How Publishers are Monetizing the Social Network
A quick history review, if I can call it that, illustrates clearly how the internet has always been the efficiency hall monitor, policing all of the worlds market inefficiencies out of the global economic system one by one. Labor mobility for example was one of the first beneficiaries of Schumpeters Creative Destruction. Further along, sites like Amazon were able to bootstrap to a single niche vertical (books), then lateral into other verticals using their massive operating cash flows until now where they are selling almost every product conceivable. The mall experience is now a family or social pastime, but the mallscommercial relevance has for all intents faded. The reason can be found in the same books that got Amazon to the level of an 800-lb gorilla. Most books I buy through Amazon, of which I have probably bought over 2000 and counting, I usually buy from competing online merchants selling the same book at a fraction of Amazons price, or at a large enough discount to offset the free shipping offer from Amazon. The fact that it was Amazon that put this merchants product up for me to buy at a huge discount has earned my consistent loyalty, and this loyalty allows their network to grow. This is why Amazon is perfectly content in allowing this to take place through their technology. Their revenue from order fulfillment allows them to also benefit from the wholesale liquidators that often dominate the book business. The core of their technology lies in their ability to recommend products to me that I would never have found or seen while visiting a book store, although visiting the local Barnes & Noble is still one of my favorite things to do. Furthermore, the fulfillment and logistics business allows Amazon to leverage its proprietary behavioral targeting technology. And how did Amazon do it? By discovering the value and defining the concept of behavioral targeting since their first Amazon Recommends technology was rolled out, followed by One Click Ordering.
Until circa 2007, the mall provided a form of personal experience through random visual exploration of whats being presented to the shopper, as does my visit to Barnes & Noble on occasion. Those that understood this, like Albert Taubman (one of the largest commercial mall developers in the history of the United States), became rich and powerful because of the value he was able to extract from his commercial real estate. By sharing his proprietary knowledge of shopper habits with his merchants, Taubman was helping them make more money through proper placement of merchandise. I guess in a way Investment Capitalist is trying to help readers make more money through the proper placement of predictive analysis of the Global Macro environment. (At least we’re trying to get there)
The recent spate of acquisitions by the four horsemen of AOL, Google, Yahoo! And Microsoft (a.k.a. G.A.Y.M.) further validates the convergence of keyword driven ad relevance with real-time anonymous collection and tracking of consumer behavior. In Googles case for example, their acquisition of DoubleClick Media, which owns the massive online affiliate marketing network Performics, solidified their market share in the high 70% to low 80% range of online search. Furthermore and perhaps much more significant, it brought Google full circle in terms of profiling the behavior of consumers from the moment of search until they close their browser. Albeit this is an anonymous level of tracking, the implications are profound in many ways but for the sake of this article, I will focus only on the economic implications for advertisers and publishers. The counter arguments being presented by privacy advocates have thus far failed to impress me. These arguments focus on the potential to discriminate with this information, a concept I find alarmist and disingenuous for reasons I will discuss another day. Besides, there are ways for users to protect themselves by using a registry cleaner and removing tracking spyware. One of the Best Anti-Spyware Softwares Ive used is made by Xsoft, plus Microsoft provides free access to Windows Defender, their version of anti-spyware.
The significance of Googles acquisition lies in their dominant market share of search traffic. By tracking the user through his or her I.P. address, Google is cataloging a mammoth database of user behavior. Doubleclick on the other hand track the user by placing a cookie on their computer. Combine the two and you have a full profile of most internet users at an individual level, anonymous or not, thats valuable information and to have it will put Google in a position of even greater power, which may not be all bad as long as they are not evil, most consumers will be better off. Web users are a fickle bunch. Google will always have to walk a tight line, similar to bumps in the road eBay faced as it was on its way of becoming the largest original user generated content (UGC) site. When eBay would make a management decision at the executive level, the repercussions in the event their user base disapproved were almost immediate. Google is walking this same line, and I believe the boys at Google headquarters are smart enough to realize that as long as they continue to innovate and provide useful services at zero cost to the consumer, they will retain their user base.
For now, if a user visits any major site on the internet where Doubleclick is serving banner ads, and the user got there using Google search, the company now knows what page the user came from, when the user was on other particular sites, where the user went from the site, and so on. This allows them to serve an ad at a later time customized for that user based on this data. Google is certainly at an important juncture and must find ways to continue growing revenues. This means that Google and all of the other major online players must expand beyond text-based search. But it is nave to think Google has just now started to get into BT by acquiring Doubleclick. All of the major have been engaged in BT for several years, including Google albeit in oblique ways. Furthermore, companies like Tacoda and RevenueScience would have been the prey if Google was after the technology. The bigger picture is what all of these tech giants are pursuing, as defined by web 2.0 and social networking. The name social networking is deceiving because it suggests some sort of communal gathering designed to sustain the whole without capitalism. The truth is more ironic as it should be called social marketing.
Web communities such as MySpace and Facebook (and dozens of others popping up everywhere) have brought like-minded people together all over the world into hyper niche verticals that continually optimize themselves through rapid evolution. From the advertisers perspective, each new social networking platform becomes a doorway to whatever psychographic and/or demographic being served by that web site. All the old fuss about monetizing the social network is being addressed by technology to deliver contextual ads to site readers. The megapixels on each individual monitor become the billboard for advertisers looking at a very specific form of content, such as a news article, e-book or blog. Advertisers are salivating at the chance for precision guided targeting of the consumer, and although some privacy advocates are making noise, there is not going to be much in the way of behavioral targeting + contextual ads becoming Silicon Valleys WMD in its attack on Madison Avenue. This new “socialization” of the web brings together multiple niche communities with similar interests. But even though I have a MySpace profile and spend time on the site, it doesnt necessarily mean that I also like the same things as one of my MySpace friends. New media marketing is all about serving highly relevant ads to every single user on the site. Because it is now possible to serve different ads on the same ad spot at the exact same time, advertisers no longer monopolize a specific time zone or TV network. At any given time, if there are 100,000 unique visitors on a web site, and 10,000 of them are on the same page within that site, one could in theory serve 100,000 different ads from unique advertisers at the exact same time, all of them customized based on the users web print.
Although behavioral targeting has thrived by allowing marketers to offer ads that are customized based on the web surfer’s age, gender, location and online activities, in the immediate future not only will those variables be considered, but also the items the user may have been shopping for recently. For example, imagine you have searched for a specific bottle of wine from a shopping web site in the past couple of weeks, and were now on your favorite news site reading an article about foreign affairs. At the end of your article, you might see an ad from a wine merchant suggesting you take a look at their inventory and pricing.
To go one step further in our example, the merchant that is serving you the ad has agreed to pay the advertising network a generous fee if that user clicks thru and ends up purchasing a product. So the advertising network will be incentivized to track every single web user going through their network in a way that continually allows them to guide users to products that meet their real time interests. The convenience factor lies in that last term, real time interests. But so does the creepy factor for some, again a topic I will save for another day. Back to our example, say you visited the site but chose not to purchase anything. Tomorrow when you log into your Gmail account to check your email, you will find a digital coupon created just for you by a competing merchant offering the same product at a 10% discount. This is long tail marketing at its finest. The combination of statistical text analysis and clustering methodologies with semantic analysis procedures creates an outcome that can be different each time depending on multiple variations of subjects, keywords, and the unique relationships between them. In other words, each users screen becomes a dynamic megapixel billboard. Recently, while trying to compare broadband options for high bandwidth users, I was served an ad marketing 3000 Satellite Stations to my PC (free). Although I ended up buying the product, the moment I noticed the ad I wondered how specifically I was being targeted at that moment.
The natural evolution of this technology will be based on smarter and smarter algorithms that will be able to predict the potential buying habits of a shopper based on their behavior during certain days, seasons, local weather, and just about any data point you can imagine, including the performance of stocks they looked up recently on their favorite finance site. Contextual advertising is for those of us that have learned to subconsciously tune out banner ads when reading a site. Imagine Tony Soprano sitting in front of his white Cadillac while doing peyote in the desert during the shows closing season drinking a can of coke. That diet Coke is there for brand awareness. With advanced BT combined with contextual advertising, online advertisers (to take the analogy a bit further) could swap out the diet coke for a can of Budweiser, or a bottle of water, or even a carton of orange juice depending on what that viewer buys when they go grocery shopping, which Church web site they may have visited, or nutritional supplements they have purchased. Although this is not yet possible for video, if you tune out the banner ads when reading up on a geopolitical situation that youve been following recently, the words within the articles will become active hyperlinks linking to products and items you are interested in.
The same technology is being used on this article as you are reading because even I find the technology convenient if it is actually providing me with a benefit. As an avid reader, I am thrilled when reading a very interesting article on the web which is embedded with hyperlinks to books being recommended by Amazon to me. It doesnt bother me to read the word as a hyperlink and I can read through or hover my mouse over the link to see what the book is. Its my choice. Furthermore, some words may hyperlink for me while other words will hyperlink for other readers based entirely on that readers interest. This is the maximum level of efficiency an advertiser can achieve when targeting a consumer but for the publishers of the world, this is absolute heaven.
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Author: Pejman Hamidi
Article Source: EzineArticles.com
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