Search: Digital Future

Wednesday 28 January 2009

MySpace's Hybrid Advertising Model Making Profits

There's been a lot of speculation about the profitability and business model of social networks since the extraordinary valuation of Facebook, when Microsoft bought a small stake in the company back in 2007. With billions in valuation but the business barely making enough to break-even, many questions have been raised about whether social networks can make real money. But then there's MySpace. MySpace is still holding onto the number 1 spot in the US but it's total global audience is now about half that of rival Facebook. However MySpace is at the $1 Billion revenue mark and growing strong. This article by Matthew Garrahan of the Financial Times looks at the success of MySpace's hybrid advertising model. Perhaps this is the right template for other social networks to follow?

On the money in social networking
By Matthew Garrahan in Los Angeles, Financial Times/, January 28 2009

Chris DeWolfe is dashing around his Beverly Hills office. The co-founder of MySpace is preparing to go to Davos, where he will rub shoulders with leaders of the world economy, including his boss, Rupert Murdoch.

Davos this year is packed with gloomy-sounding sessions on the collapse of global capitalism but Mr DeWolfe is in an upbeat mood. MySpace has fine-tuned its advertising model and as it celebrates its fifth birthday he believes the site can prove its critics wrong about the durability and profit-making potential of social networking.

With their millions of users, social media has long been seen as a panacea of online advertising. But sites such as Facebook and MySpace, which is part of News Corp, have been unable to turn those users into significant profits. MySpace narrowly missed a $1bn revenue target last year, while Facebook has preferred to concentrate on building a large base of users.

By Mr DeWolfe says a relentless focus on profits at MySpace is starting to pay off. "From day one we have always been focused on building a really big, scaleable business that is based on advertising," he says. "If you are a big brand and you want to reach any demographic you can get real scale on MySpace."

The group has devised a hybrid business model that combines big branding campaigns on the popular pages with its ability to "hyper-target" millions of users according to their interests.

The big, more general advert campaigns are a recent factor: MySpace has introduced branding on its home page, which is seen by more than 50m users daily. "That's more people than watch American Idol ," says Mr DeWolfe. Such campaigns used to be found only on portal sites, such as Yahoo, AOL and MSN but Mr DeWolfe says MySpace has those companies in its sights.

This is partly because MySpace has built a sufficient user base to compete for what is a much larger pot of money. "In the early days, either the brands or their media buyers would reserve a small part of their buy for social media sites - the rest would go to the portal sites," he explains. "But what has happened is that we are now competing against offline media and the big portals, such as Yahoo and AOL."

Analysts say this move to a hybrid model that combines the penetration of social media with the broad reach of a portal site could be decisive. "MySpace is going to be more attractive to advertisers because they have created these 'safe havens' where advertisers can put their brands," says Richard Greenfield, an analyst with Pali Research.

The home page branding comes a year after the site launched its "hyper targeting model". Mr DeWolfe says the move does not represent a strategic U-turn and instead gives the site the best of both worlds.

He points to the more than 1,000 "enthusiast groups" on MySpace as being appealing for advertisers keen to target their products at niche demographics. "We have also built a product that reaches small and medium-sized businesses that represent billions of dollars in potential ad revenue."

One user - a roofer in Chicago - turned a MySpace advert offer costing a few hundred dollars into a $30,000 roofing deal. "There has been no easy way for people like that to advertise online other than buying big display ads or by buying text ads on Google. But more than 15,000 have used our product to create graphical advertising."

With the economy crashing and advertisers reining in their spending, maintaining momentum is going to be difficult, although he says first-half sales rose 16 per cent on last year. "Where the next six months are going is hard to say because the economy is changing so quickly. But I think we are in a much better position than most of the other [online] companies formed in the past five years."

Thursday 22 January 2009

Social Networks - The New Portals?

This article by Jeffrey F. Rayport in BusinessWeek presents an interesting point-of-view - are social networkings becoming the new web Portals?

Social Networks Are the New Web Portals
Social networks like Facebook and MySpace are becoming the new gateways to the Web, threatening the dominance of Google, Yahoo, MSN, and AOL
By Jeffrey F. Rayport

Not long ago, it seemed that four companies would forever dominate the Web in traffic and ad dollars. Each of the Big Four—Google (GOOG), Yahoo! (YHOO), Microsoft's (MSFT) MSN, and Time Warner's (TWX) AOL—attracts more than 100 million unique visitors a month. Collectively the group accounts for roughly 90% of gross ad dollars online. So far, so good.

But now those companies are facing a threat to their dominance. I'm not talking about the recessionary headwinds that have slowed growth even for mighty Google. Nor is this about the self-inflicted wounds that have weakened the positions of the other three players. Yahoo spent the last year in turmoil following Microsoft's takeover offer, inducing Carl Icahn to elbow his way onto the board and then force out CEO Jerry Yang as business conditions grew increasingly dire. AOL is hardly better off. Its former CEO, Jonathan Miller, freely admits that AOL essentially missed the boat on social media and the decline of AOL's legacy connectivity business. Microsoft failed to acquire Yahoo and continues in vain to seek a credible competitive response to Google's search advertising juggernaut.

These travails aside, there are bigger threats on the landscape. Today's massive social networking systems are rapidly becoming Webs within the Web—one-stop shops for a wide range of services (from content to communications to commerce) that were once the unique province of the Big Four.

One-Stop Shopping at Facebook
For example, through a combination of its own creation and that of third-party developers, Facebook has become a world unto itself. Now the Web's largest social network as measured by active users (140 million at yearend 2008), Facebook offers bread-and-butter portal services like e-mail and instant messaging as well as photo posting and video sharing. But Facebook's reality extends much further. A partnership with (AMZN) has produced a shopping application that lets users buy items at Amazon without leaving Facebook's site, while tapping opt-in "news feeds" that broadcast activities on Amazon, such as product reviews and wish list updates, to Facebook friends. At the same time, a chat feature introduced last spring, which automatically populates itself with a user's Facebook "friends," may render older services like AOL's AIM (where new users must build their own "buddy lists") socially impoverished.

Facebook's mobile alerts, long familiar to the site's users, are just the tip of the iceberg in wireless apps, as the company delivers mobile services for plain-vanilla cell phones and more sophisticated smartphones. Applications for popular devices, such as Apple's (AAPL) iPhone or Research In Motion's (RIMM) BlackBerry, deliver even richer social experiences. Video has taken off, too, with 45 million clips uploaded on Facebook to date; last month, the site also introduced higher-resolution video formats. Facebook users can send video messages from the site and from mobiles.

Though Facebook now offers 52,000 applications created by 660,000 developers (this has done much to enrich the site's features), other social networking giants have entered the fray, too. News Corp.'s (NWS) MySpace, for example, claims 120 million active users; it recently introduced a service called MySpace Music that lets user create and host playlists on their pages.

Lots of Users Spending Lots of Time
Social networking sites are also growing at exponential rates and attracting users of all ages. Facebook's fastest-growing segment is users over 25 years of age. LinkedIn, the business-oriented social networking site, claims more than 30 million active members with an average age of 41.

Of course, scale is only one metric of success. Another is what tech types call "engagement," or "time spent." Researcher ComScore (SCOR) ranked Yahoo the No. 1 site for engagement, with users worldwide collectively spending some 120 billion minutes on the site in October. For the same period, Google users logged 42 billion minutes. Yet, Facebook and MySpace were not far behind, with 34 billion and 18 billion minutes, respectively.

The traditional portals still win on unique visitors per month, but from the standpoint of where Web users "live" their lives online, social networking sites are gaining share.

Building Constellations, Not Destinations
What all this augurs is a new stage in an ongoing battle for influence, even dominance, of the Web. Back in the "old days" of the late 1980s and early '90s, online service providers such as AOL, Prodigy, and CompuServ generated revenue through monthly subscriptions for bundled services, which combined connectivity, communications, and content. With the advent of the Web's friendly user interface combined with the rise of Internet service providers, which offered dial-up and then always-on connectivity, the old guard gave way to a new host of dominant online players—the Big Four portals. While Google focused largely on search, Yahoo, AOL, and MSN provided a rich array of content as well as services and relied on advertising rather than subscriptions to pay the bills.

Now, as usage shifts to social networks, there's a catch. This is no longer a race to build destinations, but constellations.

To be sure, the social networking sites, like the portals before them, aggregate services to provide one-stop shops for Internet users. But they're competing, too, in a race to provide a social context for Web usage generally. Facebook Connect and MySpaceID are new tools that offer users a way to make their social networks—previously wedded to a single platform—portable across other social networking sites and, in fact, Web sites of all kinds. Google's Friend Connect, based on that company's OpenSocial standard, represents similar functionality. Though late to the game, Yahoo is planning a pan-Web social offering, and Microsoft has built one into its new Windows Live. In practice, these services mean users can visit a site for the first time, register with a standard username and password, and find their experiences instantly enriched by friends' lists, profiles, reviews, ratings, and feeds. In essence, it's a way to bring social context to sites that have no social media components of their own.

It's all about defining a new World Wide Web—a meta-Web that has the functionality of a social Web.

While the portals are doing their best to catch up, challenges abound. Google's oft-stated mission is "to organize the world's information." Organizing information is how earlier generations of Web companies have traditionally created value for users, with or without search. But the new game is radically different. Facebook, in particular, has set out to organize not the world's content, but the world's people. As this social meta-Web emerges, the players that own and harness social applications will radically reorganize and reshape the Web in ways we can only imagine today, and that will profoundly alter our experience of the online world.

Monday 5 January 2009

Evolving Digital Display in 2009

Here's a great article on something I'm particularly interested in - digital predications for the future. It'll be very interesting to look back at 2009 and see whether the tough economic environment really does evolve online display (banner ads) or not.

Not-So-Banner Year for Digital
As budgets tighten, media such as display ads will come under scrutiny
Jan 5, 2009. By Brian Morrissey

There are two schools of thought when it comes to how digital advertising will fare in the grip of a recession. On the one hand, optimists see tight budgets accelerating the shift from less measurable traditional media into more targeted digital channels. The pessimists, however, point out that stagnant budgets affect all marketing, even if digital outlets fare better.

Against this backdrop, experts expect marketers will continue to push for new ways to reach audiences through digital channels. Tried-and-true methods like search marketing look to remain stable, while advertisers pay more attention to getting more solid metrics on how consumers were influenced before they type a query into a search box.

That means old school methods like display ads and microsites will come under pressure. Social media looks set to remain on the top of advertisers' agendas, as they look to apply the lessons of their early missteps in the area while adding real measurement to what have been experimental forays to date. As the Internet becomes more social, there will likewise be an acceleration of a move from purely technical implementations to using the Web's emerging social infrastructure to connect on a more human level.

According to researcher eMarketer, online ad spending will climb 8.9 percent next year, from $23.6 billion to $25.7 billion. Back in August, just prior to Wall Street's meltdown, eMarketer predicted that spending would surge 14 percent in 2009. But the economy is now taking its toll on all segments of media. Here is a roundup of how that spending may pan out:

Display ad blues

The Web has moved well beyond its former role as a place where banner ads and microsites are used to support the real meat of the offline marketing. Nowadays, the most high-profile campaigns are centered on the Web. Take "Whopper Virgins," the latest Burger King push from Crispin Porter + Bogusky. The centerpiece is a Web film, which is then spliced into components for traditional media. What's more, the push has relied on the viral buzz of blogs and other digital outlets as much as big-money media buys.

Those type of efforts will put pressure on "traditional" digital efforts like run of the mill banner ads pumped out through ad networks and Flash microsites without any compelling reason for anyone to visit.

Forrester Research expects display ads to come under the scrutiny of tight-fisted marketers uncertain of their effectiveness.

Pricing is expected to rise just 8 percent after several years of uninterrupted, solid expansion. "The financial pressure will be severe," said Dave Morgan, a former AOL executive. "When you take out big chunks of money, it's not just the spend that disappears but also the competition."

Social measures up

Facebook CEO Mark Zuckerberg's prediction that media would forever change with the advent of the popular social network's ad platform is rightly ridiculed. Yet while advertisers have few success stories on sites like Facebook, the growth of the social Web is impossible to ignore. Facebook now adds a new user every seven seconds.

For all its growth and hype, social media has been unforgiving terrain for marketers. Their efforts to date have been decidedly experimental, consisting of sponsorships, ad placements or brand applications that have proven ineffective. "Whenever you try to apply a standard ad model to a social dynamic, it's like oil and water," said Sean Finnegan, chief digital officer at Starcom MediaVest Group.

Instead, look for marketers to weave social programs throughout their marketing, using free tools to monitor their brand health and respond to customer needs. Comcast, a brand with no shortage of detractors, has scored a rare win with customers by dedicating an employee to handle customer problems on micro-blogging network Twitter. Expect more brands to follow suit, not just on Twitter but throughout the social Web of blogs and other two-way media.

"The best way is to dig in and monitor what people are saying," said Noah Brier, head of strategy at digital marketing firm Barbarian Group. "It can only help you."

Bring in the humans

To this point, the Web has been, by its nature, technology driven. Google is the most successful company of the Internet era thanks to its algorithm, a piece of technology adept at sorting the wheat from the chaff. Most of the leaps and bounds online have been in the realm of technology, whether it's ad networks deciding marketing message placement by sniffing out users' prior behavior or finely tuned measurement. Expect more advancement on those fronts, yet a greater emphasis on giving digital marketing a human face.

The algorithm is already getting a human touch with sites like Buzzfeed and Mahalo. Even Google is coming around to this notion by letting users tell it which sites are more relevant to them, a seemingly small step but one unthinkable for the engineer-driven Google just a couple years ago. New tools like Twitter will only increase the drive for people to connect with people, not just faceless entities. This will challenge marketing organizations and agencies, since humans don't scale as easily as computers. The launch-and-forget mentality will need to give way to a 24 x 7 approach.

"There's going to a big wake-up call for brands that the real work begins after the launch," said David Armano, vp of experience design at digital agency Critical Mass. He sees cause marketing via social networks as a useful bridge to brands looking to infuse their mass reach ad tactics with a human touch.

Friday 2 January 2009

Online News Now Preferred Over Newspapers

Welcome to 2009!

In the spirit of new beginnings, it's a year that's started off with a "out with the old, in the with new". This article by Erika Sass at MediaPost News discusses the rise of online news - new media replacing the old and becoming the mainstream norm. Recent research indicates that people now prefer to get their news online, overtaking Newspapers as the preferred news media. These findings are US-based but its easy to see this in other parts of the world.

Internet Tops Newspapers As News Source

by Erik Sass, Wednesday, December 31, 2008, 7:00 AM

laptop with The New York Times online The Internet is now the most popular source of news after TV, according to the Pew Research Center for the People & the Press, which released its year-end roundup of news media consumption last week. While TV is still king of the hill, its steady decline in the face of Internet competition bodes ill in the long term.

In 2008, 40% of the respondents said they got most of their national and international news from the Internet, versus 35% for newspapers in 2008. The Internet's share is up from 24% in 2007, while newspapers also increased slightly, from 34%. The long-term trend is even clearer: the Internet's share has more than tripled from 13% in 2001, while newspapers fell by almost a quarter--from 45% in those six years.

(The figures add up to more than 100% because Pew accepted multiple responses to account for ambiguity in its survey of 1,489 adults from Dec. 3-7. Although Pew did not explain this ambiguity, it might include respondents citing online newspapers or TV news Web sites alongside the traditional medium itself).

Although print newspapers--especially big metro dailies--appear to be locked in an irreversible long-term decline, newspaper Web sites have had big increases in audiences. In October 2008, the last month for which data is available, newspaper Web sites attracted a total of 68.97 million unique visitors--up 64% from 41.96 million in October 2004. The October 2008 figure represents 42% of the American adult Internet-using population--up from 28% in October 2004.

TV still takes first place as a news source, claiming a 70% share in 2008--but that's down from 74% in 2007, and a peak of 82% in 2002. Significantly, the percentage is lower among adults under the age of 30, who have taken to Internet news enthusiastically. Fifty-nine percent of respondents in this age bracket said TV news was their primary source, while an identical percentage tapped the Internet. That's a big change from 2007, when 68% of people under the age of 30 chose TV, versus just 34% for the Internet.