AdverClast

A Chronicle of Disruptive Advertising

On Strategy and Google

Posted on | December 19, 2008 | Comments

I am not an expert strategist, but I’ve picked up a few tidbits over time. In school I learned that strategy leaves a trail - You can divine a company’s strategy by the products it launches, partnerships it forms, and companies it acquires. When I moved on to Booz-Allen, I learned that when you are the market share leader, grow the market - The NBA spends its marketing dollars growing the basketball market, not persuading you to skip baseball games. Finally, as a strategy executive, I’ve learned that the P&L is king - No framework beats the pro forma for isolating drivers, providing insight.

Ad Network Trinity
Network advertising has three basic cost drivers: ad acquisition costs, delivery platform costs and media acquisition costs (ex: P&G hires Razorfish to build a display campaign placing it on Platform-A who serves to Yahoo’s main page). Gross margin is distributed between the three levels in roughly equal proportions. That is, the advertiser acquirer, platform provider and publisher acquirer seek to make 25+% gross margins. Each also seeks to move up or down the value chain. Why? Because each piece of the value chain you capture increases your gross margin by 50-100%. For example, a network that either acquires its own advertisers or serves ads over proprietary properties can double its gross margins.

Google’s Strategy
Google has a lot of initiatives including: search, iGoogle, Reader, Blogger, YouTube, Docs, Apps, OpenSocial, Android, Picasa, DoubleClick, Adwords, Adsense,… Clearly, they spend a lot of money “seeing what sticks”. Like 3M and Xerox before them, Google has learned that product innovation comes from enabling “skunk works”. But, looking beyond their dabbling, is there is method in their madness? Yes, and it’s based on two basic principles. First, Google has the pole position in the most rapidly growing segment of the ad market. So, if you’re the market share leader, grow the market. Second, per the Ad Network Trinity, Google focuses investment to maximize eyeballs and ad inventory on proprietary platforms. How? Read more

Category: Adsense, Adwords, Android, Blogger, Contextual Links, Display Ads, Doubleclick, Facebook, OpenSocial, Search Ads, Windows, YouTube
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Top 10 Facebook Feature Wishlist

Posted on | December 15, 2008 | Comments

After using Facebook, attending a developer conference and speaking to advertisers, I’ve built a Facebook roadmap. Not an application, widget or API wishlist, it’s a wishlist for Facebook platform functionality. To be sure, Facebook has initiatives focused on growing site and “ecosystem” functionality. They encourage app development through the fbFund. They encourage partner interfaces through fbConnect. Of course, they also have capable product managers.

The Challenge
Facebook seems very focused on Social Graph Marketing through fbConnect. The problem: as fbConnect pushes consumer profiles out, it will encounter data ownership issues that will slow implementation. Further, Facebook’s execution to date has been spotty. Their highly-publicized Summer 2008 Beacon launch was reversed within weeks. Their highly-publicized Fall 2008 re-design subverted third party developers by moving applications off the user profile page.

A Framework
Facebook needs a framework for prioritizing and sequencing functionality based on value to users, to advertisers, and to the platform. Fortunately, aligning interests is not as complex as it sounds. Think of Google. They invest huge sums of money to ensure highly relevant search results are delivered in sub-second response times. Then, by plugging in paid search results alongside their algorithmic results, they facilitate targeted interactions between user and advertiser. Competition between advertisers ensures relevant results.

My Top 10 Facebook Feature Wishlist
So, adopting Google’s basic framework, how do we sequence features to maximize user engagement AND provide target-rich advertiser opportunities? My suggestions below are in order, soonest-to-latest: Read more

Category: APIs, Applications On, Blogs, Facebook, FriendFeed, Google, Massive, Micro-Blogs, Netflix, Social Graph, Social Networks, Twitter, fbConnect
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Web 2.0 Killed The PR Star

Posted on | November 15, 2008 | Comments

The first act ever played on MTV, “Video Killed The Radio Star” ushered in the music video age. Driven by the powerful images, musicians of all stripes began developing videos. One or more music videos were soon required for any album release. But, as we know, video didn’t kill the radio star in 1981. Albeit with a smaller audience, radio persists today. Further, adaptable radio stars became multimedia mavens.

So, it was with a sense of deja vu that we began hearing that three social media acolytes (Michael Arrington, Robert Scoble and Jason Calacanis) had declared PR dead at the hand of social media. In truth, they were expressing frustration with aspects of the PR industry. PR practitioners, sensitive to issues of influence, may have overreacted. In doing so, they reinforced the bloggers’ primary complaint: that PR folks don’t read their work.

Why do the words of a few bloggers matter? At the very least, these Web 2.0 luminaries are sizable web publishers relied upon by thousands of readers to divine and interpret important trends. But, it’s more than that. They have “Twinfluence“. Unlike web publishers of old, through the immediacy of and interplay between media like Twitter, FriendFeed and their blogs, these authors create their own echo chambers. The result, if one of these Web 2.0 oracles say you’re dead… perception can become reality. Read more

Category: Blogs, Campfire, Crowd Source, Edelman, Federated Media, FriendFeed, Generic, Public Relations, Twitter
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You’ve Been Mac’d, Positioning Your Competition

Posted on | November 10, 2008 | Comments

In the genre of negative ads, the idea is first to distill your competition to a single product attribute and then fix that attribute to an immovable scale. Advertisers may do this by setting up a straw man or by naming their competitor’s product directly. Particularly aggressive, one-sided negative ads are referred to as attack ads. Some advertisers go on to introduce their products favorably. These are called comparative ads.

Characteristics
As outlined in the New York Times “Dueling Brands Pick Up Where Politicians Leave Off“, these ads are tactical in nature. Advertisers who choose this tactic are rarely bashful about their messaging focusing on an important buyer value. As they risk consumer backlash, negative ads often carry a humorous or “tongue-in-cheek” tone. Finally, according to the Times, they often give rise to a competitive response. Digging a little deeper, we see other “trademarks”:

  • It’s an underdog tactic. When you are the market share leader your objective is to grow the market. When you are #2 or #3, your objective is to take share. Therefore, it is a fundamentally competitive or “distributive” tactic.
  • Given time constraints, the desire to get the most “bang for the buck”, and desire to limit litigation, they are usually highly-targeted assaults focusing on one key attribute.
  • They are often topical in nature. That is, one rarely launchs a comparative or attack ad to build one’s brand. One launches an attack to quickly assert superiority. This is often best done in a topical context. For example, as we will see below, Apple uses the latest, negative press to lampoon the “PC”, a stand-in for Microsoft and it’s Windows Vista operating system.
  • There are significant differences between political ads and commercials based primarily on latitude given the different forms of speech. Commercial comparative ads must comply with the law or risk civil liability. Per Goodwin Procter’s Top 10 Things to Know Before You Launch A Comparative Advertising Campaign, the advertiser must: 1. Know both what they are saying and implying, 2. If the comparison is based on a consumer survey or demonstration, follow a bulletproof, repeatable process, 3. Substantiate all claims.

Let’s see an illustration of these points below. Read more

Category: Attack Ads, Comparative Ads, Dunkin Donuts, Mac, Negative Ads, Starbucks, Windows
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Facebook’s Social Revenues

Posted on | November 10, 2008 | Comments

Articles on potential Facebook revenue models run the gamut. Comments following those articles span the galaxy. The consensus on Facebook revenues falls into two general categories:

  1. They’re like Google - They’ve got oodles of traffic and oodles of ways to monetize it.
  2. They’re like eToys - They’ve got an unsustainable business model, users prone to flip and a management exodus.

The fact is, according to Mark Zuckerberg, they put up $150M in revenue in 2007 and are targeting $300M in 2008 with $50M EBITDA. How? They have: 1. A search deal with Microsoft’s MSN, 2. Classic “portal” placements on user profile page with $200K+ 2007 “ad sponsor” price tags, 3. “Social” a.k.a. behavioral ads which run elsewhere on the site, 4. ROS (run-of-site) inventory that is largely sold off to ad networks, and 5. Referral revenue off on-site gifting (i.e., where users send off-line gifts to each other). With 161M uniques and 61B page views each month, they’re their own ad network. So, they’re Google. Right?

Facebook Portal Placement

Facebook Portal Placement

Maybe not. While they raised $250M from Microsoft in 2007 (on a $15B valuation) and another $235M debt / equity investment in 2008, the latest scuttlebutt from outlets such as TechCrunch is that Facebook may be in need of cash. Apparently social network CPMs (cost per thousand impressions, a primary revenue driver) are dismal and expenses are ramping with a vengeance. Read more

Category: Ad Sponsorships, Behavioral Targeting, Facebook
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fbFund Winners, Some Killer Apps

Posted on | November 1, 2008 | Comments

Facebook is actively expanding platform functionality launching Facebook Connect and free classifieds in May, 2008 and redoubling efforts to build a music service in October, 2008. All point the way to a more robust platform.

Then, on October 15th 2008, Facebook announced 25 winners of its fbFund $25,000 application developer grants. Each is entered to win a further $250,000 grant. The cost of admission, fbFund investors have right of first refusal should the firms subsequently raise capital on their ideas. Taken together, and individually, these fbFund winning apps illustrate Facebook’s expansion desires. So, let’s look at our top picks in a bit more detail: Read more

Category: APIs, Widgets, fbConnect, fbFund
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Applications on LinkedIn, Niiice

Posted on | October 29, 2008 | Comments

On October 28th, 2008 LinkedIn took a big step forward by announcing the launch of “Applications on LinkedIn” (or InApps) and officially joining MySpace, Facebook, Google and Apple’s iPhone in the “platform” business. However, unlike other open platforms, LinkedIn Co-Founder Reid Hoffman focused attention on ten applications by eight companies. It appears LinkedIn is going to play more of a gatekeeper role ensuring that their applications don’t become flooded like the 24,000+ Facebook apps and 5,000+ iPhone apps.

As many are available on the internet, what is it about these InApps that creates unique value for the LinkedIn community? In general, functionality in this release empowers the average LinkedIn user with blogging and collaboration tools. Further, each app appears to have dual modes. That is, an aggregation role that can be viewed on your homepage, and a publishing role that appears on your profile page. While I was unable to load the applications on IE and Mozilla browsers (beta glitches), using their detailed descriptions, I’ve prioritized the LinkedIn apps based on what I think is their unique, innovation value. There are some gems in there: Read more

Category: APIs, Applications On, Blogs, Facebook, Google, Social Networks, Twitter, Widgets, iPhone
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Why Revenues Matter, Twitter

Posted on | October 22, 2008 | Comments

In a time when ad budgets shrink and startup revenue targets fade, much todo was made last week about Fred Wilson’s statement regarding Twitter in Wired:

“It’s like the stupidest question in the world: How’s Twitter going to make money?,” said Union Square Ventures’ Fred Wilson, another investor. “It’s like ‘How was Google going to make money?’

Broader Issue

For some, Twitter and its revenues, or lack thereof, are representative of a broader set of revenue concerns plaguing Web 2.0 and, in particular, social media companies. Hence the story quickly moved to Silicon Valley Insider and up Digg, Delicious and other barometers of online interest. So rapid was its ascent, that Fred quickly presented an explanation on his personal blog.

While comments to Fred were mostly salutary (It’s difficult to be “on” all the time), comments concerning Twitter’s need for revenue and lack of business model ran the gamut. The basic camps were:

  1. Revenues are important as the downturn will be severe and future investment is not a lock.
  2. Revenues are not important as the company should focus on “crossing the chasm” to mainstream adoption.

While one can argue about whether Twitter’s current investors or other investors will be willing to pony up more cash should the company run low (Twitter raised $15M this summer for a total of $20M), or whether generating money is a distraction (3M is able to do it and innovate quite nicely), these arguments miss the key reason early-stage businesses should put up revenues as quickly as possible. Read more

Category: M&A, Twitter
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Facebook to Developers, Build Your Own Traffic!

Posted on | October 21, 2008 | Comments

Facebook Platform (fbPlatform?) is Dead, Long Live fbConnect! While this is bad news for Facebook app developers, it won’t come as a surprise as they’ve probably noticed the almost 50% fall in traffic to their widgets since the Facebook site re-design.

What can Facebook widget developers do? According to Scott Rafer, they should get on fbConnect (Facebook’s open API program). Translation: “Don’t expect to leach impressions from Facebook. Go out and build interesting websites, attract your own traffic, and then use our open APIs to facilitate your application’s communications w/ Facebook’s social network.

Category: APIs, fbConnect, fbPlatform
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All Social Media Is Local 2008 - Edelman

Posted on | October 21, 2008 | Comments

All Social Media Is Local 2008

View SlideShare presentation or Upload your own. (tags: edelman social)

Edelman takes us on a walk around the social networking world:

  • Asia: Bulletin boards & forums drive social media. China 120M board users of 250M internet users. Language (2200 languages) + Relevance (gossipy nature) requires in-depth local knowledge.
  • Russia: adoption is slow due to lower (25%) broadbrand penetration. Three social network leaders have avg 17M people. Only 30% trust info from other users.
  • Continental Europe: Social media is language driven – “No country of Europe”. Local habits v. important. Pan-European strategy, local implementation.
  • UK: Language = differentiator. Business need to evolve to language- not country-centric. Focus on storytelling, narratives.
  • U.S.: Trends: 1. Peers filter pro content - PR focus on “layer of trust” (social network). 2. Attention crash kills brand sites – Focus on services using OpenSocial, FriendConnect, fbConnect. 3. PR focus on Google as “findability” = key. 4. Internet evolves from info to collab – stakeholder engagement = key. 5. Digital natives dominate influence networks.
Category: Edelman, FriendConnect, OpenSocial, fbConnect
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