Advertising

Article on TechCrunch about the 2008 Gartner Hype Curve, and where things lie on it.



See that one on mobile robotics - we've been tracking that awhile, I was fascinated to see that Chris "Long Tail" Andersen's other website is on Unmanned Aerial Vehicles - or Drones as they are also known. Ditto, we've been tracking behavioural economics and surface computing. There are a number I don't see - open source hardware, various deep algoritms based approaches etc.

I also suspect after this week that Cloud Computing has shortcircuited straight onto the slide into the Slough of Despond . To make matters worse, today the US Patent Office told Dell it couldn't patent the term. we're also dubious about Location services. Apart from that, its fine

The Hype curve's early rise is driven not just by PR and hyperbole pimping New New Things, but by irrational market projections. We can go back over the years and show how various forecasters often hugely over-egg the early day forecasts and recant later, and more quietly. Mobile and Advertising are very susceptible, Mobile Advertising especially so- though not usually as bad as e-Marketers for Web Video advertising this year:

In February, the Web prognosticator said YouTube et al would sell $1.4 billion in ads in the U.S. this year. Now its says it was overzealous: It has ratcheted its estimate back by 64%, to $505 million.

What's happened since then? eMarketer blamed "changes in methodology" at the Interactive Advertising Bureau to MediaWeek. But in his new report, analyst David Hallernan says advertisers remain tentative and still confused on what types of video to buy and where. In other words: You got us.

65% drop in 6 months - that is the best yet, we usually have a 33% drop over 1 year rule of thumb

Update - Speaking of hyping the Cloud, here is one of the more extreme examples - off RWW, strangely. The hyper it goes.....

From Silicon Alley Insider re our apparent love of watching web TV pre-roll:

...video ad network Tremor Media says we and everyone we know are in a small minority. It says only 20% of Web video watchers give up and leave when confronted with the pre-rolls it serves up. Or, as Tremor is putting it in a release later today, 80% watch the ads all the way through.

Tremor says its audience sticks around because it doesn't serve up crappy use-gen video, and that "audiences are willilng to accept pre-roll advertising in exchange for content they want, on demand." And Tremor also says that its stuff is so good (it measured 65 million ad impressions across 100 different ad campaigns) that the bail-out rate didn't change if the ads were 15 or 30 seconds long.

Not to be outdone, Break Media is claiming an even higher "completion rate" -- 87% -- for its pre-rolls, which includes a whole lot of user-generated video. Break's sample was a lot smaller than Tremor's -- 5.85 million impresssions.

Is this real, or just wish fulfiment from Planet Marketing to coax money out of corporate trousers? SAI are sceptical, and so are we - received wisdom is that most people don't like pre-roll - or rather, don't sit through them.

Anybody out there who watches pre-roll?

I had a catch up today with a friend of mine, and while discussing mutual assignments she mentioned she had used a quote from Seth Godin to explain something that was pretty common knowledge to anyone who had been around the Web-block awhile, but non-obvious to the new crop of entrepreneurs.

I noted that similar quotes were no doubt available from Plato onwards, via Spinoza and Grouch Marx, Yogi Berra, Peter Drucker and probably Nicholas Negroponte to boot.

She looked at me in that pitying way that very smart women have, and patiently explained that when talking to the New Media/Web 2.0 digerati, using old farts like that will kill an idea, not promote it. When in Rome, worship Roman Gods etc....

Which made me wonder - this is like a conflated Trees/Forests and Old Wine/New Bottle problem - ie an old concept cannot exist until a New new media Guru has re-phrased it. And thus, if it has not yet been re-phrased, it cannot yet exist.

So to progress, we are Waiting for Godin*

Or, to quote another Old Fogey, we are in the situation where those who cannot remember the past are doomed to repeat it. (That was from Santayana, but I am now waiting for Seth to re-phrase it )

(*I wrote this post mainly because I've always wanted an excuse to write that.... amazingly enough, Seth has recently written a post on a remarkably similar theme )

Read this piece on Techmeme re Brands on Twitter:

Do companies think about or even care what people are saying about them, their products or services on twitter? If they don’t, then they are about to be rudely awakened soon enough.

Brands and businesses have a huge opportunity to reach out & extend their brand and create evangelists. There are over 20 business use cases that we have document for twitter. We will be posting soon on brands that are embracing twitter and the several use cases that we are seeing emerging that are quite interesting. Some of these use cases on the twitter social network by companies are ok, some are crappy and some are simply amazing.

Some are good, some are bad, some are ugly - who would have thought

But there is a serious point here though - as any social network gets above a certain size, the stuff said on it starts to influence significant numbers of people, so anybody who is worrying about reputation needs to be onto it - and Twitter long since hit that sort of threshold.

Another issue is brandjacking, where cybersquatters register a brand on a new social net long before its hit any radar. The article shows about 30 brands that are on Twitter but have been hijacked. This is because early users are wise to the joys of cybersquatting and get in early (people are grabbing squats on Friendfeed at the moment, join the goldrush) so what is a brand to do? There is no way it will be able to cover everything, there are hundreds of small social nets, and monitoring them all is very hard and time consuming. .

Answer is there none, though, apart from monitoring every startup and grabbing your name on it first - in the real world there are laws to stop this sort of thing, but its far less enforceable in cyberspace. We would like to see a "use it or lose it" code of practice, and also some form of "reverse prior art" argument - ie you can claim say "Coca Cola" as your handle on Twitter or Friendfeed, but will be bumped if they dispute because Coca Cola is already trademarked

Anyway, on with the show:

Some might argue that a brand just publishing their newsfeed and saying they are on twitter is fine. I think if you just publish your news stories or blog/rss feed updates through twitter; then you suck. Why? I have a feed reader and don’t need your noise on twitter.

Now the obvious answer here is "don't subscribe then" but it does highlight another vexatious problem for Brand pimps on Twitter, in that it is a pure pull medium - I choose to follow you, and if I don't I can't hear you (la-la-la) even if you follow me. In other words, on Twitter (and to a lesser extent on other Social Nets), Brands actually have to work at being attractive, typically via bubbly personality community managers (expensive and time consuming) or benefit giveaways (typically cheap to produce early event information now, but we suspect arms races will make it more expensive over time)

What does work is people in companies interacting on these services - in a genuine way. Flacking is seen through quite fast (you can fool all some of the time etc etc). But this is expensive to do (although we have suggested ways to automate this, over here)

In fact this is a microcosm of a bigger discussion today, on the future of PR (thanks to Drew Benvie's article for the discussion and links). Drew points on to Steve Rubel, who notes that trad PR (as in stands for Push Randomly or Press Release) is ending:

They are doing what has always worked for them and I guess continues: sending out lots of email pitches in hopes that some stick. But those days are coming to an end.

It's my view that increasingly, bloggers (and maybe journos too) simply don't want our help. Many bloggers - particularly those who cover tech - love to discover new things and experience them on their own, unaided by PR. Exhibit A: Robert Scoble. Note the joy of serendipity in his post. However he's not alone by any means.

I know that when I write about news (which is not as often as I used to), I mostly do so if I discovered it on my own - as I did twice over the weekend. If I didn't find it on my own or stumble upon it early myself, I don't bother. I actually like the thrill of the chase and serendipity. I want to be first. This is something that has fueled the egos of reporters for years - partly because it sells. Heck, count me in.

Now you've heard all that for at least 3 years, so what's different now? Simple - its penetration, especially of the Yoof market, who most of the Brands want to reach. I read yesterday that there is now a total inversion of media consumption - Yoof are 1/3rd broadcast, 2/3 online and Fogies are 2/3 broadcast, 1/3rd online - and if you add Wikipedia, MySpace, Facebook etc etc that is now a big lump of people's attention.

And its damn hard to reach them in these "pull" based media - broadcasting on SocNets doesn't work as noted above (look at the CPMs on SocNets - pennies), there is increasing resistance to datascraping, so the media has to adapt the message to the new medium. Hence the need for PR - the traditional media/message massagers - to restructure themselves.

Update - Jeremiah Owyang has left a useful response to this post over here. In short he notes most of what I have said (but in more detail) but also notes something that I forgot to put in this post:

ROI unclear
What’s the ROI from Twitter? A very difficult question to answer, yet you’ll find the solution if you can also measure: “Whats the ROI of a conversation in real life”. Since many brands have an objective (return profit to shareholders or owners) ensuring this is a high priority task will be difficult for many corporations.

Economics. That cost of engagement in these new mediums, with uncertain return, makes the biz case very hard to sell early while there is time. Its the standard problem of all large companies facing new entrants - its typocally not worth getting out of bed until more than c 10-15% of market share is threatened, but if the entrant is fast growing (as many Web Co's are) thats too late.

I seem to have been plagued in the last 3 weeks with Alerts from CNN. It's interesting in that:

(i) I have certainly never signed up for them, I don't use the service in any way

(ii) Neither my ISP or my desktop spam filters seem able to stop them. It keeps on coming

When I follow the "remove" link and go to the CNN site (Note - its probably not the CNN Site - see my update below) to remove myself I see a big sign-in wall to go through - which I can't use because, as I never signed up, my password is thus unknown to me. And I have no interest in signing in because I'll bet that creates a second instance. C'mon guys, you know exactly what my address is - a simple "remove" button is the right thing to do here.

Update - following a Twitter conversation, two things are clear:

(i) Its not CNN that is doing this (or at least not overtly )

(ii) The site you are led to is likely to be a phishing site, looking more closely at the url. I was nearly taken in as I was cross and lost my natural caution - a lesson to even an old 'net hand like me, they are trying to pull all the emtional levers in phishing attempts.

So, search startup Cuil is reaping the publicity reward of its well engineered PR launch - or not. If Twitter, Friendfeed, Slashdot, the comments on our blog's review of Cuil, a search of Google Blogs or Technorati, or any myriad of ways of looking at the opinions of the Vox Digerati are used, they are harvesting the grapes of wrath.

Even the blogs they assiduously courted and got to write glowing copy pre-test are now biting the hands that fed them the PR releases.

Maybe it was the demi-gaelic name that gave them a touch of the blarney, maybe it was the advice of a previous generation of famous Irishmen:

- There is no such thing as bad publicity except your own obituary - Brendan Behan

- There is only one thing in life worse than being talked about, and that is not being talked about. - Oscar Wilde

The idea being that the name recognition was far more likely to echo far and wide than the (mis)deed. But is this true on the Internet, where 2 other things happen:

(i) Persistent commenting - in the old days, the access to media was limited - a few nasty articles in the papers and on TV and it was usually over. Now, owing to the low transaction costs and low distribution costs of writing in the new media, a salacious story gets picked over, rehashed, examined etc by some fraction of 70 million bloggers, twitterers, friendfeeders etc. It doesn't die nearly as quickly.

(ii) Persistence - lets say that Cuil get it right and do great things in future - still, every time you search for them, long into the future, this perfect blogstorm of criticism will be out there, chained to their name via a million strong links. My bet is that they will have to change their name (hey - maybe another launch )

Perhaps the advice of another famous Irishman is better suited to PR in the Age of the Internetz:

Christopher Columbus, as everyone knows, is honoured by posterity because he was the last to discover America - James Joyce

In other words, they key is to be the one that is remembered for doing it right, not doing it early.

Early last year we did a major piece of work on the economcs of online advertising, and found that - lo and behold - there is not enough advertsing overall (never mind the 6% or so that is online) to support a freeconomic "Web 2.0" business world. The total global Adspend is about $0.5 trillion, of which about 6% - c $30bn - is online today. Given that the overall ICT marketplace is c $3 trillion, and the various media markets are greater than $0.5 trillion, it very quickly became clear that a world of Ad funded free services was going to be a non starter.

This didn't stop a whole heap of people from starting, of course, the logic being that if your service could get there fastest with the mostest then you would scoop up some of that precious Ad revenue, and the devil would certainly take the hindmost.

Except it hasn't worked that way (we told ya....). As the number of pages that wanted Ads has exploded, the (more fixed) amount of revenue has been splashed over more and more pages, bringing down CPM rates across most Ad supported services.

This post today from Quinthar outlines the generic trend (I saw it on Slashdot, the discussion there is quite good too):

TechCrunch reports that Lookery, a company specializing in selling ad inventory on social networks, is barely breaking even despite selling 3 billion ads per month. And rather than raising prices to become profitable, they're actually in the uncomfortable position of lowering prices 40% -- from 12.5 cents to 7.5 CPM. It reminds me of the (often unintentional) joke "We lose money on every transaction, but we make it up in volume!"

All this has made them so gloomy about the prospects of their core business that they're thinking of switching horses mid-stream and resurrecting that Web 1.0 favorite: selling demographic data. I mean, it worked so well the first time, why won't it work now?

So far so predictable*. Readers of this blog will say we've already heard you say that. True...but this I did not know:

Ok, so you might be saying "Sure, social network ads are crap, but Google's ads are solid, right? After all, they're set by the open market!" I thought that too, until recently I learned that rather than that market being open, it in fact is restricted by a series of minimum bids.

Don't believe me? Search for "Flash" and you'll see it has zero ads. In a totally free market, that means you have no competition, and thus should be able to bid as low as you want to get your ad to appear. But when you try to create an AdWord for the "Flash" keyword, you'll see it sets the minimum price at $0.10. So even if the market (me) only wants to pay $0.01, it's priced 10x higher than the market (I) will bear. Which is why there are no ads on the "Flash" keyword.

So Google, which owns upwards of 25%+ of the overall online Adspend market (depending on whose research you use), is possibly artificially keeping prices from plummeting even further - Quinthar draws the obvious conclusion here, if true:

Hopefully, most of Google's ads are competitively priced via the auction. This would suggest that they're priced "correctly" and that we're in for no major shocks to ad revenue (and, due to Google's market share, worldwide ad revenue).

But let's say that some high fraction -- 50%? 70%? -- of Google's ads are in fact not competitively priced, but are just set arbitrarily by Google, such as Flash's $0.10 minimum. In this scenario, Google's revenue is no more protected from price declines than Lookery and it's 40% "going out of business" sale....

....Sound crazy? It's not nearly as crazy as what's already happening in reality: ad arbitrage. It works like this:

You buy a really cheap adword from Google in order to direct a lot of traffic to some site. And then you fill that site with ads with high CPM and CPC (perhaps from other ad networks, it doesn't matter). The result is you buy a click for $0.10, and then turn around and sell it for $1.00. How is that possible? Why isn't everybody doing it?

Everybody was doing it -- in huge quantities -- until Google killed it. How? By raising minimum bids.

That's right, by fiat Google leveraged its near monopoly power and raised prices to stop buyers it didn't like (spammers) from taking advantage of the mysterious imbalance between the price of an AdWord and another network.

Now we can't confirm this thesis right now, and Quinthar goes on with some speculative analysis as to the "why" of all this, but I would like to stick to the general insight from the scenario painted here - that it is possible that a cocktail of Google policy plus it's market share is setting an unrealistic price for ads in the Googleverse, that are not possible to cover elsewhere. If true, there is clearly going to be an arbitrage there, so at some point it will be unsustainable.

One to keep a close eye on methinks.

* there is a counter argument that Lookery is trying to fund a change in strategy via higher volume sales at lower prices...we'll see....

There is no doubt that social networks have a conundrum with "monetization". On the one hand they have an incredibly rich source of data about their users, but on the other no-one seems to want to give them much money to advertise to those people. Thus various schemes have been tried (such as Facebook Beacon) to extract that data in more useful (aka intrusive) forms for advertisers. That Beacon was roundly condemned seems not to deter others who wish to rush in where those already burned fear to tread.

Latest up is SocialMedia with FriendRanking:

The company scans data about your activities on Facebook and other social networks, infers who your best friends are, and ranks them. Then the company exploits that ranking to serve you relevant ads.

It does so with something it calls “social banners,” which insert references to your best friends within advertisements.

The idea is that showing you ads that reference your friends will attract your attention and thus make the ads perform better.

CNet explains it thus:

[The] social banner would ask which of your close Facebook friends, among a short list, you’d like to invite to see the movie. Or a social banner might inform you that a friend Jim just ranked Iron Man with three stars, and it might ask to “click here to buy tickets at Fandango.

So, given that people didn't love Beacon a lot, why will this work? Frankly, we don't think it will, but that won't stop desperate SocNets buying it - as SocialMedia's CEO notes, the response rate to standard display advertising on social networks is abysmal. People click on ads about 0.02 percent of the time, because people have started ignoring ads. Given that everyone wants billion dollar valuations, it has to get rates better than that.

But it won't - the Behavioural Economics are against it. Social interactions - the things we do with friends - are "social capital" and we separate those things from "Financial Capital" In fact, introducing the market to our social interactions totally changes the game of the interaction. Lewis Hyde, who wrote on Gift Economies (of which social intercourse is a type) noted that when a primarily gift-based economy is turned into a commodity-based economy, the social fabric of the group is invariably destroyed. Quite simply, pimping stuff is not an acceptable social transaction unless the information is directly asked for.

The dream of course is that by mining your social metrics, you will get Ads that are very relevant and you will welcome them - except they are not, cannot be as not only is this the commercial realm invading the social, but we are simply not "in the market" when we are conversing with friends, unless we directly ask. Not only that, but the Beacon evidence is if people do find that their data is being mined overtly, they get extremely upset (or at least a noisy enough cadre do).

For this reason, any advertising in the space has to have a very light touch - 10 years ago Yahoo experimented with email advertising and found that the only thing that was acceptable was an ad at the bottom of the email. The lesson was not lost on Google, hence Adwords - and its not on Gmail or on Google Groups!

Then again there is a new crop of bubble-valued dotcoms desperate to get (or keep) sky-high valuations despite all rational evidence, so there will no doubt be more (VC backed) toiling in the vineyards of social datamining.

So what will happen in this game longer term?

Clearly there will be continual iteration of the social net datamining play, the belief that the next approach will be sufficiently "relevant" to get under the user's trust radar and hit the economic attention El Dorado. But we predict something else will occur too - every crass attempt will build up the resistance and mistrust, people will start to be more wary and subvert these systems, so the value of what is mined will decrease as the ability to mine rises. It will also push th argument fr personal datastores, obfuscators and so on.....

And what does winning actually look like?

Congratulations, you have managed to subvert social into commercial capital - but guess what, we behave differently in that world - and we will - and its not how people like it, so its highly likely people will just move their social capital elsewhere. It is transferable, after all. And there will probably always be another VC or Offset funded SocNet starting out looking for new eyeballs too, that is willing to be more homely as it starts the journey

Afterthought - here's the thing that gets me with these services - there are a bunch of them being built, VC funding is forthcoming, but its all bad-guy stuff - its not something you would do if left to your basic human ethics after all. So imagine if you wanted to build an anti-Friendranking system, an antidote to antisocial object mining? Its not hard to do, it just reverse these technologies. How many VC's would line up to fund that? There's no money in it, after all - its just useful! Thank heavens for Open Source......

...or rather the same basic story hits Techmeme twice....the one before was on May 14th - see here and was US based, now its gone global.

Cute PR by e-Marketer to get on Techmeme twice in a week by re-releasing basically the same stuff - it doesn't say much about us Techmeme readers, who clearly have the memory of a Dory-fish though

From the Experience triumphs over Hope dept:

Jason Calacanis points to a study that confirms what what we all knew, just that no social marketeer wanted to admit (some wilfully ignored in fact - do we need a blacklist for blogspammers?). Sez Jason:

Social networking sites are probably not going to figure out a way to insert advertising into people's conversations--just like message boards, chat rooms, and IM didn't.

We could have told him that (we did, actually - try here or here). Ever since we have been tracking online Advertising 3 years ago its been clear that its only sites with valuable content that get valuable advertising because (shock horror) they attract quality time from quality people. Serve schlock to schmucks and you make sch....

As the study Jason refers to notes:

"Among the verticals, Social Networking led the plunge with monetization dropping 47 percent, from 37 cents in March to 19 cents in April, below January lows of 22 cents. Entertainment monetization dropped 17 percent from 40 cents in March to 33 cents in April. Gaming and Sports were down marginally (4 percent and 5 percent, respectively). Technology remained relatively flat at 83 cents in April vs. 82 cents in March, but is still off January highs of 92 cents."

Note that small websites (hypothesis - those that target customers with more high-value content) get CPMs an order of magnitude higher - may only be a dollar odd, but thats better than $0.18!

No mention in the study, oddly, of the single most blindingly obvious reason for this state - too much inventory chasing too few Ads. While the number of pages to put Ads on grows exponentially, the number of Ads to fill them does not increase at anything like that rate (given that the overall internet using population is roughly static now) thus the value per page of the online massvertisers plummets.

Maths - strange subject I know, but you can't beat it.