Why are users on your site? Does this match with the primary
role of your site in social networking?

Users of BlackPlanet.com come to the site for the opportunity to meet, interact and share with other African Americans. If you ask our members what value do they get, common answers would be: “I met my best friend because of BlackPlanet”, “I met my husband and wife because of BlackPlanet”, “I found my job because of BlackPlanet”, “I get to express and discuss issues that are relevant to me and my community”. We empower African Americans to improve their lives in meaningful ways through the power of their community. This matches with the primary role of our site in social networking.

3. Why is your site successful in this space? What makes it valuable?

BlackPlanet.com is successful because:
a. It focuses on African Americans which as a community of people has incredibly strong ties and affinities.

b. We provide value that affects their lives in meaningful ways.

c. It has a brand that is in an institution within the community.

4. Can you fill us in on the history of social media? Is there a story somewhere that we should know? How did this start? How do you fit into the mix?

We believe social media has existed and thrived before the advent of the Web. The Internet, before the World Wide Web was established, was primarily made up of online community systems such as bulletin board systems and usenets. When the Web came around it was like a Neutron Bomb hit the Internet. The analogy being that the neutron bomb killed all the people but left the buildings standing. The “buildings” being information and the “people” being the conversations. If you remember, the Internet became the “information superhighway” and all people could talk about was how the Internet was going replacing one to many media such as television and newspapers. The many to many and communication aspect of the medium was lost. The Internet was viewed as the largest virtual library. What happened to the people?

The early stages of community or social media on the Web was made up a lot of disparate tools. A message board site here, a chat site there or a personal page site someplace else. You may remember some of these sites such as Geocities, TalkCity or AOL Message Boards. We call this Community 1.0. Very separate and general use tools. The tools were not connected nor used for a particular goal or purpose.

Then came what we call Community 2.0. This is when tools started to be integrated to offer a more compelling communication and sharing experience. Systems such as personal pages, chat, message boards, groups, blogs were integrated onto one common platform. Sites like Friendster or MySpace took this approach and served a wide audience with a wide range of uses whether it was to meet new friends or discover new music artists.

The next evolution of Community or Social Media or Community 3.0 is about becoming more niche and use specific. Social media is becoming much more focused thereby super serving a specific consumer need. Tools such as profiles and comment boards and blogs are now being put together, changed and positioned to meet specific needs whether it is to share local business reviews (Yelp), stay connected with existing friends (Facebook), building a support network of moms (ClubMom) or professionally network (LinkedIn). This is a great thing. Social media is taking many different forms all driven by the fact that these companies are trying to better serve specific needs of much more defined and targeted consumer segment therefore becoming more valuable.

So how does BlackPlanet.com fit it in? The site was launched in 1999 and really pioneered the wave of Community 2.0 sites such as MySpace (Ask Tom Anderson if he modeled MySpace around a lot of the concepts that BlackPlanet.com proved to be successful long before MySpace was conceived). BlackPlanet.com has now been evolving in the Community 3.0 world by recognizing that in order to better serve the black community we must address the diverse and specific needs of the audience. This is why we have launched the BlackPlanet Universe. With sites such as NewsOne.com, TheUrbanDaily.com, HelloBeautiful.com, Elev8.com and GiantMag.com we know that the African American community has a wide range of interests and passions whether it be news, entertainment gossip, women issues, faith and fellowship or culture from a black perspective. We feel that one site can not be all things to all black people. However by creating a network of sites and platforms with the underpinnings of black social media woven into the fabric of these properties we are able to better serve and remain the number one online media company focused on African Americans. We believe we are part of the next wave of social media by super serving specific needs of users.

What are the 3 best and 3 biggest failures in social media advertising that you’ve been directly involved with? What is it that made them successful/unsuccessful? If unsuccessful, what should have been done differently?

Best
Barack Obama campaign – did an incredible job of integrating themselves with each social media site that they worked with and giving special attention and care about what was being communicated through what channel by using targeted messages to different segments. They continue this communication even after winning the election realizing that social networking is also another form of customer relationship management meaning that communicating on it is not a one time event.

Worst
Unnamed Test Prep Company – shut down the program because a member wrote a comment that their competitor has a better service. They were afraid of having more of these comments. The power of social media is not just about elevating brand advocates but identifying brand detractors and getting them to be brand advocates. What they should have done is find out from that user why they thought the competing service is better and either change their product or service to meet that need or if educate that consumer on why that isn’t true. Debunking myths or changing brand detractors to advocates is an incredible opportunity for a business.

5. Are there programs/technologies/brands that changed the game for social media?

For us MySpace changed the game. Online Community or Social Media was not widely accepted as a good branding opportunity. By us being black focused we faced trying to break that notion without the benefit of a general market player first breaking that barrier. Imagine if the first magazine was an African American focused magazine and if you were the ad sales person trying to sell advertising against that. That would have been harder than Jackie Robinson breaking the color barrier in major league baseball. J MySpace made it more acceptable and brought attention to the possibilities of using social media as an advertising platform. The wide range of programs on sites like MySpace, YouTube and Facebook demonstrated that Social Media can fill a wide range of needs and goals of advertisers. Therefore, making it easier for advertisers to utilize our sites.

6. What’s the current hot/new/exciting aspect of your site? Why do you think users are engaging with it so much?
See BlackPlanet Universe in the answer for Question 4.

7. Some brands are more relevant to youth culture… Do you think
every brand has a right to play in the space?

Every brand should play in the space. Social Media is becoming omnipresent and will be part of the experience of anyone that goes online. Social media is no longer a youth game. It is a people game.

8. Do campaigns live best in social networking space alone or in tandem with offline media? Please give examples if possible.

We believe that the tandem with offline media is incredibly powerful. If that campaign and message can follow the experience through a longer continuum, it can be much more effective. Look at the Barack Obama campaign. At the beginning, African Americans leaned much more in favor of Hillary Clinton. The Obama campaign focused a message and strategy that reached African Americans across all our media channels whether it be our sites, radio (Radio One stations), tv (TVOne) and print (Giant Magazine). We were a big reason for the Obama campaign winning the black vote.

9. Should a strategy be defined by the social media outlet (social networking vs. widget/applications) or by how people interact with the medium (ie voyeurs vs. content creators)?

It all depends. What drives strategy for any campaign should be the end business goal. Deciding on whether to use social networking vs. widget/applications is more tied to the distribution of that message. How they interact with the medium should be based on what meets that goal. The strategy needs to be first and foremost defined by the end business goal. Everything else should follow. The great thing about social media is the message, distribution and interactions can all vary depending on those goals. So that should be the strategy – mix and match to meet the business goals.

10. If you had to offer one piece of advice to advertisers in your space, what would it be?

Remember the fundamentals of marketing and drill down on how that can be fulfilled in social media. For example, segmentation and delivering a targeted message to that segment has been proven to be effective. The amount of segmentation and user data on social networking sites may be unmatched. Effective advertisers utilize that data. There are many values to the medium that are tied to proven marketing practices that are still under utilized.

11. What’s the next big thing for social media? Where do you see it in the next three years?

See answer to Question 4.

The Viability of Virtual Currency on Social Networking sites

I recently received an Internet Media report from some investment bankers at a boutique investment bank. It discussed how virtual currency systems may supplant advertising as the main revenue source for social networking sites. This is a very interesting thesis. At Community Connect, we were originally 100% ad supported. When the previous recession hit in 2001, we needed to diversify our revenue streams to survive. One of the few successful B2C business models was online personals with its subscription model.

We realized that people were coming to our sites to make friends and flirt. However, there was not an area on the site where you could easily identify people actually seeking romantic relationships. So we built an online personals area on our site and it saved the business. People were willing to pay for the ability to communicate with someone that they have identified as single and of interest to them. The money was pouring in and I started to believe that our business was going to be much more subscription based. The problem though was that the subscription model was based on limiting communication between users. As Friendster and MySpace emerged, we realized that if we restricted communication users would quickly leave for these unrestricted alternatives. And this soon came true of our online personals area. PlentyofFish.com exploited that issue and has been the fastest growing online dating site in terms of size of audience.

So why now will a paid model work for social networking sites.? Well, the emergence of 3d worlds such as Second Life, Habbo, IMVU and Meez as well as casual game app publishers such as Zynga who provide apps on Facebook such as Texas Hold’Em, YoVille and Mafia Wars have shed a light that folks in Asia have known for quite some time now (See TenCent and CyWorld). That by providing a virtual economy does it not only provide a strong monetization engine but actually provides a better user experience.

So how does making people pay for something, create a better user experience? By creating scarcity for something, it allows those that obtain it to have a higher level of status within the community. Isn’t this true for our real lives? Of course! And I have always believed that the more a social networking site reflects what occurs in the real world, the more successful it will be. So what type of products or services should be scarce in a social networking site:

1. Gifts – the more scarce, the greater the appreciation and recognition of your gift giving.

2. Self Expression Enhancements – Having special layouts and templates for things like your profile and the messages that you send gives you status.

3. Compliments or Elevating Someone’s Reputation – the reason why having a strong reputation on Ebay is hard is because it has scarcity. Social networking sites generally lack a good reputation system so you know those members that are appreciated by other members. By not creating any meaningful hurdle to give someone a compliment then the system will be gamed by those that truly don’t deserve that elevated status. So there should be a price to it in order to make it effective.

So do I think that a virtual currency system will be a bigger monetization engine as advertising for social networking sites. No. I stlll think the advertising platform for social networking sites is completely under monetized (more to come on that topic) and that advertising should be able to monetize every single visitor to your site. Virtual currency space has limitations and are very dependent on a subset of your most enthusiast users and probably will be limited because of that. However, it could be a very meaningful revenue stream in addition to advertising for most social networking sites.