Posts Tagged ‘web 2.0’

More Difficulties Monetizing Web 2.0

February 7, 2008
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

January 18, 2008
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

zuckerberg.jpg

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.

badoo.jpg

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

What Won’t Google Do?; Lazysphere Blogging

January 17, 2008

“The Search Party”

Recently the New Yorker published an article about Google’s foray into, well, just about everything.
Kidding.
Anyways, here’s a great quote:

As Google expands beyond search […] the risk is that the company will come to believe that its engineers can master any business, solve any problem, and that Google will lose its focus.    

So, I don’t run a multi-billion dollar corporation, but even to me it seems Google is spreading their talent too thin; it’d serve them well to stick to their corporate mission: “to organize the world’s information and make it universally accessible and useful.” That’s quite a task… so why distract yourself with other things? Is Google running the risk of Starbuck’s, that of diluting the brand? Okay, that may be an apple to oranges comparison, but I think I’ll hold my ground on that argument. I.e., Google should stick to organizing content, not producing content.

Are You A Lazy Blogger?

Steve Rubel once again makes a good point: bloggers can be lazy, meaning bloggers are joining the “Lazysphere” instead of producing thoughtful, quality content. Interesting, because a while back Rubel stated that he’d rather post less on Micro Persuasion in favor of being “into the whole micro-blogging revolution”.

Now, my two cents: it’s hard to constantly produce good content. For some of the longer posts you read here, I can spend one to two hours simply doing research… yes, that time does not even include writing. My process is to go through all of my RSS feeds, hit up some of my favorite blogs and see if I can spot a theme; then I dig a little deeper through search engines in an attempt to find more articles. I read them all. I grab the url’s of the pertinent ones and then try to form a post that includes my analysis and opinion. That takes a lot of time. And what do I get for it??? About 3 pageviews a month.

So what’s my issue? Maybe I’m a horrible writer; maybe I don’t have original, quality, thought-provoking content; maybe I don’t post enough; maybe I might not engage in the blogging community enough to draw others to my blog; or maybe people are simply not interested in my ongoing thought process of how to monetize Web 2.0 sans advertising. Whatever the reason (I’m guilty of a lot of the things I just listed), it’s hard to keep it up when you can tell for certain that no one gives a $h!t about what you have to say…

Identity, Privacy, And Web 2.0

January 16, 2008

I’ve broached the subject of privacy in a previous post, but I’ve run into a few more articles concerning the issue since then.

The Kinda Creepy YouTube Video

While looking for other material on this topic, I ran into a video from the government of Canada that attempted to shed light on how social networking sites can exchange and leverage a user’s personal information for marketing purposes.

Don’t get me wrong: privacy is very important, but the issue I take with this particular video is a) the “big brother is out to get you” tone, as well as b) they make the marketing angle sound all bad, i.e., the video says you will only get more junk mail on your doorstep, more email adverts in your inbox. This completely ignores the aim of marketing: in the fracturing media landscape, reach is not the only goal. As a marketer, I want to spend my client’s money in the most responsible way. Thus, I want to reach the people who are the most likely to be interested in buying what my client is selling, so hitting the target is more important than reaching the most amount of people; this is what responsible advertising and marketing agencies should be trying to accomplish.

Projecting Yourself Online

Did you notice the header above says “projecting” rather than “protecting”? We are putting ourselves, and our identities online. Now, we may not be the most honest, but we are the ones making the conscious decision. The New York Times published a fascinating article on how we put our best foot forward when it comes to our online persona, and quite some time ago New York Magazine had an incredible story exploring the shifting values of privacy in a new, digital generation. I highly recommend reading both (lengthy) articles.

My personal attitude about privacy online is pretty cavalier: “Marketers have already known a lot about us before the Internet came into full swing. Therefore, so what if Facebook is using Beacon?!” I’m sure that pisses off a lot of people who treasure their privacy, but honestly, I think the way things are headed your information will inevitably be viewed by someone else; the point is we need to educate ourselves on the measures we can take to protect that information: clear your cookies; actually visit the privacy settings on Facebook; and above all, delete that damn MySpace account already! It’s such a waste!

Don’t Misunderstand Me, Though

Privacy and the identity game does matter. Although many teenagers report utilizing privacy measures, MySpace has recently agreed to devote some of their resources to leading the fight against online sexual predators. There are those who are too young to be adept at protecting themselves online and require more help. I think the most heart-wrenching intersection of the privacy and identity game comes in the story of Megan Meier, a teenager who, subject to a hoax perpetrated through MySpace that turned ugly, committed suicide. I really want to say that in a case such as this, all the sentimental “this is a cautionary tale” is bullshit and is not addressing what happened on the level the incident merits. Being on the younger side, I remember seventh grade vividly; it was one of the worst years of my life. Teenagers can be merciless, and with tools such as MySpace and Facebook, they can be even more underhanded in their quest for doling out pain. It is within this tragedy that the problem of identity and privacy become even more conflated: people want to protect what information others know about them, but then can those measures be deployed to create even sneakier, meaner attacks? It also sheds light on the fact that, no matter how old some people think they are, they need assistance to safely wade through the waters of digital society.

Ad CTR On Social Networking Sites

October 30, 2007

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.

Why It’s So Difficult To Monetize Web 2.0

October 17, 2007

So maybe it’s time to take my training in post-colonial literature studies and apply it, in an ever-so-esoteric manner, to Web 2.0 and the problem of monetization.

The Problem

As the New York Times once again trumpets the possibility of a dot-com bust (see today’s article Silicon Valley Start-Ups Awash In Dollars, Again), I am beginning to believe the issues presented by web pessimists are somewhat pertinent: once again money is being thrown at sites that can only guarantee eyeballs… and in most cases not even a lot of eyeballs (sans MySpace, Facebook, YouTube, etc). It appears many are forgetting that guaranteeing eyeballs is not a sound revenue model. Even with successful advertising campaigns running on these sites, that still does not make up for other costs. YouTube is a prime example of delivering a significant audience, but with the bills they must pay for bandwidth alone I can’t foresee them making acceptable margins.

So why is it so hard to create business models around this new venture in media? I think it’s because we are trying to do something completely new; honestly, I cannot think of another instance in history where it has been done before.

The Real Question

I’m not an economist, but from what I understand a free market economy runs by taking natural resources, land, and labor and turning those materials into a commodity that is then sold at a profit. This commodity is bought at the expense of a ‘thing’ that has an arbitrary exchange value attached to it (money, for instance). But what are we trying to do with Web 2.0? Let’s use Facebook as an example: we are trying to monetize relationships. So rather than using materials to create a product that is sold, we are using materials to facilitate relationships. Cell phones facilitate relationships, but people are willing to pay for tools like an iPhone and for an outrageous monthly bill, keeping shareholders for Apple and AT&T happy. But ask anyone from the generation that is utilizing Facebook if they would pay for it (and keep in mind, this is the same generation doling out oodles of money for that iPhone and monthly bill). What do you think their answer would be?

I thought so…

Three effective business models are typically subscription fees, commission fees and advertising. The latter is being utilized heavily in Web 2.0, but I feel this will not make the majority of sites profitable. How do you monetize interactions between people? Dating sites such as eHarmony do exactly that, but finding a significant other is a critical priority for many people… commenting on a friend’s new highlights or hair cut not so much. So maybe we are asking the wrong question; maybe we should ask why isn’t Facebook such a great service that people would pay for it? But even then, Generation Y and on are used to free services; we’ve spoiled them (free MP3’s, free email accounts, free Facebook, etc).

All this said, maybe one channel for revenue is a great program that aggregates these services and allows users to access all the sites they use through one portal. Online services such as Netvibes are doing this, but I have yet to experience a robust application that is also easy to use. For access to their sites and API maybe Facebook and MySpace could charge the developers of these programs. Anyways, this is just one thought, but it still does not address the more direct question of how to monetize personal interactions and relationships; I’m really at a lost for that…

IAC Debuts Pronto: “Shopping Gone Social”

October 12, 2007

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

September 19, 2007

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.

Modeling The Flow Of Information In Social Media

June 20, 2007

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.

Monetizing Web “2.0,” Part 3

May 15, 2007

Writing the last post was an epiphany for me, in that realizing the current mode of advertising in traditional media is akin to totalitarianism, whereas social media has put power in the hands of the people through consumer-generated content. Thus, a true revolution of advertising within the context of Web 2.0 should be a categorical re-evolution, rather than an impetuous modification of current strategies (we are not witnessing new channels of media, it is a new type of media). In this post I would like to share the links that led me to this train of thought.

It was a dark and stormy night… wait, wrong blog…

Okay, it all started with a story from the Washington Post about “Putting the I in Advertising.” Here’s a part that really stuck out:

“Grant McCracken, a cultural anthropologist affiliated with MIT, says participatory advertising represents a ‘revolution’ in thinking. It means marketers are actually ‘inviting’ consumers ‘into the production of meaning,’ he says.”

We all know the story, that letting consumers have control over the content has advertisers and marketers running scared, but for some reason these two sentences struck the right chord. AdWeek published a fairly similar article, but quoted Roger Faxon, a chief executive at EMI Music Publishing, as saying,

‘Music companies will function more as facilitators for bringing music and the rights that support them to the marketplace, as opposed to being originators of the content itself.'”

This may very well apply to marketing: we work just as facilitators of content, not as creators of it. An example of this (an especially radical one at that)? The revolt of Digg users over postings of links that showed the new copyright encryption key for HD-DVD’s. At first the site administrators removed the posts; after a large push by users, the site administrators relented, even at the risk of their own (legal) peril. With these things in mind my research finally led me across a seminal treatment of the point I am trying to get it across (doesn’t someone always say it before you?!): an article by Bob Garfield titled “Chaos Scenario 2.0.” I highly suggest you read it instead of me paraphrasing it for you. After you’re done reading, I would like to note that I don’t believe in such a doom-and-gloom scenario as far as traditional media and advertising. Here’s why:

  • Not all consumers use the internet
  • Not all internet users participate in social media
  • Not all internet users who participate in social media spend time on a site relevant to your product

Anyways, I felt it necessary to sketch some boundaries before we continue to move forward. In the next entry I hope to finally get around to new advertising and its (possible) relation to adventure education; I promise I will not become like the TV show Lost and start leading you on to tune in for the next episode where only the last thirty seconds were worth your time.