More Difficulties Monetizing Web 2.0

A Branding Me First: I Was Right About Something!!!

It’s a bittersweet day for those of us who keep repeating over and over and over again that advertising on social networking sites is not effective. I think I have been spouting the same line since I started this blog: advertising, although it may create revenue, is not the most lucrative way to monetize Web 2.0.

Google’s stock tanked recently, falling 8.6%, which is the sharpest fall since it went public. As many of you already know, this is in large part due to the recent “bear hug” Microsoft gave Yahoo. But another key reason for the dive was the (semi)lack of revenue growth: although the net income rose 17% compared to a year earlier, that figure fell short of analyst expectations, and may represent the peak of continued growth.

So how come Google did not meet expectations? CFO George Reyes said, “We have found that social networking inventory is not monetizing as well as we would like.” Translation: we bought a helluva lot of advertising inventory for a helluva a lot of money, and it’s not performing. How bad is this problem? the reporter for the NY Times continues: “People involved in [the MySpace deal] said that Google never assumed that it would earn its $900 million back from that deal, but it appears to be losing even more than it had expected.”

Now, don’t get me wrong; I don’t think advertising is worth throwing out completely. I just want more creative business models for Web 2.0; there has to be other, more profitable ways to monetize these services.

Anyways, so much for me being a “naysayer” (the link back to me is in the last paragraph of this other blogger’s entry).

EDIT

Also check out AU Interactive’s rundown of a Facebook Social Ad experiment. 

Facebook: All We Know Is Advertising

Facebook On The Way Up 

Although MySpace got 76% of US social network traffic, Facebook grew 51% last year and is about to surpass MySpace in foreign traffic. It’s interesting to note that although MySpace still dominates the total pageviews traffic, growth is stagnate; meanwhile, Facebook continues to make impressive gains.

Zuckerberg Makes 60 Minutes Appearance

You can watch the full broadcast on Kara Swisher’s blog (she made an appearance on the segment) Boomtown; there is additional content and a transcript available on the 60 Minutes website as well.

Zuckerburg basically quotes PR material verbatim, which is an assumption on my part, but if you watch the video I feel it will be immediately apparent. One of the highlights of the segment is when Leslie Stahl ask Zuckerburg, “You seem to be replacing Larry and Sergey as the people out here who everyone’s talking about.” He just stares at her. And stares. So she says, “You’re just staring at me,” to which he replies, “Is that a question?” Golden.

“There Have to be Ads”

The rest of the segment is pretty fair, neither a complete puff piece for Facebook or a total humiliation either. One part the stuck out for me, however, is when responding to issues of advertising, privacy and the following PR disaster, Zuckerberg states, “I mean there have to be ads either way because we have to make money.”

Hold up one second.

Dear readers, please look at that again: “I mean there have to be ads either way because we have to make money.” [emphasis mine] It’s disappointing that so many websites these days cannot think beyond the advertising revenue model; yes Google did it and is now multi-billion dollar company, but the context of a sponsored link in a search results page is much different from text ads in a Facebook profile; same goes for many other social networking sites.

Where is the creativity?! Where is the diversified bottom line? I’m guessing all of you want glorious IPO’s that a) line your pockets with cash and b) vindicate the various investments that value your product in the billion-dollar range… are you really going to get there through simply advertising? Please, be honest here.

Here’s some ideas: Badoo, a social networking site, lets a user’s profile and content be featured for $1 in a program called Rise Up. Or, you can look at a recent in the blog A VC for a great rundown of revenue ideas, some of which are from Chris Anderson’s earlier post. 

Ad CTR On Social Networking Sites

For some people the debut of Facebook’s Flyers Pro has been somewhat lackluster, especially when it comes to the CTR. Another web consultant found similar results -actually, abysmal results– on MySpace. I left comments on both posts to hopefully generate a dialogue along the lines of:

1. Can we contextually target the profile to place highly relevant ads? In other words, rather than matching to content, would it be better to match it to the user profile? Would that increase the disappointing CTR?
2. Do we need to think outside the box as far as advertising on these sites? Would it be better to take advantage of widgets, etc., since the ads are placed outside the context of search?
3. What are the overall implications from these preliminary numbers? Is monetizing social networking solely through advertising not a viable model?

For a great breakdown/educated guess as to what value Facebook saw in adding a CPM/CPC advertising module on profile pages, head over to the smart guy’s blog.

UPDATE

Steve Rubel recently weighed in his (very similar) thoughts concerning the rather unsuccessful venture in monetizing Web 2.0 through advertising.

IAC Debuts Pronto: “Shopping Gone Social”

Last week I met with some great folks from IAC to discuss one of their new initiatives, Pronto (which was recently launched and is still in beta). The goal of Pronto is “shopping gone social,” and we discussed the community aspect of their new website (I guess because I’m an active member of Yelp [well, active before I started hanging out at the office until 8 or so…]).

When I started poking around the site I felt this may be the first social networking hub that could actually make money. I’m not clued in on the details, but here was my thought process: I have friends with their own podcast, and at their points of distribution (blogs, etc.) they have Amazon, iTunes, and other affiliates set up. So every time a user clicks on a little Amazon badge and ends up buying something, they get a (very) small part of the revenue. Pronto is structured around liking or disliking products and the reviews users make about these products; you can also compare shopping outlets online to make purchases. Now if the people at Pronto were able to set something up like my friends have with their affiliates, it could bring in great revenue (but I don’t know the intricacies of how or even if that could be accomplished).

But if that doesn’t work, they could have “Featured Stores” on the Product Review pages, where online outlets pay to be at the top of the list. And to deflect any complaints from users, they could be open about why those stores are on top, such as “Shop With The People Who Love Us More” (kidding… well, not really). Or, have a featured brand of the day where certain companies could pay to have a special presence on the website for a period of time; I have something in mind like Pandora, because although that site, according to the founder, is still losing “an armful of money every month,” I’ve read elsewhere they have incredibly high click-through rates on banner ads. Anyways, the site presents many possibilities.

Our conversation last week got me to thinking about what makes social-networking sites successful. I think sites like Myspace and Facebook fall into their own category because the main point is to keep in touch with friends. Other sites, such as Yelp, have built strong online communities with people who, for the most part, have never met but eventually take time to meet offline and hang out. I think the critical attribute about Yelp is it’s local focus, which is something users can unite around (such as the MTA meltdown due to rain; that was New York-specific and we could all post about it online). For Pronto, the one thing I can foresee users uniting around are brands. For instance, I’m not usually into brands, but I do dig Apple and Guess jeans; when those groups form on Pronto, I’ll be one of the first to sign up. This could be achieved through a few ways: showing on profiles other users who have similar tags, or, like Last FM, show users their compatibility (based on similar likes/dislikes). The second thing that makes other sites successful is their, what was basically called “ego stroking.” On Yelp you can send compliments, rate user reviews, get a Review of The Day, and on and on. Anything along these lines could help keep users engaged. Finally, ease of use is critical. Using Yelp again as an example, one of things I enjoy most about it is how easy it is to interact with others: to give someone a compliment, I do not have to click through to another page because all compliments (and private messages) can be sent through a little pop-up box, which doesn’t interfere with how I’m utilizing the site.

In the meantime, Pronto does have its bugs to fix. Such as having copies of my replies to other users in the Inbox, to fixing the search help (when looking for a Motorola Q, suggestions came up before I finished typing; one suggestion was “Motorola Q smartphone” which I clicked but brought me to a page of accessories instead). Also, I can’t imagine what goes into normalizing all those products. That must be one helluva task. But at least they payoff (pun intended) could very much be worth it.

Google Gadget Ads

Google has announced a new advertising program: Google Gadget Ads, or, as Advertising Age put it, “AdSense, Now With Widgets.”

A little over a week ago I posted a quick entry about a new advertising program Google would be announcing. My post was almost all hyperbole, and as the days passed I lost my excitement. First, because I thought maybe it was just my geek side getting riled up. Second, because the news was released a few days after I thought it would be. But now the day has come and the more I think about it, the more I believe that if utilized to its fullest potential this addition to AdWords could eventually change the face of the web experience. Why?

1) Widgets enrich the web experience. Now advertisements don’t merely have to be flashy .swf files (ha! sorry, I couldn’t avoid the pun) or moderately interesting video ads (please don’t misunderstand me: there are some incredible flash and video ads), but rather ads can exploit the immense functionality of widgets. Imagine an ad for the newest pop musician that has tabs with YouTube videos, song previews, and a list of the most recent print/web news stories about that particular musician, all of which can be viewed without leaving the web page.

2) Widgets can instantly monetize advertising for companies (and increase instant gratification for the consumer). Because the placement of these ads will be powered by AdSense, we can assume that they will show up at (somewhat) relevant sites. Reading blogs about the upcoming season of Heroes? Maybe there is a widget ad on the blog your reading that displays current prices and the time remaining for EBay auctions for the season one DVD’s of ‘Heroes’. Or maybe you’re using Yelp to find a good Thai restaurant in your neighborhood. What if there is a widget ad for a Thai restaurant (that has rave reviews on Yelp) through which you can place your dinner order and have it delivered in the next thirty minutes?

3) Widget advertising has a social component: for instance, the widgets can be pasted on someone’s MySpace site, outside of Google’s normal distribution (if I understand the model correctly). That means you have guaranteed distribution through the AdSense network (where appropriate), but also the possibility of distribution through social networking sites, meaning the chance to spread your widget virally. And if you’re spreading things such as, say, a widget that searches and books Kayak flights among travel enthusiasts… then, wow.

I graduated with a degree in English, but I must say this: Don’t tell me that’s not hot.

Blogging For Search Engine Optimization

The other my boss and I were examining organic search results for some keywords we were adding to a few AdWords campaigns. Picture me in his office and both of us going, “What is that?” “Wait, what the hell is this?” and “Where did that come from?” The top hits of our results were inundated with blogs (quick caveat: the particular product you advertise for may not give you an overwhelming deluge of blogs on the first page of Google search results, so I’m sorry if this post won’t apply to you), and both of us were fairly surprised. But as I sat down in a chair to take it all in, the hindsight (always 20/20) hit me and it became more obvious: the blogging platform is, in many ways, perfect for search engine optimization.

An Insanely Short Checklist for SEO

Here’s my quick rundown of stuff that matters when working towards SEO… in other words, a) this is from my own personal research, b) it’s also from a few things I’ve picked up from SEO companies I work with (no trade secrets revealed here, though), c) it’s the super-short version, and d) I am in no way an expert.

How popular/relevant are you with others?

1. How many inbound links point to your site?
2. Are the inbound links on-topic? From my understanding, if you are advertising a special line of lip moisturizer it may not help to have a link from a gun store.
3. Of those inbound links, which are hi or low quality (i.e., are they from the New York Times, a .edu or a .gov site? Or, are they from nefarious link farms and no-name blogs?)

Do you take special care of your own links?

1. What text do you use in your anchor tags (do links to your line of moisturizing lip gloss appear as “Click here for our product line” or the much better “Soothing Lip Balms” [please cut me some slack for my lametard examples]).
2. Do you make good use of the title attribute?
3. What do your links point to? Is it a url such as http://www.soothinglipbalms.com/xda=?a18749823196/asdj&%!189.php? Or is it http://www.soothinglipbalms.com/ultracolor/magenta? (I think this has two parts: url’s that are poorly chosen, and/or the use of dynamic url’s… from what I gather, avoid both)

Do you play tag well?

1. Although meta tags do not play much part in SEO anymore, it’s still necessary to have a kick@$$ meta tag because that’s what typically shows up on the search results page.
2. Are you title tags on-topic? Not only is this what shows up as the brief description on the search results page, evidently the little spiders that crawl the web give a fair amount of attention to these. That said, your title tag should include hyper-relevant keywords and descriptions.

How’s your writing?

1. Is your site code tight as a battleship, or is it being held together by toothpicks and bubblegum? (thanks Ross for that analogy)
2. How is the writing for your content? Did you have little Timmy from across the street write some copy to save a little dinero, or is your writing smooth, coherent and always on-topic?

And most importantly, does your website demonstrate why you are unique? There’s a ton of lip glosses out there, what makes yours so special? Does your site reflect that?

Pulling It Together: Blogging Could Be SEO’s Dream Come True

Now that you’ve read this quick tutorial, does it make sense as to why blogging may be an incredible means to achieve the first organic results on a search? It seems the nuts-and-bolts of blogging itself are ideal for achieving high rankings within search results. Blogs can have an enormous amount of content. Some bloggers are incredibly talented and consistently post well-written entries. Some are really on top of their game and either break special stories or write about old news but with unique angles. The blogging community links to each other obsessively. Links from trusted blogs may weigh more heavily. The list goes on…

Still doesn’t make sense? Okay, here’s a final example: when I started writing a draft for this entry, I wanted to title it “Dude, You Blogs Have It So Easy.” I didn’t; instead I opted for “Blogging For Search Engine Optimization.” Why? Because I learned that the permalink to this post will be something like wordpress.com/blogging-for-search-engine-optimization/, and that is what you’re see on Google. And I want it to be easy for you to find me. To read my blog.

Because it gets lonely in cyberspace.

Maintaining Brand Identity, Part The Second

The post One Lovely BlackBerry Ad Equals One Lousy Web Experience by Matthew Roche got me to thinking about times I’ve experienced similar disappointment. It is already one helluva an experience protecting brand identity in the onslaught of MySpace, Facebook, and the blog universe, but it seems we are doing ourselves a tremendous disservice by ignoring the steps we can take to ensure successful branding in such a disparate environment as the web. A while ago I posted the entry Maintaining Brand Identity in the MySpace Madness, and I think that web design (in addition to targeted placement) can be another part of the solution to protecting the character and reputation of your product within the realm social media.

Although it’s difficult to measure, we know that branding has an impact. Consider a recent study that demonstrated a(n unsurprising) correlation between the McDonald’s brand and childrens’ opinion of food. How do you translate this effect to the web (the study showed that television sets augmented the preference for McDonald’s)? The realization that Design Is Identity. This means that from beginning to end, from advertisement to conversion, your user must have a seamless experience despite the difficulty in implementing such a goal. Why is this (costly and time-consuming) goal so worthwhile? I witness first hand the frustration and confusion that results from one company having an important piece of information that another company needs but but won’t get; this breakdown is simply a lack in communication, but it’s a problem that can manifest itself on the web, like with what Matthew Roche shared.

Investing in great web developers and designers who, with the help of other key members, can execute a vision from start to finish will become more and more crucial as the checkout register increasingly becomes a consumer’s mouse click. Losing money directly at the point of conversion because of confusion or dissatisfaction in the web experience should be nothing short of unacceptable. The added benefit of a seamless experience is that the web participation becomes an opportunity for effective branding, an opportunity that, in many instances, can outlast the 30-second commercial (in more ways than one).

Now excuse me while I rethink my career and seriously consider becoming a web design genius.

EDIT

Daniel at OM Strategy (thanks for the comment!) has a post that is particularly relevant to this topic, but developed along the lines of usability and the web experience. Great stuff… so read or perish. Just kidding. But not really.

Quick Lists 7.21.07

Two lists I recently found that may prove quite useful:

• The Five Biggest Website Mistakes – If you’re redesigning or in the process of launching a new website, these five points make a good overall checklist.
• Seven Deadly Sins of Writing for Social Media – Whether you have a blog or use other social media in your strategy, it would be useful to consider these seven points. In the comments section I also discussed the possibility of another rule: “Brace Yourself”. It’s a difficult road to walk when participating in something that is ultimately out of your control.

Social Media Goes, Well, Social

Surprise, surprise. How excited was I last week? I’ll tell you: I was recently quoted in a CNet article in which the author, Caroline McCarthy, focused on the question of how to create networks online, such as Yelp, that get people together offline (who would have thought there was a real world outside my computer screen???). I feel this may become a critical measure of a social network’s success, especially when most the people on destination sites such as MySpace tend to be nothing short of uber-creepy. To find out more about the work behind Yelp, check out this podcast for an interview with the co-founder and CEO Jeremy Stoppelman.

Modeling The Flow Of Information In Social Media

A blog entry at MediaPost pointed out that consumers can avoid the salesmen/admen assault and have a new freedom to seek out product information because of Web 2.0 technologies; social media facilitates a process where companies and their products are now sought out instead of vice versa. But when spending ad money specifically within the realm of social media (online display ads/search ads not included here) Josh Lovison does a great job of reminding us exactly what we are trying to buy: influence, not direct conversions. In other words, within this niche of the digital world we are trying to create a self-sustaining PR machine: the goal of a social media campaign is to generate consumer interest among individuals who will then spread their enthusiasm to other acquaintances, hopefully creating a chain of brand advocates. Thus, as Brian Solis asserts in Social Computing Magazine:

Social media has created a new layer of influencers. It is the understanding of the role people play in the process of not only reading and disseminating information, but also how they in turn, share and also create content for others to participate. This, and only this, allows us to truly grasp the future of communications.

Accordingly, understanding the process of this information flow is one of the most critical goals to envisioning the future of advertising in emerging media.

One applicable model is diffusion research, commonly referred to as ‘diffusion of innovations theory.’ I first came across this term in a New Yorker article about ‘Cool Hunters,’ a pdf of which you can find in my Box widget to the right. Another applicable framework is utilizing epidemiological modeling to aid our understanding concerning the potential of an online dialog. One group posted a lengthy article about their research into a similar matter, during which they came up with a fairly effective mathematical formula to model the spread of an idea (the pdf ‘Power of a Good Idea’ is also available in the Box widget). Unfortunately, the math is way over my head, so unless you are a large firm that can afford a consultant or happen to have a math genius on the staff, it may be a little unrealistic; however, it really may be worth a try.

Right now there are useful tools such as Technorati, Alexa and BlogPulse, but I have yet to see this information overload put into a coherent and accessible tool which greatly hinders our ability to find out what works. Hopefully we can get to that discovery sooner rather than later and stay ahead of the game.