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Paging Google+: The race for company pages continues November 14, 2011

Posted by David Card in Uncategorized.
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When Google introduced its Google+ social technology platform last summer, I was surprised at its lack of company or brand pages. After all, Google runs the biggest advertising business online, and Facebook — its archrival in social media and obvious Google+ target — sells tons of ads to companies that want to drive traffic to their Facebook Pages. Then, last week, Google introduced Google+ Pages for companies and with big companies set to make that feature an element of their social media marketing programs, Google could have a jump on Facebook.

Facebook’s main advantage over Google is ubiquity. The former has offered brand pages for several years, and its huge audience ensures that most consumer marketers have one. Over the past couple of years, an ecosystem of companies offering marketing tools and agency services has grown up around Facebook Pages. Companies like Buddy Media, Efficient Frontier and iCrossing help marketers integrate Facebook Pages into their advertising campaigns. That’s necessary in part because as a product, Facebook Pages is pretty bare bones. The service doesn’t enable much customization in terms of layout or design, and the pages are hard to find with Facebook’s search.

But marketers like Dr PepperWarner Bros. and Nike can and do take advantage of core Facebook platform features. Updates and activities appear in users’ news feeds, although their frequency is at the mercy of Facebook’s algorithm whims. And marketers can deliver interactive experiences, shopping, gaming and sweepstakes via apps housed on their pages. In fact, companies like Ford spend more money off Facebook — e.g., buying online ads elsewhere, sponsoring video promotions — in support of Facebook Page–hosted apps than they spend on Facebook itself.

So can Google make up for four years of marketers’ experience with Facebook Pages? A few observers have been critical of Google+ Pages. Some have griped about minutiae, but there were other, more legitimate critiques of missing management tools and a lack of integration with Google Places for local businesses. But Google is wisely focusing on key aspects of company pages that differentiate it from Facebook and that many marketers will value. Just as with its overall Google+ strategy, Google is integrating its pages with services where it has industry leadership:

  • Search. Google is introducing a new search feature: “Direct Connect” will send a searcher directly to a company page. This is a lot like AOL Keywords, which were powerful marketing mechanisms back in AOL’s heyday. Even more important, Google+ Pages can reduce paid search costs for marketers.
  • Advertising integration. Google will make it easy for marketers to integrate pages into campaigns using its industry-leading search and display ad networks. Google’s +1 Like equivalent in ads and on Google+ Pages will boost organic search results, an appealing feature for sites and marketers. While Facebook Connect’s Like button is widespread, it doesn’t affect search results.
  • Analytics. Facebook’s own analytics tools are pretty mediocre, creating a need for third-party tools and services. Google is a force in analytics tools, and it typically gives them away for free to encourage adoption.

Google may not be able to instantly add 750 million highly engaged Google+ users. But its initial implementation of Google+ Pages is focused on delivering marketing benefits that play to existing Google strengths and have a few advantages over Facebook Pages. Facebook can depend on its ecosystem to counter some of those, but Google looks like it has a solid offering. Many marketers will jump on it. Now it needs to get back to work on Google+ APIs, so apps developers have more to work with.

Question of the week

How can Google convince big companies to use Google+ Pages?
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The social-media advertising ecosystem is shaping up August 8, 2011

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A recent batch of product and funding announcements (Webtrends and Nielsen, CrowdTap and Hearsay Social, respectively) points to a real trend: The infrastructure and business ecosystem for social-media advertising is developing rapidly. That’s good news for marketers and online publishers — and even for Facebook competitors — as a robust ad infrastructure is critical for growing the market beyond the $3 billion forecast for U.S. spending in 2011. The tools and systems rolling out will help the 800-pound Facebook, of course. But they will also be valuable to smaller social-media companies and even traditional media, and they will generate revenue for tools, data and agency services.

A year ago, I wrote that the winning strategies belonged to whichever companies could help big-brand marketers reach large numbers of their target customers, integrate social marketing with traditional media and measure campaign performance. Now the social-media ecosystem is adding resources around social marketing management and advertising measurement, two pillars of those strategies. For example:

Getting “social” on company pages

Today most social-media advertising comprises boring display units on inexpensive social-network pages. It’s not particularly “social.” But marketers use it to drive audiences to company pages that feature interactive conversations, video and coupons, and that can access Facebook’s feed to build recurring use through fan-friending. Last week Foursquare added self-service tools for its own company pages, while Google is still figuring out its approach for Google+.

Facebook uses its EdgeRank algorithm to filter its feed for user relevance. That can limit the company messages delivered, fiendishly encouraging ad buying to remind fans to visit. Reportedly, Facebook may be reconsidering that strategy, but regardless, tools and services that coordinate page and ad management will be the winners. The companies I mentioned are among the early leaders, along with companies like Efficient Frontier, iCrossing and Buddy Media. And last week, Facebook announced that it was opening up its advertising API that had previously been limited to a handful of partners. That means there will soon be more management, analytics and services companies able to leverage Facebook data.

Measuring social advertising

Social advertising tools and services will need to integrate data from multiple sources for campaign analysis and optimization. Gnip, which licenses and resells Twitter’s “firehose” data, says that two-thirds of its customers are social media agencies. But to work successfully, tools also need offline consumer and enterprise information (ExperianAcxiom) and third-party online-traffic analysis from the likes of comScore and Nielsen.

As noted, those two both have new social measurement services that feature the TV-advertising concept of gross rating points, or GRPs. GRPs are arguably a simpler measurement than online metrics that track unique individuals and interactions, and advertisers use them to measure their efficiency in buying TV time. While an online GRP might seem like a step backward, it is necessary to make big brands spend more of their overall advertising budgets on social media. They need to be able to compare online-advertising efficiencies and effectiveness with traditional media. Integrating a GRP with measurement techniques that gauge audience engagement — something brand advertisers will pay a premium for — will grow overall online spending.

All of this action in social advertising is healthy: Its business ecosystem is too immature to demand much consolidation or pick winners easily. A year ago, I thought big players like Yahoo and traditional media companies could garner social ad dollars due to their advertiser relationships, multichannel experience and ad-friendly content. But they’ve done little, and the social ad ecosystem will aid Facebook and smaller social players just as much.

Question of the week

What is needed to grow social media advertising beyond $3 billion?

Why Microsoft can’t give up on search August 1, 2011

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Last week, a Reuters Breakingviews piece that was picked up by the New York Times generated controversy and counter-commentary over Microsoft’s struggling efforts in search. Breakingviews suggested that Microsoft abandon its money-losing search business and sell the Bing search engine to Facebook. This is a bad idea, even though Microsoft’s online business, mostly due to search, suffered a fiscal-year operating loss of $2.6 billion. Microsoft hasn’t cracked the code on how to make Bing a winner, though it has made incremental improvements in areas like user interface and social integration. But Microsoft has to keep at it, because it needs search for several reasons: 1) to defend its core platforms, 2) to compete with its biggest rival, Google, and 3) to solidify its ad business and open emerging revenue streams.

Defending the franchise

The foundation of Microsoft’s success has been the Windows platform: an operating system with APIs that powered an ecosystem and locked in developers, and that owned end users via its user interface familiarity. But search is the main navigation UI for the web, and it is playing an increasing role in desktop, application and local information navigation. Search can also set UI standards, and it threatens to wean users off their Windows dependency as cloud computing proliferates. Microsoft’s classic product strategy — integration — is one way that it can use Bing to hold off Google’s search UI incursions on Microsoft’s position in establishing cloud and enterprise APIs and services.

Competing with Google

Search is Google’s cash cow, and Google is Microsoft’s chief head-to-head competitor in a number of markets and in API platforms. Google’s massive profitability in search funds its efforts in applications, mobile platforms and online media (YouTube).

And what each company learns from search informs its efforts in machine learning, natural language development, personalization and e-commerce. Operating under the strategy that the best defense is a good offense, anything Microsoft can do to eat into Google’s search profitability forces Google into those other already-competitive markets.

Search marketers need a viable competitor to keep Google honest. Back in 2008, when Microsoft’s hostile $47.5 billion takeover offer for Yahoo threatened to consolidate search engine competition from three players to two, a Jupiter Research survey of advertisers and publishers showed that the majority of clients were worried about search advertising price increases. Think how much worse that could be if there were only one search engine. Realistically, Microsoft is one of the few companies that can afford the investment necessary in search.

Microsoft and advertising

Search is the biggest segment of online advertising, and it could be profitable for Microsoft if it can achieve scale. Microsoft believes that 10 to 15 percentage points more of market share would produce the necessary liquidity in its advertising marketplace, meaning better conversion rates and thus higher pricing (without gouging advertisers, because those results would convert better). If Microsoft were bigger in search, it could offer more accurate tools for advertisers trying to connect the dots across search and display advertising, producing more-valuable brand advertising analysis as well as targeting.

Contrary to what Henry Blodget thinks, Microsoft needs an ad business: It is likely that advertising will be a key source of cloud-based software revenues, especially for small businesses. After all, most consumer web businesses and cloud services get their money from a combination of fees and ads. Microsoft could create a marketplace of B2B services where search ads are one of the “currencies” buyers and sellers use. Another place where Bing could gain a toehold via integration is in mobile search, which may well pay off before mobile brand advertising, if Apple’s mobile ad network struggles are any indicator.

Finally, Facebook has plenty on its plate without trying to take on Google directly in search. It’s far more likely that Facebook hopes to continue to partner with Microsoft in search and advertising with social integration, while it concentrates on creating more valuable — and pricier — display ad inventory and sponsorships. In fact, the Microsoft-Facebook partnership’s continuing on its current course might just be Redmond’s best chance to gain search share.

Question of the week

Why should or shouldn’t Microsoft abandon search?

Yahoo’s growth options dwindling July 25, 2011

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Yahoo reported another disappointing quarter, with ex-TAC revenues (i.e., revenues minus the money it shares with ad network partners) down 5 percent, to just over $1 billion. Its core display advertising business was up 5 percent, but it appears to be losing share to companies like Google and Facebook. Yahoo is still one of the biggest online properties in the U.S., with fairly sturdy content and communications assets, but its options for restoring growth are getting fewer.

The reason? Yahoo has missed the most important new digital consumer trends. It might still have a shot at adding social media; after all, after many failures, Google’s Google+ project to add social elements to its services appears to be gaining traction, at least among early adopters. But Yahoo failed to translate a solid position in casual gaming into social gaming, and it is only dabbling in social commerce, even though it coined the phrase. And its acquisition of “content farm” Associated Content doesn’t seem to be increasing profitable traffic. Meanwhile, outsourcing its search business to Microsoft hasn’t paid off yet. So what is the company to do?

Yahoo blamed its display-ad sluggishness on a sales re-org that delayed some big deals. Let’s give Yahoo the benefit of the doubt and assume it still has good relationships with big-brand advertisers like GMC, Visa and Target (all of which are serving up rich media ads or sponsorships on Yahoo as I write this). If Yahoo cashed out its assets in China, it could use that money for other acquisitions and investments to bolster online advertising and gain a little social media momentum.

Yahoo already has a decent number of online video viewers – it’s a distant No. 3 after YouTube – but it is relatively weak in how much time those users spend with its content (35 minutes per viewer compared with Hulu’s 185, according to comScore). Buying Hulu might be too expensive: Apple and Google are rumored to be interested, and Hulu may not get long-term exclusive contracts for TV shows. But Yahoo’s brand-advertising expertise is still better than Hulu’s, or Netflix’s or Amazon’s. Its IntoNow TV check-in acquisition is already focused on synching twin-screen activities with on-air ads, and Yahoo Connected TV is showing signs of life. Yahoo could make a compelling social TV pitch to advertisers like Coke and Verizon, for example, connecting an on-air ad to an on-screen or PC-based check-in or other activity.

Yahoo could try to be the social-media advertising marketplace for everybody but Facebook. Even a social network as big as Twitter needs help creating and selling ads. If Yahoo didn’t choose to acquire a real-time ad network like OneRiot or 140 Proof that places ads near social streams, it could still bulk up its social targeting and analytics via Lotame, 33Across or Media6Degrees. With some acquisitions and integration, Yahoo could ease the effort a publisher or ad buyer has to make to cobble together customized solutions.

Yahoo is reportedly working on a hybrid content/ad syndication network. Instead of just renting out ad space, a second-tier online publisher could get related personalized content and advertising from Yahoo in a single package. Yahoo has plenty of high-quality content, and it could make Associated Content create advertorial-like opportunities. Newspaper publisher Gannett attributed a solid online quarter partly to its ad network partnership with Yahoo, proving that Yahoo has some success dealing with quasi-competitors.

With some effort, Yahoo could reenergize its business around video, a social advertising network and/or syndication over the next 9 to 18 months. Its costs are under control and its ad business is growing, albeit slowly. If investors or its board don’t have the patience, I suppose it could try to sell itself to Microsoft or AOL, assuming they’re still interested. Either would be a pure consolidation play among general-purpose content portals, combining audiences, tech infrastructure and sales forces. That kind of cost-savings merger is always brutal, and brutally difficult to execute.

Question of the week

How can Yahoo start growing again?

Don’t relax, Google. Integrate July 18, 2011

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Google is on a tear. It just had a great quarter (revenues up 32 percent to a record $9 billion), 550,000 Android devices are activating daily, and with Google+ it finally has a social product generating positive buzz and attracting users (10 million in limited release). CEO Larry Page is pleased with the progress of Google’s reorganization around product-oriented business units. But Page can’t just sit back and let those business units go their merry ways. Google faces key challenges to the growth of its core search and advertising businesses that it could address with better product integration.

For all the talk of search-quality problems and threats from social search, Google still dominates the market with a 65 percent share. But there are worrying signs. U.S search query volume is pretty flat. And while Google’s paid clicks were up 18 percent in the second quarter, that’s slower than revenue growth and actually down from Q1. Google’s average price per click growth was also a little sluggish, at 12 percent.

Sales VP Susan Wojcicki said on the quarterly earnings call this week that the primary growth drivers of paid search are query volume and Google’s ability to deliver better-quality results. But Google conceded that one of its key quality initiatives had actually hurt revenues a bit by featuring sites that weren’t advertisers — its Panda algorithm tweaks, which aimed to diminish the influence of content farms. Over time, improving relevance will pay off in user loyalty and more clicks. Meanwhile more improvements to results formats would get paid click rates up.

Getting deeper into display

Google needs more higher-priced display ads so that it can make better integrated use of the valuable data it gleans from search to create accurate display targeting. Google doesn’t break out display-ad revenues in its financial reporting, and you’ll get different estimates of its size. But the company has two components to its display business: an ad network selling mostly low-cost ads on third-party sites and the advertising it sells on its own properties like YouTube and Gmail.

The real money is in owning the pages that show ads, as Google’s ad networks keep only about 30 percent of the sale. On the call, Google ducked a question on whether it needed more “owned and operated” ad inventory: The answer is that it does. YouTube is getting more aggressive in advertising experiments like its skippable ads (which already compose a third of inventory, according to Wojcicki) and in pushing pricey sponsorships. But Google hasn’t said anything about advertising on Google+, which might be its next big source of page views. It is promising Google+ company pages, but it likely won’t charge for them, because archrival Facebook doesn’t. It needs to integrate Google+ inventory into its ad networks, so it can make money selling ads that drive traffic to company pages, just like Facebook does.

Connecting some more dots

Google has an impressive collection of local assets with Maps, search and Offers. But they’re only lightly integrated so far. And adding a one-page sign-up form is no substitute for having a local sales force that could package search, display, offers and analytics for marketing-challenged small businesses in a way that no other company could match.

While Google brags about Chrome’s 160 million users, it has only 12 percent market share. I’ve been dismissive of browsers as technology platforms, but Chrome could do web-wide what Google is doing with its promotional black toolbar on its own sites. That could be a powerful incentive for +1 and Google+ usage.

Don’t get me wrong. Google’s business is in solid shape. But a little more integration would help ensure growth and defend against would-be usurpers. Page pointed at Google’s visual redesign as a cross-group initiative: He just needs a few more of these.

Question of the week

How can Google maintain its growth?

Facebook and Google: lessons to learn from Myspace July 5, 2011

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Last week, News Corp. unloaded Myspace for a pittance. Understanding why Myspace failed to maintain its early dominance in social networking is critical to determining whether Facebook is similarly vulnerable, and whether Google+ is on the right track.

BusinessWeek’s cover story on the fall of Myspace blames the usual reasons: Rupert Murdoch lost interest, Myspace got a rep for sleaziness, it went through a crippling technology transition and users lost interest and migrated en masse to Facebook. Other critics fall back on the tired idea that Myspace’s do-it-yourself design led to garish personal pages that scared away mainstream users.

The real story? Myspace was done in by technology and business model failures that Facebook is explicitly countering. Google’s social strategy is less clear. Although Myspace embraced third-party developers’ apps and widgets, it never built out a robust technology platform of APIs and services they could use, let alone syndicate across other sites. And Myspace signed an initially lucrative advertising deal with Google that distracted it from cultivating relationships with “classier” advertisers instead of cheesy direct marketers, and from building out innovative social marketing programs.

Not every online media business has to be a platform, but an ambitious social network does, and it can’t ease up on the innovation pace. Myspace was never a very connected network: it focused on self-expression at the expense of communication and everyone “was in your extended network.” More like Geocities than Friendster, Myspace only recently adopted a feed-based UI.

In contrast, Facebook launched APIs early, syndicated them offsite with Connect, Likes and Comments, copied and/or acquired its feed – and pushed it, despite initial user resistance – and is a leading contender as a unified communications hub. Google’s first social technologies were flawed as platforms: Orkut was a standalone effort, Wave was too complex, and Buzz had no central viewing place or reason to participate. Now, Google appears to want its innovative, communications-oriented Google+ to gain traction among digerati users before it shows any APIs, but its distributed +1 Like-button wannabe has a better pitch for publishers (use it and improve SEO) than for users.

On the business side, Facebook has surpassed Myspace’s early lead in ad targeting, though it’s still highly dependent on low-priced cost-per-click advertising. But Facebook is building relationships with brand advertisers and agencies through an advisory council and social marketing test bed. Moreover, Facebook collects ad revenues and virtual currency fees from its apps ecosystem members, something Myspace never mastered.

Meanwhile, some of Google’s social impetus is defensive, geared to protect its paid search business by ensuring access to social “signals” for ranking search results. While it’s currently unconnected to Google+, YouTube counts as social media and is signing big deals with premiere advertisers and experimenting aggressively with video ad formats. Unlike Facebook’s social platform, Google’s search, maps and mobile platforms offer its ecosystem a ready-made revenue stream from Google’s ad networks, a boon for developer relationships and lock-in. Presumably, Google will offer that for its social platform. I’d give Facebook an A for its social tech platform and a B- for its social media business model. Google gets an incomplete on both fronts.

As for Myspace, it’s been acquired by Specific Media, a top-ten online ad network that already reaches 79 percent of the U.S., according to comScore. Myspace’s user information will be useful for Specific’s ad targeting, although Specific says it’s more interested in becoming a media company like Yahoo than in Myspace’s data. Myspace had some interesting ideas on curating entertainment content via professional and semi-pro editors – if Specific is smart, that effort won’t succumb to layoffs.

Myspace doesn’t seem poised to regain much past glory. Under Specific, it could survive as a low-cost, medium-sized entertainment portal. It still gets about 30 to 35 million monthly users in the U.S. and has fairly strong relationships with the music industry and Hollywood. If it works hard on sponsorships and can secure access to some entertainment exclusives, it may be able to overcome the baggage of its tarnished brand.

Question of the week

Why did Myspace fail, and what does that imply for Facebook and Google+?

Integrating Social Media and Traditional Entertainment May 9, 2011

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Remember when social media was going to re-invent the entertainment business? Back in 2007 and 2008, Viacom’s MTV Networks tried to tie its shows together into the since-abandoned Flux social network, and even launched a short-lived TV channel driven by user-generated content. About the same time, NBC Universal’s Bravo network bought snarky fan site Television Without Pity, but has done nothing with it since. But that was then, and recent news suggests the social entertainment space is far from dead.

Last week, two big old media companies made acquisitions that signal new life: Warner Home Entertainment, home of the movie studio’s DVD efforts, acquired Flixster/Rotten Tomatoes, and News Corp.’s IGN bought Hearst’s UGO. Warner’s move hints at Netflix-envy: It said it wanted to use Flixster’s Facebook-driven user reviews and Rotten Tomatoes’ aggregation of professional ones to “grow digital content ownership.” Meanwhile, by doubling down on video game info sites, News Corp. is constructing a traditional aficionado-magazine model, but with lots of social media elements (user blogs, friend-following, points for participation). Most think News Corp. will spin off the combination.

Given these moves, has the industry finally figured out how to add social media to traditional entertainment for fun and profit?

Extending and Enhancing Entertainment Formats

Excitement about tablets and apps, lots of startup activity and Facebook’s role in distribution and audience acquisition are combining to create new opportunities to extend and enhance traditional entertainment forms. Expanding on Michael Wolf’s analysis of how this is working in social TV, here’s what TV and other entertainment media can do to capitalize on social media:

  • Discovery and user-based curation: GetGlue is the early leader in cross-media entertainment check-ins, smartly using Facebook and Twitter (a check-in auto-generates a topic hashtag) to amplify the promotion.
  • Extension: Forums and discussion boards give a fan a dose of his favorite TV show more than once a week, and book clubs are migrating online.
  • Shared experience: VH1 showed a slick app last week that, in addition to adding user commentary to live viewing, acts like a “DVR for tweets.”
  • Gamification: Entertainment check-ins deliver the ubiquitous participation stickers and leaderboards; they should offer virtual currency for loyalty.
  • Commerce: Apple’s Ping social network doesn’t seem to be boosting iTunes sales yet, and Facebook’s only just begun to dabble in video rentals.
  • Analytics and fan feedback: FOX Broadcasting and others use Think Passenger’s private communities for audience analysis. Who will figure out if simultaneous Twitter traffic means anything?

What’s Still Missing?

While the check-ins have stickers and can act as a launchpad for Twitter conversations, by and large, companies try to deliver the six objectives above via separate apps or experiences. Would they be more effective if they were integrated? I always thought digital music could blend discovery, retail and consumption, but Rhapsody combined them better than iTunes long before Spotify, and Rhapsody failed to catch on. Likewise, while a friend’s reviews and curation could emerge as valid components to an entertainment recommendation engine, by themselves they don’t appear to be as effective as the collaborative filtering approach of Netflix or Amazon, or Pandora’s professionally and algorithmically curated recommendations.

Perhaps the experiences should remain seaparte, but the business engine behind the apps and sites can benefit from roll-ups like News Corp.’s game-site play, or from formal partnerships and licensing. Some are emerging now: Time Warner already owns a piece of GetGlue and is responsible for many of the paid promotions that run on the service. Yahoo scooped up video check-in service IntoNow and is using audio recognition to track TV advertising. A handful of publishers are building a new digital book club and looking to tap AOL and Starbucks for ad sales and distribution.

It is inherently easier and more efficient in terms of audience reach, segmentation and analysis to offer advertising displayed on a network rather than an individual title or show. That means big media companies are best positioned to package and deliver social entertainment experiences along with advertising and sponsorship opportunities.

Question of the week

How can traditional entertainment companies implement social media strategies?

Handicapping Facebook’s Next Billion-Dollar Business(es) May 2, 2011

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Amidst reports that it was having trouble unloading $1 billion worth of shares at a very rich valuation, Facebook last week tweaked an existing advertising service and started testing its first home-grown social commerce product: Facebook Deals. Will that be Facebook’s next billion-dollar business? Possibly. But it already faces stiff competition from Groupon and LivingSocial, not to mention a new Google entrant. More importantly, other growth- and revenue-generating opportunities exist that could be worth exploration on the part of Facebook, too.

Let’s examine each of these potential new revenue streams.

Big New Businesses for Facebook

Facebook dominates social media and the advertising spending that surrounds it. The company makes its money from low-priced display advertising (estimated at nearly $2 billion in 2010) and the 30 percent commission it takes from social gaming companies using Facebook Credits for virtual goods (forecast to be $250 million in 2011). Its three best new business opportunities are:

  • Rich-media brand advertising: To get at ad budgets that need more than the low-priced display ads driving social networks, Facebook needs to offer brand advertisers big, rich-media ad units like those of the New York Times and AOL. If it’s worried about user resistance, Facebook could show the ad only once a day, leave it over on the nearly empty right-hand sidebar or even reserve it for Friday movie openings and holiday promotions. Other than Yahoo, Microsoft and AOL, no other site has inventory with the audience reach for this kind of advertising, which commands $30-plus cost-per-thousand pricing and is usually sold out. This one should be a slam dunk.
  • Deals and social commerce: Facebook’s toe is barely in the social commerce water — it’s testing Deals in only five cities, sourcing some of the offers from partners and not charging merchants anything yet. Facebook is differentiating its deals by not demanding they be deeply discounted, and focusing on more social, shared-experience offers like restaurant deals or concert tickets. Local deals require an expensive local sales force that Facebook doesn’t have. While the company can deal directly with national retailers and merchants that target locally — a good opportunity otherwise — most of them don’t make the kind of “shared experience” products mentioned above.
  • Connect-based ad network: Unlike most ad networks, which make do with remnant ad inventory scraped from the bottom of online publishers’ barrels, Facebook has access to ready-made, desirable space through Connect services such as its Like button, sign-on and comments. Even without getting into behavioral targeting, Facebook could show ads targeted by context just like Google’s AdSense network. For example, it could serve up a hotel ad in an online newspaper’s travel section. If publishers balk, and weren’t cowed by their need for the traffic that Likes generate, Facebook could always share a piece of the revenue.

Potential Partnerships

I’ve talked about Facebook’s need for brand advertising and its potential to create an ad network before, and this piece by Jason Calacanis and his Launch team also likes those two opportunities and tries to put a dollar figure on their near-term revenue. He also suggests Facebook do in-stream advertising, which I suspect Facebook would deem too intrusive and competitive with Like messages and other promotions. Other potential revenue streams? Facebook has never charged for company pages (it sells them ads), I’m skeptical that it could do search effectively, and it has been very selective about data licensing.

But it needs partners to tap into the three new businesses identified above. Companies like:

  • Microsoft, already working with Facebook on search, who could build the ad network. These days, however, Microsoft seems focused almost exclusively on search after outsourcing some ad network functions.
  • Gilt Groupe, whose Gilt City deals unit is part of Facebook’s trials. Unlike other deal companies, Gilt also is a retailer, which could open other social-commerce doors.
  • Other online ad technology companies that could help Facebook’s advertising platform. Those that do data mining (e.g., Experian, Audience Science, BlueKai) and social targeting (e.g., Lotame, 33Across, Media6Degrees, Rapleaf) may need to do direct deals with Facebook to accommodate potential privacy legislation.

Question of the week

What will be Facebook’s next billion-dollar business?

Privacy Legislation’s Potential Impact on Online Media April 18, 2011

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Last week, the bipartisan Kerry-McCain bill proposed legislation on a Commercial Privacy Bill of Rights that would put the Federal Trade Commission in charge of policing the online collection, sharing and use of personal information. Because the legislation is watered down relative to prior proposals, the Kerry-McCain bill will face the least industry resistance and is more likely to be passed this year. Passage would shift some power in online media, and force changes in the way online ad networks and other targeters work with content sites.

The proposed bill is relatively business-friendly, so much so that it’s drawing criticism from privacy rights activists. The bill:

  • Focuses explicitly on the use of personal information for behavioral ad targeting — and particularly on data sharing between companies — rather than information collection in general.
  • Mandates opt-out policies for personal information use, but only requires tighter opt-in permission for sharing “sensitive” personally identifiable information related to religion, health and finances.
  • Enables what some are calling a Facebook loophole that imposes lighter restrictions on web-wide information collection and use by companies where the user has an account. This would favor Facebook Connect over ad networks.
  • Is strict about data-sharing for behavioral targeting via third parties (data collectors and ad networks), but much looser on ad targeting done by a publisher that collects the data on its own site.
  • Does not address “Do Not Track,” the concept of a universal opt-out mechanism that users broadcast to sites popularized by the FTC last December. In February, Congresswoman Jackie Speier, D-Calif., proposed that the FTC create and manage a Do Not Track framework.

Although advertising industry groups are predictably resistant to any kind of regulation, their initial reactions to Kerry-McCain seem more muted than concerns they had prior to the bill’s introduction. Big tech companies like Facebook, Microsoft, eBay, Hewlett-Packard and Intel expressed support for the bill. The trade groups are probably relieved about the absence of Do Not Track, which they fear encourages users to block all cookies and customization indiscriminately, and requires potentially costly support from ad servers, ad networks and sites. Apple is the latest browser maker to experiment with Do Not Track support, after Mozilla and Microsoft; Google favors an alternative approach that maintains user opt-outs.

Privacy Legislation Impact Scenarios

The promise of online advertising has been the potential combination of television-like reach with precision targeting. Passage of the Kerry-McCain bill or something similar will have the following effects on the online media landscape:

  • Online content sites: Don’t call me a conspiracy theorist, but some traditional publishers like the Wall Street Journal might be perfectly happy without web-wide behavioral targeting. They could tout the value of their online/offline audience and promote contextual targeting and sponsorships. As noted, publishers would able to follow and target a user within their own site, which would benefit portals like Yahoo and AOL, which have huge audiences and broad variety of content.
  • Online advertising ecosystem: The bill’s restrictive approach to behavioral targeting favors search advertising over display ad formats. It also weakens industry efforts to deliver attribution, i.e., understanding and valuing the longer-term effects of seeing brand advertising. The data sharing guidelines could force data miners (Experian, Audience Science, BlueKai) and ad networks (DoubleClick, ValueClick, 24/7 Real Media) to secure more formal contractual relationships with content sites that have registered users. And the legislation seems to leave room for third parties to take user info and create anonymized groups of targetable customer “types” based on demographics and behavior.
  • Social targeting: Today, most third-party social targeters (Lotame, 33Across, Media6Degrees, Rapleaf) base their analysis on tracking user behavior with their own cookies, rather than getting access to API data from Facebook or Twitter. Legislation may make them pay for access, and even then, Facebook to-date has been stingy about data sharing. Likely it’s saving that targeting opportunity for itself.

Question of the week

How could potential privacy legislation affect online advertising?

Facebook Patent Hints at Social Search Plans March 21, 2011

Posted by David Card in Uncategorized.
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Last week Facebook was awarded a patent that covered essential elements of social search. Patents don’t always predict products, but this one was acquired by Facebook when it purchased intellectual property from Friendster, which perhaps indicates new and active intent. Is Facebook is building an alternative to Google? Possibly. Let’s examine the state of social search and its potential implications for online media.

There is a “social will replace search” theory that runs something like this: Overwhelming amounts of data, along with SEO gaming, make Google’s traditional approach to ranking results less effective than it once was. And driven by social networks, a passive, feed-based user interface is usurping the old “seek and search” style of online navigation.

The big search engines like Google and Bing are already incorporating social signals into their ranking schemes, and into how their results are presented to users. It’s likely, in fact, that both social and search will co-exist as navigation modes. Some observers may have over-interpreted back-and-forth traffic among top sites (Google, Yahoo, MSN, Facebook) as an indication that Facebook drives more viewers than Google. A lot of cross-site traffic for them is the natural flow of an online session — check mail, headlines, social network — rather than a search- or feed-directed path. And sometimes a user’s friends aren’t the best source of relevance. Seeking medical information rather than a preferred dentist, or a convenient airline ticket rather than a fun vacation destination, will remain directed queries based on authority and the breadth of information coverage.

Social Search Competitors

If Facebook’s creating a social search alternative, Google is the big target; it has, after all, over $25 billion in search advertising revenue. It both integrates and segregates social technologies. Personalized social search that displays content shared or posted by a user’s friends is buried under More Search Tools on Google’s results page. It puts real-time search — licensed Twitter results and what public Facebook content it can crawl — a little higher on the page, and sprinkles in a few real-time results on its main results pane. With its existing strength in ad networks, Google is in the best position to build out real-time advertising.

Microsoft’s Bing, which isn’t really gaining ground on Google yet, has partnered with Facebook to gain more access to Facebook data like friends, status updates and Likes. Bing’s results feature Facebook and other social content a little more prominently than Google’s do, but Bing also offers a separate social content-only search function.

Other social search players include Topsy, which searches real-time content and keeps a deeper archive of tweets than Twitter does, and blekko, which uses human editors to create authoritative indices of results, partly by blocking what they determine low-quality sites. WOWD was building a social search engine, now concentrates on personalized feed filters. OneRiot ceded its real-time search to Topsy while it attempts to build an ad network.

What Facebook Might Do

The Facebook patent covers ranking and displaying search results by their popularity among a searcher’s contacts and those removed by a few degrees of separation. In fact, Facebook nearly does this already. When users start typing in the search field, Facebook auto-suggests content that’s been Liked by the user’s friends. Carefully adding friends of friends would expand the results index.

Facebook could be thinking of using its patent offensively to gain licensing royalties. But although Google’s patent portfolio isn’t as big as Microsoft’s, it’s pretty diverse, and even contains a lot of social technologies. So maybe the patent’s just defensive.

Building a full-blown search engine requires attempting to index the entire Web. Even if Facebook relied on its users to do the indexing, the results would be spotty. Facebook search would no doubt do well on entertainment, baby photos and sports trash talking. But that medical content and those travel arrangements would likely remain thin. Chances are, Bing remains Facebook’s search engine strategy.

Question of the week

What is Facebook’s social search strategy?