MetaMuse

Growth in Online Ad Spend

I just read on ClickZ that online ad spend for Q1 2006 soared to a record $3.9 billion, which is a 38% increase over Q1 2005 and 6% greater than Q4 2005. The report did not discuss ad spend by category, but the IAB CEO says he suspects the increase is from rich media and video. I could see rich media, but I wouldn't think video ads have grown THAT much. Sure the viewing of online video has grown substantially, but I just don't feel like video advertising has grown at the same pace -- it's too early yet.

A Lovely Evening on the Lake

Went fishing last night at Rattlesnake Lake, and my what a lovely evening it was. Started out a little breezy but rowed to the far end of the lake and spent hours casting dry flies to the many frequent rises among the old stumps. The clouds gave way to a beautiful sunset, and the eagles and osprey seemed to be having a contest for the biggest fish. Caught probably 7-8 fish in total, myself.

Viral vs. Predictable Growth

Alex Smith (from Kaye-Smith) recently pointed me towards an interesing article from a Wharton newsletter called MySpace, Facebook and Other Social Networking Sites: Hot Today, Gone Tomorrow.  The writer basically says that social networking is ingrained in Internet society and here to stay, however so much of the growth within any given site has been serendipitous. 

This is something that's been on my mind for a couple months, ever since I talked to a potential investor who wasn't interested in our proactive business development efforts to grow our user base -- he basically felt that if all our growth wasn't entirely viral (meaning by 'word of mouth' only) then we weren't an interesting business. I don't believe that ANY company should rely primarily on a viral growth strategy.

Don't get me wrong. Viral is great -- it's free user acquisition, and hell if you can somehow create/leverage a trend or fad in the marketplace, it's a beautiful thing. But there are a few issues I have with viral growth:

• It's too much like an 'accident'. There are very few people in this world that can consistently forecast and/or control fads or trends in the marketplace. Tipping points just happen, like the 'perfect storm', and hindsight on how it happened is never 20/20.
• It's very difficult to model and plan for. You don't know how fast you'll grow, when it'll stop, and how to structure your business operations to handle it. Friendster hit the tipping point in 2003 and it took them months to recover -- I couldn't login for 6 months and then I finally gave up. I wonder how many others gave up too.
• You can't reliably reproduce a viral trend, nor can you control where it goes. Google's Orkut social networking Web site didn't take off in the US, but rather Brazil where 70% of its members are -- and no one knows why.
• If you grew by 'accident' then you can certainly shrink by accident too. We all know of companies that were "one hit wonders".

With Others Online, I'm sure we'll experience some level of viral growth, but I'm not betting the company on it. We will work hard to plant many viral "seeds" but we'll work harder to demonstrate that regardless of our viral growth, we can build a successful business through media buys, distribution partnerships, and affiliations with Web site communities. As a result, by August we will be able to demonstrate a predictable, reproducable model for growth that shows how much we pay for each user acquired, how much we'll earn, and how we will scale.

A Good Day for a Patent

I'm pleased to announce that today our patent attorneys at Darby & Darby filed a provisional patent for Others Online! We're laying claim to a unique method for displaying information on remote users who have associated themselves implicitly and/or explicitly to multiple matching keywords that represent shared interests and intentions.

In layman's terms ... Today, online connections between people are synchronized around the same Web site location and based on explicit profile information. No one sets up a profile at every site they go to; even if they could it's too much trouble. And our interests take us to many different sites. So while there are 800M people on the Internet, you really don't see them. With Others Online, you simply indicate your interests once and then on every Web site you visit, you see the people that not only share those interests, but are also interested in the same content. We match you with others on as many keywords as we can, on every page you go to.

Special recognition goes to Joe Seefeldt, whose work on this complex technology has been invaluable!

Why Blog?

I've been meaning to comment on David Sifry's most recent "State of the Blogosphere" report, because it's compelled me to think about why people blog and what that means to Others Online. He's the CEO of Technorati (the leading blog search engine?), and has published some great information on the growth of the blogosphere, # of posts per day, etc. Key takeaways:

• Blogging is popular: the blogosphere has been doubling in size every 6 months since March 2003. Technorati now tracks over 37M blogs.
• Blogging is fairly sticky: over 55% of bloggers are still posting 3 months after their blogs are created.

A blog can be anything, but it's best described as an online personal journal. So why do people keep an online journal? Did it replace their paper-based diary? No, I don't think so. People can write anything anytime, they've always been able to. People blog because they love the idea that anyone can and will read what they're writing -- it's the thrill of knowing that you've instantly published something that any one of over 800M people could possibly look at, appreciate, and as a result connect with you.

I have a feeling that most of the 55% of bloggers still posting after 3 months are doing so because they noticed that someone else (a complete stranger) saw what they wrote, and that many of the 45% who quit wrote for a while and then stopped because only THEY were reading their posts. People need validation.

Attracting readers is a big problem for bloggers, just as it is for anyone with content on the Web. With every post, you're contributing to the 100's of billions of pages already on the Web (maybe a small exaggeration). So unless you're tied into a tightly-knit group of bloggers and can join their "network/club", it's currently next to impossible for people to find YOU and read your blog. Same old Web story -- >90% of pageviews on <10% of the pages.

Enter Others Online, a new way for people to find you and vice-versa. When you post a profile on Others Online, you indicate your blog URL and associate yourself to whatever tags you like (representing your interests, passions, hobbies, business, favorite products, neighborhood, etc.), things you usually blog about anyway I should think. Thereafter, anytime those tags come up in other users' browsing behaviors, searches, or tagclouds, your profile shows up along with your blog link. Bingo, they found you -- on your terms, their terms, and in context with multiple mutual interests. So much warmer than "results 1-20 of about 1.2B".

Social Networks' Popularity Still Soaring

Just read on WebProNews that the top 10 social networking sites, taken together, grew 47% in the past year, and they now reach 45% of active Internet users. Of course, MySpace at 367% growth skewed the results quite a bit.  This was according to Nielsen/NetRatings, who echoed what I've said before that these sites are the reality TV of the Internet.

I agree with the author of this article that Internet social networks are here to stay, but I also think the term "social network" is too broad and overly used in this context. Can't any use of people as content be deemed social networking, and then doesn't that cover just about every area of the Internet nowadays? I think social networking should not be thought of as a destination or Web site, but as a feature of the Web itself -- just part of the landscape like video, audio, email, IM, etc.

NBC Mandates "Digital" Element

Thanks to my wife for pointing out this article in USA Today, which says that NBC Universal TV head Jeff Zucker has mandated that all new programs have an element to involve fans digitally, through cell phones, the Web or iPods. They want to reach consumers on as many platforms as possible, such that they're *mandating* it into their programming!

That bodes well for Others Online. Think about the value-add they get from creating, owning  and proliferating an Others Online keyword to their fan base, for each program. Not only do they then leverage the desktop in order to better understand their audience contextually/behaviorially, strengthen their community/brand every time one fan sees another online (where ever they may be), and message their user base directly in real-time, but they can now also better measure their offline/online advertising response (TV ad --> online visit). And it doesn't compete with their Web site initiatives!

Future IM Systems?

Interesting article on IM at USA Today, which points out the decline in IM usage by 4% but goes on to mention all the neat new features being added onto IM which, in his opinion, will increase usage again. I think he's got it a bit backwards.

I see IM being added to all sorts of neat new applications, not the other way around. IM is a commodity, like email, audio and video on the Web, and needs to be set free. It's bullshit that AOL, MSN and Yahoo continue to operate closed networks. It's not like they're making them any money. Instead, they should open their messaging wide open and innovate with other apps on which IM piggybacks. The value is IM is two-fold: messaging and presence, and the latter is at least 50% of the value, in my opinion. Presence is everything, because without it IM would pretty much be email right?

The New MDA

Recently picked up the new MDA phone from T-Mobile, and I really like it. Now mind you, I'm not a heavy mobile email user, so I don't judge PDA phones merely by their email capability.  I'm looking for a full-featured consumer phone that is also a hard-core biz phone, and I've already bonded with the Microsoft Windows Mobile platform better than Palm, for a variety of reasons. Here's what I like over my previous PDA phone (which was the XDA from O2):

• It's smaller and lighter but no sacrifice in usability.
• Syncing with Outlook via infra-red is just so convenient.
• It supports WiFi and GPRS/EDGE which makes it really easy to use when you've left your laptop downstairs, or just don't feel like booting it up.
• The battery life is amazing. I can go several days with heavy phone and data use.
• I like the thumb pad. It works for me.
• I like the screen swivel idea, where if you open it up the screen view rotates 90 degrees. That makes web page viewing so much better.
• The camera is a HUGE improvement. Not only is it double the resolution (1.3 megapixel), you've got up to 2x zoom, a flash and all kinds of other settings.
• I think the speaker phone works better (sounds better to others).

The only problem I have is that it seems to be a little slower, especially with camera use. Can hesitate slightly when moving between windows.

Behavioral Advertising Market Projections

A new report from eMarketer forecasts that behavioral targeting ad spend will surpass $2M in 2008, up from $925M in 2005, for three key reasons:

1. Behavioral targeting helps marketers get better results from fewer impressions.
2. Publishers like the fact that behavioral targeting delivers more revenue from some lesser pages.
3. Users tend to find ads targeted by their actions to be more relevant to their needs.

But what is "behavioral marketing" really, compared to search engine marketing and spyware? Behavioral marketing is nothing more than profiling the online habits/interests of users over time. It's different than search engine marketing, which is targeting users based on their current search keywords (or context), which I've mentioned before is a $20B business. In terms of targeted advertising, I think of "contextual" as current interests, and "behavioral" as interest patterns over time.

Until the last couple years, spyware was the greatest source for behavioral targeted inventory, and I've mentioned before this is a $450M business. Being on the desktop, they can profile at least 20x more efficiently and effectively than any Web site, but they only offer popups. In the last couple years, many ad networks have built the capability into their systems to track user behavior. Since they're not on the desktop, they have to do it using cookies (within standard or invisible ad tags) and a broad network of publishers; therefore it takes a LOT of time to develop decent profiles. But the promise is that they can show me an ad for fly fishing when I'm on wsj.com, not because it relates to wsj.com but because I've shown a recurring interest in fly fishing.

It's a reasonable value proposition, but behaviorial is going to be a tough sell for ad networks because of their weak profiling capabilities. They'll offer breadth but not depth. In my opinion, the companies best positioned for deep behavioral AND contextual profiling are, in this order:

1. Ad supported desktop software -- provided there is consent, and the value proposition is tightly coupled to the profiling effort
2. ISPs -- next best thing to being on the desktop is access to the proxy server right?
3. Search engines
4. Ad networks