Category Archives: advertising

Facebook’s New Gift Service: Nice, But Not Yet An E-Commerce Game Changer

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From my Forbes.com blog The New Persuaders:

Just in time for prime gift-giving holidays like Friday’s World Rabies Day (or if you prefer, Ask A Stupid Question Day), Facebook today launched a social gift service. It’s rolling out to only a select few for now.

I must be one of them, because I was able to send something to my wife to try it out. But in its current form, I doubt I’m going to use it much.

This isn’t the 2.0 version of the Facebook Gifts virtual-gift service that the company shut down two years ago, by the way. In fact, the new Gifts is built upon, and run by, the folks at Karma, the gift-giving service Facebook acquired in May.

It actually looks pretty good. And while I have ordered precisely one gift that obviously has not yet been delivered, so I can’t judge the entire gift-giving process, it worked quite smoothly. I clicked on my wife’s Timeline, clicked the gift button, and off I went to order her some caramels. She can even pick her own flavor–that’s pretty cool.

In this case, I obviously know her address, so one advantage of Facebook Gifts–not having to know or ask for someone’s address–is moot in my case. What’s more, I didn’t get an automatic reminder I might get if it were her birthday, so that bit of friction elimination wasn’t a factor for me either. But it’s fast and easy to send gifts to friends, and that’s great–not just for consumers, but for Facebook, which can use a service that brings in revenues not dependent upon its brand of advertising that many large marketers are still doubtful about.

So what isn’t great, at least for me?

* A lot of the most prominent gifts are pretty vanilla–teddy bears, spa appointments, flowers, cupcakes. Maybe they’re fine products. Maybe they’re the sort of thing most people give their friends. But for a service with a tagline “real friends, real gifts,” too many of these products seem just too impersonal. Products, especially gifts, are not necessarily fungible, and all the less so for close friends for whom you’re supposed to be getting something special. And if they’re not close friends–and let’s be honest, most people don’t have several hundred close friends–I probably won’t be sending them many gifts, from Facebook or anywhere else. …

Read the complete post at The New Persuaders.

Apple’s New iOS 6 Ad Tracking Feature Is ‘Broken,’ Says One Source

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From my Forbes.com blog The New Persuaders:

With the new iOS 6 operating software released with the launch of the iPhone 5 last Friday, Apple introduced a new version of a feature that allows advertisers to track phones to serve targeted ads. But it seems that for people who updated their iPhones via wireless networks, Apple’s new Advertising Identifier is not working.

That’s a big deal for advertisers, for which iPhones and iPads are a rich channel for mobile marketing. Without being able to identify users–or more accurately, their phones–they can’t track whether those ads produced a sale or other “conversion” such as an app installation. And they may not to spend a lot on iOS ads until they can do that again. “It’s crucial for the advertising market,” says Ravi Kamran, CEO of the apps marketing platform Trademob, which discovered the problem. “It drives the whole ecosystem.”

Apple’s new Advertising Identifier, which replaced a Unique Device Identifier widely seen as flawed from a privacy perspective, shows numerical IDs that are entirely zeroes instead of the usual unique sequence of numbers. In an interview, Kamran said the problem affects only those phones updated via WiFi, not via iTunes on a computer or via Xcode that Apple software developers use, but that’s a lot of people.

For the time being, advertisers will have to depend on third-party identifiers such as Open Device Identification Number, Kamran says. IPhone and iPad users who don’t like being tracked may be perfectly happy the Advertising Identifier doesn’t work. But the new identifier also offered a way to opt out of tracking, so ultimately a working Apple identifier is probably desirable for all concerned.

I’ve contacted Apple on whether it’s aware of the issue and what it may do about it and will update this post if and when I hear back.

Lots Of Blame To Go Around For Facebook’s IPO ‘Debacle’–But It Doesn’t Mean A Thing

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Facebook CFO David Ebersman. (Photo: Wikipedia)

From my Forbes.com blog The New Persuaders:

When anything goes wrong, we just love a scapegoat, don’t we? Today’s scapegoat in the business world is David Ebersman, Facebook’s chief financial officer, who New York Times writer Andrew Ross Sorkin says is completely, solely, and utterly at fault for the social network’s underwhelming initial public offering and subsequent swoon in its stock price to less than half its IPO level.

Sorkin, as well as others, say Ebersman’s insistence on a higher stock price and especially on issuing more shares shortly before the offering were the key reason Facebook’s post-IPO shares not only failed to rise but steadily fell–vaporizing some $50 billion in shareholder value in the past 90 days.

But Ebersman is hardly the only culprit in the IPO. There’s also:

* Facebook’s underwriters, including Morgan Stanley and J.P. Morgan Chase. Not only did they go along with and even encourage the pre-IPO hype, but recently they cut their target prices for Facebook, contributing to today’s slide that knocked shares to under half the IPO level.

* Facebook investors. Business Insider’s Henry Blodget, who knows a little something about Internet stock dynamics, says investors willfully ignored both Facebook’s own warnings about advertising revenue uncertainties and CEO Mark Zuckerberg’s letter to, yes, investors, that he would focus on building Facebook’s services over maximizing its profits.

* Not least, CEO Mark Zuckerberg. After all, the buck (or in this case, 50 cents) stops here. While finances are probably at least third on the list of his concerns, behind Facebook’s services and its employees, a CEO ultimately is responsible for such a signature event in a company’s life.

Still, regardless of whom you might think is most culpable, in the end it probably will have little impact on Facebook’s prospects. That’s because there’s an even more fundamental reason to question the singling out of Ebersman: Perhaps Facebook’s IPO wasn’t really a debacle after all. …

Read the rest of the post at The New Persuaders.

Google Shuts Off TV Ads Business

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From my Forbes.com blog The New Persuaders:

After five years of trying to sell ads on television using the automated buying system that works so well for its signature search ads, Google has finally given up. In a blog post this afternoon from Shishir Mehrotra, VP of YouTube and video, the ad giant said it will shunt the group’s staff to other projects:

Video is increasingly going digital and users are now watching across numerous devices. So we’ve made the hard decision to close our TV Ads product over the next few months and move the team to other areas at Google. We’ll be doubling down on video solutions for our clients (like YouTube, AdWords for Video, and ad serving tools for web video publishers). We also see opportunities to help users access web content on their TV screens, through products like Google TV.

The shutdown is clearly a disappointment for Google, yet another sign that its math-driven advertising systems don’t readily translate to traditional advertising. Back in 2009, the company shut down radio and print ad efforts for lack of interest.

Mehrotra’s not being entirely disingenuous when he says that Google’s efforts are better spent on online video advertising. After all, more and more TVs get connected to the Internet and more and more people watch TV shows on their laptops, smartphones, and tablets. With its Google TV project and its fast-growing YouTube video service, Google remains in a prime position to vacuum up ad revenues as big advertisers start to follow their audience onto the Web.

Indeed, YouTube especially has shown considerable traction in attracting new ad spending–$3.6 billion this year, by the reckoning of Citigroup analyst Mark Mahaney. As I wrote in a recent story, YouTube is where Google is placing its television-scale bets:

Now Mehrotra’s goal is to try to grab a big chunk of the $60 billion U.S. television business. But to do that, and fend off TV-content-oriented online rivals such as Hulu, YouTube has to become a bit more like conventional TV. To that end, it organized itself last year into TV-like channels, investing $100 million in cable-quality launches from Ashton Kutcher, Madonna, the Wall Street Journal, and dozens of others. More and more TV advertisers are being won over, says David Cohen, chief media officer at the media buying agency Universal McCann. “They’re getting marketers to think about YouTube as a viable outlet,” he says. 

Mehrotra, who last year became ­YouTube’s vice president of product, envisions millions of online channels disrupting TV, just as cable’s 400 channels disrupted the four broadcast networks. “We want to be the host of that next generation of channels,” he says.

In other words, Google’s strategy is to attack the TV ad business from where it’s strong instead of from where it’s not.

Why Do Programmers Hate Internet Advertising So Much?

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Facebook ad question (Photo credit: renaissancechambara)

From my Forbes.com blog The New Persuaders:

Another week, another pontificating programmer slamming online advertising. What is it with these guys?

The latest example is a steaming heap of linkbait from software developer and entrepreneur Patrick Dobson entitled Facebook Should Fire Sheryl Sandberg. That would be the chief operating officer of Facebook, whose purported crime is that she steered Facebook toward being an ad-supported company.

In Dobson’s telling, while Facebook cofounder and CEO Mark Zuckerberg was off at an ashram in India, onetime Google ad exec Sandberg mandated that Facebook would henceforth be an advertising company. Proof of her folly? Facebook’s now worth half of what it was at its IPO three months ago as it “continues to flounder in advertising hell.”

This, despite the fact that Facebook will gross about $5 billion in ad revenues this year, despite the fact that its current market cap is still more than $40 billion less than eight years after the company’s founding in a Harvard dorm.

Thousands of Web developers would love to flounder this badly.

Dobson’s preferred alternative is that Facebook should gradually phase out advertising in favor of–and I have to get technical here, because the bigger picture he provides is fuzzy–selling access to its application programming interface. That way, developers can build businesses like Zynga did on top of the social network in the way personal computer software developers built applications atop Microsoft’s Windows. From his post:

… There is massive value in the social graph and the ability to build applications on top of it. I believe the value is greater than all of the advertising revenue generated on the web to date. … What is the best way to monetize the social graph? To sell access to the social graph! … Developers can then figure out if advertising, or micro transactions, or payed access is the best way to monetize the social graph.

I’m not really sure what “selling access to the social graph” would be, though it sounds like the result could make Facebook’s many privacy gaffes to date look tame.

But the bigger problem is the persistent implication by tech folks like Dobson that advertising is beneath them, and beneath any intelligent human being. Now, I’m no huge fan of most advertising, and all too often it is indeed lame. But there’s no doubt it can be useful at the right place and time, and even when it misses the mark, advertising is a small, remarkably frictionless price to pay for a whole lot of free Web services.

The notion that advertising is evil, to use a favorite term of Google critics, or at least useless is a longstanding meme in Silicon Valley. It goes at least as far back as Google’s founding, before it became–right–the biggest online ad company on the planet. Cofounders Larry Page and Sergey Brin famously wrote in their Stanford doctoral thesis describing Google that advertising could pollute search results.

Why this antipathy to advertising? A lot of tech folks seem to believe they’re immune to the influence of advertising. More than that, they assume that no one else is much influenced by it either (despite ample evidence over many decades that ads do influence people’s attitudes and behavior). Therefore, the reasoning goes, ads are nothing more than an annoyance, an inefficient allocation of capital. Dobson accuses Sandberg of a “rampant lack of business creativity” that has “no place in centers of innovation,” later saying she should start an ad agency in Miami. …

Read the complete post at The New Persuaders.

Here’s How Badly Google Wants To Make Nexus 7 Tablet A Hit

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From my Forbes.com blog The New Persuaders:

Only a couple of times has Google deigned to clutter its famously spartan home page with advertising. This is one of those times.

Today, Google is running an ad below its search box for the Nexus 7, the seven-inch tablet that it hopes will steal a march on Apple’s enormously popular iPads. Why now? Google hasn’t said, but it seems likely the ad push is looking ahead to Apple’s expected October release of the seven- to eight-inch iPad Mini, as well as to the expected announcement of Amazon.com’s new Kindle Fire next week.

As tablets take the computing market by storm, Google clearly views them as a critical device on which to make sure its search and other services, and the advertising that rides atop them, continue to be front and center. I remain doubtful about whether Google itself really wants to become a full-on maker of hardware, Motorola Mobility acquisition aside. But at the very least, a successful Nexus 7 could spark other manufacturers to pick up the pace of innovation in tablets.

That’s all the more critical in the wake of Apple’s big win in court last week, when Samsung was found to be infringing multiple Apple patents. Although Google’s underlying Android software was not directly involved, the jury’s ruling cast a pall on Android’s potential for further gains vs. the iPhone and the iPad.

The Nexus 7 spot marks a rare appearance of a Google ad on its home page, though not the first one. The company also ran ads for Motorola’s and Verizon’s Droid phone in 2009, followed by one for Google’s own Nexus One phone a few months later. It also has promoted other Google products, including the T-Mobile G1 phone in 2008. And just a few days ago, if you hovered over the “I’m Feeling Lucky” button, you got alternative messages that sent you to other Google services.

Still, don’t expect to see Google start splattering ads all over its home page. After all, then we’d all stop writing about how unusual it is and Google won’t get the free publicity it’s getting right now.

How YouTube Turned Into a Real Business By Making Ads Optional

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From my story in MIT Technology Review:

In 2008, when Shishir Mehrotra joined YouTube to take charge of advertising, the booming video-sharing service was getting hundreds of millions of views a day. ­YouTube, which had been acquired by Google in 2006, was also spending as much as $700 million on Internet bandwidth, content licensing, and other costs. With revenue of only $200 million, YouTube was widely viewed as Google’s folly.

Mehrotra, an MIT math and computer science alum who had never worked in advertising, thought he had a solution: skippable ads that advertisers would pay for only when people watched them. That would be a radical change from the conventional media model of paying for ad “impressions” regardless of whether the ads are actually viewed, and even from Google’s own pay-per-click model. He reckoned his plan would provide an incentive to create better advertising and increase the value for advertisers of those ads people chose to watch. But the risk was huge: people might not watch the ads at all.

Mehrotra’s gamble paid off. YouTube will gross $3.6 billion this year, estimates Citi analyst Mark Mahaney. The $2.4 billion that YouTube will keep after sharing ad revenue with video content partners is nearly six times the revenue the streaming video service Hulu raked in last year from ads and subscriptions. And that suggests Mehrotra has helped Google solve a problem many fast-growing Web companies continue to struggle with: how to make money off the huge audience that uses its service free.

In 2008, Mehrotra was working for Microsoft and hankered to have his own startup, but he agreed to talk to a Google executive he knew about working there instead. He decided against it—but that evening he kept thinking about how the exec was frustrated that most ad dollars go to TV, even though nobody watches TV ads. Yet at his Super Bowl party two weeks earlier, Mehrotra recalled, guests kept asking him to replay the ads. Was there a way, he wondered, to make TV ads as captivating as Super Bowl ads, every day?

The answer came to him in a flash. …

Read the complete story in MIT Technology Review.

Stung By Click Fraud Allegations, Facebook Reveals How It’s Fighting Back

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From my Forbes.com blog The New Persuaders:

It’s a question that has haunted online advertisers since soon after Google perfected pay-per-click search ads a decade ago: Are those clicks from real potential customers, or are they from scammers draining my ad budget?

Now the issue of “click fraud” has hit Facebook full-force. On July 30, Limited Run, which provides software to enable bands and music labels sell physical products like records, said it was closing its Facebook account after finding that some 80% of the clicks it got during a recent ad campaign on Facebook were likely generated not by real people but by bots. Those are coordinated groups of computers hijacked by scammers or spammers, so any clicks they generate cost advertisers money for no benefit. (In a separate issue, in fact the main reason Limited Run said it’s leaving Facebook, the company also said Facebook asked it to spend $2,000 on ads in order to change its Facebook page name, something Facebook has said is not its policy.)

Limited Run said it came to the conclusion that the clicks were fraudulent after running its own analysis. It  determined that most of the clicks for which Facebook was charging it came from computers that weren’t loading Javascript, a programming language that allows Web pages to be interactive. Almost all Web browsers load Javascript by default, so the assumption is that if a click comes from one that isn’t, it’s probably not a real person but a bot.

To be clear, Limited Run isn’t charging that Facebook itself is responsible for those apparently fraudulent clicks. Often the culprits in click fraud are small-time ad networks and other outfits that pay people to click on Google and other ads they run on their sites, though that’s unlikely to be an issue for Facebook, which does not yet run its ads outside its own site as Google and others do. Perhaps, Limited Run has suggested, rivals could be using the bots to cost the company money by forcing it to pay for useless clicks.

The click fraud issue has at times loomed large for Google and other companies because of the potential impact on advertiser trust, and Google continues to fight click fraud–as does Facebook. Indeed, the issue isn’t new for Facebook either, with complaints, including lawsuits, bubbling up since at least 2009.

But while click fraud doesn’t seem to have driven away a large number of Google advertisers, whether because the company has minimized it or because advertisers simply factor it in as a cost of doing business online, the issue is a particular concern for Facebook now. It’s trying to prove to skeptical advertisers and investors that its ads work, and claims that there’s rampant click fraud don’t help. At the same time, Facebook has said recently that some 1.5% of its nearly 1 billion accounts are “undesirable,” meaning “user profiles that we determine are intended to be used for purposes that violate our terms of service, such as spamming.

Facebook has declined to say much about the Limited Run situation, though the company says it believes it catches and filters out the vast majority of “invalid clicks” before they’re even charged to advertisers. Its own page on “click and impression quality” doesn’t reveal much detail about how it deals with click fraud, however, so I asked the company for more insight on what it’s doing about the problem.

Mark Rabkin, an engineering director on Facebook’s ads team, responded to questions by email. While at times he’s repeating what Facebook has said before, he also reveals that the company has a growing staff of 300 people working on security and safety and explains in more detail the various ways the company tries to catch bad clicks. Here are his answers. …

Read the complete interview at The New Persuaders.

Why Google May Be Secretly Happy That Apple’s Dropping Its YouTube App From Next iPhone

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From my Forbes.com blog The New Persuaders:

OK, so Apple will drop its YouTube app from iOS 6, the new version of its iPhone operating system due out this fall. Cue loud and histrionic coverage about Apple’s thermonuclear war, as the late Apple cofounder Steve Jobs put it, vs. Google and its Android mobile software.

Except it seems likely that script is off the mark. Here’s why: Most people may not realize it, but that YouTube app on their iPhones is actually designed by Apple, a holdover from the iPhone’s introduction in 2007, when all the apps were Apple’s and YouTube was a big draw. (So big that one of Apple’s original iPhone ads highlighted YouTube, as in the video above.) Problem is, since then, Apple has appeared to do relatively little to advance the app, which now looks old (almost as old as that TV used in the app’s icon, at least on my impossibly old iPhone).

Even more important from the point of view of Google and the pro content producers on YouTube, the Apple YouTube app doesn’t allow ads to be run against all those billions of videos views a month that YouTube draws on mobile devices. So search for “Lady Gaga” on your iPhone and what do you see? Well, Lady Gaga, but very little from official channels such as ladygagaofficial, which means very few official videos. Contrast that to a search on “Lady Gaga” on YouTube.com, and official videos are there, along with ads all over the place.

Why the huge difference? Because she can’t run ads on the iPhone YouTube app, and no ads means no money generated. Multiply that by thousands of artists, movies, and all kinds of content that advertisers want to run ads against–ads that will bring in up to $3.6 billion in revenues this year, by Citigroup analyst Mark Mahaney’s recent estimate for YouTube. Now you realize why Google may not mind much that the creaky old adless Apple app is heading for the trash can icon.

Read the complete post at The New Persuaders.

Google Makes Renewed Grab for the Rest of Online Advertising

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New DoubleClick ad system heats up battle to create an operating system for digital marketing

Cross-posted from my Forbes.com blog The New Persuaders:

It wasn’t supposed to be this way. Hundreds of well-funded online ad technology companies have sprouted up in recent years, each aiming to make it easier and more efficient for marketers to reach just the target audience they want.

Terence Kawaja, CEO of boutique investment bank Luma Partners, created this now-famous Display Lumascape to show how complex the online ad tech industry has become.

Yet the result is a crazy quilt of companies–graphically illustrated in that mess of a chart on the right–that drives marketers and agencies crazy. The very existence of so many competing products, in fact, has made placing ads online and measuring their impact more complicated and cumbersome than ever. “Venture capital has supported and financed a bunch of chaos,” advertising veteran Randall Rothenberg, CEO of the trade group Interactive Advertising Bureau, griped at a recent ad conference.

The result: Most ad dollars, nearly $200 billion a year, still get spent on television because it’s so much easier.

That’s the problem Google aims to solve with a revamped ad buying system it will announce today at a private Future of Advertising event hosted by its DoubleClick display-ad management and technology unit. (Part of the event will be livestreamed here.) The company, which already dominates 60% of the online ad business–those little text ads that appear on the right and top of the page when you do a search–now has its sights set on the remaining 40% of the industry. That would be the $25 billion worldwide market for display ads, the graphical and video banners familiar on virtually every commercial website.

Google’s goal: Provide the leading one-stop shop for advertisers and publishers to buy ads on websites, mobile phones, social networks, apps, and whatever other new media the Internet spawns. Essentially, it’s building an operating system for ads much like Microsoft did with its Windows for PCs–with much the same appeal to marketers and agencies as Windows has for PC users. “When you’re putting together a campaign, you want everything connected vs. trying to piece it all together,” says Kurt Unkel, president of the online ad buying operation at Publicis Groupe’s VivaKi digital ad agency, a Google partner.

Google’s announcement is the latest salvo in a war to control the next era of digital marketing. After a decade in which Google’s search ads overtook display ads with an unmatched ability to turn clicks directly into sales, many advertisers and publishers expect–or at least hope for–a resurgence of new kinds of display ads that could woo brand advertising dollars from TV. Neal Mohan, Google’s vice president of display advertising products, has predicted that display will be a $200 billion industry in a few years.

Read the rest of the story at The New Persuaders.