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The social-media advertising ecosystem is shaping up August 8, 2011

Posted by David Card in Uncategorized.
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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?
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Can Mining and Filtering Monetize NewNet? December 20, 2010

Posted by David Card in Uncategorized.
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One of the keys to monetizing NewNet technologies like real-time feeds and social media will be harnessing the massive amounts of data they create. In recent weeks, there have been a handful of announcements illustrating creative ways of using this data to enhance products, often via recommendations. But most of them have not shown clear revenue strategies.

What the initiatives have in common is their use of information from feeds or social graphs. Foursquare posted a job listing for a data scientist to assist in mining its own data to enhance product features, but there may be more opportunities — and competitive differentiation — in combining data sources. The recent initiatives display at least two ways of tapping those veins:

  • Mining happens behind the scenes. Companies license and/or utilize APIs to extract information and apply it to applications and services to aid in targeted marketing, aid personalization, or create entirely new products.
  • Filtering is more visible to the end customer. Like mining, filtering adds relevance, but is generally controlled by the user.

Who’s Doing It, and How

Mining NewNet data from multiple sources may require the resources of a company with a big, established business —rather than a startup — for deployment if not development. Social media buzz-monitoring companies like Cymfony (part of ad agency giant WPP) and Buzzmetrics (part of Nielsen) sold themselves to ad agencies and market research firms. Because changing an established user interface is a tricky thing, innovations in filtering multiple data sources will likely originate at startups.

Examples of each include:

  • Wowd filters Facebook’s feed. It applies its own algorithms to Facebook APIs to automatically create natural groups of a user’s friends by analyzing users relationships to each other and posted info. Wowd allows the user to filter by time, topic, and trends.
  • Clicker, that makes an Internet video guide, is one of the few companies that pulls in Facebook data via “Instant Personalization.” It maps a user’s self-professed Likes into genres and topics to produce recommendations it shows alongside editorial suggestions, friends’ viewing, and popularity.
  • Google mined its own traffic and embedded content for YouTube Trends, and tweaked its social search presentation. Microsoft appears to be using Facebook data in its basic Bing results, as well as offering an alternative social view. MTV Networks created a new music discovery space by mining social data.

But Payoff Remains a Challenge

A simple ad revenue model for a site or app that filters a Twitter or Facebook feed produces pretty small dollars. I used traffic data from Compete, “visits” as a proxy for page views, and assumed a low-cost ad (CPM of fifty cents to a dollar). If a filter company showed a single, relatively untargeted ad per page, and siphoned of 10 percent of Twitter’s site traffic, it could generate yearly ad sales that would be measured in the tens of thousands of dollars to perhaps half a million. If the company managed to appeal to one percent of Facebook’s US users, the figures are in the same ballpark.

My model is very simple, and very conservative. If Facebook is really approaching $2 billion in revenues, it generates roughly $2 to $3 per user per year. Google is more efficient: it gets $25 per user/year. To get to multi-million dollar yearly ad sales, a filtering company would have to attract a million users, preferably of a distinct demographic, job description or sphere of interest. That would enable it to offer a better-targeted audience and a richer palette of ads and marketing opportunities to advertisers, and charge a CPM in the $3-plus range.

Active personalization — convincing a user to set up a customized experience — is tough. Yahoo never got more than 15 to 20 percent of its users to build out a My Yahoo page. Those who did were its most valuable users, the ones that used multiple Yahoo products and converted to paid services. The passive personalization enabled by mining could indirectly contribute to customer monetization via retention and increased usage frequency.

Question of the week

How can you make money off of social media and real-time data?

How to Measure Social Media Advertising September 27, 2010

Posted by David Card in Uncategorized.
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Recent stories about social networking companies and third-party data suppliers highlight a key challenge currently facing social media: advertising measurement. Facebook cut some beta features out of its measurement tools for advertisers; Twitter said it would offer an analytics dashboard for the first time. Meanwhile, traffic tracker comScore introduced a new social media monitoring service and news leaked about a new metric from Nielsen.

Companies that best address the social advertising measurement challenge will be the ones to get more of what eMarketer says will be $2.1 billion in U.S. spending next year. How? Opportunistic suppliers will thrive by better measuring the unique characteristics of this new advertising medium and translating those metrics into ones that complement traditional media-buying.

What Social Media Adds to Advertising Analysis

In traditional media, day-to-day brand advertising measurement is about tracking efficiency in buying ad space. Advertisers usually measure brand objectives like increased preference or loyalty after the fact. And they tend to do marketing mix modeling — comparing the effect of different media on sales as well as brand objectives — rarely, due to cost and complexity.

Social media experiences, on the other hand, lend themselves to brand advertising rather than direct marketing techniques. Most advertisers use ads on social networks to raise awareness and consideration, rather than for direct conversion to sales.

And while most traditional advertising measurement concepts are applicable to social media — demographics, reach, frequency, duration, brand “halo effects,” etc. — there are three things truly unique to social media advertising:

  • Explicit preference. Whether it’s Facebook Likes or Twitter followers, social media properties offer marketers the chance to observe users’ self-professed preferences rather than relying on implied or survey-determined preference, or on actual purchase behavior.
  • Advocacy and pass-along. Beyond preference, social media enables consumers to post reviews and recommendations and act as influencers for advertisers. Of course, viral word-of-mouth exists offline, but social media greases the wheels and accelerates it.
  • Real-time feedback. Social media enables marketers and brands to take the pulse of their customers and prospects in real-time, where traditional media has to rely on slower market research techniques.

Social media marketers waste a lot of time debating “engagement.” Some studies hint that marketing messages experienced on social networks engender better recall or brand affinity than those in other forms of media. But that idea doesn’t differ much from what happens in traditional media, where advertisers choose which magazine or TV show runs their spot for context as well as audience type.

Where’s the Opportunity?

Marketers can get some of those traditional and social metrics mentioned above from the social media companies where they happen, e.g., Facebook, Twitter, YouTube, Foursquare, etc. But agencies and third-party tools like Google Analytics, Nielsen Buzzmetrics, WPP’s Cymfony, Radian6 and others do a better job at aggregation and comparison. Social media properties that support and integrate those third-party tools will get more than their fair share of ad dollars, particularly if they can help agencies demonstrate those three aforementioned social attributes for campaigns and long-term marketing programs.

What’s lacking that social media players and measurement companies need to provide?

  • Benchmarks. Companies can track their own progress in achieving effective advertising. But advertisers would loosen their purse-strings faster if there were standard measures for things like how often a social user should see an ad before it becomes ineffective or the value of a follower versus that of a casual visitor. Case studies will have to suffice for the moment.
  • Currency. Likewise, there’s no single ratings currency online — let alone in social media — to fill the role of Nielsen ratings for television or ABC circulation data for magazines. Fragmentation remains across Nielsen, comScore, Hitwise and others.
  • Cross-media comparisons. In theory, Nielsen is best positioned to deliver something like a gross ratings point that would be comparable across TV and online, enabling media planners and buyers to compare the efficiency of different properties. But industry inertia, expense, panel inconsistencies and new TV data from set-top boxes have distracted or slowed Nielsen so far.

Related Research: Multiple Models for Social Media Businesses

Question of the week

What’s missing in social media measurement?