Digital Marketing and Technological Insight

Google took the offensive today in defending its partnership with Yahoo by launching a “Facts about the Yahoo-Google advertising agreement” website. YahooGoogleFacts.com (nice domain) sole purpose is to squash any fears about anti-competitiveness / ad monopolization the partnership would create through putting all of the details on the table.

Highlights from the website include:

• Facts about the deal
• What people are saying (testimonials)
• What the deal means for advertisers
• Why the deal is good for competition
• Terms of the deal
• Voluntary delay for regulators
• The below document that covers the partnership in specific detail:

For a company with Google’s size and power it surprised me that they felt the need to put up what basically is a public relations portal….too me this says that they aren’t  confident the deal will pass government review. The website covers the basic facts people would be interested in, however it lacks exact details of when, how and where.

Remember when AOL.com was exclusive territory for all things AOL related? Well, those days - just like 56k dial-up - are a thing of the past. Yesterday a new AOL.com homepage launched that, among other things, allows users to access competing services. The redesigned AOL.com now includes integration of outside email services (Gmail, Hotmail, Yahoo Mail), external bookmarks, social network integration (Facebook and MySpace) and automatic personalized content.

AOL also added a link within the main navigation to Bebo, the social networking portal they bought for $850 million. I am a bit confused as to why they didn’t integrate Bebo more into the new AOL.com. To me it seems as though integrating some of Bebo’s social elements into the site would have created the stickiness they were looking for - and of course drive more usage to Bebo. I am assuming this will happen in phase 2 of the re-launch.

The new design is the latest effort by AOL to kick-start their web efforts and regain the prominence they used to have back in the dial-up days as the first and only stop for millions of online users. AOL.com still generates significant traffic but has long been an after-thought when compared to other portals and online destinations like Yahoo.com, Wikipedia.org or MSN.com.

The bottom line is that the new AOL.com is better and I am a huge fan of getting away from the “walled garden” approach AOL was long known for. However, AOL.com misses the mark on various areas, including better integration of other AOL content properties and services. I am also disappointed when it came to advertisements - basically I think they could have done a better job with the inclusion of bigger, more eye-grabbing, display ad placements. The new AOL.com continues to focus on the smaller “sponsored by” and “featured” spots throughout the content of the pages. These niche revenue opportunities are all well and good but in a iffy ad market, AOL should be focusing on better ad integration marketing efforts.

Along with the new AOL.com, AOL also launched various niche web properties in an effort to further expand their ad inventory.

As many of you have probably read already, Google has signed a deal with “Family Guy” creator Seth McFarlane to distribute a series of original videos. Starting this September, MacFarlane will launch a new animation project called “Seth MacFarlane’s Cavalcade of Cartoon Comedy” that will be shown exclusively on the Internet. The Google twist is that the new animation series will be syndicated through AdSense, Google’s advertising platform, to targeted websites. To break it down – when visiting your favorite blog or website instead of the standard text or graphic based ads you will see the “Cavalcade” videos. The videos will be 2 minutes long and are described by MacFarlane as “animated versions of the one-frame cartoons you might see in The New Yorker, only edgier.” Each of the 50 episodes MacFarlane will be developing will be different, but according to a NY Times article a typical example will be the 28 second long “Mad Cow Disease” episode.

How does this make money? Advertisements in various forms will be embedded into the video experience - the type of ads displayed can range from pre-roll, ad breaks or ads wrapped around the video - all options are on the table in terms of monetization. MacFarlane will also be involved in creating animated commercials that will run with his content. In return for his efforts MacFarlane will get a percentage of all revenue generated by his episodes.

Now, I do agree that this is a very bold move by both Google and content creators, a move that will be watched closely. The distribution of content, especially when it is professionally produced, is a huge challenge. However, AdSense ads are never put in prime locations - that is reserved for content. AdSense ads, and therefore MacFarlane’s videos will be regulated to the sidebar, bottom of an article or maybe if it lucky embedded into the actual content. On top of that, the whole power of AdSense has been the ability to target ads based on relevancy of the site. You have a blog about gum, you get gum ads. The videos will lose this specific targeting ability and be targeted to a broad demographic (e.g. young men) and not specific to the content.

So what is my problem? As an owner of numerous content websites, including many focused on videos, why would I want another video taking my visitor’s attention away from my content? Yes, I understand I will get paid if someone clicks on the ad but that is not the point. For many websites the main draw is not just to get someone to click on an ad and get a few pennies, the goal of most websites is to get those visitors to engage in the site, not engage in the ad. Also, let’s look at it from the content creators’ side. Online ad space has always been looked at as a “hate it but I can live with it” part of the Internet. You don’t mind the ads because the content is free…is this how you really want your professional videos to be seen?

To me the addition of professional video in ad spots is the same as all of the other types of intrusive ad formats out there. So, again – no thanks Google. I will pass.

TechCrunch posted an article today that talks about the “real” value of social networks. The article gives a great in-depth look at the real valuation of  Social Networks from a global perspective and ranks them accordingly. However, the article stops short from really getting into the burning question when talking about Social Networks - monetization.

It seems like over the past few weeks there has been a flurry of articles written that discuss how Social Networks can monetize their traffic in a more effective manner. The obvious path for most social networks lies in advertising, especially targeted / behavioral based advertising. Even though the monetization via advertising on sites like Facebook and  MySpace has been talked to death, as the recent redesign of the MySpace home page shows, monetization is and will always be a top priority. So what are they suppose to do? How else can they monetize the hoards of people visiting their websites on a daily basis? From my perspective, companies, regardless of what niche they are in,  should not rely on advertising alone – in fact, as it was discussed in this Silicon Alley Insider article – Social Networks should be looking at more creative ways of augmenting their revenue.

So what exactly would be my solution to this all important question? Social Networks need to think outside the box. Yes, that is easier said than done, however from what I see in regards to plummeting CPC rates and advertiser value, do Social Networks really have a choice? With that being said, here are some of my thoughts on how Social Networks can further monetize traffic. Yes, some are realistic, some are probably ludicrous - however, all are feasible. It is also important to point out that the growth of the big Social Network players has mainly been caused by the openness and free aspect that allowed for the viral message to get out. Obviously a social network needs to be careful when looking “outside of the box” for monetization so that they do not interfere with the overall user experience or flow.

• Add-Ons: Like I said above, a Social Network needs to be careful with what they charge for when most people are used to getting things for free. However, there are a few add-ons that many people would not mind paying for. These add-ons, like small profile enhancements,  would be minor in the grand scheme of things – they would have to be very cheap to buy (e.g. $0.99) and easy to obtain. The key with add-ons is creating the “cool factor”. Once something achieves a level of cool, especially with the teen demographic, it becomes a must have for everyone. Add-ons can be big like exclusive profile control / designs or minor like a custom media player - regardless of what they are, the cost to make would be minor but the impact would be huge.

• Premium accounts: Social Networks can go the Ning route and allow users to create their own personalized Social Networking experience based off of the Social Networks existing platform. Using MySpace as an example, a “premium user” would be able to create a fully customizable Social Network living off of the MySpace domain – for example the URL example.com/Kieran would be for standard users and the URL Kieran.example.com would be reserved for premium users. Allowing for premium accounts can be billed in just about any method possible…monthly, yearly, one-time – you can also allow for add-on services that cost extra…for example, no ads (like Ning offers), more storage space, premium features, etc. With very little effort a Social Network can leverage its platform in a whole new way. Premium users might not bring in as much as display advertising, but when billed on a regular basis, these users can be a nice guaranteed cash flow.

• Virtual Worlds: Virtual worlds do not get the press they they used to and it is possible they will only be a niche area and never truly go mainstream, but I still think Virtual Worlds will play a big part in how large groups of people participate and interact with others online. So what about adding a “Second Life” type environment to a Social Network that users have to pay to use? Think about it for a second…take all that time people (especially the younger demographic) spend on MySpace and now make it so they can “virtually” interact with their friends - imagine instead of your own island or city your place in the virtual world is your profile and the changes you make on the web and in the game are transferable between each. Putting a virtual world into play opens up numerous revenue streams: membership fees, upgrades, in-game sponsorships…the list is endless. Plus, by creating a virtual social network you will be generating extreme brand loyalty as users would be less likely to tire and move on to another service.

There you have it, my ramblings of how a Social Network can leverage its brand and traffic to generate other revenue streams. I am sure as time goes on I will think of more crazy ideas…when I do, I will be sure to add them to the list. One last thing, when writing this post it occurred to me that taking away the ability to display ads might cannibalize the advertising business - however, since I predicted and mentioned in previous posts, advertisers are not necessarily looking for just bulk traffic, the highest CPM’s go to targeted traffic - quality over quantity.

When looking at monetization of a website, also check out my previous post on the monetization of micro-blogging start up Twitter.

The recent search partnership between Google and Yahoo has already been talked to death and I see no need to continue it. If the deal does get approved by the Justice Department it will add some nice revenue to Yahoo’s bottom line, but really how much will this really help Yahoo in the long run? Since the deal is important let me just call out some high-level aspects of the Google / Yahoo search deal.

• The deal between Yahoo and Google is non-exclusive
• Yahoo will display Google’s search and contextual ads will be displayed on Yahoo’s US and Canadian web properties and partner sites.
• Yahoo’s ad platform Panama is not going anywhere - Google’s ads will be inserted into results based on monetization opportunities.
• Yahoo’s search platform and results will not be impacted at all.

This deal with Google is not a game changer and there are still a great deal of questions that surround Yahoo right now. Questions like what is the future of Yahoo, how does Yahoo become relevant again, what do they do with the $800 million from the Google deal and how do they stop the mass exodus of top talent should be what keeps Jerry Yang up at night. Sadly, there is no easy answer, no partnership or solution that will right the ship anytime soon. But, does this mean all is lost and Yahoo is just slowly fading away? As I see it, this is not necessarily the case. First lets look at the Raw numbers, Yahoo.com drove over 1.9 Billions visits in May alone and had 10% year over year growth - that is impressive and means that no one should count Yahoo out. The crazy thing to me is that despite the shear magnitude of people that come to Yahoo properties everyday they have lost out on the biggest aspects of the online environment…the search race is pretty much over. Remember the social networking effort Yahoo 360? Yeah, all those Facebook and MySpace users don’t remember it either.

So enough with the Yahoo bashing, what is Yahoo to do in order to rise to the top again and take back what was once theirs? The way I see it Yahoo does not need to do any mega-deal or spend billions on some second tier web property that is the “it” online name of the moment. What Yahoo needs to do is focus all of its attention and revenue internally. First and foremost remember all of that money coming in from the Google deal? Reinvest that money on 3 things: research & development, retention and hiring. In fact, all three can be taken care of if Yahoo starts throwing serious amounts of money on R & D. Yes, Yahoo has made some attempts at being innovate with offering like Yahoo Buzz and SearchMonkey, but what I am talking about is really pushing itself and their top talent on improving every aspects of their business, from their enterprise technology, to all of their brands, to their display / search advertising platform and of course to their core search offerings (especially Video search). Take that Google money and throw it right back into the company and start building a innovate / entrepreneurial environment that would not only keep top employees but recruit top talent as well. A lot of people have a great deal of loyalty to Yahoo, it would not take much effort to change the overall perception of the once king of the web.

Secondly, again focusing internally, Yahoo should work on further integrating all of their products and services into each other. Yahoo Mail, Flickr, del.icio.us, Yahoo Game, Yahoo Sports, Yahoo Movies, Yahoo Maps, Yahoo Finance, Upcoming.org…the list goes on and on. Yahoo needs to create a tighter synergy between all of its properties and I am not talking just about cross-linking. I am talking about true integration of Yahoo properties - for example, Flickr photos and del.icio.us bookmarks fully integrated with Yahoo Mail. Yahoo has the core properties (e.g. Mail and Finance) that drive heavy daily traffic - what they need to do is get some of those people expanding across their network and consuming more Yahoo content. Yahoo can not have internal “walled gardens”, each and every property should be fully open and integrated in order to create a comprehensive Yahoo experience. Oh, and remember how I said they should reinvest the Google money in Research and Development? Here is where that will all pay off.

Of course it is very easy for someone outside of Yahoo to come up with answers or solutions to all of their problem. Yahoo has a long road ahead of them no matter which way you look at it…however, if anyone can make a full comeback it would be Yahoo.

Ad Age just published their conversation with IAC head honcho Barry Diller, in the wake of the splitting / spinning IAC is doing with its properties (IAC is spinning off four divisions into separate publicly traded companies). Putting aside the series of softball questions and  cookie cutter answers the one real interesting part of the whole conversation revolved around Barry’s interest in AOL. Here is how the brief AOL exchange went down:

Ad Age: Are there sizes of acquisitions you’d rule out?

Mr. Diller: Never. We’d never rule anything out. … I don’t want to set the world up for surprises. We’ve tended to surprise people every year with something. So I hope there’ll be a few more, but hopefully not shock.

Ad Age: There’s still talk that Jeffrey Bewkes could break up Time Warner. Would you ever be interested in AOL?

Mr. Diller: We’ve talked over the years about our interest in AOL and never been able to get Time Warner to engage with us. I’ve always said AOL is great opportunity for somebody. When and if Warner doesn’t want it, I’ll certainly be at the door.

So why is this so interesting? Of course IAC, and any online focused company would be interested in AOL and in fact AOL’s deep list of properties combined with solid traffic and relatively efficient adverting models would fit perfectly into Mr. Diller’s future / current online plans. All IAC needs is a nice influx of cash in order to offer an amount Time Warner couldnt refuse to get AOL off their hands…oh wait isn’t that what IAC is planning? Mr. Diller has shown over the years that he loves brand names and what brand is bigger then AOL (well at least one he can afford to buy)?

Regardless of whether or not IAC buys AOL it is safe to say that someone, somewhere, will snap it up. AOL has been dragging down Time Warner for years and I am sure that sooner or later AOL will be sold off - my guess would be 2nd or 3rd quarter of 2008 at the latest.

ZenithOptimedia released a forecast Monday stating that online video and local search will drive 30% growth in online ad spending this year. ZenithOptimedia had this to say in their report: “We have revised our forecasts for Internet advertising upwards yet again, we now forecast 29.9% growth this year (up from 28.6% three months ago) and 85% growth between 2006 and 2009 (up from 82%). Online video and local search are the new, fast-growing segments, but display, classified and the rest of search are still growing rapidly as well.” The forecast goes on to point out that the share of worldwide ad spending for newspapers will decline, again

This report is only the latest I have read that predicts continuous growth in interactive ad spending. In fact I think that this report is conservative in its estimates. We are only starting to see the possibilities online video brings to advertisers with new technologies and ad opportunities popping up every month. Just think of all of the syndicated content that has yet to reach the public. User generated content has created the interest but professional shows will be the true driving force behind the innovation and growth that we will see in the future.

MySpace is on to something big, really big. Peter Levinsohn, President of Fox Interactive Media (the News Corp. unit that owns Myspace), outlined how MySpace will take down Facebook at a Merrill Lynch’s Media & Entertainment Conference on Tuesday. How do they plan on doing this? By targeting ads to the data on a users personal pages of course! Take a few minutes to digest that…got it? Ok. After more then six months of testing, MySpace is ready launch what they call “interest targeting technology” to a broader MySpace audience. This new initiative will allow advertisers to target consumers with advertisements based on the information they put into their profiles.”What we’re talking about is very new — the ability to make [marketing] decisions based on user interests,” Levinsohn told the roomful of investors and analysts.

The algorithms powering MySpace’s new ad targeting system works by grouping users into 10 key interest group like autos, fashion, finance, sports and games. Along with the targeted groups the ad system determines ad placement by key demographic stats and previous ad interactions. This targeting reaches 3 million plus active MySpace users and during tests within the auto category it improved the likelihood that members would interact with an ad by 70%. 3 million users * 70% = $$$$.

Levinsohn views this as only the beginning for MySpace, with future enhancements enabling even more direct targeting. Levinsohn also spent some time comparing MySpace directly to Facebook, mentioning key stats like MySpace users visit 30% more often than Facebook members.

So who do you think MySpace thinks the most about?

Apollo Group, which is best know for their for-profit University of Phoenix, announced late yesterday that they would be acquiring online ad network Aptimus for close to $48 million. By acquiring Aptimus, the Apollo Group will have be able to maintain their marketing push but in a much more cost effective manner.

Aptimus, based in San Francisco, will continue to provide its services to advertisers and web publishers, their clients include Proctor & Gamble, Nokia, Dell, Vonage and many more.

Apollo Group is one of the largest advertisers online and considering the consolidation of major ad networks it shouldn’t come as to big of a surprise that advertisers would step in and scoop up what is left. Apollo did make it a point to say they will continue their existing relationships with competing ad networks

Adverlicio.us is probably the best online advertising archive around or as they like to say "World’s Tastiest Collection of Online Advertising". The site is plain vanilla but is brilliant in its effectiveness. You can search for ads by industry, check out advertising news and jobs or browse their list of featured ads. I hit the site at least once a day to see which cool new ad(s) they feature on the homepage. Today it is the Apple iPod + iTunes "Rockin’ The Islands" 300×250 - I know I am not alone when i say I am a big fan of Apple’s campaigns.

I can and have spent hours scrolling through pages and pages of the best ads online - if you do anything with online advertising you should put this site in your favorites.