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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.

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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)

Will Our Industry Ever Innovate Like Morse? Probably Not.

By - July 10, 2012

Last month I finished a compelling biography of Samuel Morse: Lightning Man: The Accursed Life Of Samuel F.B. Morse, by Pulitzer-prize winning author Kenneth Silverman. If you’re a fan of great biographies, or just want to learn more about the history of both our industry and of the United States during a seminal and innovative period, I certainly recommend this book.

If you had no idea that Morse was an acclaimed painter – possibly one of the top US artists of his era – well you’re in good company. I had no idea either. Born just a few years after the Constitutional convention, Morse grew up as one of the first native expressions of the new country that was America. A gifted painter, Morse never quite found his voice – his failure to create a masterpiece, in fact, drove his obsession with making his name as an inventor.

It was on a return trip from Europe in 1832, where he was studying art in Italy, that Morse came upon the idea for the telegraph. He was hardly alone, but his version of the idea turned out to be the most efficient and useful of many devised during the mid 1800s. Morse doggedly pursued his invention, convinced it was world changing. He was right, of course – but what I found most extraordinary about his story was how long Morse fought to get anyone to pay attention to his work, and, once proven, how hard he had to fight to keep claim to what was rightfully his.

Morse worked on perfecting his telegraph for nearly 15 years, and once he finally managed to demonstrate its efficacy, he endured several decades of lawsuits, public defamation, and endless commercial battles to maintain both his place in history as well as some claim to the fortunes created by his invention. In short, Morse’s life was pretty damn hellish for someone who laid the foundation for all that came after – including the modern Internet.

I can only imagine what Morse might think of the mayfly-like successes of “inventions” like Instagram, or Pinterest, or even Facebook and Google, compared with the ridicule, infamy, and commercial skullduggery he had to endure to finally see his contributions recognized, late in his life, after nearly four decades of struggle.

And it makes me wonder if our industry, for all its innovation, will ever be capable of the kind of breakthroughs that Morse represents – the man was past 50 years old when he first demonstrated his invention, and just past 80 when the world finally celebrated him as the “Father of the Telegraph.”  Imagine that – someone in the Internet industry, today, a founder with his or her first product who works on a prototype for 15 years, then introduces it at age 50?!

Of course, times are quite different today, and far faster to boot. Morse lived in a time when most of Europe was regularly at war with itself, when Britain invaded the United States, and he lived to watch the horrors of the Civil War unfold. His life spanned from America’s early, agrarian beginnings to the full bloom of the industrial age. And his invention had much to do with that shift: the telegraph shrank time and space to nearly nothing – allowing, for the first time, information to be communicated “as if by lightning.” Combined with the other great innovation of the day – the railroad – the telegraph allowed America to conquer its vast space and resources, and rise to become the most important power in the world.

When I think of the work Morse did, and the time it took him to do it, only a few people – and the companies they built – come to mind. One is Google, and the tinkering and invention Larry Page and Sergey Brin are encouraging through Google X. Another is Microsoft, which continues to drive innovation outside of its core revenue base through Microsoft Research. And another is IBM. But as much as I’d like to think that a lone inventor, obsessed to the point of near bankruptcy, might one day invent something that will forever change our world, I’m not sure that’s even possible anymore. It feels like an era that’s well over. Perhaps I’m wrong, but ….

I’ll get more into the impact of the telegraph in a review of The Victorian Internet: The Remarkable Story of the Telegraph and the Nineteenth Century’s On-line Pioneers, by Tom Standage (a must read for anyone in our industry, I’d wager). I finished that book a few weeks ago – and yes, I’m very far behind in my reviews here. Forgive me, I’ve been a bit distracted with family and work!

Other works I’ve reviewed:

Code: And Other Laws of Cyberspace, Version 2.0 by Larry Lessig (review)

You Are Not a Gadget: A Manifesto (Vintage) by Jaron Lanier (review)

WikiLeaks and the Age of Transparency by Micah Sifry (review)

Republic, Lost: How Money Corrupts Congress–and a Plan to Stop It 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)

Year Zero: This Is What the Beach Was Made For

By -

It’s summertime, and if you’re not already lying on a beach somewhere, I’ve got a good reason for you to go: My friend Rob Reid’s new novel is out today, and it’s absolutely tailor made for beach reading. It’s called Year Zero, and it’s a hilarious send up of the music industry, mixed, naturally, with a ripping yarn about aliens, romance, and intergalatic politics.

Rob let me read an early-ish draft of the book, and I loved it. It’s his first novel, years in the making, and it’s a masterstroke.

Given all the headlines just this week about the music industry’s endless self-inflicted woes, Rob’s timing couldn’t be better. Here are just two, ripped from my favorite aggregator Media ReDEFined just this week:

How Big Music Threatened Startups and Killed Innovation

Are There Too Many Music Streaming Services?

Not to mention, of course, the ongoing Kim Dotcom/Pirate Bay drama.

You guys know I don’t often recommend fiction – but despite the fact that Rob and I are drinking buddies, I must say, this is one book I can tell you to go buy, now!

Below is the Year Zero “trailer,” an idea I plan to steal for my book when it comes out next year!


Halfway Through The Year: How’re The Predictions Doing?

By - July 02, 2012

It’s time to review how my Predictions 2012 are faring, now that half the year has slipped by (that was fast, no?).

One thing that stands out is the timing wrt Twitter – my first two predictions were about the company, and now that I think about it, given the news just this week (and the attendant debate), I should have realized how the two could be in direct conflict with each other. It all makes for some interesting chin stroking, which I’m busy doing while on vacation – fishing the Rio Blanco up above Meeker in Colorado. Yes, you may now give me shit for writing that.

But to the review: I’ll take them one at a time:

Predictions 2012: #1 – On Twitter and Media

Twitter will become a force as a media company, not just a platform for others’ media.

Well, we’re only six months in, but I’d say this is happening, full force. From expanded tweets to hosting photos and videos to creating brand pages to major deals with entertainment companies, Twitter is certainly becoming a major media company. I predicted it will improve its Discover feature (it continues to – this is and has been critical to its success with Promoted Tweets, esp. in mobile), and that it’d roll out something like Flipboard. That hasn’t happened yet, but I’d wager it’s coming….

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Every major player on the Internet will have to do a deal with Twitter, and Twitter will emerge as a Swiss like, open, neutral player in the battle for the consumer web.

Hmmm. I am not sure if this is happening quite as I might have predicted. Just this past week, Twitter cut LinkedIn off, but that doesn’t mean a new deal isn’t in the works, or that the way the old deal was going made anyone at either company – or their customers – happy. On other fronts, Twitter is flowing through search results at Bing, but no renewed deal with Google yet. Twitter is on stronger footing with Facebook than it was before – with a reciprocal deal finally in place. But its moves in media might mean it begins to act in a protective, domain-specific way over the next six months. I hope not. In other news, this move – the Twitter Transparency Report – is sure welcome news. I wrote about this just a few weeks ago….and suggested Twitter might be next. See: Google’s Transparency Report: A Good And Troubling Thing

Predictions 2012 #3: The Facebook Ad Network

Facebook will launch a web-wide competitor to AdSense.

Well, it’s certainly looking like this is coming true. Not only has Facebook begun the process by allowing its ads to be shown on Zynga.com, it also has offered its own inventory up for third-party exchanges. Both moves augur a next step: a web-wide competitor to AdSense. I’m still a bit nervous this won’t happen this year, but I’d wager it’s going to come at some point soon.

Predictions 2012 #4: Google’s Challenging Year

Despite doing well overall, Google will fumble one big play this year. 

Well, early in the year, the Search Plus Your World fracas seemed quite a fumble, but that tempest has cooled, at least for now. However, the company is the target of several government probes, and it remains to be seen how its perceived early missteps might play out.

Predictions 2012 #5: A Big Year for M&A

2012 may well be the biggest year of all for Internet M&A.

OK, I mentioned Instagram as a probable candidate, but it’s not like that wasn’t pretty damn obvious if you were paying attention. I don’t have all the numbers in, but man, it’s been a huge year so far for M&A in our space. We’ll see by the end of the year if it’s a record.

Predictions 2012 #6: “The Corporation” Becomes A Central Societal Question Mark

We’ll all start to question what role the corporation plays in our society and culture.

This one is fuzzy to begin with – it’s hard to prove such a zeitgeisty prediction. A challenge to Citizens v. United failed to get the court’s attention, had it been reviewed, we’d certainly be talking about this issue a lot more. I’d wager I might be a bit early on this one.

Predictions 2012 #7: Shooting From The Hip

In which I cover ten or so other rapid fire predictions. In turn:

- Obama will win the 2012 election, thanks in part to the tech community rallying behind him due to issues like SOPA, visas, and free speech.

Can’t call this one yet!

- Both Apple and Amazon will make billion-dollar acquisitions. More interestingly, so will Facebook.

One down, two to go….

- Android will be brought to heel by Google, eliciting both massive complaints and cheers, depending on where you sit.

 Seems to be happening, from accounts I’ve read.

 – Microsoft Windows Phone will become the Bing of mobile (IE, move into double digit market share).

 The phone is clearly a win for Microsoft so far, we’ll have to wait for version 8 to see if it maintains double digit share.

 – Microsoft Xbox will integrate meaningfully with the web (Kinect is key), and start to compete in social across the digital spectrum

This is happening in some ways (an ecosystem is developing) but I’m not sure yet about social…

- IBM will emerge as a key player in the consumer Internet.

 Not yet. But it is an emerging player in marketing IT, which drives much of the consumer Internet.

 – China will be caught spying on US corporations, especially tech and commodity companies. Somewhat oddly, no one will (seem to) care.

It’s happening, but we haven’t yet had the spectacular news (like the Google hack last year) that folks can then ignore.

- A heads up display for the web will launch that actually is worth using, but most likely in limited use cases.

Thanks, Google Glass!

All in all, not so bad for six months in. There’s still a lot of time to either prove me a fool, or of Nostradamus’ lineage.

Related:

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did

 

 

 

 

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.

Do Not Track Is An Opportunity, Not a Threat

By - June 10, 2012

This past week’s industry tempest centered around Microsoft’s decision to implement “Do Not Track” (known as “DNT”) as a default on Internet Explorer 10, a browser update timed to roll out with the company’s long-anticipated Windows 8 release.

Microsoft’s decision caught much of the marketing and media industry by surprise – after all, Microsoft itself is a major player in the advertising business, and in that role has been a strong proponent of the current self-regulatory regime, which includes, at least until Microsoft tossed its grenade into the marketplace, a commitment to implementation of DNT as an opt-in technology, rather than as a default.*

For most readers I don’t need to explain why this matters, but in case you’re new to the debate, when enabled, DNT sets a “flag” telling websites that you don’t want data about your visit to be used for purposes of creating a profile of your browsing history (or for any other reason). Whether we like it or not, such profiles have driven a very large business in display advertising over the past 15 years. Were a majority of consumers to implement DNT, the infrastructure that currently drives wide swathes of the web’s  monetization ecosystem would crumble, taking a lot of quality content along with it.

Once released, it’s estimated that IE 10 could quickly grab as much as 25-30% of browser market share. The idea that the online advertising industry could lose almost a third of its value due to the actions of one rogue player is certainly cause for alarm. Last week’s press were full of conspiracy theories about why Microsoft was making such a move. The company claims it just wants to protect users’ privacy, which strikes me as disingenuous – it’s far more likely that Microsoft is willing to spike its relatively small advertising business in exchange for striking a lethal blow to Google’s core business model, both in advertising and in browser share.

I’m quite certain the Windows 8 team is preparing to market IE 10 – and by extension, Windows 8 – as the safe, privacy-enhancing choice, capitalizing on Google’s many government woes and consumers’ overall unease with the search giant’s power. I’m also quite certain that Microsoft, like many others, suffers from a case of extreme Apple envy, and wishes it had a pristine, closed-loop environment like iOS that it could completely control. In order to create such an environment, Microsoft needs to gain consumer’s trust. Seen from that point of view, implementing DNT as a default just makes sense.

But the more I think through it, the more I’m somewhat unperturbed by the whole affair. In fact, I’m rather excited by it.

First off, it’s not clear that IE10’s approach to DNT will matter. When it comes to whether or not a site has to comply with browser flags such as DNT, websites and third party look to the standard settings body knows as the WC3. That organization’s proposed draft specification on DNT is quite clear: It says no company may enforce a default DNT setting for a user, one way or the other. In other words, this whole thing could be a tempest in a teapot. Wired recently argued that Microsoft will be forced to back down and change its policy.

But I’m kind of hoping Microsoft will keep DNT in place. I know, that’s a pretty crazy thing for a guy who started an advertising-run business to say, but in this supposed threat I see a major opportunity.

Imagine a scenario, beginning sometime next year, when website owners start noticing significant numbers of visitors with IE10 browsers swinging by their sites. Imagine further that Microsoft has stuck to its guns, an all those IE10 browsers have their flags set to “DNT.”

To me, this presents a huge opportunity for the owner of a site to engage with its readers, and explain quite clearly the fact that good content on the Internet is paid for by good marketing on the Internet. And good marketing often needs to use “tracking” data so as to present quality advertising in context. (The same really can and should be said of content on the web – but I’ll just stick to advertising for now).

Advertising and content have always been bound together – in print, on television, and on the web. Sure, you can skip the ad – just flip the page, or press “ffwd” on your DVR. But great advertising, as I’ve long argued, adds value to the content ecosystem, and has as much a right to be in the conversation as does the publisher and the consumer.

Do Not Track provides our industry with a rare opportunity to speak out and explain this fact, and while the dialog box I’ve ginned up at the top of this post is fake, I’d love to see a day when they are popping up all over the web, reminding consumers that not only does quality content need to be supported, in fact, the marketers supporting it actually deserve our attention as well.

At present, the conversation between content creator, content consumer, and marketer is poorly instrumented and rife with mistrust. Our industry’s “ad choices” self regulatory regime – those little triangle icons you see all over display ads these days – is a good start. But we’ve a long way to go. Perhaps unwittingly, Microsoft may be pushing us that much faster toward a better future.

*I am on the board of the IAB, one of the major industry trade groups which promotes self-regulation. The opinions here are my own, as usual. 

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.