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Here We Go Again: The Gray Market in Twitter and Facebook

By - August 07, 2012

So, casually reading through this Fast Company story about sexy female Twitter bots, I come across this astounding, unsubstantiated claim:

My goal was to draw a straight line from a Twitter bot to the real, live person whose face the bot had stolen. In the daily bot wars–the one Twitter fights every day, causing constant fluctuations in follower counts even as brands’ followers remain up to 48% bot–these women are the most visible and yet least acknowledged victims…

There it was, tossed in casually, almost as if it was a simple cost of doing business – nearly half of the followers of major brands could well be “bots.”

The article focuses on finding a pretty woman whose image had been hijacked, sure, but what I found most interesting (but sadly unsurprising) was how it pointed to a site that promises to a thousand  followers to anyone who pays…wait for it…about $17. Yes, the site is real. And no, you shouldn’t be surprised, in the least, that such services exist.

It has always been so.

Back when I was reporting for The Search, I explored the gray market that had sprung up around Google (and still flourishes, despite Google’s disputed attempts to beat it back). Fact is, wherever there is money to be made, and ignorance or desperation exists in some measure, shysters will flourish. And a further fact is this: Marketers, faced with CMO-level directives to “increase my follower/friend counts,” will turn to the gray market. Just as they did back in the early 2000s, when the directive was “make me rank higher in search.”

Earlier this week I got an email from a fellow who has been using Facebook to market his products. He was utterly convinced that nearly all the clicks he’s received on his ad were fake – bots, he thought, that were programmed to make his campaigns look as if they were performing well. He was further convinced that Facebook was running a scam – running bot networks to drive performance metrics. I reminded him that Facebook was a public company run by people I believed were well intentioned, intelligent people who knew that such behavior, if discovered, would ruin both their reputation as well as that of the company.

Instead, I suggested, he might look to third parties he might be working with – or, hell, he might just be the victim of a drive-by shooting – poorly coded bots that just click on ad campaigns, regardless of whose they might be.

In short, I very much doubt Facebook (or Twitter) are actively driving fraudulent behavior on their networks. In fact, they have legions of folks devoted to foiling such efforts.Yet there is absolutely no doubt that an entire, vibrant ecosystem is very much engaged in gaming these services. And just like Google had at the dawn of search marketing, Twitter and Facebook have a very – er – complicated relationship with these fraudsters. On the one hand, the gray hats are undermining the true value of these social networks. But on the other, well, they seem to help important customers hit their Key Performance Indicators, driving very real money into company coffers, either directly or indirectly.

I distinctly recall a conversation with a top Google official in 2005, who – off the record – defended AdSense-splattered domain-squatters as “providing a service to folks who typed the wrong thing into the address bar.” Uh huh.

As long as marketers are obsessed with hollow metrics like follower counts, Likes, and unengaged “plays,” this ecosystem will thrive.

What truly matters, of course, is engagement that can be measured beyond the actions of bots. It is coming. But not before millions of dollars are siphoned off by the opportunists who have always lived on the Internet’s gray edge.

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Who’s On First? (A Modest Proposal To Solve The Problem with First- and Third-Party Marketing)

By - July 26, 2012

Early last month I wrote a piece entitled Do Not Track Is An Opportunity, Not a Threat. In it I covered Microsoft’s controversial decision to incorporate a presumptive “opt out of tracking” flag in the next release of its browser, which many in the ad industry see as a major blow to the future of our business.

In the piece, I argued that Microsoft’s move may well force independent publishers (you know, like Searchblog, as well as larger sites like CNN or the New York Times) to engage in a years-overdue dialog with their readers about the value exchange between publisher, reader, and marketer. I laid out a scenario and proposed some language to kick that dialog off, but I gave short shrift to a problematic and critical framing concept. In this post, I hope to lay that concept out and offer, by way of example, a way forward. (Caveat: I am not an expert in policy or tech. I’ll probably get some things wrong, and hope readers will correct me if and when I do.)

The “concept” has to do with the idea of a first-party relationship – a difficult to define phrase that, for purposes of this post, means the direct relationship a publisher or a service has with its consumer.  This matters, a lot, because in the FTC’s recently released privacy framework, “first-party marketing” has been excluded from proposed future regulation around digital privacy and the use of data. However, “third-party” marketing, the framework suggests, will be subject to regulation that could require “consumer choice.”

OK, so in that last sentence alone are three terms, which I’ve put in quotes, that need definition if we are going to understand some pretty important issues. The most important is “first-party marketing,” and it’s damn hard to find a definition of that in the FTC document. But if you go back to the FTC’s *preliminary* report, issued in December of 2010, you can find this:

First-party marketing: Online retailers recommend products and services based upon consumers’ prior purchases on the website.

Later in the report, the term is further defined:

Staff proposes that first-party marketing include only the collection of data from a consumer with whom the company interacts directly for purposes of marketing to that consumer.

And in a footnote:

Staff also believes that online contextual advertising should fall within the “commonly accepted practices” category (Ed. note: Treated as OK, like first party marketing). Contextual advertising involves the delivery of advertisements based upon a consumer’s current visit to a web page or a single search query, without the collection and retention of data about the consumer’s online activities over time. As staff concluded in its 2009 online behavioral advertising report, contextual advertising is more transparent to consumers and presents minimal privacy intrusion as compared to other forms of online advertising. See OBA Report, supra note 37, at 26-27 (where a consumer has a direct interface with a particular company, the consumer is likely to understand, and to be in a position to control, the company’s practice of collecting and using the consumer’s data).

The key issue here for publishers, as far as I can tell, is this: “the delivery of advertisements based upon a consumer’s current visit to a web page or a single search query, without the collection and retention of data about the consumer’s online activities over time…where a consumer has a direct interface with a particular company, the consumer is likely to understand, and to be in a position to control, the company’s practice of collecting and using the consumer’s data.”

Whew. OK. We’re getting somewhere. Now, when that 2010 report came out, many in our industry freaked out, because of the next sentence, one which refers to – wait for it – third party marketing:

If a company shares data with a third party other than a service provider acting on the company’s behalf – including a business affiliate unless the affiliate relationship is clear to consumers through common branding or similar means – the company’s practices would not be considered first-party marketing and thus they would fall outside of “commonly accepted practices” … Similarly, if a website publisher allows a third party, other than a service provider, to collect data about consumers visiting the site, the practice would not be “commonly accepted.”

Now, this was a preliminary report, and the final report, which as I said earlier came out this past Spring, incorporates a lot of input from companies engaged in what the FTC described as “third party” marketing – companies like Google that were very concerned that the FTC was about to wipe out entire swathes of their business. And the fact is, it’s still not clear what’s going to be OK, and what isn’t. For now, my best summary is this: it’s OK for websites that have a “first party” relationship to use data collected on the site to market to consumers. If, however, those sites was to let “third parties” market to consumers, then, at some point soon, the sites need to figure out a way to give “consumers a choice” to opt out. If they don’t, they may be subject to regulation down the road.

Which brings us back to “Do Not Track,” or DNT. Now DNT has been held up as the easiest way to give consumer a choice about this issue – if a consumer has DNT enabled on their browser, then that consumer has very clearly made a choice – they don’t want third-party advertisements or data collection, thank you very much. See how easy that was?

Wrong, wrong, wrong!!! As implemented by Microsoft in IE 10, DNT is an extremely blunt instrument, one that, in fact, does *not* constitute a choice. It’s defaulted to “on,” which means that a consumer is not ever given a choice one way or the other. And once it’s on, it’s the same for every single site – which means you can’t say that you’re fine with third-party ads on a site you love (say, Searchblog, naturally), but not fine with a site you don’t like so much (say, I dunno,  You Got Rick Rolled).

That’s pretty lame. Shouldn’t we, as consumers, be able to chose which sites we trust, and which we don’t? That’s pretty much the point of my post on DNT last month.

Fact is, we don’t really have a way to demonstrate that trust. Many in the industry – including the IAB, where I am a board member – are working to clarify all this with the FTC. The working assumption is that it’s far too much to ask of most publishing sites to give consumers a choice, much less give them access to the data used to “target” them.

Well, I’m not so sure about that.

Check out this screen shot from independent site GigaOm (yes, FM works with GigaOm):

A few other sites are starting to do similar notices – and I applaud them (this is already becoming standard practice in the UK, due to strict regulations around cookies). GigOm is saying, in essence, that by simply continuing to read the site, you agree to their privacy policies. Now, take a look at what GigaOm’s policy has to say about “third party advertising:”

GigaOM may allow third party advertising serving companies, including ad networks (“Advertisers”), to display advertisements or provide other advertising services on GigaOM. These third party Advertisers may use techniques other than HTTP cookies to recognize your computer or device and/or to collect and record demographic and other Information about you, including your activities on or off GigaOM. These techniques may be used directly on GigaOM….Advertisers may use the information collected to display advertisements that are tailored to your interests or background and/or associate such information with your subsequent visits, purchases or other activities on other websites. Advertisers may also share this information with their clients or other third parties.

GigaOM has no responsibility for the technologies, tools or practices of the Advertisers that provide advertising and related services on GigaOM. This Privacy Policy does not cover any collection, use or disclosure of Information by Advertisers who provide advertising and related services on GigaOM. These Advertisers’ information gathering practices, including their policies regarding the use of cookies and other tracking technologies, are governed entirely by their own privacy policies, not this one.

To summarize: By reading GigaOm, you’ve made a choice, and that choice is to let GigaOm use third-party advertising. It’s a nifty move, and one I applaud: GigaOm has just established you as a first party to its content and services just like….

….Facebook, which just announced revenue of more than a billion dollars last quarter. Facebook, of course, has a first-party relationship with 955 million or so of us – we’ve already “opted in” to its service, through the Terms of Service we’ve all agreed to (and probably not read.) We’ve made a choice as consumers, and we’ve chosen to be marketed to on Facebook’s terms.

The same is true of Apple, Amazon, eBay, Yahoo, and any number of other large services which require registration and acceptance of Terms of Service in order for us to gain any value from their platforms. Google and Microsoft have been frantically catching up, getting as many of us as they can to register our identity and agree to a unified TOS in some way.

But what about independent publishers? You know, the rest of the web? Well, save folks like GigaOm (and AllThingsD, which warns its audience about cookies), we’ve never really paid attention to this issue. In the past, publishers have avoided doing anything that might get in the way of an audience consuming their content – it’s a death sentence if you’re engaged in the high holy art of Increasing Page Views. And bigger publishers like Time or Conde Nast don’t want to rock the boat, they’ll wait till a consensus forms, and then follow it.

But I like what GigaOm has done. It’s a very clear notice, it goes away after the first visit, and it reappears only if you’ve cleared your cookies (which happens a lot if you run an anti-virus program).

I think it’s time the “rest of the web” follows their lead. We rely on third-party advertising services (like FM) to power our sites. We live in uncertain times as it relates to regulation. And certainly we have direct relationships of trust with our audiences – or you wouldn’t be reading this far down the page. It’s time the independent web declares the value of our first-party relationships with audiences, and show the government – and our readers – that we have nothing to hide.

I plan to look into ways we might make easily available the code and language necessary to enact these policies. I’ll be back with more as I have it….

*Now, the other two terms bear some definition as well. I think it’s fair to say “consumer choice” means “give the consumer the ability to decide if they want their data used, and for what purposes,” and “third party marketing” means the use of data and display of commercial messages on a first party site by third-party companies – companies that are not the owner of the site or service you are using.

On Mayer, Yahoo!, and The (Other) Customer

By - July 18, 2012

Mayer at the Web 2 Summit, San Francisco

(image James Duncan Davidson)

I try to let big news percolate for a few days before weighing in, and it seems even more appropriate to follow that playbook when it came to the scrum around Marissa Mayer joining Yahoo.

Yes, I’ve known both Marissa Mayer (and Ross Levinsohn) professionally, for more than a decade, but so do many other folks, and it seems nearly all of them – Steven Levy and Kara Swisher intelligently among them – have weighed in, multiple times, on what this all means. If you want a rundown, just search for “Marissa Mayer” in Google News.

The coverage has taken its usual course from “Holy Shit!” to “What Will Happen to Ross?” to “Wait, Is Mayer Right for the Job” to “Here’s Our Advice/The Things That Need  to Be Fixed/What Mayer’s Focus Should Be” types of pieces.

This won’t really be any of those. Instead, I find myself thinking about the things I’ve not really seen much coverage of, at least in depth. And true to what I’ve spent a fair amount of time thinking about, they all come down to the intersection of media and technology, and the role marketing plays in that landscape.

When I spoke to Mayer after she was named CEO, I asked the question, almost as a joke – “So is Yahoo! a media or a technology company?” She was quick to respond that she just does not get the debate – of course it’s both. What matters, she pressed, is creating great products that surprise and delight Yahoo! customers.

I couldn’t agree more, yet there is an important nuance here – just who *are* Yahoo’s customers?

Let me step back here and posit something that might upset more than a few of you: Yahoo has two sets of customers, and of course the “end user” is one of them. But the other is the marketer.  And media companies – or “tech companies driven by media revenues,” or however else one might want to phrase it – sometimes ignore this fact at their peril.

I’ll let those of you who find such a statement anathema go ahead and click away – here’s a nice unicorn chaser if you’d like – or you can flame me in the comments (I do respond to most, as long as they’re in English and don’t employ more than the occasional insult).

But those of you who’ve continued to read probably know that I believe, deeply, that commercial publishing is a conversation between three key parties: The reader (or viewer), the publisher/content creator, and the marketer. And while it’s generally been true that this conversation has been all kinds of broken during much of the web’s history, the truth is, it needn’t be that way. Six years ago (!) I wrote a series of posts describing the rise of conversational media and imploring that marketers learn to join the conversation. I think it’s fair to say that this is happening, at scale.

Beyond the contributions of pioneers like Federated Media (yes, I had to plug us), the rise of “native” advertising formats is proof of this. Twitter’s promoted suite is one growing example, as is Facebook’s Sponsored Stories (and its attendant focus on getting brands to be true publishers on the Facebook platform). Pinterest, WordPress (in partnership with FM), and Tumblr are hard at work on “native” solutions for their services as well. All of these advertising solutions pale, however, in comparison to the original “native” advertising format of the Web: Google AdWords.

Many have pointed out that Mayer’s principle weakness, when compared to Levinsohn, is her lack of traditional media and marketing chops. I can say from very deep experience that the marketing business is very much a relationship business – CMOs and agency leaders live in a world driven by ideas, creative and content – and they want to know the people who they do business with, and trust them in a way that is difficult to model algorithmically. Mayer’s detractors point out that she’s not spent much time wooing Madison Avenue, or dealing with the inevitable headaches born of the complex, people-driven businesses that are agencies, marketing clients, and content partners.

While there is some truth in this criticism, I think it overlooks a few things. First and foremost, Mayer is a very fast study, and she already knows how important the traditional media business is to Yahoo. Hell, a quick overview of the company’s financials bears this out, as does a visit to any of its properties, which are dominated by advertising. Yahoo may have a lot of technology behind the covers, but its products are nearly all media products – content intended to gather an audience and provide a place for marketers to message to that audience. More than half of Yahoo’s revenues come from “display” advertising, most of the rest comes from search, which is also marketer driven.

Secondly, Mayer will be a big draw of talent, and not just engineering talent. She understands that if she can’t retain Levinsohn and/or his recent CRO Michael Barrett (I certainly hope she can), she’ll need to attract top tier media minds to the business. And I think she’ll succeed at doing just that.

But to me, the thing many are missing is that Mayer will bring her fanatical product focus to more than just Yahoo’s consumer-facing media offerings. She’ll also be staring at the company’s advertising products, and asking this simple question: How can we do better?

To answer that question, Mayer will need to do more than study the data (though of course, that will be important). She’ll need to sit down with a wide swath of Yahoo’s marketing customers and ask them what they want from their investment in her platform. She’ll hear an awful lot of conflicting advice, but it’s in the bricollage from all the feedback that the best ideas come out. Mayer can’t afford to immediately tack away from all those boxes and rectangles cluttering up the Yahoo! experience, nor should she – it turns out that display advertising does indeed work for marketers. But the larger question remains: Can we do better?

The answer lies in executing the subtle and ongoing iterative work of true digital publisher – improving the core product experience both sets of customers – consumers of the media experience, as well as marketers looking to be part of that experience in a more native fashion. And again, from a quick study of Yahoo’s products, there’s plenty of improvements to be made.

An important and related part of the work ahead for Mayer and her team will be deciding what role ad tech and search will play in Yahoo’s future. Despite purchasing Right Media back in 2007, Yahoo has never been seen as a leader in ad tech, and word on the street in the weeks prior to Mayer’s ascension was that Yahoo was about to outsource its ad technology platform to market leader Google. Of course, such a move is fraught with regulatory and business implications. And Mayer may well decide it’s in Yahoo’s best interest to invest in own its own destiny when it comes to the machine-driven world of ad serving and programmatic audience buying. But trust me, what Yahoo does here will be an extremely important directional indicator.

Which brings us to search. It’s been widely reported that Yahoo’s 2009 deal to outsource core search to Microsoft hasn’t worked out as well as either party wished it would. Given how important search is to Yahoo overall, and how deeply knowledgeable Mayer is in this particular field, I’d expect big changes in Yahoo Search. The company recently unveiled a new search product called “Axis,” which seems like a neat idea but feels a bit too complicated for most consumers to really grok. Mayer will likely take Occam’s Razor to search, and I expect the results will be quite positive.

But it’s the other side of Yahoo’s revenue equation – the branded display market – where Mayer will face her greatest challenges, and find her biggest opportunities. Yahoo isn’t a startup like Pinterest, Tumblr,  or even Twitter, where founders can leverage massive user growth to raise enough capital to “figure out how best to implement appropriate native marketing solutions.” Yahoo is nearly 20 years old, and it’s got a very deep, tangled, and somewhat tarnished brand in the minds of its best advertising customers. It’s true that creating world-beating consumer-facing products will go a long way toward fixing that brand. But those products must be informed by – and even created for – both sets of customers – the consumers of content, as well as those who pay for them to be created in the first place.

The Nexus 7 and The Cloud Commit Conundrum: Google Wins (For Now)

By - July 13, 2012

Google was kind enough to send me a Nexus 7 tablet to play with last month, and over the past week or so I’ve had the chance to actually put it to use. Even though I own an iPad, I have serious reservations about the constraints of Apple’s iOS ecosystem (more on that below), so I was eager to see how Google’s alternative performed.

Now, before I get into details, I want to state what I think really matters here: The Nexus device – and others like it – represent a play for something extremely valuable: a hard-wired digital portal to our hearts, minds, and wallets. As I’ve written elsewhere, there are five major companies deeply engaged in this play – Amazon, Google, Facebook, Microsoft, and Apple. All of these companies want us to commit to their services as the basis of our digital lives – how we consume media and entertainment, how we manage our work and personal lives, where we store our most important information (including our money), and of course, how we declare who we are and what we believe (our identity). The more these companies can get us to upload our music, videos, photos, identities, purchases, browsing behaviors, etc. etc. etc. into their nebulae, the more they’ve locked us into a lifetime relationship of revenue and profit.

Put in that frame, your choice of tablet or phone is about much more than feeds and speeds or features and prices (for all that, see this Engadget review). It becomes a choice about what kind of a company you want as a partner in your digital life. Will the company let you export your data easily to other services? Will it be transparent about how your data is used? Will it have the guts to stand up to bad actors, whether they be governments or other corporations? Will the company create dashboards where you can see, edit, delete, and contest how your data is displayed?

In short, will the company be a good partner in your digital life? If you’re going to upload your digital doppelganger into this company’s servers, can you trust it? I call this choice the “Cloud Commit Conundrum,” and I’ll be writing about it more in the coming months.

For now, I’ll just say this: while Google is far from perfect on any number of fronts, it comes far closer than any other in embracing a philosophy that I feel I can trust when it comes to the cloud commitment conundrum. To wit: The Google Transparency Report. Further: The Data Liberation Front. And further, the open (and yes, messy) nature of Android. Lastly, I believe Google’s founding DNA is as a product of the open web, and its founders have a deep commitment to that idea, even as we enter a rather cloudy era of closed, non-generative systems and walled gardens.

But up till now, Google hadn’t really “wowed” me with a product that I felt I could really get behind.

No more. I’m not a hardcore tablet user, but I might become one thanks to this device. I found the iPad to be too large and heavy to use comfortably in casual situations (like reading in bed, for example), and too limited to use as a replacement for my laptop. By comparison, the Nexus 7 is just the right size for use anywhere – it’s very similar in size to my daughter’s Kindle Fire, but lighter.

But what I like about the Nexus is how good it is for all those lightweight web-connected tasks I want to execute on the run. I find web browsing, checking multiple email accounts, and Google mapping rather tiresome on an iPhone – the iPhone’s native interface, for all its supposed perfection, has all kinds of wrong baked in – and the screen is just far too small. The Nexus 7 is about the same size as a Moleskin notebook, and  it just *feels* like the right form factor for doing all those things you want to do on a smart phone, but can’t quite do in the right way.  It’s not too big, and not too small – just right.

It’s also very responsive, and has plentiful access to apps and content (Google is a bit aggressive in how it promotes its Play store – but it’s very easy to remove the Play clutter and customize your own experience). So far, it doesn’t have cellular service, but I expect that will come soon. The wifi works great, and I barely missed a beat this week in New York – seems there was open wifi just about anywhere I went.

I think Google has a winner on its hands here – and the $200 price point makes the Nexus a clear competitor to not only Amazon’s more limited $200 Fire, but to the more expensive and clunkier iPad.

I’m going to go out on a limb here and predict Apple will ship a 7-inch version of its iPad soon, at a similar price point. If it does, I’m sure it’ll be a strong competitor to the Nexus 7. But for me, the tiebreaker comes down to the cloud commit conundrum. And the winner there, so far anyway, is clearly Google.

Anyone in the market for a slightly used iPad 2?

(cloud image via Shutterstock)

Google’s “Mute” Button: Why Didn’t I Think Of That? Oh, Wait…

By - June 30, 2012

One of my pet peeves about our industry is how slowly we change – I understand it takes a long time to gather consensus (it took three years to get AdChoices rolled out, for example) – but man, why don’t the big players, like Google, innovate a bit more when it comes to display advertising?

Well, yesterday Google did just that, announcing a “mute this ad” feature that it will roll out across its network over the next few months. The feature does what you might expect it to do – it stops a particular ad from “following” you around the web. It will look like this:

 

As you can see, the “mute this ad” is right next to the AdChoice icon, adding a bit more clutter to the creative, but also, more control for consumers, in particular those who find the practice of “retargeting” irritating.

All I can say is, it’s about time. Back in August of 2010, I wrote about my own experience: On Retargeting: Fix The Conversation. In the post, I suggested:

…as I’ve said a million times, marketing is a conversation. And retargeted ads are part of that conversation. I’d like to suggest that retargeted ads acknowledge, with a simple graphic in a consistent place, that they are in fact a retargeted ad, and offer the consumer a chance to tell the advertiser “Thanks, but for now I’m not interested.” Then the ad goes away, and a new one would show up.

Well, it looks like Google has gotten with the program. Of course, Facebook already has that “X” on all of its display ads, but so far, retargeting hasn’t come to Facebook – yet. Watch that space, because I gotta believe it will soon.

Facebook’s Real Question: What’s the “Native Model”?

By - May 23, 2012

 

The headlines about Facebook’s IPO – along with questions about its business model – are now officially cringeworthy. It’s an ongoing, rolling study in how society digests important news about our industry, and it’s far from played out. But we seem at an interesting tipping point in perception, and now seemed a good time to weigh in with a few words on the subject.

Prior to Facebook’s IPO, I drafted a post about its core business model (targeted display advertising), but decided not to publish it. The main thrust of my post is below, but I want to explain why I didn’t post right away, and provide you all with something of a “tick tock” of what’s happened over the past few days.

The truth is, I didn’t post last week because I didn’t feel like piling on to what was becoming a media frenzy. Less than 24 hours before the biggest Internet IPO in history, the negative stories questioning Facebook’s core revenue model were coming fast and furious. My piece wasn’t negative, per se, its intention was to be thoughtful. And in the face of a media scrum, I often pull back until the dust settles. (There’s a media business in there somewhere, but I digress).

I figured I’d wait till Monday. Things would have settled down by then…

Well, that didn’t happen. Compared to Google’s IPO, which was controversial for very different reasons (they ran a “modified auction,” remember?), the Facebook IPO is quickly becoming the biggest story in tech so far this year. And unfortunately for the good people at Facebook, it’s not a positive one.

The starting gun of Facebook’s IPO woes was the news that GM planned to pull its $10 million spend - but would continue to invest around $30 million in maintaining its Facebook “presence.” Interestingly, that $30 million was not going to Facebook, but rather to GM’s agency and other partners. I’m not sure how that $30 million is spent – that’s a lot of cheddar to have a presence anywhere (you could build about 15 Instagrams with that kind of money, for example). But most have speculated it goes to staffing social media experts and working with companies like Buddy Media, buying “likes” through third party ad networks, and maintaining a burgeoning amount of content to feed GM’s myriad and increasingly sophisticated presence on the site.

Now, some folks have said the reason GM pulled its ads were because the auto giant failed to understand how to market on Facebook – but if that’s true, I’m not sure it’s entirely GM’s fault. Regardless, since the original WSJ piece came out, a raft of pieces questioning Facebook’s money machine have appeared, and they mostly say the same thing. Here’s last week’s New York Times, for example (titled Ahead of Facebook I.P.O., a Skeptical Madison Ave):

“It’s one of the most powerful branding mechanisms in the world, but it’s not an advertising mechanism,” said Martin Sorrell, chief executive of WPP, the giant advertising agency.

“Facebook’s a silo,” said Darren Herman, the chief digital media officer at the Media Kitchen, an agency that helps clients on Facebook. “It is very hard to understand the efficacy of what a Facebook like, or fan or follow is worth.”

It seems, just ahead of the IPO, folks were realizing that Facebook doesn’t work like Google, or the web at large. It’s a service layered on top of the Web, and it has its own rules, its own ecosystem, and its own “native advertising platform.” In the run up to the IPO, a lot of folks began questioning whether that platform stands the test of time.

I’ll have more thoughts on that below, after a quick review of the past few days in FacebookLand.

What Just Happened?!

As I outlined above, Facebook faced a building storyline about the efficacy of  its core revenue model, right before the opening bell. Not a good start, but then again, not unusual for a company going public.

One of the inevitabilities of negative news about a company is that it begets more negativity – people start to look for patterns that might prove that the initial bad news was just the tip of an iceberg. When word came out last week that demand for the stock was so high that insiders planned to sell even more  shares at the open, many industry folks I spoke to began to wonder if the “greater fool” theory was kicking in. In other words, these people wondered, if the bankers and early investors in Facebook were increasing the number of shares they were selling at the outset, perhaps they knew something the general public didn’t – maybe they thought that $38 was as high as the stock was going to get – at least for a while.

Clearly, those industry folks were talking to more than just me. The press started questioning the increase. As Bloomberg reported at the time: “…insiders’ decision to pare holdings further may heighten some investors’ concern over Facebook’s earnings growth, said Greenwood Capital’s Walter Todd.”

That quote would prove prescient.

As Facebook opened trading last Friday, the stock instantly shot up – always taken as a good sign – but then it began to sink. Were it not for significant supportive buying by the offering’s lead banker, the stock would have closed below its opening price, an embarrassing signal that the offering was poorly handled. Facebook closed its first day of trading up marginally – not exactly the rocketship that many expected (a crowdsourced site predicted it would soar to $54, for example).

Then things got really bad. Over the weekend, officials at NASDAQ, the exchange where Facebook debuted, admitted they bungled the stock’s opening trades due to the massive demand, citing technical and other issues. Monday, the Wall Street Journal, among many others, questioned Morgan Stanley’s support of the stock. To make matters worse, the stock slid to around $34 by the end of the day.  A frenzy of media coverage erupted – including a number of extraordinary allegations, first made late Monday evening, around insider information provided verbally to institutional investors but not disclosed to the public. That information included concerns that Facebook’s ad revenues were not growing as quickly as first thought, and that mobile usage, where Facebook’s monetization is weak, was exploding, exposing another hole in the company’s revenue model.

In other words, what my industry sources suspected might have been true  - that insiders knew something, and decided to get out when the getting was good – may have been what really happened. True or not, such a story taints the offering considerably.

Predictably, those allegations have spawned calls for investigations by regulatory authorities and lawsuits or subpoenas by individual investors as well as the state of Massachusetts. On Tuesday, the stock sank again, closing at near $31, $7 off its opening price and more than $10 off its high point on opening day.

Not exactly a honeymoon for new public company CEO Mark Zuckerberg, who got married last Sunday to his college sweetheart. Today’s early trading must provide at least some comfort – Facebook is trading a bit up, in the $32 range, a price that many financial news outlets reported as the number most sophisticated investors felt was correct in the first place.

Is the worst of it over for Facebook’s IPO? I have no idea. But the core of the issue is what’s most interesting to me.

Stepping Back: What’s This Really All About?

Facebook is  a very large, very profitable company and I am sure it will find its feet. I’m not a stock analyst, and I’m not going to try to predict whether or not the company is properly valued at any price.

But I do have a few thoughts about the underlying questions that are driving this whole fracas – Facebook’s revenue model.

Facebook makes 82% of its money by selling targeted display advertising – boxes on the top and right side of the site (it’s recently added ads at logout, and in newsfeeds). Not a particularly unique model on its face, but certainly unique underneath: Because Facebook knows so much about each person on its service, it can target in ways Google and others can only dream about. Over the years, Facebook has added new advertising products based on the unique identity, interest, and relationship data it owns: Advertisers can incorporate the fact that a friend of a friend “likes” a product, for example. Or they can incorporate their own marketing content into their ads, a practice known as “conversational marketing” that I’ve been on about for seven or so years (for more on that, see my post Conversational Marketing Is Hot – Again. Thanks Facebook!).

But as many have pointed out, Facebook’s approach to advertising has a problem: People don’t (yet) come to Facebook with the intention of consuming quality content (as they do with media sites), or finding an answer to a question (as they do at Google search). Yet Facebook’s ad system combines both those models – it employs a display ad unit (the foundation of brand-driven media sites) as well as a sophisticated ad-buying platform that’d be familiar to anyone who’s ever used Google AdWords.

I’m not sure how many advertisers use Facebook, but it’s probably a fair guess to say the number approaches or crosses the hundreds of thousands. That’s about how many used Overture and Google a decade ago. The big question is simply this: Do those Facebook ads work as well or better than other approaches? If the answer is yes, the question of valuation is rather moot. If the answer is no…Facebook’s got some work to do.

No such question hung over Google upon its stock debut. AdWords worked. People came to search with clear intent, and if you, as an advertiser, could match your product or service to that intent, you won. You’d put as much money as you could into the Google machine, because profit came out the other side. It was an entirely new model for advertising.

I think it’s fair to say the same is not yet true for Facebook’s native advertising solution. And that’s really what Facebook Ads are: the biggest example of a platform-specific “native advertising” play since Google AdWords broke out ten years ago.

But it’s not clear that Facebook’s ad platform works better than any number of other alternatives. For brand advertisers, those large “rising star” units, replete with video capabilities and rich contextual placements, are a damn good option, and increasingly affordable. And if an advertiser wants to message at the point of intent, well, that’s what Google (and Bing) are for.

It’s astonishing how quickly Facebook has gotten to $4billion in revenue – but at the end of the day, marketers must justify their spend. Sure, it makes sense to engage on a platform where nearly a billion people spend hours each month. But the question remains – how do you engage, and who do you pay for that engagement? Facebook is huge, and terribly successful at engaging its users. But what GM seems to have realized is that it can engage all day long on Facebook, without having to pay Facebook for the privilege of doing so. Perhaps the question can be rephrased this way: Has Facebook figured out how to deliver marketers long-term value creation?  The jury seems out on that one.

Now that Facebook is public, it will face relentless pressure to convince that jury, which now demonstrates its vote via a real time stock price. That pressure could force potentially new and more intrusive ad units, and/or new approaches to monetization we’ve yet to see, including, as I predicted in January, a web-wide display network driven by Facebook data.

As Chris Dixon wrote earlier in the month:

The key question when trying to value Facebook’s stock is: can they find another business model that generates significantly more revenue per user without hurting the user experience?

A good question, and one I can only imagine folks at Facebook are pondering at the moment. Currently, Facebook’s ads are, in the majority, stuck in a model that doesn’t feel truly native to how people actually use the service. Can Facebook come up with a better solution? Integration of ad units into newsfeeds is one approach that bears watching (it reminds me of Twitter’s approach, for example), but I’m not sure that’s enough to feed a $4billion beast.

These questions are fascinating to consider – in particular in light of the “native monetization” craze sweeping other platforms like Tumblr, Twitter, Pinterest, and others. As I’ve argued elsewhere, unique approaches to marketing work only if they prove a return on total investment, including the cost of creating, optimizing, and supporting those native ad units when compared to other marketing approaches. Facebook clearly has the heft, and now the cash, to spend considerable resources to prove its approach. I can’t wait to see what happens next.

The Internet Big Five: Up $272 Billion in Six Months

By - May 17, 2012

Last December I posted on “The Internet Big Five,” noting their relative strengths and the market cap of each. Since that time, the Five have only gotten stronger, adding a cumulative $272 billion in market cap (much of that is Apple, but Amazon and Facebook – assuming the offering does as expected on Friday – have also increased quite a bit). All in all, nearly 30% increase in value for these five companies – sort of makes me wish I was an investor, rather than a writer and entrepreneur.

I’ll also check the number of engaged users for each platform, to see if there are any significant shifts, though I don’t recall seeing any in the news recently (save Facebook crossing 900 million users). It is interesting to note that Facebook, should it hold its supposed valuation, will be more highly valued than Amazon.

A reminder as to why I’ve made a point of watching the Big Five, from my original and secondary posts:

..there’s more to the selection of this Big Five than just market cap. In fact, there are four main criteria for making it into the Big Five.

First, as I began to describe above, the companies must have financial heft, both in terms of large equity capitalizations, significant cash on hand, and a defensible core profit making machine. This gives them the ability to throw their weight around: they can make strategic acquisitions (like Google’s acquisition of Motorola), and they can leverage their profit centers and cash positions in any number of ways that offer them flexibility to play the corporate game at the very highest levels.

Second, the companies must have scale in terms of direct reach to consumers. By this I mean their brands are used as meaningful platforms by hundreds of millions of people on a frequent basis.

Third, the companies must have deep engagement with those consumers, the kind of engagement that builds brand and creates massive stores of useful data. The relationship between the brand and its customer has to be meaningful and consistent (therefore creating permission to extract a premium and offer new products and services). It takes an ongoing service relationship for such engagement to occur….

 

More on the product strength of the Big Five here.

 

The Audacity of Diaspora

By - May 13, 2012

Last Friday Businessweek ran a story on Diaspora, a social platform built from what might be called Facebook anti-matter. It’s a great read that chronicles the project’s extraordinary highs and lows, from Pebble-like Kickstarter success to the loss of a founder to suicide. Given the overwhelming hype around Facebook’s IPO this week, it’s worth remembering such a thing exists – and even though it’s in private beta, Diaspora is one of the largest open source projects going right now, and boasts around 600,000 beta testers.

I’ve watched Diaspora from the sidelines, but anyone who reads this site regularly will know that I’m rooting for it. I was surprised – and pleased – to find out that Diaspora is executing something of a “pivot” – retaining its core philosophy of being a federated platform where “you own your own data” while at the same time adding new Tumblr and Pinterest-like content management features, as well as integration with – gasp! – Facebook.  And this summer, the core team behind the service is joining Y Combinator in the Valley – a move that is sure to accelerate its service from private beta to public platform.

I like Diaspora because it’s audacious, it’s driven by passion, and it’s very, very hard to do. After all, who in their right mind would set as a goal taking on Facebook? That’s sort of like deciding to build a better search engine – very expensive, with a high likelihood of failure. But what’s really audacious is the vision that drives Diaspora – that everyone owns their own data, and everyone has the right to do with it what they want. The vision is supported by a federated technology platform – and once you federate, you lose central control as a business. Then, business models get very, very hard. So you’re not only competing against Facebook, you’re also competing against the reality of the marketplace – centralized domains are winning right now (as I pointed out here).

It seems what Diaspora is attempting to do is take the functionality and delight of the dependent web, and mix it with the freedom and choice offered by the independent web. Of course, that sounds pretty darm good to me.

Given the timing of Facebook’s public debut, the move to Y Combinator, and perhaps just my own gut feel, I think Diaspora is one to watch in coming months. As of two days ago, the site is taking registrations for its public debut. Sign up here.

Larry Lessig on Facebook, Apple, and the Future of “Code”

By - May 09, 2012

Larry Lessig is an accomplished author, lawyer, and professor, and until recently, was one of the leading active public intellectuals in the Internet space. But as I wrote in my review of his last book (Is Our Republic Lost?), in the past few years Lessig has changed his focus from Internet law to reforming our federal government.

But that doesn’t mean Lessig has stopped thinking about our industry, as the dialog below will attest. Our conversation came about last month after I finished reading Code and Other Laws of Cyberspace, Version 2. The original book, written in 1999, is still considered an authoritative text on how the code of computing platforms interacts with our legal and social codes. In 2006, Lessig “crowdsourced” an update to his book, and released it as “Version 2.0.” I’d never read the updated work (and honestly didn’t remember the details of the first book), so finally, six years later, I dove in again.

It’s a worthy dive, but not an easy one. Lessig is a lawyer by nature, and his argument is laid out like proofs in a case. Narrative is sparse, and structure sometimes trumps writing style. But his essential point – that the Internet is not some open “wild west” destined to always be free of regulation, is soundly made. In fact, Lessig argues, the Internet is quite possibly the most regulable technology ever invented, and if we don’t realize that fact, and protect ourselves from it, we’re in for some serious pain down the road. And for Lessig, the government isn’t the only potential regulator. Instead, Lessig argues, commercial interests may become the most pervasive regulators on the Internet.

Indeed, during the seven years between Code’s first version and its second, much had occurred to prove Lessig’s point. But even as Lessig was putting the finishing touches on the second version of his manuscript, a new force was erupting from the open web: Facebook. And a year after that, the iPhone redefined the Internet once again.

In Code, Lessig enumerates several examples of how online services create explicit codes of control – including the early AOL, Second Life, and many others. He takes the reader though important lessons in understanding regulation as more than just governmental – explaining normative (social), market (commercial), and code-based (technological) regulation. He warns that once we commit our lives to commercial services that hold our identity, a major breach of security will most likely force the government into enacting overzealous and anti-constitutional measures (think 9/11 and the Patriot Act). He makes a case for the proactive creation of an intelligent identity layer for the Internet, one that might offer just the right amount of information for the task at hand. In 2006, such an identity layer was a controversial idea – no one wanted the government, for example, to control identity on the web.

But for reasons we’re still parsing as a culture, in the six years since the publication of Code v2, nearly 1 billion of us have become comfortable with Facebook as our defacto identity, and hundreds of millions of us have become inhabitants of Apple’s iOS.

Instead of going into more detail on the book (as I have in many other reviews), I thought I’d reach out to Lessig and ask him about this turn of events. Below is a lightly edited transcript of our dialog. I think you’ll find it provocative.

As to the book: If you consider yourself active in the core issues of the Internet industry, do yourself a favor and read it. It’s worth your time.

Q: After reading your updated Code v2, which among many other things discusses how easily the Internet might become far more regulated than it once was, I found myself scribbling one word in the margins over and over again. That word was “Facebook.”

You and your community updated your 1999 classic in 2006, a year or two before Facebook broke out, and several years before it became the force it is now. In Code you cover the regulatory architectures of places where people gather online, including MUDS, AOL, and the then-hot darling known as Second Life. But the word Facebook isn’t in the text.

What do you make of Facebook, given the framework of Code v2?

Lessig: If I were writing Code v3, there’d be a chapter — right after I explained the way (1) code regulates, and (2) commerce will use code to regulate — titled: “See, e.g., Facebook.” For it strikes me that no phenomena since 2006 better demonstrates precisely the dynamic I was trying to describe. The platform is dominant, and built into the platform are a million ways in which behavior is regulated. And among those million ways are 10 million instances of code being use to give to Facebook a kind of value that without code couldn’t be realized. Hundreds of millions from across the world live “in” Facebook. It more directly (regulating behavior) than any government structures and regulates their lives while there. There are of course limits to what Facebook can do. But the limits depend upon what users see. And Facebook has not yet committed itself to the kind of transparency that should give people confidence. Nor has it tied itself to the earlier and enabling values of the internet, whether open source or free culture.

Q: Jonathan Zittrain wrote his book two years after Code v2, and warned of non-generative systems that might destroy the original values of the Internet. Since then, Apple iOS (the “iWorld”) and Facebook have blossomed, and show no signs of slowing down. Do you believe we’re in a pendulum swing, or are you more pessimistic – that consumers are voting with their dollars, devices, and data for a more closed ecosystem?

Lessig: The trend JZ identified is profound and accelerating, and most of us who celebrate the “free and open” net are simply in denial. Facebook now lives oblivious to the values of open source software, or free culture. Apple has fully normalized the iNannyState. And unless Google’s Android demonstrates how open can coexist with secure, I fear the push away from our past will only continue. And then when our i9/11 event happens — meaning simply a significant and destructive cyber event, not necessarily tied to any particular terrorist group — the political will to return to control will be almost irresistible.

The tragedy in all this is that it doesn’t have to be this way. If we could push to a better identity layer in the net, we could get both better privacy and better security. But neither side in this extremist’s battle is willing to take the first step towards this obvious solution. And so in the end I fear the extremists I like least will win.

Q: You seem profoundly disappointed in our industry. What can folks who want to make a change do?

Lessig: Not at all. The industry is doing what industry does best — doing well, given the rules as they are. What industry is never good at (and is sometimes quite evil at) is identifying the best mix of rules. Government is supposed to do something with that. Our problem is that we have today such a fundamentally dysfunctional government that we don’t even recognize the idea that it might have a useful role here. So we get stuck in these policy-dead-ends, with enormous gains to both sides left on the table.

And that’s only to speak about the hard problems — which security in the Net is. Much worse (and more frustrating) are the easy problems which the government also can’t solve, not because the answer isn’t clear (again, these are the easy problems) but because the incumbents are so effective at blocking the answer that makes more sense so as to preserve the answer that makes them more dollars. Think about the “copyright wars” — practically every sane soul is now focused on a resolution of that war that is almost precisely what the disinterested souls were arguing a dozen years ago (editor’s note: abolishing DRM). Yet the short-termism of the industry wouldn’t allow those answers a dozen years ago, so we have had an completely useless war which has benefited no one (save the lawyers-as-soldiers in that war). We’ve lost a decade of competitive innovation in ways to spur and spread content in ways that would ultimately benefit creators, because the dinosaurs owned the lobbyists.

—-

I could have gone on for some time with Lessig, but I wanted to stop there, and invite your questions in the comments section. Lessig is pretty busy with his current work, which focuses on those lobbyists and the culture of money in Congress, but if he can find the time, he’ll respond to your questions in the comments below, or to me in email, and I’ll update the post.

###

Other works I’ve reviewed: 

You Are Not A Gadget by Jaron Lanier (review)

Wikileaks And the Age of Transparency  by Micah Sifry (review)

Republic Lost by Larry Lessig (review)

Where Good Ideas Come From: A Natural History of Innovation by Steven Johnson (my review)

The Singularity Is Near: When Humans Transcend Biology by Ray Kurzweil (my review)

The Corporation (film – my review).

What Technology Wants by Kevin Kelly (my review)

Alone Together: Why We Expect More from Technology and Less from Each Other by Sherry Turkle (my review)

The Information: A History, a Theory, a Flood by James Gleick (my review)

In The Plex: How Google Thinks, Works, and Shapes Our Lives by Steven Levy (my review)

The Future of the Internet–And How to Stop It by Jonathan Zittrain (my review)

The Next 100 Years: A Forecast for the 21st Century by George Friedman (my review)

Physics of the Future: How Science Will Shape Human Destiny and Our Daily Lives by the Year 2100 by Michio Kaku (my review)

On Thneeds and the “Death of Display”

By - May 07, 2012

It’s all over the news these days: Display advertising is dead. Or put more accurately, the world of “boxes and rectangles” is dead. No one pays attention to banner ads, the reasoning goes, and the model never really worked in the first place (except for direct response). Brand marketers are demanding more for their money, and “standard display” is simply not delivering. After nearly 20 years*, it’s time to bury the banner, and move on to….

…well, to something else. Mostly, if you believe the valuations these days, to big platforms that have their own proprietary ad systems.

All over the industry, you’ll find celebration of new advertising-driven platforms that have eschewed the “boxes and rectangles” model. Twitter makes money off its native “promoted” suite of marketing tools. Tumblr just this week rolled out a similar offering. Pinterest recently hired Facebook’s original monetization wizard to create its own advertising model, separate from standard display. And of course there’s Facebook, which has gone so far as to call its new products “Featured Stories” (as opposed to “Ads” – which is what they are.) Lastly, we mustn’t forget the grandaddy of native advertising platforms, Google, whose search ads redefined the playing field more than a decade ago (although AdSense, it must be said, is very much in the “standard display” business).

Together, these platforms comprise what I’ve come to call the “dependent web,” and they live in a symbiotic relationship with what I call the “independent web.”

But there’s a very big difference between the two when it comes to revenue and perceived value. Dependent web companies are, in short, killing it. Facebook is about to go public at a valuation of $100 billion. Twitter is valued at close to $10 billion. Pinterest is rumored to be worth $4 billion, and who knows what Tumblr’s worth now – it was nearly $1 billion, on close to no revenues, last Fall. And of course Google has a market cap of around $200 billion.

Independent web publishers? With a few exceptions, they’re not killing it. They aren’t massively scaled platforms, after all, they’re often one or two person shops. If “display is dead,” then, well – they’re getting killed.

That’s because, again with few exceptions, independent web sites rely on the “standard display” model to scratch out at least part of a living. And that standard display model was not built to leverage the value of great content sites: engagement with audience. Boxes and rectangles on the side or top of a website simply do not deliver against brand advertising goals. Like it or not, boxes and rectangles have for the most part become the province of direct response advertising, or brand advertising that pays, on average, as if it’s driven by direct response metrics. And unless you’re running a high-traffic site about asbestos lawsuits, that just doesn’t pay the bills for content sites.

Hence, the rolling declaration of display’s death – often by independent industry news sites plastered with banners, boxes and rectangles.

But I don’t think online display is dead. It just needs to be rethought, re-engineered, and reborn. Easy, right?

Well, no, because brand marketers want scale and proof of ROI – and given that any new idea in display has to break out of the box-and-rectangle model first, we’ve got a chicken and egg problem with both scale and proof of value.

But I’ve noticed some promising sprigs of green pushing through the earth of late. First of all, let’s not forget the growth and success of programmatic buying across those “boxes and rectangles.” Using data and real time bidding, demand- and supply-side platforms are growing very quickly, and while the average CPM is low, there is a lot of promise in these new services – so much so, that FMP recently joined forces with one of the best, Lijit Networks. Another promising development is the video interstitial. Once anathema to nearly every publisher on the planet, this full page unit is now standard on the New York Times, Wired, Forbes, and countless other publishing sites. And while audiences may balk at seeing a full-page video ad after clicking from a search engine or other referring agent, the fact is, skipping the ad is about as hard as turning the page in a magazine. And in magazines, full page ads work for marketers.

Another is what many are now calling “native advertising” (sure to be confused with Twitter, Tumblr, and others’ native advertising solutions…) Over at Digiday, which has been doing a bang up job covering the display story, you’ll see debate about the growth of  publisher-based “native advertising units,” which are units that run in the editorial well, and are often populated with advertiser-sponsored content. FMP has been doing this kind of advertising for nearly three years, and of course it pioneered the concept of content marketing back in 2006. The key to success here, we’ve found, is getting context right, at scale, and of course providing transparency (IE, don’t try to fool an audience, they’re far smarter than that.)

And lastly, there are the new “Rising Star” units from the IAB (where I am a board member). These are, put quite simply, reimagined, larger and more interactive boxes and rectangles. A good step, but not a panacea.

So as much as I am rooting for these new approaches to display, and expect that they will start to be combined in ways that really pay off for publishers, they have a limitation: they’re focused on what I’ll call a “site-specific” model: for a publisher to get rewarded for creating great content, that publisher must endeavor to bring visitors to their site so those visitors can see the ads.  If we look toward the future, that’s not going to be enough. In an ideal Internet world, great content is rewarded for being shared, reposted,  viewed elsewhere and yes, even “liked.”

Up to now, that reward has had one single currency: Traffic back to the site.

Think of the largest referrers of traffic to the “rest of the web” – who are they? Yep – the very same companies with huge valuations – Google, Facebook, Twitter, and now Pinterest. What do they have in common? They’ve figured out a way to leverage the content created by the “rest of the web” and resell it to marketers at scale and for value (or, at least VCs believe they will soon). It’s always been an implicit deal, starting with search and moving into social: We cull, curate, and leverage your content, and in return, we’ll send traffic back to your site.

But given that we’re in for an extended transition from boxes and rectangles to ideas that, we hope, are better over time, well, that traffic deal just isn’t enough. It’s time to imagine bigger things.

Before we do, let’s step back for a moment and consider the independent web site. The…content creator. The web publisher. The talent, if you will. The person with a voice, an audience, a community. The hundreds of thousands (millions, really) of folks who, for good or bad, have plastered banners all over their site in the hope that perhaps the checks might get a bit bigger next month. (Of course this includes traditional media sites, like publishers who made their nut in print, for example). To me, these people comprise the equivalent of forests in the Internet’s ecosystem. They create the oxygen that feeds much of our world: Great content, great engagement, and great audiences.

Perhaps I’m becoming a cranky old man, a Lorax, if you must, but I’m going to jump up on a stump right now and say it: curation-based platform models that harvest the work of great content creators, creating “Thneeds” along the way, are failing to see the forest for the trees. Their quid pro quo deal to “send more traffic” ain’t enough.**

It’s time that content creators derived real value from the platforms they feed. A new model is needed, and if one doesn’t emerge (or is obstructed by the terms of service of large platforms), I worry about the future of the open web itself. If we, as an industry, don’t get just a wee bit better at taking care of content creators, we’re going to destroy our own ecosystem – and we’ll watch the Pinterests, Twitters, and yes, even the Google and Facebooks of the world deteriorate for lack of new content to curate.

Put another way: Unless someone cares, a whole awful lot…it isn’t going to get better. It’s not.

Cough.

So I’m here to say not only do I care, so do the hundreds of people working at Federated Media Publishing and Lijit, and at a burgeoning ecosystem of companies, publishers, and marketers who are coming to realize it’s time to wake up from our “standard display” dream and create some new models. It’s not the big platforms’ job to create that model – but it will be their job to not stand in the way of it.

So what might a new approach look like? Well first and foremost, it doesn’t mean abandoning the site-specific approach. Instead, I suggest we augment that revenue stream with another, one that ties individual “atomic units” of content to similar “atomic units” of marketing messaging, so that together they can travel the Seussian highways of the social web with a business model intact.

Because if the traffic referral game has proven anything to us as publishers, it’s that great content doesn’t want to be bound to one site. The rise of Pinterest, among others, proves this fact. Ideally, content should be shared, mixed, mashed, and reposted – it wants to flow through the Internet like water. This was the point of RSS, after all – a technology that has actually been declared dead more often than the lowly display banner. (For those of you too young to recall RSS, it’s a technology that allows publishers to share their content as “feeds” to any third party.)

RSS has, in the main, “failed” as a commercial entity because publishers realized they couldn’t make money by allowing people to consume their content “offsite.” The tyranny of the site-specific model forced most commercial publishers to use RSS only for display of headlines and snippets of text – bait, if you will, to bring audiences back to the site.

I’ve written about the implications of RSS and its death over and over again, because I love its goal of weaving content throughout the Internet. But and each time I’ve considered RSS, I’ve found myself wanting for a solution to its ills. I love the idea of content flowing any and everywhere around the Internet, but I also understand and sympathize with the content creator’s dilemma: If my content is scattered to the Internet’s winds, consumed on far continents with no remuneration to me, I can’t make a living as a content creator. So it’s no wonder that the creator swallows hard, and limits her RSS feed in the hopes that traffic will rise on her site (a few intrepid souls, like me, keep their RSS feeds “full text.” But I don’t rely on this site, directly, to make a living.)

So let’s review. We now have three broken or limping models in independent Internet publishing: the traffic-hungry site-specific content model, the “standard display” model upon which it depends, and the RSS model, which failed due to lack of “monetization.”

But inside this seeming mess, if you stare long and hard enough, there are answers staring back at you. In short, it’s time to leverage the big platforms for more than just traffic. It’s time to do what the biggest holders of IP (the film and TV folks) have already done – go where the money is. But this time, the approach needs to be different.

I’ve already hinted at it above: Wrap content with appropriate underwriting, and set it free to roam the Internet. Of course, such a system will have to navigate business process rules (the platforms’ Terms of Service), and break free of scale and ROI constraints. I believe this can be done.

But given that I’m already at 2500 words, I think I’ll be writing about that approach in a future post. Stay tuned, and remember – “Unless….”

———

*As a co-founder of Wired, I had a small part to play in the banner’s birth – the first banner ran on HotWired in 1994. It had a 78% clickthrough rate. 

**Using ad networks, the average small publisher earns about seventy-five cents per thousand on her display ads. Let’s do the math. Let’s say Molly the Scone Blogger gets an average of 50,000 page views a month, pretty good for a food blogger. We know the average ad network pays about 65 to 85 cents per thousand page views at the moment (for reasons explained above, despite the continuing focus of the industrial ad technology complex, which is working to raise those prices with data and context). And let’s say Molly puts two ads per page on her site. That means she has one hundred “thousands” to sell, at around 75 cents a thousand. This means Molly gets a check for about $75 each month. Now, Molly loves her site, and loves her audience and community, and wants to make enough to do it more. Since her only leverage is increased traffic, she will labor at Pinterest, Twitter, Facebook, and Google+, promoting her content and doing her best to gain more audience.

Perhaps she can double her traffic, and her monthly income might go from $75 to $150. That helps with the groceries, but it’s a terrible return on invested time. So what might Molly do? Well, if she can’t join a higher-paying network like FMP, she may well decide to abandon content creation all together. And when she stops investing in her own site, guess what happens? She’s not creating new content for Pinterest, Twitter, Facebook and Google to harvest, and she’s not using those platforms to distribute her content.

For the past seven years, it’s been FMP’s business to get people like Molly paid a lot more than 75 cents per thousand audience members. We’re proud of the hundred plus million dollars we’ve injected into the Independent web, but I have to be honest with you. There are way more Mollys in the world than FMP can help – at least under current industry conditions. And while we’ve innovated like crazy to create value beyond standard banners, it’s going to take more to insure content creators get paid appropriately. It’s time to think outside the box.

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Special thanks to folks who have been helping me think through this issue, including Deanna Brown and the FMP team, Randall Rothenberg of the IAB, Brian Monahan, Chas Edwards, Jeff Dachis, Brian Morrissey, and many, many more.