advertising

A lot of the recent buzz in the tech sector has been about unsuccessful efforts to monetize online social tools via advertising. Google is losing money on their advertising deal with MySpace. User sentiment suggests that demographic targeting doesn’t raise the relevance of advertising, and clickthrough rates are low across the board.

It’s not that social networks aren’t playing a role in business transactions. Blogger Charles Hudson wrote that he routinely makes transactions whose impetus has been a recommendation from friends through an online social network:

Judging by the activity I see within my own network, there are a lot of my friends using social networks as social Q&A systems to get input, advice, and recommendations in addition to just letting folks know what they’re up to at the moment.

But that activity doesn’t translate into revenue for the networks, and advertisers aren’t seeing the conversions like they do with Google’s AdWords service. So what’s a marketer to do?

A few suggestions:

1. If you’re doing targeted, self-serve advertising on Facebook, get as specific as you can. Avoid stereotyping your potential customers, all women are not interested in weight loss. Many men are not interested in having sex thrown at them all day long.
2. Think about ways of rounding out your campaign to encourage echo chamber behavior. Everyone is after conversions these days rather than brand awareness, so be sure to link your ad to a landing page that drives conversions and also enables social sharing of product recommendations. Even if the user who clicks through to your site doesn’t wind up becoming a customer, you want to enable him to encourage his friends to visit via social mechanisms such as embedding a video in his MySpace page or sharing your landing page on Facebook because it contains interesting content.
3. Consider building something useful — like an embeddable widget or a Facebook application that lets your customers connect with their friends in a way that involves your brand.

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It is an ongoing question, highlighted earlier this week by both Blogspotting and Adweek. Social technologies have always had trouble finding good advertising schemes.

One of the big issues with advertising in online social networks is, as both posts point out, a lack of reliable metrics. Adweek points out that MySpace is working hard to bring new variables to the table when talking with advertisers about value of their ad dollar:

Instead of only measuring ad exposures and clicks, MySpace is gathering data on visits to community pages, time spent there, whether visitors watched a video or embedded a piece of content in their page. What’s more, it is then tracking the pass-along rate for pieces of portable content, currently to one degree but soon beyond that. It is also tracking demographic and psychographic information for “friends” a brand has accrued.

MySpace is right to try to move beyond the limited CPM and CPC models that have dominated Web advertising for most of its existence. There are so many other factors in evaluating the effectiveness of an ad campaign.

Advertisers should probably be looking at comments, wall posts, or even posts in the blogosphere to see what is being said in response to their product and their campaign. To really evaluate impact in social networks and on the internet, you have to look at reactions not only from multiple people or through multiple feedback mechanisms, but in multiple places.

If you run an ad on Facebook and someone disagrees, they just might blog it instead responding in the network.

In the end, I don’t think there exists currently a metric that accurately represents the value an advertiser is buying in social networks. But I think it’s a very important question to be asking.

I read Nick O’Neill’s post about SocialAds earlier today with some curiosity. After all, SocialAds have proven themselves to be somewhat underwhelming since the announcement from Facebook on November 6th.

Nick is right that what SocialAds taps into is the online version of Word of Mouth Marketing, plus a bit of measurement as to a particular mouth’s influence. And he’s right that this is cool, and in concept, revolutionary.

But I haven’t seen it work so far.

It might revolutionize advertising, if it starts working.

But it needs to work first. Has Google revolutionized advertising with AdSense? Indisputably. Did Overture think of the concept first? Yep.

I guess that’s my point.

Nick O’Neill at AllFacebook just posted a really interesting comparison between Google’s AdSense and Facebook’s SocialAds based on a semi-scientific experiment that you can find here. By the numbers, Google takes the cake:

Visitors coming from Facebook:

* pages per visit: 1.22
* Bounce rate: 82.84%
* average time on site: 13 sec
* 3.92 % clicked to Amazon
* 7.84 % clicked to Audible
* total conversion rate (clicked on product links): 11.76 %

Visitors coming from Google:

* pages per visit: 1.61
* Bounce rate: 67.21%
* average time on site: 42 sec
* 12.31 % clicked to Amazon
* 9.94 % clicked to Audible
* total conversion rate (clicked on product links): 22.26 %

I’ll admit, I’m not an advertising junkie. I don’t know everything there is to know about ads, CTRs, conversions, yield, and whatever else is involved.

But I’m pretty sure that there’s more to this than just “by the numbers.”

One of the things I think we’ve really lost track of with CPC (cost per click) ads is the value of the impression. For example: billboards on the highway. Nobody is expecting drivers to flip open their cell phone and order that new car, right now!!.

The idea is exposure. The same goes for most advertising throughout the history of advertising. Advertising is supposed to make it so that when a person goes to the store and looks for pens, she thinks “Bic.” Once you start focusing on action…now you’re talking about something else entirely.

Just to be clear, I’m not saying that Facebook ads are more effective. I’m just saying that I think the CPC metrics are wrong for most advertising contexts. It works for Google and other search engines (and google is clearly the leader in monetization) because people are there to *click* on things.

Almost everywhere else on the web, though, I think we may eventually have to rely on other metrics. I wonder how many people on FB already owned the book? They’re fans after all. The FB ads had images in them, unlike the Google ads. How many people bought the book a week later? How many people thought about the book the next time they were at the book store?

We can’t measure these things, but they are real effects of advertising. I think you have to consider them before you throw SocialAds out the door.

I’ve said before that one of the big problems with Facebook’s advertising plans is that they don’t really have a lot of profile data to go from.

It turns out I’m not the only one that thinks so. Alex Iskold over at ReadWriteWeb just wrote up a good breakdown of Facebook’s ad system and the problems they face going forward:

There is a myth floating around that contextual advertising is going to help Facebook justify its $15 billion valuation. The myth goes something like this: because Facebook knows everything about us, it will always be able to serve perfect ads. However, the reality is more like the following:

* Facebook does not know much about us
* The data that Facebook has is not structured
* People are not coming to Facebook to click ads

He’s absolutely right. Facebook does not know that much about me. And Facebook is unlikely to have a lot of success selling CPC ads because people aren’t going to Facebook to click on ads.

What with application spam and company pages and new ad systems all over the news, it’s easy to start wondering if Facebook is “selling out.” Are they throwing away the core value just trying to make money?

I know that I’ve got a much higher tolerance for capitalism than most people, but I’m not the only one who thinks Facebook is still doing alright:

I heard about the new Facebook advertising platform and I was afraid they were selling out.

In order to pacify my fears I decided to set up my own company “Page” for HUGONGO, and check it out from the advertisers perspective… Facebook is winning me over.

Every business should have their own Facebook “Page” and should do everything they can to start connecting with their customers.

That’s a pretty strong endorsement! I’d also suggest that before you do start up your group, check out my previous post (I know, I know) about whether your should start a group or a page.

A lot of people I’ve talked to, especially college and just-post-college people, are either tired or getting tired of commercial-style apps and the increase in advertising in Facebook. My co-worker Teresa is right to call for freemium service in Facebook (or any network).

The beauty of Facebook’s platform is how many different ways different people can use the same tools. If Joe doesn’t want advertising, he should be able to opt out of it by buying his membership on a subscription basis. Makes sense to me. I think my underlying point is: Facebook is a great service, but they can’t provide it for free. Given their options, I think the endorsement-style ad system is a very respectful way to try and bring money into their network.

Ruslan over at AbuZant Web Goodies has picked apart the code on Facebook’s new pages service to see exactly what they’re using to target the new social ads.

Apparently he downloaded the javascript file that delineates the targeting variables (he posted the code in his post, but it’s long and scary looking, so I opted not to re-post it here). He sums up, however, that:

They are targeting the using “at least” information about:

* Your political view
* Your sex
* Your age
* Marital status
* Country, City and/or Region
* Education Status
* Workplace

This is really not that much of a surprise. Part of the reason everyone has been so interested in this new ad system is that it can rely on a wealth of information that simply isn’t available to services like adSense.

In a practical sense, I’d say don’t upload any personal information to Facebook that you don’t want used by Facebook to try to target ads.

But in a realistic sense, is it a problem that Facebook has all of this personal data, and is using it to target ads? Certainly if the ads are annoying or useless. But what if the ads are really really good? In other words, at what point do you stop trading privacy for relevant advertising?

ps. It’s not fair to say there shouldn’t be ads. If that’s the case, then maybe the question is “how much would you pay per month to use Facebook?”

Both of the Social Network behemoth’s made advertising announcements today, and from what I can tell, they went in completely different directions. I can’t do a whole lot better than point you first to the TechCrunch liveblogging of the Facebook announcement, and second to Jeremiah’s breakdown of the two new services.

OK, so now you’re caught up.

Based only on those two posts (since that’s currently all I know about these new ad systems), I’d say Facebook has a better concept going forward. It sounds somewhat like a large-scale affiliate program with a set of Groucho glasses on, which is not really a bad way to go.

Facebook has been right to try to identify what can drive sales inside a social network, and look to leverage that rather than to just increase the real estate given to “traditional” ads.

I’m also skeptical of the business profile pages. I don’t think they’re going to be a big hit. It’s good that businesses will finally have a real home on Facebook, but I’m not sure that it brings a lot of value to the network, or for that matter, more value to the business than having your employees on as individual people.

It’s no secret that Facebook ads, at least in their current form, are not the money-making machine that Google ads are these days (despite the fact that there are people who have never clicked on them at all). The real question is whether or not Facebook’s expected brand-spanking-new ad system will be able to deliver better results.

A lot has been said about the expected announcement. But in the end, all that really matters is whether or not the ads are good enough to bring in money.

A while ago (I can’t find the post) Fred Wilson said that when an ad is relevant to him, it becomes content. I think he’s absolutely right. I always look for the full page Fry’s ad in the paper on weekends because that’s good content to me (although it never leads to financial responsibility). But that works because the content makes sense in the context of a newspaper.

So the trick in Facebook’s new ad system, in fact one might argue in all new ad systems, needs to be the ability to make advertising into content that makes sense in the context of a social network. My gut says it needs to be more than pairing advertisements with the things people say they are interested in.

But I guess we’ll see.

[ Update: I found a post that Seth Godin wrote where he says what I'm saying but far more eloquently. Read it here. ]

Rumor has it that on November 6th Facebook will be announcing some new goodies to the world, specifically the addition of a targeted ad network that extends beyond its own pages.

Nick’s right on the money when he says that this move makes a lot of sense for both Facebook and Microsoft, but calling the death of AdSense may be a bit premature. Here’s why:

Google serves ads on all of its search pages, plus gazillions of individual web sites (now known as the Long Tail).

Microsoft sells ads on all its search pages (which FB will now have access to), and WANTS to have the kind of Long Tail penetration that Google has.

But they can only co-opt that long tail if two things are true about the FB ad system:

1. The site owner makes more money with it (this could be from a higher % of ad money, or a higher CTR, but neither is a given)
2. The UI and visual customization for getting/placing site ads is as good or better than Google’s

It will be interesting to see what happens.

Mashable hypothesizes that Microsoft may use some combination of browser cookies and profile data to target advertising on third party sites:

For example, if you’ve listed in your profile that one of your favorite bands is Coldplay, you might see an ad for their CD or concert tickets when browsing a random web site like ESPN.

Since people don’t seem particularly interested in clicking on ads within FB, this idea might hold more water than the Facebook’s current targeted advertising model.

Mashable contends that the targeted ads would have a higher click-through rate than Google’s context-sensitive advertising, thereby drawing content publishers away from AdSense. But I’m not so sure that’s the case if the targeting doesn’t get any better — after all, I’m still getting ads for weight loss products because I’m female.

I’m not sure I’d be any more likely to click on an ad featuring a tanorexic Hillary Duff clone if it were served to me while surfing Feministing than I would if it were served to me while I was playing around getting work done on Facebook. In fact, the juxtaposition would be downright incongruous, and I’m betting that publishers like Feministing’s Jessica Valenti wouldn’t be too keen on hosting such ads either.

The other obvious downside of this is — of course — that dropping cookies on people’s computers that feed their personal data to third-party websites raises all kinds of privacy concerns. Something innocuous like a taste for complaint rock might not be too sensitive, but something like sexual orientation might be more worrisome. Data privacy would have to become a top priority.

AdAge raises some very interesting questions about the accuracy of Facebook’s assumption that the connections users have on its site closely mirror their real world connections:

What [Facebook CEO Mark Zuckerberg] is essentially proposing is a new cultural role for the mass online social network that recasts what has been mainly a time waster as a useful and efficient communications tool for business and personal use. It’s a vision that requires its users to take its conventions very, very seriously — a strange concept to anyone acquainted with, say, the MySpace notion of networking, a motley group of associations, bands and hooking-up. In Mr. Zuckerberg’s high-minded conception, one’s collection of Facebook friends should reflect one’s real-life social network by providing accurate data about users and by being a close-to-comprehensive map of all the important nodes in one’s life.

The problem is that a person’s Facebook connections are rarely that accurate. I must admit that I am Facebook friends with people I don’t even know, while my parents, youngest two siblings and some of my best friends are not yet engaged with the site. My oldest brother only recently joined the site after moving into his freshman dorm and realizing that he was the only kid on his entire floor without a Facebook profile. He’s still not that active, and he replies to my wall postings with posts on his own wall. So half the time, I never see them.

Evidently, he takes Facebook’s conventions even less seriously than I do. As it turns out,  über-Facebooker Robert Scoble behaves the same way: friending everyone in sight. I would hazard a guest that most Facebookers are using the site “wrong” by Zuckerberg’s standards.

I wonder if Facebook will continue to adapt the site to the way people actually use it — as it did with the announcement of an impending friend grouping feature — or whether a more top-down attitude will prevail. If the latter is true, then advertisers may go into Facebook with unrealistic expectations of user behavior, and the value of an ad.

There’s a large and predictable amount of skepticism around the announcement yesterday that Microsoft’s investment in Facebook values the burgeoning social utility at $15 billion. Most people thought that $10 billion was absurd enough. Lee Lorenzen of Altura Ventures seems to think that Facebook is actually worth $100 billion.

As enthused as I am about Facebook — remember, I convinced my boss to do a Facebook conference — I’m tentatively weighing in on the side of the skeptics. Facebook in its current form is not worth even $10 billion, let along $15. But it does have potential that may make Lorenzen’s valuation look reasonable.

That potential revolves in part around feature revisions that will accomplish two key business goals for Facebook: (1) keep the growing user base daily and active, and (2) improve the click through rate on their advertising.

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When Facebook first announced its targeted advertising, I thought it was a great idea. I reasoned that if advertisers knew a lot about me, they would be able to show me stuff I’m actually interested in spending my money on. That’s not happening.

If Facebook is really going after the targeted advertising space, then they should treat their ads like Pandora treats music. When I say I like a song, Pandora plays me more songs like it. When I say I don’t like a song, Pandora stops playing it. When I ask Pandora why they’re playing a song for me, they tell me.

For example: I don’t buy weight loss products because I don’t need to lose weight, but I’m seeing a lot of ads for them. I think that I’m getting these ads primarily because I’m female and I list “fitness” as one of my interests. But it could be that they’re just painting with a broad brush and targeting all women on Facebook.

Either way, I’m rather perturbed because even though I’m thrilled with my body — it can climb mountains and do the splits — looking at pictures of tanorexic models with 24 inch waists isn’t good for me. I’d rather see products designed to help me increase lean muscle mass and flexibility, rock climbing gear and yoga products. Those are the kinds of things I’d be more likely to spend my hard-earned cash on.

But Facebook’s advertisers have no way of opting out of showing their ads to people who are unlikely to click on them. They have no way of knowing that I don’t want to see weight loss ads, unless Facebook gives me a way to tell them.

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Marketers who want to make the most of Facebook’s explosive growth are currently working around several barriers:

• Facebook freqently changes the API, FBML language and terms of service. The prospect of budgeting for application development when you might have to turn around and throw more money at the project in six months is daunting for marketing teams used to fixed budgets.
• Facebook’s advertising click through rate is widely regarded as a big downside for the social network. Are advertising campaigns on Facebook ever effective? What would make them more effective?
• Companies that start sponsored groups need to spend more than money. Without effective community engagement and moderation, groups can be overrun by spammers and trolls. Recent criticism of Wal-Mart’s Facebook strategy underscores the need for effective community managers.

What is the optimal mix of these outreach strategies for organizations that want to make a splash inside Facebook? As with business blogging, there is no one-size-fits-all formula.

We’ll be tackling these issues in a session at the upcoming Web Community Forum entitled “Outreach Strategies: Balancing Applications, Advertising, Groups and More.” In this session, we’ll discuss the ways that marketers, web strategists and community builders are developing their own strategies within the walled garden.