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Social media and analytics counter online ad crisis December 3, 2012

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UBS Securities’ annual media investment conference gets underway today, and media buying agencies are lowering their ad spending forecasts. Even online advertising – that looks relatively healthy with projected double-digit growth – is facing a bit of an identity crisis. Content and media sites are struggling to accommodate the polarizing forces of programmatic ad-buying and so-called “native advertising.” While there’s no single solution to thriving in digital advertising, several social media-driven angles bear watching.

Brand-name online publishers have been uncomfortably coexisting with ad networks since the beginning of the internet, but what used to seem an efficient way of unloading remnant ad inventory now threatens premium slots sold for high CPMs. Early last month, Federated Media Publishing, itself a network of mostly tech blogs, cut back its sales force to shift emphasis to its automated display ad Lijit Network. And depending on your perspective, real-time bidding exchanges from Google, The Rubicon Project, and Facebook, are either the latest scourge driving down CPMs or, in Facebook’s case, a way to raise the value of its bargain-basement inventory. As we wrote, third-party big data audience analytics plus real-time bidding enable advertisers to buy targeted audiences across the web, without relying much on media companies.

Faced by network-driven programmatic buying, and former premium ad spots going unsold, companies like Federated, and even the New York Times, are responding via native advertising. Native advertising is the latest buzzphrase describing content marketing, sponsorships, and advertorials – marketing vehicles that blend in more naturally with content than banner ads, and that often take advantage of social media technologies.

Countering the crisis

Here’s how some companies are thriving amidst the digital advertising disruption:

  • Facebook’s sponsored stories – that blend users’ Facebook activities with marketing messages – are a prime example of native advertising. But that approach is most useful to content or retail sites with large volumes of users that do a lot of posting. Facebook and Twitter aren’t renting out that technology to other publishers, but it might be an opportunity for Amazon or Best Buy. Likewise Facebook’s exchange only uses its own inventory, notwithstanding the usual talk of a web-wide Facebook ad network. Its exchange is driving investment in marketing companies like Triggit, but it doesn’t help other sites. Facebook won’t even sell ads on Zynga anymore. But content sites should pay close attention to tracking and analytics techniques Facebook is trying out. Its View Tags are new, but potentially offer better attribution analysis, something other content publishers could emulate.
  • LinkedIn has been firing on all cylinders lately, but most of its revenue is tied one way or another to jobs and recruiting. In an effort to expand its advertising business, the company launched very limited access to a new Ad API. LinkedIn is positioning the API as a way for preferred partners to buy text or small image ads. The approach seems overly cautious in not letting its three designated marketing partners (Adobe, Bizo, Unified) do much creatively, although they can better track and integrate LinkedIn inventory with broader web campaigns.
  • Spiceworks is another B2B advertising business that is thriving. Spiceworks offers free, SaaS network management and help desk tools to IT professionals at small and medium-sized businesses. In doing so, it has built up a pretty targetable audience of 2 million highly engaged users that participate on message boards, reviews and ratings, and self-help systems. Advertisers like Dell and Rackspace can do the native advertising thing, and Spiceworks is an effective distribution channel for white papers and product info.
  • There are plenty of tactics to increase audience engagement on content and retail sites. Two that play off the data analysis theme come from Demandbase and Bloomreach. Demandbase enables site personalization based on its analysis of what company a site visitor is coming from. Companies like Cisco, Dell, and NetSuite do account-based targeting of ads and content. Bloomreach draws on web-wide analytics that drives content personalization, which, in turn, makes SEO more effective. Bloomreach’s platform is most effective for merchants with lots of products and content about them; customers include blue-chip retailers like Bluefly, Williams-Sonoma, and Nieman Marcus.

The countervailing forces of programmatic buying and native advertising will wrench online advertising back and forth for at least the next 24 months. To prosper, publishers and other content-oriented sites must emulate analytics and targeting tactics driven by sites with active user communities.

Holiday shopping raises social commerce questions November 26, 2012

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The commercial frenzy of Black Friday is done, but now it’s Cyber Monday, that possibly-fictitious phenomenon of the heaviest day of e-commerce spending online. We’ll see. So far, it looks like it will be a strong holiday season for online commerce, as comScore’s tracking shows spending up 16 percent, mildly outpacing Forrester’s forecast for 15 percent growth.

It’s a little early to get a clear reading on whether online is stealing holiday sales from the physical world. Brick and mortar retailers are trying to combat “showrooming” with price-matching and online-offline connections like in-store pickup. Walmart.com is aggressively promoting such tactics with TV advertising that extends Cyber Monday to a full “cyber week.” It’s easier to track online retail, so we may have to wait for earnings reports for confirmation of serious channel shift.

New trends?

Even though online shopping and home broadband access are well established, shopping behavior continues to evolve. Mobile and social are this year’s buzzwords: mobile’s impact appears marginal but growing, but social commerce remains in serious flux.

Mobile price comparison is a very real phenomenon, but does it lead to direct transactions? And are single-merchant or -retailer apps an effective vehicle for buyer lock-in? According to IBM analytics, mobile accounted for 16 percent of Black Friday sales. But the leading “mobile” shopping platform is the iPad, which is a living room rather than pocket device. Meanwhile, some are interpreting that Amazon and eBay apps – coupled with showrooming – are doing damage not only to physical retailers but to Google as well, as shoppers rely less on the big search engine. Interpreting this as a major disruption in search is probably premature, but this potential trend bears watching.

Everybody’s down on social commerce, as defined by daily deals and flash sales. Well, not everybody. Hedge fund Tiger Global Management thinks Groupon is salvageable, and start-up Zulily, which offers deals for moms and kids, raised $85 million from Andreesen Horowitz. That’s in the face of Groupon’s flat growth, layoffs, and management turmoil, and Gilt Groupe’s strategy shifts while it searches for a new CEO.

Unanswered questions

But it’s not just the daily deals companies that have to prove the staying power of social commerce. Companies like Facebook, Twitter, and Pinterest also have to answer key questions to prove the validity of the category:

Is social commerce mainstream? The answer to this one is “almost.” Groupon is roughly the same age as Foursquare, and our GigaOM Research consumer survey data suggest daily deals usage is much more mainstream than local check-ins. Already, nearly half as many online adults visit daily deals and flash sales sites (30 percent) on a monthly basis as buy from online stores (64 percent) and 20 percent make regular purchases. Check-in is still a single-digit (6 percent) phenomenon.

Source: GigaOM Research U.S. online consumer survey, March 2012, n = 1,165

Is social commerce a new category? Unlike social gaming, social commerce does seem to be an original category. Zynga games aren’t really very social, and are used by the same audience that played earlier time-killing casual games like Bejewelled. What Zynga did was use Facebook for distribution. Groupon did, too, and admittedly, daily deals don’t depend on social sharing to get a certain volume of commitments before the deal goes live the way web 1.0 systems like Mercata worked. But reviews and recommendations give hints where Pinterest and Facebook stores could evolve.

Where does social commerce fit in the e-commerce ecosystem? That’s the big question. Twitter does not seem to be driving many real transactions yet, even though its interest graph might be more predictive of buying behavior than Facebook’s social graph. Gifting probably won’t be a billion-dollar business for Facebook anytime soon – retail margins are thin, and impulse purchase opportunities limited – but it makes logical use of friend connections and personal data. Social media, including so-called social shopping platforms, may end up being a better source of data for merchants and retailers than they are powerful transaction engines.

Where does social commerce fit in the online marketing ecosystem? See “data,” above. And regular readers are probably tired of my argument that Groupon should be a marketing rather than shopping platform. But I’ll make it one more time: Groupon could make better use of its saleforce and local merchant relationships by selling marketing services like display ads and paid search listings than it can selling them point-of sale systems.

Mapping Session results: Next-generation user interface November 20, 2012

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At the GigaOM RoadMap conference, GigaOM Research hosted a Mapping Session on “Next-generation UIs: What comes after Siri?” We wanted to take the pulse of conference attendees on what they thought were the market forces driving user interface innovation, and whether post-Jobs Apple would remain at the forefront.

GigaOM Research analysts David Coleman and Lynn Langit started the session with some slides that showed examples highlighting some of the themes of the discussion. (Those slides are posted on Slideshare; the link is at the end of this post.)

  • Even when thinking of UIs for enterprise applications, it’s useful to look to what can be learned from the gaming industry, which tends to set the standard for information and feedback, as well as deliver an experience that trains users in the application itself.
  • Heads-up displays aren’t just for the military or Google science projects, but commercially available goggles don’t integrate much in the way of input or user control.
  • Gesture-based input is mainstream already, but motion-based controls are just starting starting to emerge beyond gaming.
  • Visualization of data requires more than a little art – and a lot of science.
  • Audio can be used for immersive experiences as well as alerts and aural cueing.

Why does Siri disappoint?

The feed-based UIs common in social media applications like Facebook and Twitter have already made their mark on enterprise computing, Pinterest-style image maps are showing up everywhere,  and the latest “new new thing” is Apple’s Siri. Siri has been something of a bust – Apple overset expectations for a mobile personal concierge. The panelists concluded Siri was over-ambitious in its attempt to deliver a universal conversational UI. Siri is far more than voice input. It adds voice output, context-based search of multiple sources, and applications command.

Attempting to deliver a user experience that depended on solving multiple technology “grand challenge” problems (speech recognition, speech generation, contextual search) was just too much to ask, even for Apple. GigaOM analyst George Gilbert observed that trying to force that combination into handling all the various tasks Apple was promising, rather than taking a more pragmatic, structured approach (like Google’s info cards or IBM’s single-function models), is the main reason we haven’t seen a Siri API for third-party application integration yet.

Disruption Vectors driving user interface evolution

We often use Mapping Sessions to lay the groundwork for deeper analysis on emerging markets where we apply our Sector RoadMap approach. We’ve done Sector RoadMap reports on categories like the Platform as a Service market and work media tools. Sector RoadMaps are collaborative research efforts that match up competitors’ abilities to align with what we call Disruption Vectors, i.e., the key technology or market forces that drive emerging markets. Smart vendors can ride Disruption Vectors to gains in revenue or market share.

Siri’s failure to deliver on its promise led the Mapping Session participants towards the conclusion that we’ll be seeing UI innovation on an app by app, or task by task basis. We probably won’t see a single technology, approach, or metaphor apply broadly in different contexts such as enterprise applications, in-vehicle command and control systems, or home entertainment. That doesn’t bode well for Microsoft’s efforts to apply Windows 8 conventions across phone, desktop, tablet, and console. Similarly, the graphic above illustrates the consensus of the session participants as to the relative importance of Disruption Vectors in user interface innovation. Three different market forces seem to have equal weight, instead of a single dominating source.

  • Input technologies include voice and motion – and neural connections – but also draw from the proliferation of sensors and the Internet of Things. They’ll bring valuable context to applications to feed the algorithmic analysis behind feedback and suggestions.
  • Output. Besides the visual display of information, whether in augmented reality or decision support dashboards, UI innovation will come from companies that exploit suggestions and recommendations in a contextually appropriate manner to cut through clutter and accommodate small displays.
  • Big Data technologies lie behind both of the above. Cloud-based data storage and access, along with APIs for apps to get at it, will dramatically reduce the effort of working across data silos, even as sensors and social media produce ever greater volumes of unstructured data. Cleaning and structuring that data is a huge opportunity for third party providers.

Panelists and participants suggested other forces as potential UI Disruption Vectors, but none of them drove as much discussion. Automobiles aren’t the only place where passive participation while multitasking is a key factor in UI design. The file-and-folder metaphor is aging, and inappropriate for many entertainment or collaboration tasks, yet participants didn’t see timelines or other schemes as obvious successors. Session participants agreed that new devices and twin- or multi-screen applications are driving UI development, if not completely disrupting the space. And while there’s a tension between designing for business versus consumer functions, consumerized IT trends are already in play, and collaborative interfaces might be the bigger trend.

Feedback

We welcome your feedback on these trends, and on what might accelerate the development of user interface technologies. Have we missed or mis-emphasized anything that you believe will be key to driving the sector over the next 12 to 24 months? Continue the discussion by leaving a comment below.

Mapping Session panelists

  • David Coleman – Founder and Managing Director, Collaborative Strategies and Analyst, GigaOM Research
  • Larry Cornett – Founder, Brilliant Forge and Analyst, GigaOM Research
  • George Gilbert – Principal, TechAlpha Partners and Analyst, GigaOM Research
  • Lynn Langit – Founder and Consultant, Lynn Langit and Analyst, GigaOM Research
  • David Card – Vice President, GigaOM Research
The slide deck we used to drive the conversation can be seen below, and it is available for download through SlideShare.

Martha Stewart’s modern media model November 2, 2012

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Martha Stewart Living Omnimedia’s trials and tribulations don’t mean that fundamental omni-media principals are wrong. MSLO was, from the start, a multi-media media company. It may eventually be digital-first sooner rather than later, but the company was built to leverage print, TV, digital, and even physical store presence. It reached its audience on multiple channels, sold ads and products across all, and vigorously cross-promoted.

No, MSLO’s struggles are very traditional. Among media, it’s a truism that magazines are the most personality-based: They rise and fall based on the energy and buzz generated by the likes of Tina Brown (Vanity Fair, the New Yorker) and Rolling Stone’s Jann Wenner. Oprah and Martha are TV-centric examples. It seems like the popularity of the Martha persona may have run its course, and MSLO’s bench is thin. The company hasn’t tapped into social media currents as much as it should have, either.

Students of media will remember the odd synchronicity of MSLO’s IPO on the same day as that of another modern multi-media company, World Wrestling Entertainment. WWE may not be at its peak, but it’s going strong.

 

Still seeking social commerce October 29, 2012

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Fancy, a site that looks a bit like Pinterest, but invites brands and merchants to sell the items “fancied,” has raised an over-$26 million round of funding, according to SEC documents. Another social commerce play, Pickie, that aggregates social recommendations a bit like a Flipboard for shopping, announced it is launching on Apple’s App Store with a $1 million seed fund. And last week, Facebook closed down its Pinterest-like Collections test, claiming it was doing so not because it was a flop but because it was analyzing early results in preparation for re-launch as a real service.

We’ve written that Pinterest could likely thrive – if not challenge Amazon or eBay – by connecting some dots for merchants and retailers, even if it just scraped by on affiliate fees. But building a large company while being a middleman for other middlemen like retailers leaves pretty thin margins and/or requires huge scale. Some data show that Pinterest is highly engaging for would-be shoppers. And Facebook has its own data to make the case to sellers for its advertising, and its Offers product.

But most e-commerce is directed. Search, price transparency, and comparison shopping are complemented by reviews and recommendations, from friends or otherwise. Social commerce feels like impulse purchasing. Facebook storebuilder Payvment cites analysis that impulse purchases represent the majority of offline retail. But that’s impulse purchases made in stores, not in social gatherings or quasi-magazines. Social commerce that weaves threads across channels, where consumers shop as well as browse, will likely be the real payoff.

 

Running the online advertising numbers October 29, 2012

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Several big digital advertising companies reported their third-quarter results over the last week or two. Those reports reveal a few key trends: Google and Facebook are gaining share, mobile advertising is growing but still tiny and search-dominated, and slow progress in digital brand advertising means that television isn’t going away.

Google. Google’s ad revenue grew 16 percent to $10.9 billion. For once, its ad network sales grew faster (21 percent) than sales on its own sites (15 percent), although its own sites still make up two thirds of the total. That likely means that Google’s display ad network sales grew faster than search. While paid clicks were up 33 percent, the average cost per click was down 15 percent, which most observers blame on mobile search pricing. Google dropped broad hints, rather than clear guidance, about its overall mobile business, including Motorola, but it appears to be on the way to $2 billion/year in mobile search and advertising.

Facebook. Facebook’s ad sales grew faster than Google’s, showing a 36 percent improvement year over year to $1.09 billion. Facebook has a relatively small search business based on some revenue sharing with Microsoft, so it will probably maintain its number one spot in U.S. online display advertising this year. Some forecasters had been predicting that Google would take the lead, based on its ad network growth. Facebook revealed that it had over $150 million in mobile ad sales for the quarter. That figure is still only 14 percent of Facebook’s total, and much smaller than Google’s, but it relieved investors and might very well give Facebook second place in mobile ad revenue.

Yahoo. Yahoo’s display ad business was flat at $452 million. While search was up 11 percent to $414 million, that was due to guaranteed revenue from Yahoo’s search partner, Microsoft, rather than to organic growth.

Microsoft. Ad revenue from Bing, MSN, and Microsoft’s ad network business was up 15 percent to $655 million. Microsoft said search was up, but display ads down across the board.

The other big U.S. online advertising player, Aol, will report its earnings next week. Aol had over $335 million in ad revenue in the second quarter, with its ad network business growing twice as fast as sales on its own properties, and search (via Google) slightly down.

Key takeaways

Earlier this month, the Interactive Advertising Bureau released its 2012 first-half report, showing overall U.S. growth at 14 percent. That’s healthy compared to most traditional media categories, but slowing versus last year. According to the IAB, search still dominated, but mobile and digital video were each worth over $1 billion in first-half sales.

Search and free online classifieds decimated the newspaper business, but I would not expect online video and display advertising to gut the television industry anytime soon. TV is still best at delivering emotional messages to big audiences. The TV industry is likely to add targeting techniques learned online to multi-channel campaign selling sooner than online delivers mass-reach video. And much of the recent action in online advertising is in ad networks and real-time bidding. Those technologies better suit direct marketing, though they offer some efficiency in brand ad-buying.

Mobile advertising still feels like search right now, although Facebook is mixing some social flavoring with its direct-marketing mobile ads. Brand advertisers are still figuring out what to do with social media, whether it’s mobile or web-based. To-date, ads on social media have proven only modestly effective for direct marketing, and proponents believe branding is the true promise for the medium. Quite a bit of brand advertising spending depends on buyers measuring the efficiency of their buying, based on assumptions proven years ago on television. Testing for branding effectiveness achieved via TV and print is costly.

Social media could not only provide a vehicle for harnessing an audience’s social connections, but also a relatively cheaper way to test results by measuring interest and incorporating CRM data. Ad sellers who can put together programs for delivering and measuring that combination will make lots of money in years to come.

Facebook Q3 delivers, shows a hint of mobile October 24, 2012

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Facebook reported solid results for its third quarter. Its ad revenue growth outpaced Google’s, as I expected it would, and Facebook showed that it can make at least a little money off of its mobile users. The market (over)reacted favorably, just as it had over-expressed its concern.

Ad sales were up 36 percent year over year, to $1.09 billion. Mobile advertising represented 14 percent of the total. Some observers think Facebook might even be able to command higher ad pricing for mobile than for its web advertising. Facebook is now probably the number two seller of mobile advertising, after Google. All that shows, really, is how immature mobile advertising is, and how search-dominated it’s likely to be for the near future. Facebook’s real money comes from its website, and it still needs to work on proving to brand advertisers that social media is effective.

And although Facebook’s payments revenue grew year over year, it is down sequentially. Nearly all of that comes from Facebook’s cut of virtual goods sold by social games. Zynga, Facebook’s biggest source of payments, is between hits, and struggling a bit.

Aol’s Alto shows some UI innovation October 22, 2012

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Last week, Aol started showing off Alto, a new spin on email that’s all about design in the service of ease of use. Back in the day, Aol introduced millions of consumers to email and to the web, but Alto looks very modern in a Pinterest-y, tablet-friendly way. Alto is more than just a pretty face, though, and it’s worth evaluating the user interface techniques that it employs. Good developers copy; great ones steal, regardless of source.

Although early previewers call it an app, Alto is a cloud-based service that acts as a front end for a user’s existing consumer IMAP email accounts. Aol positions Alto against Gmail in particular. Alto’s primary differentiation is a very visual, uncluttered UI that auto-sorts email in real time into “stacks” based on predefined categories like retailers, photos, attachments, daily deals, and social notifications. Users can create their own stacks pretty easily, but as Google Circles have shown us, even simple drag-and-drop group creation is too much work for most consumers.

Tradeoffs in power versus ease

From the descriptions I’ve read of Alto, it seems that once messages are assigned to stacks – defined by topic, sender, and Alto’s interpretations – it stays in that stack and only in that stack, and similar messages will go there, too. Aol’s objective was to simplify and unclutter an inbox; it says its analysis shows that most users don’t bother with folders and routing rules. I’m sure that’s true. While I admire the ability to apply more than one label to a message in Gmail – something that’s hard to do with folders – I expect I’m a more obsessive user than most.

Innovating in UI is a tricky balance of introducing the new without alienating the old, especially when working with existing applications and user behavior. And many user interfaces can’t bridge the gap between easy-to-learn and practical-to-use. Alto looks like it’s done a fair job on this balancing and bridging. Alto is also on-trend in its use of metadata and visual cueing to add context. And although it doesn’t look like Twitter, Facebook, or Yammer, it’s essentially delivering a real-time feed.

Missing out on unified communications

While it can pull in and present multiple email accounts at once, Alto falls short as a unified communications hub. Aol’s traditional email integrates instant messaging – something that’s a future feature for Alto – and Alto only makes the slightest nod to social media by sorting social update email messages. It doesn’t seem to offer anything in the way of persona or identity management.

Alto seems to have achieved its design objectives of favoring ease of use over power for general users. But it’s hard to imagine it being a serious contender in unified communications. This version of Alto doesn’t have any apparent business model: Aol execs hint at ads near the retail stack or premium services, but Alto doesn’t even feature portal content aggregation to drive user traffic. Smart developers should study Alto and evaluate their own tradeoffs between function and design. Aol has made some nice compromises in Alto, though it’s hardly a new paradigm.

The GigaOM RoadMap event is all about design, UI, and connectivity. It’s scheduled for November 5 in San Francisco, and I’ll be moderating a breakout Mapping Session on next-generation user interfaces. I hope to see you there.

Social media threads require weaving October 15, 2012

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Last week a pair of thoughtful posts and some announcements from Facebook were a reminder that the social web is more complex than you might think. Burned by Groupon, Zynga, and Facebook, investors have soured on consumer social media companies lately, perhaps thinking that all the good opportunities have been figured out, and the growth days are over. Far from it.

The ways that consumers use social media and the way developers and marketers harness its audiences and underlying technologies is still evolving. Smart companies must recognize social media provides threads they can weave into more traditional marketing, media, and commerce programs. It’s too simple to think of Facebook, Twitter, and YouTube as slightly updated versions of the mass-market websites – and their accompanying business models – that we have understood for the past 10 years or more. Facebook, for instance, is not just Yahoo 2.0.

Social doesn’t just mean “social sites”

Yes, Facebook seems to have wisely adopted some tried-and-true digital marketing techniques. It is adding to the value of its advertising inventory – and raising prices – by enabling it to be more easily used in re-targeting campaigns. But the reason it’s a relative latecomer to this practice, and why Facebook is still missing easy opportunities by offering conventional branding formats for big advertisers, is because the company is still trying to prove the effectiveness of new and truly different social marketing techniques.

A post by Jaap Favier lays out an ROI model for social media marketing that uses customers in bars as a metaphor. Read the post; it’s not the only way to evaluate social media, but it points out some of its key benefits relative to traditional media. Meanwhile, Alexis Madrigal points out in The Atlantic that if you run your analytics properly, you’ll see that a great deal of social content promotion comes from sources most people don’t associate with “social media,” including email and instant messaging from older online brands.

Thinking of social networks as social media sites gets a company only part way there. Facebook’s latest plan surrounding Open Graph actions for user- and developer-initiated sharing apply to apps that run on its site, even if “Collections” doesn’t look like much of a threat to Pinterest yet. But, possibly more important, these platform tweaks can be used by apps that run elsewhere on the web and on mobile devices.

Multi-channel weaving

I recently had conversations with two unrelated companies that offer services that help companies weave these various social threads together across channels:

  • Shopigniter recently updated its promotions management system for retailers. The company offers a bundle of cloud services that resemble a lightweight content management system for merchandisers with analytics and shopping cart accommodation. It enables a higher degree of interaction than conventional posts within the Facebook stream – although Facebook’s own analytics may not capture those actions, so EdgeRank promotion might need some help. Shopigniter works across Twitter and Pinterest, too, and looks competitively priced relative to six figure custom campaigns done with digital agencies.
  • SocialTwist is a company with app server roots that builds a cross-channel offer-promotions vehicle for big packaged goods and financial services customers like Sara Lee and CapitalOne. SocialTwist primarily focuses on coupons for both customer acquisition and retention. It integrates and tracks across the usual social media suspects as well as IM and email, which still drives over half of interactions. It has a similar pricing model to that of Shopigniter.

The ecosystems supporting social media marketing continue to produce new companies, and big players with their eyes on social CRM make acquisitions. The social platforms themselves continue to evolve at a rapid pace. All this swirling around social marketing and content discovery adds complexity, but it also means opportunity. Expect to see further expansion in the space before any serious consolidation.

Facebook app auto-sharing changes October 11, 2012

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Facebook announced some changes to its auto-sharing features for third-party apps that will take effect in 90 days. Facebook won’t allow any custom “verbs;” apps will have to make do for the time being with the existing built-in actions like Listen, Read, Watch, Follow. (Actions where a user clicks a button are still okay.) Facebook also said it would tweak its ranking algorithm to show more stories with images or locations in them, while it will prohibit “post to a friend’s wall” and some auto-authorization techniques.

Facebook’s rationale is that these steps will produce more consistent user experiences, and also increase story sharing and interaction. Of course, any time Facebook makes changes, apps and content companies depending on it for discovery cringe. It’s an over-reaction to say these changes foreshadow a disintegration of Facebook’s ecosystem and grand vision of social sharing and discovery. The ecosystem will watch for results, and chances are, if they’re completely disastrous Facebook will react quickly and change its policies and practices again. It has done so before.

But “chances are” is a shaky foundation to build a business on. Any developer must have back-up plans in place – including advertising, driving users to its own site and giving them a reason to stay, and vigorous cross-promotion.