Fred Wilson from Union Square Ventures, links to a Harvard Business Review article that discusses the “hidden return” of online advertising.
While comScore provides a fantastic service — I don’t think we need to rely solely on panel data to measure the impact of online advertising on offline sales. There are a number of ways to do this and I’ll get into the details over time.
In the meantime, it’s great to see reputable trade publications pointing out the true legitimacy of online advertising as a medium. This doesn’t mean it’s easy to do online advertising well, or that every online advertising campaign will succeed.
With the right strategy in place — and the correct follow-through on that strategy, the possibilities are significant.
This article was originally published by iMedia Connection on August 28, 2007.
MySpace and Facebook are arguably two of the most powerful media forces in our time. Other, lesser known, yet still fantastic social networks — like Tagged, Piczo, and Flixster — rival huge media conglomerates with audiences exceeding 10+ million uniques. Ironically, these media powerhouses are some of the less effective media companies when it comes to monetizing their audiences’ attention.
One day we will all look back on this time as the stone age of online advertising. As I scan the ads on MySpace and Facebook, I’m besieged with ads encouraging me to receive my free iPhone or to snap a photograph of a pop star in order to win ringtones for my phone. Despite the great intentions of these ads, they suffer from two distinct problems. First, they do not target my personal demographics. Second, they have no relevance to my psychographic behavior. After all, I already have an iPhone and more ringtones than contacts in my phone. If we’re going to advance our state of advertising, we’re going to need advertising to be more relevant.
There are six potential layers of data that can make advertising more useful to consumers.
Conventional wisdom says that MySpace and Facebook are powerful because of their massive reach and addictive usage. While true, they are in fact even more powerful because they are able to add significant layers of data to make their advertising more relevant. Indeed, very few properties other than social networks collect the various layers of data necessary to provide true relevance. Social networks have the potential to serve advertisements based on a user’s age, sex, interest, relationship data, and with some modifications, they could add the rest of the data as well.
Some companies have begun to take advantage of this. MySpace, for example, recently announced that they will be selling their audience on a behavioral basis for between 20-60 percent more than their standard rates. The Wall Street Journal andiMedia recently reported that Facebook is also developing a sophisticated ad serving platform to leverage both the demographic and relationship data they already have.
The days of untargeted advertisements on top-ranked social networking sites are numbered. It’s only a matter of time before top social networks find ways to add data layers to increase the value of their inventory. There’s simply too much value lost under the current model.
While the CPMs of social networks may never exceed those of Forbes or WebMD, it’s inevitable that they will increase significantly beyond their current levels.
This article was originally published by DM Confidential on August 24, 2007
It’s a great time to be in online marketing. Spending is booming, old and new firms are innovating, and just about everyone is making money. But despite the good vibes and rosy analyst projections, the CPA and affiliate industry faces significant risk.
The danger is not entirely obvious. It would seem that, for advertisers, there is an oversupply of cheap inventory. After all, remnant inventory is inexpensive – “unsold” inventory often sells for CPMs well below $1.00. Moreover, the explosive growth of social networks including MySpace and Facebook has flooded the market with a huge surplus of even cheaper inventory. For now, this is true. But irrespective of appearances, the cold reality is that direct marketers must prepare for a day when the brand marketers begin to buy their remnant inventory and the prices go up to the point that they’re out of reach.
This is not a distant possibility – it is something that can happen at any time. The direct marketing industry essentially lives on a fault line where at any moment, if the brand advertisers savvy up, the cost of remnant inventory could increase significantly to the point that it’s no longer affordable for the direct marketers to buy.
If and when this happens, the DR industry will be in serious trouble. Unable to buy media, many firms will cut back or even close. One small tremor could shake the land whole.
Some will argue that there is no chance that this will happen any time soon. They will point out that the industry is too entrenched in its traditional buying processes to start buying remnant advertising.
But let’s step back and ask ourselves:
Why is it that the top traditional interactive agencies do not buy remnant inventory?
Why do they overpay for media?
There are a few possible causes for the inefficient model:
Lower perceived quality of inventory
Ad serving is a profit center for agencies and they do not want media CPMs to compare to ad serving costs
Poor payment terms with advertising clients
None of these reasons seem significant enough to stop the transition. Clients will demand evolution or they will spend their money with those that adapt.
The key for direct marketers is to begin planning immediately for the rise in remnant rates. Instead of buying cheap inventory, direct response marketers will want to publish cheap content and facilitate user-generated content. This is easier said than done – but we’re already seeing this with companies like Blue Lithium launching MingleNow.
There are no easy answers on how direct marketers will survive the inevitable earthquake. But now is the time to start putting together your contingency plan.
