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Life:Water, Internet:??? November 23, 2007

Posted by thedotcomillusionist in Uncategorized.
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When I was still in equity research, one of the hottest topics and continues to be a prevailing theme are the varying monetization solutions for many of the widely popular services that comes as second nature for our generation – Instant Messaging, Social Networking, Search, Media, just to name a few. And for these, there are a slew of different types of advertisements – banner, contextual, rich media, in-text, pop-up, rss, in-video, mobile, product placement, and so on. The evolution of the Internet (huge un-researched assumption) went from informative, and as technology advanced, the permutation of more media rich content came into play, to today’s ravaging of the village that is the Internet. Everyone is getting in the game, not just free services, even those with winning products and services that are proven breadwinners. Its totally cool, don’t get me wrong. I don’t mind watching an advertisement on the new Nissan Versa in order to catch my latest episode of heroes on nbc.com so that I don’t have to pay extra to have a Tivo device at home. If not for advertising, then how would NBC justify serving such media intensive content? Obviously there are people out there with both televisions and computers who prefer to watch their shows on a computer.

 

So who wins in this equation…definitely not the advertisers. As I’m writing this post, I clicked to view an episode of Heroes on NBC’s website. I was expecting to probably see an in-video about Nissan’s Versa, instead I was served an ad by Comfort Inn. As I was recovering from being totally juked out, I tried to my limited ability to ask myself, “Why Comfort Inn?” I’m not so sure if this is a good fit. What assumptions does the Comfort Inn advertising group make for the type of viewership the Heroes? I am no expert in advertising or marketing, but to me, Heroes is a more adult version of many of the comics my generation grew up on, so I’m thinking:

 

  • Majority age range of 20-30

  • Young professional

  • Income bracket somewhere between $45k and six figures.

 

Not having done any research, these are loosely based assumptions, so no need to bash me, I’m just using it as an example to further my observations….Ok, lets wrap this up. My point is that the advertising is not engaging, and neither would a Nissan Versa ad. If I was traveling, I would probably google map a list of hotels in the area, and depending on whether I’m paying myself or on the company dime, I would make my decision there. Or if I was going to purchase a new car, I would make a set of decisions – sedan or coupe, power or efficiency, price range, and then visit a review site. I can see the product placement of the Versa in the show “One of the heroes is driving the Versa,” because it plays on the emotional appeal of the viewer. Some idiot out there will think they’ll be as cool if they drive the same car as the time-bending character.

 

Recently, I interviewed with a social networking company for an advertising analysis manager position. Before the meeting, I read an interesting article on the economist about the implications of advertising on today’s many web 2.0 companies. A lot of what that writer said makes a whole lot of sense to me. The problem with advertising is the difficulty of engaging the user to create an experience. Only then is it likely that you will see the percentage of performance significantly increase. The article goes on to talk about search engines and social networks. User types something to the tune of “I want to buy a car” and I’m sure a lot of of the hits will come back with websites that will let you purchase a car online, or tell you how to. Whereas with a social network, user types into the interests section, “I like South Park,” and an ad to purchase a dvd box set of south park is served. But the conversion rate is low. In fact, despite being one of the most popular and intuitive social networks, Facebook has one of the lowest CTR’s in its space. This has been a problem plaguing online advertising for a long time coming. Would I be able to solve this problem? Haha…..(wipes tears from eyes)…no. In the recent slew of acquisitions by big tech companies (Yahoo/Third Screen Media, Microsoft/aQuantum, Google/DoubleClick), it is apparent that this has been on the mind of these technology powerhouses for some time. Mobile or Internet advertising, everyone is trying to cover their own asses, paying high premiums to ensure their livelihood into the next big mobile stretch, which I’m sure was a good choice. But living in Silicon Valley, where the advertising startups flow like the salmon of Capistrano, something tells me that very few to no advertising companies have yet to discover the holy grail solution. What this also says to me is that those starting up don’t think the ones already in the game are close to getting it right.

 

 

So how to create the experience? Going back to my previous examples, personalize the ad, put Hiro in the passenger seat with a silhouette in the drivers seat of a brand new Nissan Versa with some catchy tag like, “Save the world, save the cheerleader, save $1500 on a brand new Nissan Versa.” Or put Hayden Panettiere in a cheerleader outfit sitting in a Comfort Inn room with a *come in* gesture. That’ll definitely help create an experience (She is 18, right?)

 

Hayden

Either that, or narrow the focus of your demographic. For giant social networks where user’s interests are grouped, finding an advertiser that can generate a decent conversion rate would be hard to find. Large retail companies like Best Buy, Amazon, etc. Is the target of your monetization based on the relevancy, behavior, or actions of your users?

 

Bringing it back to Web 2.0, one company that I kept my eye on for some time is Loopt, a mobile LBS startup. It notifies you when one of your buddies (on Boost or Sprint, and also has the service) has stepped into a certain proximity of you. Somewhat limited, but pretty sweet right? Having been time-tested on Boost’s network, it recently scored big with an agreement to serve on Sprint’s network. Now a solution that will make it even easier for cheating spouses to get away with it….jk but it has a wide range of implications; I only see good things for this company. When they roll out with an ad-supported platform (incorporating the same technology to track businesses on the radar), I’ll be first in line to download the service.

 

Kinda long…yeah I know. But I hope this is a good transitory post from what I’ve recently been posting to the goals I hope to achieve with this blog. In the next big post (I’m going to subpost a viral link test), I will lay out my first idea that I hope will stir some discussion. Happy Turkey Day, I’ve got the turkey food coma.

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