How Social and Mobile Will Disrupt Online Advertising

It’s no secret that online display advertising is going through huge changes, thanks largely to the fact that banner ads have never worked very well. Everyone from Google to Facebook to Twitter to a gazillion ad technology startups is trying to figure out something that will work as remotely well as search ads. So I’m always interested to hear how smart folks think display ads will evolve. This morning a panel at the TechCrunch Disrupt conference in New York, which I’m watching by its livestream, will be exploring this. On the panel: former Yahoo/Right Media’s Mike Walrath, now with Moat, a “search engine for display ads”; Carolyn Everson, new head of advertising at Facebook; Eric Litman, CEO of mobile ad platform Medialets; and Gurbaksh Chahal of ad network RadiumOne. TechCrunch editor Erick Schonfeld is moderating.

Q: Is the online advertising we have now sufficient or broken? Walrath: It’s broken, the way we’re delivering it to marketers is fundamentally broken. Two things are bullshit: that usage of the Net will drive brand spending; and that if that doesn’t work, sight, sound, and motion (video, flashy stuff, etc.) will solve it. Neither will.

Everson: For 10 years, every digital company has been trying to say you should move more advertising online, and they haven’t figured out why it hasn’t. TV is still strong. You have to get the creative community comfortable with digital advertising. They do not feel comfortable enough with the medium to bring more advertising to the Net. Can’t just offer a billion little boxes.

Q: Don’t online ad budgets have to take from TV? Litman: To think that dollars are not flowing in, that’s an argument from 1998. There are dollars available to come from traditional media.

Walrath: We’re having the wrong conversation–the latest whiz-bang way to target an ad. Just incremental. Until we change the conversation, we’re going to be battling for table scraps from traditional media. Channeling Wenda Harris Millard (who famously said years ago at Yahoo that online ad companies needed to do more than sell the ad equivalent of pork bellies, meaning banners sold cheaply by the ton)… We need to show purchase intent and brand recall. Otherwise, the conversation is meaningless. (Amen!)

Chahal: Disagrees (not surprisingly). Display advertising works. People want to spend more money. You can make that multibillion-dollar display industry better. Everson: The top brands care about the social graph. 50 million “Likes” per day happen on Facebook, which drives Facebook’s latest ad offering, called “Sponsored Stories,” which turns Like and other actions into ads on Facebook.

Q: To what extent does mobile and location help brands? Litman: I don’t need an ad to tell me there’s a Starbucks near me. That’s not the model for local advertising. It’s really much more defining where people are within a store, walking down an aisle, and using a tool to compare products; the brand can pay slotting fees to get their products in those tools. We’ve seen a bunch of search dollars coming into mobile. Walrath: Most mobile ads I’ve ever seen have been a shitty experience. Can’t just show ads–they need to be intrinsic to the apps being used. Chahal: Mobile ads are still pretty new–$550 million last year.

Do@ Aims to Disrupt Mobile Search–Including Google

It’s ironic, or maybe apropos, that you can’t find anything about the new mobile search application Do@ by Googling it. Google doesn’t track the @ symbol at all. But the Israeli company (pronounced “do-at”), which launched its free iPhone app today at TechCrunch Disrupt in New York, is looking to do a number on Google. It aims to provide a new way to find stuff specifically when you’re on your phone and the iconic list of site links becomes cumbersome. Instead, a search using Do@ helps you zero in quickly what category of information you want and then sends you directly to the app that’s most likely to have just what you’re looking for.

Here’s how it works: Search for, say, “Bob Marley” using Do@, and you’re presented with a drop-down list with the query followed by categories designated with the @ sign, such as @music (where you’ll see results inside apps such as Pandora or iTunes or SoundCloud) or @movies (where the likes of Flixster or provide results).

These categories are relevant to the particular query, so a search on “sushi,” and you see “sushi @restaurants,” “sushi @food,” and so on. Then when you click on one of those, you’re whisked to an app or service such as Foodspotting or Flixster, which then shows its own mobile-optimized results for that query. You can swipe through multiple apps for a query to get more quickly to just what information you want.

You’re seeing only a selected subset of Web sites and services this way, of course, but for common queries made from a mobile phone, that may be better in most cases than a huge list of links. Do@ ranks the lists of apps and services itself at first, but you can choose your favorites or, if you’re signed into Facebook, get your friends’ amalgamated choices. Essentially, says cofounder Ami Ben David, publishers answer users’ queries themselves, using their own apps or services, their own brands, and their own business models.

The judges at the TechCrunch Disrupt startup competition who viewed the demo questioned how Do@ knows the results it’s presenting–that is, the results inside other apps and services–are actually relevant for users. “We try to stay away from making these decisions for users,” Ben David said. The judges, including Bing’s Barney Pell and Google’s Bradley Horowitz, weren’t really buying this, noting that Do@ needs to objectively determine whether its partner apps and services are actually delivering the goods.

When Ben David first demonstrated the service to me in early March, he said Do@, which has $8.6 million in venture funding including a recent $7 million round led by Draper Fisher Jurvetson, is “trying to be completely different.” That’s commendable, but it’s also the company’s key challenge. Google’s list of links may not be perfect for many mobile searches, but it’s still not bad, and Google’s Instant Search solves some of the hassle of doing multiple search queries on a phone keyboard. Persuading users to change their behavior, even for something that may work better in many cases, is a huge hurdle that virtually no Google rival has yet jumped.

And given that Do@ isn’t doing the heavy lifting to index the Web’s huge collection of sites, or vetting the actual search results its partners offer, its key offering amounts to a new user interface for mobile search. Which sounds like a set of features–albeit a very nicely designed set of features, one likely to be copied if it proves effective–more than a company.

AOL CEO Tim Armstrong at TechCrunch Disrupt: Content Still Rules (and Will Make Money. Eventually)

Long an apparent candidate for permanent obscurity after its ill-fated merger with Time Warner, the now-independent AOL has been getting more interesting lately. That’s thanks to its high-profile acquisitions of prominent online brands such as TechCrunch and Huffington Post as well as some interesting services such as So I’m tuning into the livestream of CEO Tim Armstrong‘s interview with TechCrunch editor Mike Arrington at TechCrunch Disrupt in New York. Here’s what he had to say:

Q: Is any of this stuff going to work? Can you make money off all this content? Armstrong: Yes (what else did you expect?). I love the fact that people think content isn’t a good business. It keeps other people out of it and attracts people who believe in it.

Will you do other deals? Armstrong: Holding off for now, but there could be more. I have a list in my head and ongoing discussions with people in this space. I see five or 10 companies in this space that are interesting.

Q: Yahoo? Amstrong: Implies no, not surprisingly.

Q: What would you do to run Yahoo? Armstrong: We had a leadership meeting in California recently with Yahoo executives. We were talking about what it takes to be a great company. One is having a real clear vision for the future. Second is having a clear execution plan with metrics. Third is culture, a good culture.

Q: What’s the deal with all the Thursday night drinking parties, given AOL’s official rules against drinking on the job? Armstrong: Doesn’t answer. It doesn’t have to do with drinking. It has to do with the culture we’re trying to create.

Q: When will you start monetizing the products being developed in Brad Garlinghouse‘s group (in Palo Alto)? Armstrong: I’ve told Brad for the new products I’m not concerned about monetization. I’m concerned about consumer usage. We’re working on nailing the consumer DNA.

Q: Won’t AOL and Yahoo be the same company in a year? Armstrong: Why? Arrington: Both companies are struggling. Armstrong: We clearly know where we’re going. We have more work to do. But we’re making tremendous progress. On target to get to industry growth rate in the second half of the year. I don’t think there’s any competitive dynamic in the market that prevents us from being successful.

Q (from Google’s Don Dodge): Why don’t paywalls work and why does local content monetize terribly? Armstrong: Local content doesn’t monetize terribly. I think local is going to monetize at a great level. Paywalls do work. How you pay matters a lot. Micropayments? Our strategy has been free content but I am a long-term believer in paid content for the Web. We’re at the start of the next evolution for content.

LIVE from TechCrunch Disrupt: John Doerr, Mark Pincus, Bing Gordon

TechCrunch Disrupt, the tech blog’s annual conference in San Francisco, is underway. I’ll liveblog the highlights of this first panel of luminaries, which is looking at Building Internet Treasures. FYI, John Doerr is a partner at Kleiner Perkins, as is Bing Gordon (former longtime creative guy at Electronic Arts), and Mark Pincus is CEO of social game giant Zynga.

Actually, Doerr is soliciting audience questions for everyone, and then they presumably will address them. They’re all over the place–where do you look for new ideas, what about micropayments, the wisdom of developing on a closed platform (in other words, Facebook), is advertising the revenue model for the Internet, what’s the future of companies like Groupon, what matters most for the future of the Internet, what is the future of social games, is the intelligent Web real or a myth, is there a future for Flash vs. HTML5, Internet disruption in health care.

Pincus starts out. 33 million people as of yesterday played a Zynga game. 1200 full-time people. Won’t disclose revenues.

Pincus says the best companies are creating products and services that we now can’t imagine living without–Amazon, Google, etc. That’s what an Internet “treasure” is. He says Zynga measures its users’ “net promotion score,” which has to do with how much they spread the word of their game experiences to others, if I understand correctly.

Doerr says he’s getting a different sense of games culture today–more analytical than creative. “We’re data junkies. We measure everything,” he says, and Zynga has invested in big data warehouses–more than a petabyte of data a day. “We’re adding a thousand servers a week.” Yikes.

But, he adds, design and creativity still really matters.

Doerr: What is disruptive about social games? Gordon: Four big disruptions from the Internet: Social, analytics, APIable Internet (app economy) and new payment methods. What’s disruptive about social games is that they combine all four in one. Pincus: In summer 2007, I was here for the Facebook apps platform launch (so was I). Games and fun were not a big macro on the Internet yet. The disruptive thing for me was not apps and platforms, but that they took down the barriers to entry to playing games–you could now design games that three clicks in, you know how to play them.

Doerr: Is the social Web going to create other great possibilities beyond games? Pincus: We are going through the biggest change in Internet consumer behavior since using the browser. Somebody will become the travel icon on my phone–and be that throughout the Web as a result. Health is waiting for someone to turn it into a consumer product that’s useful.

Turns out John Doerr’s daughter Mary, in high school when meeting Pincus along with her dad and Gordon to assess whether Kleiner would invest in Zynga, sealed the deal by saying, “He’s cool.”

Pincus: Wanted to keep control of the company to avoid “death by a thousand compromises.”

Doerr: Zynga has the notion that every employee is a CEO. That can’t be right, can it? Pincus: We sure try. People have to define what they’re the CEO of, and how they’re going to kill it (that goal).

Doerr: Is it the app economy? Pincus: Every consumer behavior on the Web is going to become an app and a new kind of industry. Consumers are going to expect the way they interact with a service is an app.

Will there be a revenue stream besides advertising? Pincus: I’m a big believer in the user-pay economy. Just as offline, ads will eventually be a small part of the overall Internet economy. Advertising [online] is only a $50 billion industry–smaller than the auto industry.

Pincus: We’re still far far away from being an Internet treasure. People can still imagine life without playing our games. Gordon: I don’t know, I was harvesting wheat at 6:15 this morning. Pincus: We have to make the daily grind have more meaning. It’s a big challenge.


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