LinkedIn's growing success is both admired and feared by many in the content business, but the rap against them for quite some time has been, "Well, yeah, but where's the monetization?" In truth LinkedIn has been growing revenues steadily through traditional brand ads, partnerships and payments for premium services. But with two key moves LinkedIn is raising the bar on its prospects for revenues - and for a potential exit at a more appreciable price.
The fist LinkedIn initative is its new DirectAds service, which enables LinkedIn members with profiles to produce simple text ads on a self-service basis that can appear in other members' profile pages. Similar in overall concept to Facebook's SocialAds program - a link to the advertiser's profile appears in each ad to ensure that marketing is on a conversational basis with a known entitiy - DirectAds has the added benefit of being able to target executive peers in the LinkedIn network with a great deal of granularity - and charges healthy but affordable minimum rates to do so - a $25 minimum for a flight of ads, with impressions based on a variable formula. Filtering options include many of the criteria found in a typical member's profile, including the ability to limit ads to specific geographic regions.
The potential for DirectAds is very strong within LinkedIn itself, but it also has the potential to provide B2B publishers with some real concerns as this evolves. Though there is no announced plan to take DirectAds off-site into other publishing venues, certainly classifieds in B2B journals and Web sites could be easily targeted by LinkedIn with its extensive network of top-shelf executives and salespeople. More importantly, it's not too hard to imagine that a B2B publisher seeking revenues from companies trying to get a message through to very specific executives would jump at the chance to use DirectAds to get rates far higher than classifieds for its very targeted profiling capbilities. In very tightly knit B2B communities DirectAds would play very well in B2B publishing venues. Technologically, it would not be hard to implement at all - it would only take enabling a B2B publishing site with Google's OpenSocial API. With such a combination DirectAds would have a Google AdWords/AdSense revenue combo for on-site/off-site revenues that could be impressive indeed. If done properly - hopefully avoiding Facebook's pratfall with its Beacon program that released private data in a user-unfriendly manner - this has the potential to be to B2B publishing what Google was to consumer publishing, turning advertising into relationship building with one click of the mouse. With its potential for ultra-precise targeting, it could put somewhat of a dent in marketing lists services as well in time.
The other interesting new program at LinkedIn is the LinkedIn Research Network, which leverages some of the concepts that it employed in LinkedIn Answers to provide a tool that can enable executives to conduct peer-to-peer industry research. As in LinkedIn Answers members of LinkedIn can pose questions to peers in the LinkedIn network, using LinkedIn's extensive structured and unstructured member profile data to zero in on just the right people to target for questions. The Research Network provides its users with a workbench to monitor responses to questions and to in effect build research panel who can be contacted for additional questions.
The revenue hook in Linked in Research Network is its use of LinkedIn's private InMail network to contact members. Members may use InMail for contacting up to 20 people at a time, presumably to cut down on "spam" research requests and presumably to make it easier to meter the pricing to a reasonable block of minimum requests. Of course, one can sign up for InMail at any number of premium levels, so the real hook is to promote InMail premium subscription revenues as much as possible. Given that the demo video was intent on saying that this product was targeted primarily at financial industry analysts trying to contact experts in companies and market sectors, perhaps their initial expectations for its use are limited. But clearly its ability to combine the art of research into the art of marketing will make this a popular option for many over time.
With both of these options LinkedIn is taking a relatively low-key approach to product development, moving relatively slowly to ensure that their most valuable asset - the trust and security that the LinkedIn system of opt-in relationships has protected through its development - will not be tainted or abused. Executives are a conservative bunch when it comes to dealing with their personal reputations, but LinkedIn has proved to more than 20 million professionals so far that it is by and large a very trustworthy environment. With that trust as a primary asset, it's likely that LinkedIn has set the stage for some solid revenue development that is likely to upend a few B2B applecarts in the long run. For the time being, though LinkedIn is just at the begininning of what promises to be a long battle for the rights to what professionals value most in carrying out their business - trusted relationships that can yield revenues.
If you go through Grand Central Terminal in New York and many other major transportation hubs you're likely to encounter the new immersive style of ad campaigns gaining popularity, with huge stick-on panels for one product following one after the other on walls, floors and any other surface that will get your attention. Grab the shuttle subway train to Times Square and you're likely to wind up in a car that's a head-to-toe ad for rum, athletic shoes or whatever other consumer experience that someone wants you to deep-fry in for a few moments. It appears as if such methods are making their way onto the Web as well, now.
Jason Calacanis Twittered about a new site called break.com, a new site specializing in little video clips, photos, games and such for those seeking some well-packaged time wasters and potential big bucks - up to USD 2K if your uploaded content makes it to their home page . Digg meets YouTube, if you will. The site itself is amusing enough, well-designed and sure to gain some attention, but the interesting thing that I found about it was that it has an ad for an upcoming movie wrapping itself entirely around the main content area on the site's home page. Immersive ads have made their way to the Web - courtesy of the high-res screens that are the typical norm now for most Web consumers. View the page in a smaller display and the sides clip off neatly, making for a big banner ad with a little noise on the side.
As much as this is about making more of an immersive experience online I think that it's also acknowledging another immersive medium that's beginning to get the attention of consumers: HDTV. Before we got our new hi-def set I rarely focused on the TV itself unless it was breaking news or a key sporting event. With HDTV, the quality of the picture is so much closer to the visual quality of the typical PC monitor that you actually wind up watching shows again - and sometimes the ads that go with them. The Break.com all-screen ad makes use of all of the screen real estate to get a message across, a large-scale distraction on a page that's all about distractions. Oddly enough, then, it fits right in - and helps to get through to consumers equipped with both HDTV and TiVo-like devices. I suspect that we'll probably see some back-channeling of this technique into HDTV channels as advertisers begin to realize that some shows have blank screen margins that can be exploited more effectively for their campaigns. Myself, I'd rather see Web content of my own selection in that space, but that's for another post.
UPDATE: I wrote this entry yesterday originally, focusing on the Hulu launch versus HDTV. Any coincidence that today TiVo launches a direct interface to YouTube accounts? Perhaps not. Post is updated to reflect this new announcement.
A significant wedding anniversary gave our family a reasonable excuse to replace our aging and failing television with an HDTV set which arrived yesterday. Having suffered through years of the old set's fuzzy screen and scratchy sound it was quite a shock to experience faces as big and clear as life and wonderfully crisp audio. But while the senses were definitely doing backflips thanks to this not-so-little toy the cable box still had the same number of channels to flip through, with the same stuff as before - just better looking and sounding. As amazing as the technology behind it may be, it's still just a glorified monitor.
At the same time the world is bracing for tomorrow's much-ballyhooed debut of Hulu.com, the online television portal that will provide DRMed video content from NBC/Universal, News Corp and a network of 50 other providers already pumping out video through its own portal and partner sites. Staci Kramer at paidContent.org notes that there are already more than 50,000 imbeds of the Hulu player at 6,000 Web sites, with content from more than 250 TV shows and 150 clips from major shows already in the archives. It's superficial social integration, but it's a start.
In other words, Hulu is a good step forward for mainstream media outlets to adopt the cable programming model to online markets through user-assisted contextualization of secure content players, enabling a wide proliferation of places in which one can encounter their video content, albeit without any ability to mash it or otherwise do much of anything with it. Archives will also be a little problematic, apparently, with current shows not necessarily being available online indefinitely - at least until they pass off into another economic lifecycle through syndication. In the meantime, Silicon Valley Insider notes that many old-time television shows have found enthusiastic new audiences on the Hulu service, including old chestnuts such as the 1950's series "Davy Crockett" and a less successful 1980s series "Airwolf."
The concept for Hulu has matured quite a bit and is likely to experience a fair amount of success, in spite of its proprietary player dampening the service's ability to integrate much with its partners' platforms. Just the ability to search through archives of traditional TV shows should enable people to gain more breadth in their television viewing far more easily than ever before. But as always old business models hold on to television production like boat anchors on the QE2. The introduction of materials on the service is likely to be slowed by producers concerned about how it will affect DVD and syndication revenues, in spite of the fact that audiences will be more able than ever to reach the content that they enjoy most when and where they want it. In the meantime more than 65,000 videos are posted on YouTube daily, gaining more and more of people's attention bandwidth and creating a competing "long tail" of monetizable content.
Hulu is certainly a step forward for TV producers in search of increasingly distributed audiences who seek out content in the contexts that matter most to them , maintaining a "walled garden" of sorts that replicates the closed loop of content typically distributed on cable TV networks. As it succeeds, though, the services that it's most likely to impact - cable and satellite distributors - may want to ask themselves a key question: why aren't we doing a better job of providing content when and where people want it? With TiVo having announced a direct interface to YouTube downloads and HDTVs having the ability to interface directly to PCs the envelope of on-demand content that's accessible to cable and satellite TV viewers is going to have to become a priority for these companies - as the Web side of their facilities consumes more and more bandwidth for video delivery.
This brings me back to that brand-new HDTV in our family room. It's great that we can see all of these channels more clearly and even get a smidgen of content via on-demand services, but why is there still virtually no integration between cable services and the Web? Why can't I find some video that moves me on the Web, click on an icon next to my "email to a friend" and "embedding code" links that will queue it up for viewing on my HDTV in a TiVo/DVR device? Years after the introduction of TV monitors capable of managing digital video content there's almost no interactivity with those devices and the Web, save for a handful of enthusiasts who hook up their PCs to their home theatre systems. I'll enjoy it for what it is, but it seems as if the most sure-fire way to make sure that cable and satellite TV systems remain relevant is to improve the integration of TV and Web services.
Hopefully Hulu gives cable and satellite companies enough competition that they'll start thinking more seriously how they're going to be able to leverage a Web that's far better able to locate and serve up interesting video content from millions of sources worldwide. As it is the digital interfaces to modern televisions offer home audiences a wide variety of options for people to bypass the monotony of cable viewing and find the content that's most relevant to them in brilliant displays that may or may not require old business models to pay for them.
Instead of focusing on a few hundred channels, most of which are of almost no interest to a particular person, cable and satellite providers should be focusing on being the most efficient download services possible to enable set-top units to be filled with lots of programming that's of high interest to a given audience - then tailor advertising and other services to the downloader, not the program channel. It's a day that's coming sooner rather than later, hopefully - that is, if cable and satellite providers can outdance the Hulu craze and recognize that if they don't out-TiVo TiVo the days of hundreds of subscription channels is definitely numbered.
There are some basic patterns that seem to repeat themselves through the publishing industry, one of them being the relative attractiveness of subscriptions in a down economy and the relative attractiveness of ad-supported publishing in an up economy. With the global economic cycle already beginning to cut into online advertising money and that money spread across more high-quality online inventory than ever, it's not really a surprise that there's some reaffirmation of subscription models at Dow Jones. As noted in The Wall Street Journal, News Corp Chairman Rupert Murdoch underscored in comments at the Davos World Economic Forum that Dow Jones would be continuing a subscription component to the WSJ's online offering, even as it expands its free offering to a far broader online audience.
Dow Jones has little to lose and quite a bit to gain by trying this "guns and butter" approach to online monetization. With about two million affluents and influential online subscribers, WSJ offers strong demographics to advertisers who would otherwise be left to compare only WSJ's open Web assets with other quality online content. WSJ will hold its own with those competitive products, to be sure, but why toss out higher ad rates if you don't have to? By expanding both search engine exposure to much of WSJ's online content and continuing to build an online club for elites there's reason to think that the Journal is headed towards a comparatively robust year of growth.
The main question is, what will keep the subscribers coming back for more? We've mentioned in earlier posts that the subscription component could be used to leverage WSJ's upscale demographics in any number of social media-oriented efforts, as well as to offer financial analysis tools that would one-up offerings made available by Yahoo! Finance as well as premium offerings from Morningstar and other online suppliers. Whatever the changes they need to be oriented more towards a younger generation's needs if they are to use subscription revenues for anything more than the temporary bulwark that the TimesSelect premium experiment turned out to be.
Any way you look at it it's not clear that there's a core of traditional editorial content from any news publisher that's likely to sustain growth in online subscriptions in the long run. The tricky job that Dow Jones has on its hands is to project the value of its brand more globally via ad-only content whilst maintaining some sense of value in its exclusive subscription product. Dow Jones has much to gain in retaining its subscription model as it expands ad-only content, but they will be challenged to keep the value of the Wall Street Journal brand high unless there are new styles of content that can build on the existing brand's loyalty.
In short, Knol will enable people to create encyclopedia-like articles on various topics which can be rated by their readers and have both in-article links to other sources on the Web and automatically generated links to related Knol content. Unlike Wikipedia, there's one author per article, but multiple authors can create articles on the same topic, creating a free-market effect as to who is the leading expert on the topic. Articles will be equipped with Google ads, revenues from which will be shared with the author.
This is quite different in many important aspects from Jimmy Wales' Wikipedia, which in addition to attributing authors only in the history trail on collaboratively edited articles also maintains an ad-free environment for their content. While there are more than passing similarities to Wikipedia in Knol's overall design, the system doesn't seem likely to yield similar results. Knol's emphasis on single authorship without editing means that any particular subject is going to gain popularity based on a particular person's outlook, which may be good one day and quite out of date the next.
So while Knol may help people to get a leg up on what leading experts think about a particular subject - and mind you, that might be great for consultants like us folks at Shore - it's at the mercy of the editing priorities of whomever is maintaining their articles. For fast-changing topics this means that it may take a little bit more work for a reader to figure out who's really at the top of their game on a particular topic - and who's off on holiday for a while. Wikipedia needs constant monitoring to keep powerful people and organizations from trying to add spin to their articles, but at least there's highly active editing of one reasonably definitive version of the facts on a given topic.
While the comparison to Wikipedia is inevitable I see this in many ways as much a play for a wider variety of reference portals. Certainly About.com's docent system has resulted in topic experts who have financial motivations to maintain reference topics well on a wide variety of subjects, and in many ways Knol seems to be aimed at providing more efficient ways for subject matter experts to compete with one another in ways that generate revenues more efficiently than About.com. Knol puts more of an onus on an individual author to keep their information up to date, as others could come up with fresher content first, providing a framework that will help them to focus on content while leaving usability, design and monetization concerns to other. As Google's OpenSocial initiative gains steam one can imagine a person's Knol pages as reference content that can travel with them throughout related social media sites.
This free-market approach to knowledge is intriguing but it highlights a major problem that Google faces. As more and more high-quality user-generated content comes online, many people are finding answers to their questions from leading experts in social media venues that are precluding the need to reference a search engine for answers. As it is, so many topic-oriented searches display Wikipedia articles as the definitive source that in some ways Google has become the default front end for Wikipedia lookups as much as an index of the Web in general, reducing overall ad engagement on Google search results pages - and, in time, fewer searches generated on Google. Fewer searches means less available inventory for Google ads - so keeping more people engaged in Google inventory of some kind becomes an increasingly important goal for Google. So as much as this is a very interesting and useful approach to knowledge development it's overshadowed by commercial considerations that may or may not result in knowledge that people really trust. Collaborative editing has its limits for generating quality reference content, but at some point one's own version of a topic needs to stand up to the challenge of other knowledgeable people.
There are many different ways that Knol could evolve out before it launches, but the key factor would seem to be to provide people with a way to aggregate knowledge effectively. As much as one individual's view of a topic can be useful collaborative editing offers the most certain way to gain insights that are going to provide people with the deepest insight into a given topic. There's still room in such a system to reward individuals - one can imagine a system like Wikinvest in which a collaborative neutral article could be supplemented by opinionated personal articles - but first and foremost one hopes that Google will see that the best system will be one that serves the truth before it serves the bottom line. Knol holds out great promise as a platform that can help individuals to create useful reference content, but it may wind up having to serve too many competing interests to gain much of an impact on the marketplace.
As could be expected there is a lot of strong reaction to Facebook's new SocialAds program, ranging from the interested to the irritated in some instances but also pointing towards legal concerns in other instances. As noted in PC World a law professor at the University of Minnesota pointed out that Facebook might be in violation of privacy statues in several states - including New York and California. At issue is SocialAd's appropriating the name or likeness of a person for commercial purposes without explicit consent in their terms and conditions for such uses. It's an important and compelling angle to the new system that probably should have been thought through more carefully by Facebook, but also one which points to further refinements that might increase the potential value of the innovative contextual ad program.
The lack of a voluntary opt-in for SocialAds is certainly a potential legal concern but more importantly it does not allow advertisers to take full advantage of the power of personal endorsement. By linking ads to user posts without explicit permission the ad is only loosely associated with a person's personal endorsement of a product or service - one assumes that there's a positive impression of a product or service if someone bothers to mention it in their Facebook posts but the strength of that endorsement is not easily understood by someone viewing the ad. Is it a like, a love, or relative indifference? If I went to that restaurant that I mentioned in the post, was the food really good or was I just name-dropping to impress my friends and colleagues - and did I actually pick up the check?
A potential solution to this dilemma is seen in the other new ad feature on Facebook - pages for products and brands. Individuals can declare themselves "fans" of commercial entities with Facebook pages, a feature that seems to have been used mostly by a company's employees so far but that could expand in time to include real fan bases. This sort of passionate and loyal grass roots backing is what author Kevin Roberts refers to as "lovemarks," endorsements that have legs far longer than even superstars such as Michael Jordan backing the brand of basketball shoes for millions of dollars. Lovemarks get their endorsements for free - and with a little tweaking Facebook's SocialAds could be adjusted to tie "fan" endorsements to SocialAds placement to ensure that their presence in a fan's posts represented true enthusiasm for an advertiser's brand.
What has gone begging in this equation so far, though, is an obvious opportunity: if personal endorsements from sports superstars who aren't necessarily passionate about a product can command millions, why shouldn't the personal endorsements of Facebook members via SocialAds for benefit the person giving that implied or explicit endorsement more directly - and be under their control more directly? For example, if I am a person who's very influential in my online community or in a real-world community shouldn't SocialAds be able to reward me financially for their endorsement - or to enable them to funnel funds paid by an advertiser to place a SocialAds ad to their favorite charity or cause?
While such a mechanism alone would not address the potential legal exposures for the SocialAds program it may provide the incentive for people to participate proactively - and, in doing so, accept the legalisms that would apply to their use of personal endorsement. There are some potential complexities in such a system - would a member set a minimum bid for their endorsement rights or would this be determined algorithmically, or both? - I think that this is the likely direction in which systems such as SocialAds are likely to head. If being rewarded for endorsements works for sports superstars and other notable figures in mass media, why shouldn't it work in more highly focused social media as well? It's an interesting issue that is likely to unfold in a bigger way over the next several months.
(NOTE: See the ShoreViews Video on this topic below in this post.)
At the recent Future of Business Media conference one of the key trends outlined by the speakers was that B2B media knows that social media is an important trend but that they are very reluctant to engage with social media tools. Most mainstream consumer publishers are about as far along, if truth be told, but it's of crucial importance that they wake up and see the opportunities in social media before others begin to skim off the best revenue opportunities.
One of the best examples of that can be seen in the recent launch of Facebook's advertising features, which are unlike most other tools used for marketers trying to reach audiences. Instead of just throwing up banner ads or typical CPM-oriented ad networks, Facebook is leveraging the power of their own social network to make companies, products and brands a real part of the Facebook community on a peer basis. The new Facebook marketing capabilities consist of two key components: SocialAds, which enables advertisers to get messages into the feed of Facebook activity appearing on member home pages, and Facebook pages for companies and products.
The SocialAds implementation on one level is not too different from any other ad feed that might appear in a weblog's RSS feed but with much more powerful capabilities based on member profiles and activity. An advertiser can target members on Facebook based on their personal profiles, including interests that match up with keywords, targeting both very small communities and very large communities based on those parameters. While keyword selections are fixed, as opposed to being able to define one's own, this still allows a fairly fine degree of targteting.
But the kicker in SocialAds is in the ability to link an ad to a member's reported activities on Facebook. So, for example, if a member visited a particular restaurant a graphic with a sponsored link to that restaurant could appear as a part of that member's post. Since there was probably a positive reason that the member mentioned this restaurant this then provides a very powerful personal endorsement to the advertiser, linking word-of-mouth directly to advertising. This is something very new and extremely powerful in advertising, a development that is potentially as revolutionary as Google's AdWords sponsored links were several years ago.
The introduction of Facebook pages for companies, products and brands is a more subtle features but equally important in its ability to support social media marketing. There are already more than 100,000 commercially-oriented Facebook pages for companies (our company page here) and their power is that they are so much like any other member's page. You can post company or product profiles, videos, links or any other type of content that you think is relevant, but the real value is that members can declare themselves "fans" of your commercial page - a high level of endorsement that enables a brand or product to become in effect a peer member of one's social network.
This is a positioning for marketing and messaging that for the first time really enables marketers to act in conversations within a social community as true peers. Certainly Second Life has shown the way on these types of capaiblities with its ability to allow brands to show of their stuff in virtual reality, but in Facebook's community it's less about glitz and more about rubbing shoulders with bona fide human beings rather than users wrapped in fanciful avatars with who knows what real persona behind them strolling into an online shopping mall. In Facebook pages a brand is less about exhibitionism than it is about engaging customers on a very personal basis.
Not all is sweetness and light in this new marketing environment - why is a sponsored link to ESPN's Pontiac-sponsored online site appearing in my news feed? A little TOO broad targeting, perhaps - but with futher refinements by Facebook and further refinements by Facebook members to indicate the kind of commercial messages they feel comfortable receiving the more powerful this kind of environment will become. It's perhaps a sneak preview of the kind of marketing environment that Google's OpenSocial may be able to make available to companies wanting to extend their message into a wide variety of media platforms that want to take advantage of the power of social media applications.
In the midst of a very busy week of product announcements bookmark Facebook's new marketing capabilities as one that you're going to the talking about - and thinking about - for a long, long time. This is just the beginning of a new era in conversational marketing that will change forever how goods and services enter the conversation of the marketplace.
For a visual run-through of how this all works take a peek at the following ShoreViews Video:
While the New York Post's report on a possible move by The New York Times to sunset its premium TimesSelect online service is still in the rumor mill, the plateauing and gentle decline of Web-only subscribers to the package underscores that general news content is not a likely candidate for online subscriptions. When TimesSelect came out a couple of years back, we noted:
The Times Select model provides temporary bolstering of online and print revenues squeezed from those who need their Op/Ed "fix" of established columnists, but in the long run it isolates these columnists from the media mix that's driving much of the value of online news content today.
This seems to be exactly what has happened. While some NYT columnists behind the TimesSelect firewall still have some influence outside of traditional media channels the deafening growth of social media has drowned out many of their voices - and has helped to amplify the strength of new online opinion-makers. In the meantime the NYTimes has slipped in its overall online rank and reach, emphasizing the need to be able to expose more page inventory to search engines and social media for ad monetization. Once conceived of as the cream of their online content TimesSelect has become more like a pricey version of Slate, an online general-interest news magazine which long ago abandoned premium pricing to capture online market share.
While specialty publications like The Wall Street Journal have enough focus and demographic cachet to benefit still from a premium pricing strategy the huge projected growth for online ad spending argues strongly for traditional news organizations with far broader reader demographics becoming far more efficient in exposing both current and archived general news content online as aggressively as possible. As pointed out by Read/Write Web, though, much of the growth in online ads will go to social media sites which do very well with highly targeted contextual ad buys from Google's AdSense and other contextual ad services.
In other words if the readership is going online and online advertising is becoming far less about broadly based selling and far more about selling in microcontexts then the future of news organizations like The New York Times is to get their content into those microcontexts as efficiently as possible. This may still leave room for some premium components, but it's likely to be a set of components built around social networking. Rather than viewing social networking as a dangerous marketing environment, many context-driven marketers are learning how to exploit social media fairly effectively. While major brand advertisers are still nervous about committing their brands to social media it's where the eyeballs are - and it's where news has to prove itself as being able to provide an effective context for marketing.
It's likely that there will be some residual TimesSelect premium package for some time, perhaps built up around a new type of social media experience that allows for more conversational interaction with the news and editorial staff, but the bulk of TimesSelect content is likely to be put out to general ad exposure by year's end. While this may not slow the decay in online readership at "premium" news publications such as the NY Times it will be likely to provide short-term ad revenues more quickly to help fill the gap left by rapidly declining print revenues. So think of the potential fading away of TimesSelect from the NYT perspective as more of a stopgap measure that acknowledges well-established changes in the online ad marketplace.
Unless newspapers can define truly elite communities that will benefit from premium subscriptions there's little reason to think that the failure of the TimesSelect experiment should spell out anything less than the official death of the online premium model for general interest publications. The long-standing relationships between editorial operations and audiences have changed fundamentally but traditional news organizations have moved at the most ponderous of paces away from being isolated teams of experts to acknowledge and adapt to the new conversational world of news-making. Here's hoping that The New York Times can now focus on engaging their audiences more effectively in the contexts that matter most to them.
CNET News chronicles Microsoft CEO Steve Ballmer's assertion that the software and services giant would be making a big noise in online advertising - an assertion that's been backed up by two short-term deals and likely to be followed by other major announcements. Forbes covers Microsoft's deal with social media portal Digg to use Microsoft for most of their online advertising, a deal that displaces John Battelle's FM publishing in large part for now - though based on John Battelle's upbeat assessment of the deal FM is gaining some inroads into Microsoft. Such a deal would be good for both partners: FM has done well with a number of major social media properties but has lacked the ability to fill available ad inventories effectively oftentimes, whereas Microsoft, ever late to the game, needs to start finding some leverage in social media as soon as possible. Both deals could presage exit plans that result in Microsoft acquisitions, but Microsoft may be learning from Google that it's more important to own the context than the content.
The other deal announced by Microsoft is the acquisition of ad auctioning technology from AdECN, a capability that should enable Microsoft to succeed more effectively against self-service ad placement services such as AdSense. AdECN is modeled after stock exchanges used in financial securities markets, requiring matching sellers' inventories against offers from advertisers, dealing only with existing ad networks as its members. So in effect demand for advertising coming in from one ad network could flow over to match inventory on another ad network, with each network receiving a portion of the buyer's ad fee proportionate to their role in the brokered transaction for the end publisher's sold inventory. AdECN takes a proportionately small piece of each transaction as a processing fee, in addition to up-front membership fees to cover basic infrastructure costs.
One can see how AdECN can be used by Microsoft to match inventory from ad networks such as FM Publishing to a greater universe of advertisers being glued together by Microsoft, giving FM-affiliated properties a broader universe of buyers without having to expand its direct sales presence. One can also see how this will enable Microsoft to enable traditional publishers and advertising agencies to gain access to a wider array of online properties without having to resort to the legwork required to cut deals with an ever-expanding universe of online niche market players and advertising networks. This will become increasingly important as more micropublishers begin to service niche markets more effectively online in B2B and consumer markets. So Microsoft can play "middle man" now with any number of media players, making easy money in the process and developing more direct sales and marketing relationships where it is most profitable for them to do so.
Given Microsoft's relatively late moves into trying to dominate online advertising a brokered market approach is a good strategic move. It enables Microsoft to gain the benefits of broad market penetration while enabling advertisers and publishers to work directly with the ad networks that make the most sense for their industry profiles. Given the increasingly niche-oriented nature of online advertising this may offer Microsoft more flexibility than a one-size-fits-all network like Google's AdSense network or its potential acquisition DoubleClick. The main weakness in this strategy is that it doesn't help Microsoft reach the "long tail" of advertisers as effectively as Google and Yahoo straight off, but in time Microsoft is likely to make inroads there as well. As its software revenues from tools that create content weaken Microsoft has little choice but to seek revenue from the content that's created by publishing tools. It's early days but expect Microsoft to develop some increasingly savvy solutions for ad buyers and sellers in search of the most premium online content markets.
I had a chance to catch up with Answers Corporation Chief Strategy Officer Bruce Smith recently regarding their recently announced acquisition of Lexico Publishing Group, the publishers of the Dictionary.com, Thesaurus.com and Reference.com online portals , for USD 100 million. Lexico's reference portals are fairly simple and undramatic properties, but they have an audience that's about comparable to Answers.com in overall ranking and a footprint in education that offers Answers.com a complementary and loyal footprint. Most importantly Answers.com has been more efficient in being able to extract revenues from its references audiences than Lexico, so it effectively doubles its advertising base for marketing and ecommerce any may come close to doubling its revenues and then some along the way. As with its acquisition of FAQ Farm the Lexico properties are likely to remain autonomous sites, gaining common branding and integration over time but remaining tools that for the time being leverage highly popular bookmarked addresses.
While many magazine publishers are still sniffing around for undervalued print publications to take under their wings this move by Answers.com to scoop up highly ranked but underperforming online sites with complementary advertising bases demonstrates how quickly a highly profitable online site can extend its advertising efficiencies to build profits - even before an ounce of synergy or integration is added. To hearken back to my earlier post on Yahoo's possible sale it's far more likely that media companies that know how to extend advertising synergies online to related online holdings are going to build profitability more quickly than companies looking simply for overall scale of operations.
Tim Ferriss highlights an over-the-shoulder video (embedded below also) he shot of leading weblogger Robert Scoble discussing and demonstrating how he absorbs content from over 600 feeds from weblogs and other sources. The short answer: pretty much the same way that anyone else does from a technology standpoint. Robert's equipped with Google Reader, with which he scans headlines - including content more personal than professional - checks out the authors that he cares about most and leaves the rest for another day. Probably the key insight that Robert tends to focus on bloggers who he knows or may meet personally moreso than the big-name sources who play to the masses. But in the process of creating his own weblog that's fed from this culling process he's creating both an intimate fabric of insights that amplify the value of a small and very personal community which in turn get amplified by the general media's attention to Scoble.
This points to a couple of key points. First, the technology used to look at weblog feeds today is about where news feed readers were about twenty years ago in Wall Street's minicomputer-fed desktop displays - perhaps not even that, as they don't even have very sophisticated alerting features for the most part. So much for "cutting edge" technologists. This points to tremendous upside for using feeds to develop more mature content products. The second point is that most advertising in weblogs is utterly wasted - everyone's trying to go for huge audiences to build up substantial ad revenues through mass programs such as AdSense or semi-tailored programs such as FM Publishing when in fact the people who you really want to influence constitute very tiny audiences who should command far greater rates. Ads in a person-to-person publishing environment should be far more equivalent to stock traders seeking trading partners in a relatively small community of professionals.
Where I think that this goes is that just as today we have blogrolls to provide endorsements of others' weblogs we will see some time in the not so distant future "adrolls" - small and not-so-small networks of like-minded people who are willing to accept ads in content that they receive along with trusted peers. Adrolls would be opt-in networks in which people would specify specific types of ads or other sponsored content that they like to see and/or to specify the types of companies or partners from whom they would like to see them. Members within an adroll network could share their taste in ads with other adroll members and/or keep some tastes private based on filtering criteria - or perhaps triggered by other content filtering mechanisms. Why bother spending on ads on thousands of web sites and search engines to reach a few hundred key decision-makers when you can tap into the handful of sites that they really care about on an opt-in basis with the ads that they're most interested in? The messaging that one may get through an adroll may be significantly different from today's Web ads - more equivalent to direct response marketing than mass advertising - but in the end far more cost-effective.
Early thoughts, but bear this theme in mind, I think that it's what we need to look at to take full advantage of the power of social media as an advertising medium. Original video:
Download Squad highlights a new experiment on YouTube to embed advertising in its online video footage, using a small text box appearing under the live video box with a link to the advertising video. According to Download Squad a limited number of video clips are being exposed via this method in the YouTube site, with ads not appearing when clips are embedded into other sites. Download Squad sees this as a plus, as the embedder of a clip does not benefit from the ad revenues.
But on the other side of the coin, what if the site DID want to benefit from the ad revenue stream? Sites such as TheNewsRoom allow a viral distributor of their videos to take a piece of the revenues from their pre-roll ads, which they hope would entice users to choose their footage from major video outlets for embedding. But there seems to be some push-back from webloggers and other social media outlets on pre-rolls in embedded content. Embedding is a form of personal endorsement for the core content being inserted: the person choosing the content being embedded doesn't necessarily want to endorse a brand advertiser as well. Enabling the embedder to participate in the revenues seems to mitigate this somewhat, but the magic formula for embedding viral video for profit seems to be elusive.
The YouTube experiment seems to point in one key direction in finding a good balance in embedded video ads: sponsored links. As with Google search results in which AdWords sponsored links exist alongside non-sponsored search results the text bar appearing under the video clip enables a viewer to be exposed to the concept of looking at and ad while looking at the clip in question. The key concept of the ad gets exposed to the viewer without creating an interruption. Presumably Google's AdSense infrastructure could enter this picture and allow sites embedding YouTube content to turn on these sponsored links and to participate in their revenue stream.
This Google/YouTube experiment holds promise, but traditional video advertisers are going to want more out of the equation. And perhaps they can get that - for a price and in specific contexts. But in trying to define a new common-denominator formula for online video ads Google's enormously successful experiment with AdSense and AdWords may point to approaches that will be drawing video advertisers away from interruption-driven advertising and towards a level of engagement that may put their content in front of more highly engaged eyeballs.
