TV viewing losing ground

If you have an Internet connection, chances are you are spending much more time surfing the Web than watching TV. “The time spent using the Internet will continue to increase at the expense of television and, to a lesser extent, print media,” said Karsten Weide, program director, Digital Media and Entertainment at IDC. “This suggests that advertising budgets will continue to be shifted out of television, newspapers, and magazines into Internet advertising.”

Read at www.unitedBIT.com

Could Google and Microsoft’s online advertising model change the pricing of all Web services

Perhaps this micropayment model is also the future of Web services or software as a service (Saas). Soon, companies like Salesforce.com and Qualys could be offering their on-demand services with the same pay-as-you-go pricing as Google charges for sponsored links. “There’s a growing demand of the businesses and enterprise to be treated as a customer,” says Yisrael Dancziger, CEO and president of Digital Fuel, a company that makes software specifically for measuring SaaS utilization.

Reat at www.unitedBIT.com

Is bad news for banner ads equal to good news for ‘featuretisements’?

In 2007, BlueTie has developed a new Web marketing technique, called ‘featuretisement.’ For advertisers or retailers, featuretisements blend the targeting of AdSense with the one-click sale of an auction or store listing. For users working inside a Web application such as BlueTie’s hosted e-mail and collaboration software, they minimize disruption.

Read at www.unitedBIT.com

U.S. Online Ad Market Double In Four Years

The U.S. online advertising market will generate annual revenue of $50.3 billion by 2011, the Yankee Group predicts. However, it still accounts for only a small percentage of advertisers’ overall budget. Advertisers currently spend 7.5% of their budget online, even though the Internet accounts for 20% of overall media consumption in the U.S.

http://www.unitedBIT.com

Al Ries on branding strategy

Whether you are selling a politician or a product, your objective is exactly the same: build a brand in the prospect’s mind. Owning a word is as important for brands as it is for US presidential candidates. However, many marketing people make some fundamental mistakes.

Read more at http://www.unitedBIT.com

Targeting Mobile Ads

By Andrew Schrock

Mobile-phone manufacturer Nokia expanded its reach with the recent acquisition of Enpocket, now called Nokia Ad Business, a mobile-advertising company that matches consumers to advertisements by considering their tastes and needs. Mike Baker, vice president of Nokia Ad Business, describes this as an “advanced targeting infrastructure.” Baker says that the matching system gives advertisers new kinds of opportunities that could be particularly beneficial for selling tickets to local events, for example, or for offering time-sensitive discounts. If the system is deployed properly, consumers would be automatically delivered ads about products that they want at the ideal time and place.

Context is already a cornerstone of online advertising, as it leads to more-effective campaigns and higher payouts for advertising providers. Google’s Gmail, for example, automatically extracts information from your e-mail, which is used to target campaigns. Facebook uses information saved in personal profiles to present more-relevant advertisements. Similarly, Nokia already has access to critical contextual information about consumers, such as demographics, which Enpocket can capitalize on. Information from Nokia’s OVI Web portal could eventually be incorporated as part of the data set to accurately match up people with relevant ads. For example, user histories from OVI social-networking and media-sharing site Mosh could be employed to track which pictures and movies users are sharing, signaling an interest in certain products.

Nokia believes that, by leveraging such information, it can offer higher response rates than current online marketing campaigns can, because the company delivers a message that consumers want to hear, where and when they want to encounter it. Contextualized advertising would also be more integrated into the services, so it might seem less irritating than a distracting pop-up window online, for instance. Initial response rates to contextual mobile advertisements are high, partly because of the novelty of the medium. According to Enpocket, the company’s recent mobile campaign for Land Rovers was wildly successful: 70 percent of people who were exposed to the campaign chose to download videos that promoted the automobiles. Baker says that consumers may be paying more attention to the ads purely because they are so novel, and he admits that this number will likely go down as the mobile-advertising space becomes increasingly saturated, as has occurred in more mobile-friendly markets like Asia.

Some consumers might perceive directed, contextualized advertising as an invasion of privacy. Some demographics might find the fact that their personal information is being shared annoying. Gary Pearl, CEO of Community Hotspot, says, “There’s a certain segment of the population which will accept it, and another segment that won’t.” He sees online and mobile business as being in a constant flux between subscription services and advertising-driven revenue.

At the moment, hardware is the biggest obstacle to delivering contextualized mobile advertising broadly. According to Nokia, there are nearly one billion Nokia mobile devices worldwide, or nearly twice the number of PCs. However, relatively few of these mobile devices are capable enough to handle the kind of contextual campaigns that Enpocket would like to deliver. Currently, campaigns rely on technologies such as SMS and WAP to deliver messages to devices that couldn’t otherwise provide a compelling multimedia experience. As more and more multimedia-friendly phones are sold, this will become less of an issue.

Nokia’s sheer market share ensures that its decisions will be closely watched and mirrored by the industry. Philip Stanger, CTO and founder of BluBlast, a company that specializes in ads for mobile networks based at specific locations, such as trade-show and showroom floors, views this favorably. If Nokia Ad Business takes off, it could create a more consistent business model and standard software-development tools for ads, potentially benefiting mobile-advertising companies of all sizes. “One of the big problems in the mobile space has been lack of standards and coordination between any of the systems,” Stanger says, citing lack of developer support. “It’s a nightmare developing [multimedia ads] for 50 different phones.”

Source:Technology Review

Search for Tomorrow

By Alison Overholt

It was an advertiser’s worst nightmare. Last summer, the New York Post ran a breathless story about a gruesome murder in which the victim’s body was hacked to pieces, the parts stashed in an old suitcase. Opposite the online version of the story ran an advertisement cheerily touting the benefits of . . . luggage.

The offending ad was served up using Google’s search-marketing technology called AdWords. For the uninitiated, search-engine marketing lets advertisers bid on keywords or phrases. Top bidders then have their ads appear alongside search results whenever a user types in that phrase. Or in this case, the ads run alongside editorial content containing the keywords. Suitcase in the article. Suitcase ad. We have a match.

It was an excruciating goof, emblematic of the tricky juncture where the search-engine marketing industry finds itself today: The dream is to transform the Internet into a sales tool that finally delivers on the promise to generate eminently qualified, targeted, and trackable customer leads that convert quickly into big sales. Marketers that embraced the first generation of these tools have already achieved phenomenal success by targeting ads to consumers seeking products and services on search engines. Now the toolmakers, predominantly Google and Yahoo, want to serve up ads to the rest of the Web — delivering relevant messages not just when buyers come to a search engine already hunting for something, but any time, and any place.

There’s big money at stake in nailing the solution. In an advertising environment that has steadily weakened over the past three years, search marketing has breathed new life into online advertising by showing how powerful it can be when an advertiser catches a shopper’s attention at that perfect moment when she is ready to buy.

Advertisers rewarded the nascent industry by doubling its revenues in 2003 to the tune of $1.9 billion (a figure that is expected to jump again in 2004 to $2.8 billion dollars, says Forrester Research), or nearly one-third of all online advertising spending. And those hefty totals ring up in small increments: Expedia, for example, is the top bidder on Yahoo’s service for “Miami vacation,” paying 83 cents a lead.

Three techniques are emerging that could push online ad revenues even higher: contextual ads, behavioral ads, and local ads. But none of them are slam dunks. In pushing the envelope to make related text ads as ubiquitous as the 30-second TV spot, the search engines and the marketers that use them tap dance along a very fine line between what is helpful and what is obnoxious, what is exciting and what is simply in very poor taste.

Keeping Things in Context

“We advertise on TV and radio,” says Steve Hartmann, the director of online marketing for eHarmony, an online dating service. “But we discovered that a lot of people only vaguely remember our name. Maybe they’d just catch the word ‘harmony’ and that we were a dating service. When they typed that in at a search site, that’s when they’d find us.” Hartmann discovered that close to 70% of eHarmony’s new customers from online advertising channels arrive through search-based ads.

Seeking to go to the next level, Hartmann bought contextual ads from both Google and Overture (owned by Yahoo). He did so because the ability to place eHarmony ads where serious-minded singles spend time on the Web — say reading an article on CNN’s Web site about a scientific discovery on the brain chemistry of love — sounded ideal. Google and Overture dominate search marketing and offer contextual ads through partners such as AOL, MSN, CNN.com, and the Web sites of The New York Times and The Washington Post.

But contextual ads don’t seem to target consumers as effectively as pure search ads. “We’re definitely not seeing the traffic from newspaper sites that we see with search engines,” Hartmann says.

There are many reasons for this lower success rate. Many publishers are leery of these ads for fear of blurring the lines between editorial and advertising, so their reach is limited. The bugs in the system also remain, ergo the very targeted but terribly unfortunate luggage ad. These incidents expose the flaw in the logic that purchasing a given keyword can guarantee relevancy to the material next to the ad.

Overture has responded by instituting an editorial review process. “We needed human influence to deal with those words that are ambiguous in meaning,” says David Karnstedt, senior vice president and general manager of direct business at Overture. Google, meanwhile, believes its technology can fix any editorial problems.

Perhaps more problematic to contextual marketing’s prospects is the very nature of the Internet experience. When someone types the name of a product or service into a search engine, chances are he wants to find it and buy it. When that same person surfs a news or content site, he may just be catching up on the day’s events. “They’re not in shopping mode, they’re in browsing mode,” says Danny Sullivan, an analyst who runs SearchEngineWatch.com. And there’s not any fine-tuning that can be done to fix that.

Fresh Ads for Good Behavior

Because of the inherent flaws in contextual marketing online, the stakes are even higher for the online advertising industry’s next big play: behavioral marketing. This technique promises to serve up ads based on a Web surfer’s habits and mind-set. “You’re targeting the person, not the content,” says Forrester analyst Charlene Li. It’s far more ambitious — and more advertiser-friendly — than contextual marketing. “You could never target intent before, in any medium,” says Li, capturing what’s exciting about the new method. “You just put your message out there around content that seemed likely to attract the right people and hoped it worked.”

To deliver on that opportunity is a daunting technological task. It requires analyzing the surfing habits of millions of users in order to define segments based on what users are reading, how often they read it, and what products they search for. One of the first entrants in the market is Kanoodle, a small New York-based search-marketing firm. It has joined with online advertising network 24/7 Real Media to launch BehaviorTarget, a behavioral search service. “We’ve created a taxonomy of 486 topics that we’ll roll out slowly as we reach critical mass with each audience segment,” explains David Hill, president of media solutions at 24/7 Real Media. “If you visit sports sites several times a month and fashion sites several times a month, you might fall within our ‘active women’ behavioral segment.” Unless you’re a guy who likes sports and fashion, or works in one of those industries.

Though a potential gold mine for advertisers, data collection on this scale — and at this level of detail — is, for many consumers, a little scary. It raises a host of privacy issues as well as questions about who retains the rights to or ownership of particular kinds of information. Lance Podell, president of Kanoodle, is quick to defend his company’s concern for privacy. “I’m tracking a cookie, not you, and you will be able to opt out at any time. That cookie doesn’t know your address or your Social Security number, it just knows your behavior. IP addresses aren’t being collected,” he says.

Lycos is one of the first companies to sign up for BehaviorTarget. Says Steve Gross, Lycos’s vice president of marketing, “We need different and creative ways of making money off of our user base. We have a unique user base in the tens of millions, but our ability to understand that base was limited.” Consider a group of users who have been defined as car enthusiasts because they visit automotive sites such as Edmunds.com and NASCAR.com. Gross is eager to sell ads aimed at that group and deliver marketing messages to them even when they’re visiting a technology blog. “Television advertisers would love to understand composition this well, to identify audiences and what they want, beyond just age and sex, which is how they sell ads now,” says Hill.

So although it may seem simplistic to get lumped into a bucket because of a few Web-surfing habits, it is better information, as Gross notes, than most advertisers have to work with. Yet even its boosters acknowledge that behavioral marketing is a work in progress. “There are things we’re still working out,” admits Hill. “For example, somebody goes to a series of auto sites, but how many times must they visit before they become part of that segment? Our plan is to use our software to watch their behavior over the course of time, then do branding studies to hopefully get the mix and the formula right.” If that works, and if the privacy guardians don’t howl too loudly, this may be the method with the best chance of taking off.

Think Local, Act Local

If the search engines have learned anything from their original keyword-advertising system, it’s that when people type a product name into the search window, they want to buy that product now. Chances are, though, that users see ads from online retailers who can ship it within the week, not the minute. How can you feed immediate needs, such as where’s the closest party-goods supply store that’s open late? Hit ‘em where they live.

In March 2004, Google launched a beta site called Local.google.com that lets users search by zip code or local address. Thirty percent of all advertising is purchased in local markets, and the Yellow Pages ad market is estimated at $14 billion per year — a stash that Google would love to break into. So far, the company has focused on importing Yellow Pages data into its local engine and getting the location algorithms right, without serving up additional ads alongside search results. The big question will be whether the advertisers arrive when local goes live.

Seth Berkowitz, vice president of business development at the car-buying information site Edmunds.com, says no thanks. In theory, he’s a likely customer, since he sells customer leads to local auto dealers. But he’s focusing on buying location-specific keywords through traditional search-marketing products. “I love it when people type in ‘Los Angeles Honda Dealers’ because 20% of those people execute on those ads,” he says.

“To make local search work,” says Jupiter research analyst Gary Stein, “you have to get all the plumbers and dentists on there, then you have to get people to shift over to thinking about using Google to find plumbers.” Don’t expect local search to be a significant moneymaker for anyone until national retailers hop on board to let you know where the closest Home Depot is and whether they have that sander in stock you’re itching to buy.

It’s obviously too early to pass judgment on any of these emerging online marketing techniques, although each has significant flaws. Remember that GoTo.com, the precursor to Overture, was laughed at in its early days for selling simple keywords on a search engine. No matter which, if any, succeed, what’s clear is that these models for segmenting, targeting, and reaching customers are forever changing the way companies think about advertising as a sales tool. When you can select your target customer by geography, actual (not projected) buying patterns, and browsing behaviors — and track the return on investment of each ad by following a customer from the time she is targeted to the time she makes the purchase — it’s hard to go back to fuzzy math and schmoozy ad salespeople. The technocrats will have the last laugh, even if it’s at the marketers’ expense.

Source:

IBM: The End Of Advertising As We Know It

IBM Global Business Services unveiled its new report, “The End of Advertising as We Know It,” forecasting greater disruption for the advertising industry in the next five years than occurred in the previous 50.

To examine the factors influencing advertising and explore future scenarios, IBM surveyed more than 2,400 consumers and 80 advertising executives globally. The IBM report shows increasingly empowered consumers, more self-reliant advertisers and ever-evolving technologies are redefining how advertising is sold, created, consumed and tracked.

Traditional advertising players risk major revenue declines as budgets shift rapidly to new, interactive formats, which are expected to grow at nearly five times that of traditional advertising. To survive in this new reality, broadcasters must change their mass audience mind-set to cater to niche consumer segments, and distributors need to deliver targeted, interactive advertising for a range of multimedia devices. Advertising agencies must experiment creatively, become brokers of consumer insights, and guide allocation of advertising dollars amid exploding choices. All players must adapt to a world where advertising inventory is increasingly bought and sold in open exchanges vs. traditional channels.

“Digital entertainment is experiencing faster adoption than anyone had previously anticipated. The advertising community needs to dramatically re-orient its business to serve consumers who increasingly access content in non-linear formats,” said Bill Battino, Communications Sector managing partner, IBM Global Business Services. “Companies must re-look at how they serve content to consumers with business models based much more on engaging consumers in a relationship.”

The report observes four change drivers tipping the advertising industry balance of power: control of attention, creativity, measurement, and advertising inventories. As shown in IBM’s global digital media and entertainment consumer survey released in August, consumers’ attention has shifted, with personal Internet time rivaling TV time. Consumers have tired of interruption advertising, and are increasingly in control of how they interact, filter, distribute, and consume their content, and associated advertising messages. IBM’s survey findings demonstrated that half of DVR owners watch 50 percent or more of programming on re-play, and that traditional video advertising doesn’t translate online: 40 percent of respondents found ads during an online video segment more annoying than any other format. Amateurs and semi-professionals are increasingly creating low cost advertising content that threatens to bypass creative agencies, while publishers and broadcasters are broadening their own creative roles. Advertisers are demanding accountability and more specific individual consumer measurements across advertising platforms. Self-service advertising exchanges are attracting revenues that were once exclusively sold through proprietary channels or transactions.

Advertising Experts’ Expectations in Line with Global Consumer Trends

IBM’s research found that advertising experts recognize the changing nature of consumers and also anticipate dramatic changes on the horizon. More than half of ad professionals polled by IBM expect that in the next five years open advertising exchanges (currently led by companies like Google, Yahoo, AOL) will take 30 percent of current revenues now commanded by traditional broadcasters and media. Nearly half of the advertising survey respondents anticipate a significant (greater than 10%) revenue shift away from the 30-second spot within the next five years, and almost 10 percent of respondents thought there would be a dramatic (greater than 25 percent) shift. Two-thirds of advertising experts surveyed by IBM expect 20 percent of advertising revenue to move from impression-based to impact-based formats within three years.

Saul Berman, IBM Media & Entertainment Strategy and Change practice leader, said, “Advertising remains integral to pop culture and continues to fund a significant portion of entertainment around the world. But it needs to morph into new formats and offer more intrinsic value to consumers, who will have more choices. The wealth of new advertising outlets means consumer analytics will have a more prominent role than ever regardless of where you reside in the value chain. Young people in particular have grown accustomed to not paying for content. Despite greater consumer control over content and advertising, we envision a world where consumers will continue to prefer to view advertising rather than pay for content directly.”

The report indicates by 2012, the landscape of the industry will change so profoundly that to survive, advertising industry players need to take aggressive steps to innovate in three key areas:

• Consumers: making micro-segmentation and personalization paramount in marketing;
• Business models: how and where advertising inventory is sold, the structure and forms of partnerships, revenue models and advertising formats;
• Business design and infrastructure: All players need to redesign organizational and operating capabilities across the advertising lifecycle to support consumer and business model innovation: consumer analytics, channel planning, buying/selling, creation, delivery and impact reporting.

IBM believes that all players will need to invest heavily in consumer analytics and automation to gain more insights about the consumer and how to reach them. For example, interactive advertising paired with consumer analytics provides compelling knowledge of who viewed and acted on an ad rather than estimates of impressions, allowing advertisers to maximize revenue and yield management. Industry players will also need to examine if they have right resources and capacity to handle increased marketing promotions and integrated advertising sales. Finally, IBM observes that the dramatic increase in both the number and variety of promotions is leading to greater investment in tools to digitally transform and reduce the cost of companies’ workflows including content management, creative development, production and sign-off processes.

Download the research here

Ad Networks Are the New Dot-Coms

By Saul Hansell

 

It’s no longer enough to have a Web site. Blog software let absolutely everyone into that club. Now the way to fame and riches seems to be starting an advertising network.

In just the last two days, Martha Stewart Omnimedia, BuzzMetrics and ZoomInfo all said they would start ad networks. Most significantly, Facebook is preparing to start one that draws on the information it has about users.

Meanwhile, the existing networks are expanding. AOL just agreed to buy Quigo, which helps publishers sell advertising on their own sites. And Google, the biggest ad network by far, said it would start putting ads into videogames.

Martha Stewart has started Martha’s Circle,” a network that includes Apartment Therapy, 101 Cookbooks, Style Me Pretty and other sites that are “Martha-like in their aspirations and interests,” Wenda Harris Millard, the president of Martha Stewart Omnimedia, told Advertising Age.

For Martha, this is a way to leverage the company’s existing sales force and attract more attention from marketers because it can offer
them more reach.

Other sites are morphing their own business models to tap into the ad network craze. For example, ZoomInfo, a company that started out as a search engine for information about people, is now planning to use the data it gleans about people in a targeted ad network.

BuzzLogic is going the other way, trying to use software originally designed to help marketers find influential bloggers for advertising purposes. Its new ad network is meant to put advertisements next to discussions related to what they are trying to sell. Mortgage lenders, for example, can advertise on blogs talking about home buying.

Prediction 1: We’ll see dozens more ad networks announced in the next six months.

Prediction 2: 95 percent of them will be gone in two years.

Everyone who has ever sold advertising says that buyers like things to be simple. And the plethora of competing networks and technologies is anything but. Google has already proven that there is a powerful network effect to advertising. The more buyers and sellers in one place, the better prices for all.

Yes, there are some who argue that the rise of advertising exchanges, like Yahoo’s Right Media, will help make the market efficient for lots of players. That could be, but I’ll still stand by the idea that Google and a handful of others will end up with the vast bulk of the ad network business.

Source:

On Facebook’s open to advertisers

Information Week

On Tuesday, Facebook announced Facebook Ads, an ad system for businesses to present Facebook users with targeted ads in a social context that encourages customers to share marketing messages with friends.

According to the company’s statement, Facebook Ads is

“an ad system for businesses to connect with users and target advertising to the exact audiences they want. And “through Facebook Ads, these users can now learn about new businesses, brands and products through the trusted referrals of their friends.”

“Facebook Ads represent a completely new way of advertising online,” Zuckerberg, Facebook’s CEO, told an audience of more than 250 marketing and advertising executives in New York. “For the last hundred years media has been pushed out to people, but now marketers are going to be a part of the conversation. And they’re going to do this by using the social graph in the same way our users do.”

Facebook Ads consists of three parts: a way for businesses to build pages on Facebook to connect with their audiences; an ad system that facilitates the spread of brand messages virally through Facebook Social Ads™; and an interface to gather insights into people’s activity on Facebook that marketers care about.

Just like a Facebook user, businesses can start with a blank canvas and add all the information and content they want, including photos, videos, music and Facebook Platform applications. Outside developers have created a range of applications to enhance Facebook Pages, such as booking reservations or providing reviews of restaurant pages, buying tickets on a movie page or creating a custom t-shirt. Companies launching applications for Pages include Fandango, iLike, Musictoday LLC, OpenTable, SeamlessWeb, Zagat Survey LLC and Zazzle.

Twelve major advertisers plan to use the system initially, including Blockbuster, CBS, Chase, The Coca-Cola Co., Saturn, Sony Pictures, The New York Times Co., andVerizon.

“With Facebook Ads, our brands can become a part of the way users communicate and interact on Facebook,” said Carol Kruse, VP of global interactive marketing at Coca-Cola, in a statement. Coca-Cola plans to invite Facebook users to add an application to their Facebook pages called “Sprite Sips,” which will let them modify and interact with an animated Sprite Sips character. U.S. consumers will be able to access additional features of the advertising application by entering a PIN code found under the caps of 20-ounce Sprite bottles.

In addition, Facebook also announced today that 44 websites are using Facebook Beacon, a tool that allows users to share information
from other websites for distribution to their friends on Facebook. Beacon is a part of the Facebook Ads system.Web sites participating in Beacon can allow users to sell an item, buy an item or view video. When users who are logged into Facebook visit a site in the Ads network, they receive a prompt asking whether to they want to share those activities with their friends on Facebook. Friends may view those actions through the Facebook News Feed or Mini-Feed stories.

Online auctioneer eBay, for example, plans next year to use Beacon to let sellers include their eBay listings in their Facebook News Feeds. This will allow them to share information about the items they are selling with their network of friends.

On Nov. 7, Blockbuster launched MovieClique, an application that allows Facebook users to create lists of movies they want to see, or movies they’ve already seen, along with ratings and reviews, to share with their friends.

With Beacon, Web sites offer Facebook users the most relevant parts of their sites for distribution on the social site. When a logged in Facebook user visits a participating site, he or she is asked whether they want to share activities with friends.

eWeek

Fandango and Zagat have created applications to buy tickets on a movie page and book reservations, respectively, while Blockbuster is letting fans compose lists and reviews of films.

IDC analyst Rachel Happe said Facebook Ads has the ability to do for brand advertising what Google’s AdWords keywords platform did for
direct marketing: making ads available to small and midsize businesses. This strategy helped Google, of Mountain View, Calif., grow to its
roughly $200 billion valuation.

But Facebook users could also decide that they really have no interest in associating themselves with products or companies. Moreover, the process is not without its drawbacks. Happe said she tried setting up a Facebook Page but can’t invite people to it without buying an ad.

“The only way around it was to first make myself a fan and then get people in my network to go to my profile and sign up for the Page from there … so it’s not really smooth yet but they are obviously trying to influence companies to use their advertising,” Happe told eWEEK Nov.
7.

Still, Facebook Ads delivers us a new model. While many businesses buy their way into online advertising through spending, Facebook users may influence the reputations of the businesses by their ability to share information about them to friends.

“Advertising comes from people, who imbue a company with value by loyalty,” Forrester Research analyst Charlene Li told eWEEK Nov. 7. This means advertisers will want to redouble their efforts and have the most interesting advertisements so they can attract the most influential people with friends to endorse their brands. When Facebook makes it a two-way street those lists and review content will strengthen its partnerships and spread its brand even more, she said.

Of course, by creating a socially driven ad platform, Facebook is inviting, (or re-inviting if you prefer), another elephant into the room: privacy concern. While the Federal Trade Commission on Nov. 1 bemoaned the fact that advertisers cull too much data from people’s Web actions, Facebook promised to only use information that members share, and won’t give it to advertisers.

Forrester’s Li, who has one business and one personal Facebook account, said the privacy concerns over social networking sites are overblown because of the very nature of the site: people intend to get found by other people on such sites.

In addition, Facebook wouldn’t bite the people that feed the machine by giving out their information. Would it?

Facebook Ads may alienate some users, who will have to decide if the site is still the right place for them. But most of the fans seem fiercely loyal, so they are likely to take the new features in stride.

If the ad system doesn’t drive more folks to The Coca-Cola Company and other advertisers, they may well pull out. That would just put Facebook back to square one, which, at a $15 billion valuation and Microsoft as a prime supporter, is not such a bad place right now.

Just remember that no one expected Google to do as well as it has with its ad programs. If Facebook Ads takes off, the sky is the limit.

AdAge

Sharing in the brand engagement

Tactically, it’s not an easy concept to explain. The first part involves user-initiated recommendations of a brand: When people visit a business’ Facebook page, they can choose to share their engagement with the brand (by becoming a “fan” or writing on the brand’s “wall”) with their peer network using a newsfeed or mini-feed. Facebook users can also share their interaction on a brand’s own website through a program coined Beacon. For example, users can share with their network when they post an item for sale on eBay, rent a movie on Blockbuster.com or rate a book on Amazon.com.

The idea is that communication moves not from the brand to the consumer but from the consumer to his or her friends and family.

Then there’s the actual paid-advertising part: Facebook will permit advertisers to attach an ad message to those user notifications. To do so, marketers make a Facebook ad buy targeting users by any number of traits users volunteer on their profiles, such as age, political leanings or interests and activities. Facebook will then serve up those ads — fairly simple text-plus-graphic creative — either without the social element or, if a friend has sent notification of a brand engagement, within that.

“We are putting advertising back in the hands of people,” said Chamath Palihapitiya, VP-product marketing and operations, Facebook. He said it would create a system for user recommendations “so ads are less like ads and more like information and content.”

Facebook is offering the Beacon placement and branded pages for free. In return, the social-networking site gains access to potentially valuable targeting data about what kinds of brands users interact with.

A Trojan Horse

“It’s a brilliant Trojan Horse,” said Mark Kingdon, CEO of Organic. Overall, he called the platform “a natural evolution, both advertiser-friendly and user-friendly.”

Marketer reaction ranged from modest skepticism to major enthusiasm.

Jeffrey Glueck, chief marketing officer at Travelocity, which was a launch partner of Facebook’s Social Ads platform, said he was excited about the opportunities, but he admitted his brand has an inherent social aspect to it.

“Travel is very social, people like to talk about travel, invite their friends … and Facebook users like to share information with friends,” he said.

James Warner, exec VP-Avenue A/Razorfish East Region, said he liked the ability to linking a user action into an ad. “It’s unique,” he said, reservedly.

John Harrobin, senior VP-marketing and digital media at Verizon, was perhaps the most effusive, calling it exciting in the same way Google’s launch of AdWords was exciting. The difference, he said, is Facebook’s plan not only drives ads to those people who are in the bottom of the sales funnel but also the overall marketing effort.

“This lets us tap into the Facebook community’s potential to drive results,” he said.

But will consumers share?

Still, the service hinges on several things, not the least of which is users wanting to share their purchase behavior with friends. The targeting aspect assumes people honestly share their profile info. It also doesn’t take into account what is happening in the offline world.

Rob Norman, CEO of Group M Interaction, blogged about the announcement and said it was encouraging concept but also posed a “massive challenge in reputation management and just one more destination to deal with in terms of driving the traffic with messaging that shapes opinion.” He cautioned that clutter could become impenetrable, that people who share information about brands with friends might not actually like that being co-opted by advertisers; an easy slip up could, of course, broadcast something like a porn purchase to an entire social network.

While Facebook executives said that the ads would feel more like content because they would be yoked to a friend’s comments, some analysts said the approach could backfire.

“Just because you like Reebok doesn’t mean I am going to like Reebok,” said Jeremiah Owyang, a senior analyst at Forrester Research.

Facebook has 60 advertisers already signed up as partners, and last night 100,000 new profiles were added to the site to promote products, bands and other interests. Condé Nast will ask visitors to its Flip.com and Epicurious.com sites if they would like to send information back to Facebook, and will later expand the option to its other sites.

Adage

One day after Facebook unveiled a number of ad innovations, media outlets are setting up shop on the site. CBS plans to promote the recent return of longstanding reality program “The Amazing Race.” CondeNet’s Epicurious.com has a site offering a recipe for “beef stroganov” from the pages of Gourmet magazine as well as wallpaper downloads featuring cranberries or “salmon roe.” The New York Times Co. has also created a Facebook page that allows users access to features such as top news, most e-mailed articles, video and The New York Times
News Quiz. The newspaper company has also set up pages for The Boston Globe’s Boston.com and its regional media group.

Coke has spot too

And at least one marketer was ready to jump in as soon as it was able. A new page featuring Coca-Cola went live at 4:21 a.m. today, according to a news feed at Coke’s new Facebook roost.

Facebook is in many ways going down a path used by MySpace, opening its collection of user-generated profile pages to marketers, who can now populate the social net with “personifications” of individual products and services. Facebook also unveiled a system that lets marketers spread promotional messages virally and what it called an “interface” that lets advertisers analyze relevant activity by Facebook users.

For its part, CBS is using the site to develop an online community of “Amazing Race” fans. The show’s page will include interactive content tied to the program, which had its season premiere Sunday — filling the slot that was to be occupied by “Viva Laughlin,” a hybrid musical comedy program that was widely drubbed by critics.

“Word-of-mouth has always been very important in entertainment marketing, but now because digital media has fractionalized the audience so much, we see this Facebook [move] as kind of tying it back together,” said George Schweitzer, president of CBS Marketing Group. He likened Facebook as a replacement for the office water cooler, where people often discuss what happened the previous night on their favorite programs. CBS may even use its “Amazing Race” site to seek out people who are predisposed to the show’s premise because they enjoy travel, hiking or are from the same hometown as a contestant, Mr. Schweitzer said.

Broader range of ads

Facebook’s move seems to be aimed at opening its users to a broader range of ads and promotional techniques. But it’s not as if the site hasn’t let marketers in before. In August 2006, for example, the company struck a partnership with J.P. Morgan Chase’s Chase credit-card division to be the site’s exclusive credit-card sponsor. Chase created a social network within Facebook of people interested in learning about or signing up for credit-card services.

Now, however, the site is open for many different kinds of ad placements. A new program called Facebook Beacon provides a way for users to choose to share their activities with their friends on the social network. People who surf Blockbuster.com, for example, might send the titles of the movies they add to their queue on Blockbuster’s website back to their friends on the Facebook website. In another example, Coca-Cola will let participating users create, configure and interact with an animated “Sprite Sips” character aligned with its Sprite soda.

Marketing observers have some concerns that Facebook users could be a little rattled when they find their activities on some applications, such as Facebook Beacon, communicated to a broad array of friends. But Sarah Chubb, president of CondeNet, the Condé Nast internet unit, said people are generally interested in talking about hobbies and passions, and so long as advertisers appeal to that dimension of consumer behavior, the ads and promotions could be more welcome.

That said, there has to be some sense of when to approach and when to hold back, she suggested. “I think Facebook is being very careful to limit the number of things you’ll see in any given day, a pretty conservative limit. We are being pretty conservative about the kinds of messaging that we’re doing. It’s not going to look like an ad. It’s going to look like an invitation to try it yourself.”

Internet Evolution

Three Flaws With Facebook’s Social Ads

1. Where’s my money? Since the Paleolithic era, celebrities and regular cats alike have been endorsing products and getting compensated for it through money and lifetime supplies of triple-quilted paper towels. Fast-forward to Web 2.0: Everything gets interactive, everyone is a celebrity, and we find the best endorsements come from our friends. Facebook’s plan to mooch off our endorsements is all well and good — for Facebook — but where are my paper towels? Why should I scratch your back if you’re throwing itching powder on mine? As we get turned into marketing monkeys, we should get compensated somehow. And
   if there is little demand for this from our side, well, then we’re just falling into a trap of stupidity.
2. If it’s optional, why should I? This system’s success relies on user compliance. For those of us who are neurotic and insecure (I am not referring to myself, per se… I have this friend, see?), a product endorsement with our picture on it could mean subjection to judgment by our peers. “Umm… Did you see that Nicole bought the ‘Shari Lewis Memoirs’ on Amazon.com? What an incredible weirdo!” If I’m not making any cash money off of the deal, and I’m risking becoming socially shunned by the anti-Shari Lewis congregation, why would I comply?
3. I don’t have to take this! I can go somewhere else!
   As Facebook becomes a storefront for marketing activity, will it lose its appeal and, in turn, its network of users? Maybe not. Facebook has promised (Scout’s honor) that this new system will not produce any more ads than usual. And all successful social networking sites will, at some point, have to sell advertisements or succumb to homelessness. So, the spiteful shift to a new network may be pointless.

Read more here: