A VC« A Day Without A Post Is Like ..... | Main | Not Sitting Tight »
The New Media Deal
I am headed up to westchester county this morning to participate in a panel discussion on "consumer behavior on the internet - behavioral targeting and lead generation". It's an area I've written extensively on over the years but not much lately.
In thinking about the topic in the shower this morning, my mind latched onto this comment that Adrian left to my recent Facebook post:
Facebook doesn't seem to have tried too hard yet to maximize the value that they can get from ads. They know so much about me that they could do as well or better than google with targeting; most of the ads shown are inane
Of course that is true. It's the "new media deal" as Matt Blumberg coined the phrase in this post from August 2004.
The New Media deal is that ... consumers are willing to share a certain amount of personal information in exchange for even better content, more personalized services, or even more targeted marketing -- again, as long as those things aren't too intrusive and provide adequate value.
The thing that is so interesting to me is that the Facebook generation doesn't resist the new media deal for privacy concerns, they embrace it. They don't fear the targetting, but they sure hate the "inane ads". I do too.
Comments (15) | Posted July 19, 2007 in Venture Capital and Technology
Comments
To my mind this raises some interesting questions:
How many keyword advertising systems can an advertiser manage/afford effectively?
Is there room for more players, or will this start to force people out (LinkedIn, Multiply, etc)
Are some systems inherently better value than others (eg if it's on a facebook page is it more valuable than a keyword search)?
How do you convince advertisers of this (anti-viral problem: advertisers have little incentive to let others know of the great success they have with XYZ over Google).
Is this something where boots on the ground (salespeople) wins the war, or is there a better way to pull advertisers to your system?
Posted by: David Blankley | Jul 19, 2007 8:52:27 AM
I see solid parallels between category management for retail and "ad" delivery for players like Facebook (=leveraging scale, seeking operational efficiencies with partners). At some point, profit and consumer fit are going to matter to a savvy social network provider, maybe Facebook, by moving from ad networks like Google (a distributor) and ramping up on in-house metrics and capabilities to optimize the financial side of the equation, and deliver a superior user experience.
Posted by: CoryS | Jul 19, 2007 9:48:14 AM
With new media or old, companies have continually pushed the boundaries of privacy "violations" either by selling the data or perhaps just losing people's credit card numbers - and they've discovered that most people don't care.
Posted by: Daniel Berch | Jul 19, 2007 10:32:07 AM
People don't hate advertising. They hate being annoyed.
Posted by: Andy Freeman | Jul 19, 2007 12:09:19 PM
To answer to you're question "How many keyword advertising systems can an advertiser manage/afford effectively? The answer should be ONE. The advertiser should have one centralized data warehouse that manages all digital marketing (and offline) data. It's possible to take ad serving data from multiple advertising systems (paid search, banner, etc) and put it in a centralized warehouse for analysis and media optimization. Some advertisers are even starting to use this data to customize message/offer in banner advertising. Facebook should certainly investigate technologies that enable this.
Posted by: Alan Osetek | Jul 19, 2007 12:13:17 PM
None of the existing ad systems/marketplaces are geared towards (or even compatible with!) user-generated content. I have some technology ideas to address this hole in the market-- Fred, ping me if you want to hear my pitch!
Posted by: Joshwa | Jul 19, 2007 12:30:39 PM
I want targeting in every aspect of my digital life: ads, cultural recommendations (music, movies, books, ...), websites, money management, etc.
Think something that stitches up the capabilities of:
(1) My implicit information (think, in a less contained respect, Amazon and their recommendation engine based on clickstream).
(2) Collaborative filtering (think Aggregate Knowledge's "people who liked ___ also like ____" offering)
(3) Social shopping (think ThisNext's ability to filter against what friends of mine have purchased)
(4) Semantic information available on the page/item at hand
Now that would be a powerful recommendation/filtering application.
I think you have a firm capable of working towards this in your portfolio... will we see their strategy go this route?
Posted by: Fraser | Jul 19, 2007 1:50:24 PM
Where was this event? I wish I had known about it -- assuming it was public. I live in Westchester and it's not usually bustling with tech talk.
Posted by: Jonathan Greene | Jul 19, 2007 2:50:30 PM
"With new media or old, companies have continually pushed the boundaries of privacy "violations" either by selling the data or perhaps just losing people's credit card numbers - and they've discovered that most people don't care."
I think the "Facebook generation" tends to be more in tune with, and therefore more easily angered over privacy issues. That being said, I think you've got a lot of wiggle room between showing someone an ad for the pizza place in their town instead of a generic food ad and infringing upon their privacy in a way that makes them feel violated. Losing credit card numbers or selling personal info obviously falls on the violation side. Targeted monetization efforts are mostly going to fall on the harmless side, so I agree with your conclusion here.
Posted by: Evan | Jul 19, 2007 4:23:42 PM
Fred,
Interesting conversation here for sure...
I think the whole shift in the mindset of consumers with regards to PII (personally identifiable information)--in no small part due to the advent of social networks, has really opened up some interesting possibilities for advertisers. People are much more willing to give away all sorts of details about themselves in turn for a service they deem useful. In addition, my opinion is that this is really going to drive a lot of new business models around automated personalization of the internet experience (ideally transparent behind the scenes a la Aggregate Knowledge even though AG doesn't use PII, but u get the idea) for everything from ecommerce to news sites to entertainment destinations.
-RG
Posted by: RG | Jul 19, 2007 6:40:57 PM
"...consumers are willing to share a certain amount of personal information in exchange for even better content, more personalized services, or even more targeted marketing..."
Is that really the case? Is that really what a typical user thinks to themselves when they are faced with a profile page? I would be very skeptical. For me there are 2 points:
1. I enter my profile data so I can let other *users* know about me and find me. I dont give a second thought to the service provider or its needs.
2. Apathy, when faced with profile entry screens on so many services it becomes almost automatic for users to just enter the data (but how I would love a portable open profile!).
Posted by: Ian Wilson | Jul 19, 2007 9:44:49 PM
I wonder if there needs to be a fundamental change in the nature of advertising on social networks. Can these sites and advertisers work together as affinity marketers to dynamically create and package offers driven by community preference? Can marketers use tools like Facebook’s API to reinvent advertising that's genuinely a benefit of participation?
Posted by: George J | Jul 19, 2007 11:15:56 PM
I think that this generation is more media and business savvy than ever...They understand that both business and media work together to attract and excite customers, yet also realize that targeted advertisements offered by Google or Facebook (eventually) have the potential to be useful to every consumer. It's still difficult, however, for entities such as FB to venture into such territory at such an early stage, since part of their business is to provide information about people's social networks (which were never before published for a company's manipulation) in an unbiased manner. But culture has a way of adapting to the climate of business...
Posted by: Jessica | Jul 20, 2007 12:40:43 AM
This always worries me - is it a real deal that we've implicitly signed up to or is it a retrospective rationalisation predicated on the need to generate revenue?
The corollary is that every time any of us in online it is assumed that we are, in some sense, contemplating a purchase related to our reading and I'm just not convinced that's true.
Presumably, enough people click though to make the numbers work, but the majority of people will not and, it might be argued, face having their experience denuded by the presence of the interruptions. The key is to stop that reaction leading to increased churn or reduced clickthroughs. I think that might be a hard task.
Posted by: John Dodds | Jul 20, 2007 6:31:26 AM
One quick aside... I seem to remember there being a Valleywag article about Facebook having one of the worst click through rates for advertising out of major internet destinations--despite being #1 in time on site.
http://valleywag.com/tech/advertising/facebook-consistently-the-worst-performing-site-242234.php
(I freaking love Nick Denton's cynicism!)
Is this still the case? Anyone have some new data re:facebook's conversion rate on text and banner ads?
-RG
Posted by: RG | Jul 21, 2007 3:26:29 AM
Main RSS Feed of All Posts
VC and Technology Posts Only
