Sunday, October 28, 2007

Social Networks as Ad Platforms – How appealing is that to society?

With Microsoft’s $240m investment in a 1.6 percent stake of Facebook for advertising and growth opportunity purposes, I do wonder what form this will take.

Recent notable changes to Facebook include applications (among others), such as iRead, iLike and Flixster where users can upload the books, music, and movies they enjoy to rate, review, and discuss with others. A book I am currently reading didn’t feature on iRead’s selection, so I was able to upload it from Sharing such interests is still a digestible form of promotion while partaking in social network.

However, if Facebook opt for a similar incentive model introduced on MySpace, such as Vivasearch (or the like), it may be detrimental to the quality of the network. Users appear to sign up with organizations like Vivasearch to earn profit by adding “friends” on MySpace.

The concept is similar to the IndieClick model where media/marketing professionals “work with advertisers and agencies to deliver relevant and targeted messaging to our discerning audience of more than twenty-eight million 16-34 year old “Influencers” and tastemakers.”

What this could smack of, depending on delivery, are those pyramid-type schemes.

In a recent study (discussed more in-depth further on) IBM interviewed executives about challenges in new content and distribution strategies. Here are the results:

Source: IBM Global Business Services - "Navigating the media divide"

Back in June 2007, FOOA (Future of Online Advertising), featured an article on “Deciphering trends in online advertising.” IndieClick is the topic of discussion in this article, but what I found of interest are:

  • Things that affect the landscape of online advertising (Digital Rights Management, disintegration of content from platform, consolidation of major players, remnant players expanding into premium markets, new forms of media, new hardware)
  • Audience’s acceptance of new forms of advertising
  • Advances in ad-serving technology
  • Flight of talent from print and television
  • Online advertising metrics

After posting Google’s Terms and Conditions to Biz Blog Review, I wondered how Google (if they had got the Facebook stake instead of Microsoft) would have approached this ad platform or “landscape”. A comparison of Microsoft-Google approaches may give us an idea of two different Facebook user social experiences/experiments in advertising.

On visiting the IBM site, I discovered the article “The fight ahead on media’s main streets” produced in February 2007 highlighting how user-generated content and open distribution platforms are shaking up the media industry:

“A new media world has arrived. Pioneered by teens and gadget-savvy professionals, it has quickly spread into virtually every consumer segment, and started to encroach on traditional media. The number of unique visitors to has now surpassed the 50 million mark – something akin to the number of U.S. households that tune into the Super Bowl.1 Every day, consumers around the world watch about 100 million videos on YouTube – putting that number in context, the top 15 British primetime television shows combined attract about 100 million viewers, as do the top 4 U.S. shows.2

To examine the inherent tension between new and traditional media and explore future industry scenarios, we conducted a comprehensive study that included interviews with leaders of media companies and an in-depth analysis of the factors that are shaping the industry outlook” – IBM.

Through the analysis, IBM identify four business models co-existing – Traditional media (The Walt Disney Company), Walled communities (NTT DoCoMo), Content hyper-syndication (BBC with My BBC interactive media service), New platform aggregation (YouTube, MySpace, Second Life) – with a blur of the models over time as media companies experiment into 2010.

While the revenue of new media channels is expected to reach US$55 billion in 2006 with a Compound Annual Growth Rate (CAGR) of 23 percent to 2010, traditional channels are expected to generate US$455 billion in revenue in 2006 with a CAGR of 6 percent.

The study shows the drivers of change and the catalysts of the conflict between new media and traditional channels to be:

  • Device and access rollout
  • Multichannel content innovation
  • New consumer behavior and roles
  • Faster revenue to attention alignment

According to IBM – available bandwidth, interactive media possibilities, falling prices of sophisticated media editing and recording equipment and software – “have put the tools of the trade within reach of almost any aspiring talent or wannabee. The result is a blurring and merging of the roles of producer and consumer, or a “prosumer,” as coined by Alvin Toffler.”

And what happens when media companies start experimenting with the role of the “prosumer” (producer + consumer) as “prosumermoter” (producer + consumer + promoter)?

One aspect may be the review of industry standards. IBM report:

“Government policy affects consumer pricing for access and content, piracy rules and their enforcement, network usage and competitive neutrality, business conditions for entrepreneurs, just to name a few areas. In addition, as telecommunications and media industry boundaries blur, companies are often subject to two sets of regulators, instead of one. For the foreseeable future, regulation remains a critical factor that can accelerate or derail new initiatives or strategies.”

In this analysis, IBM identifies options and provides ten recommendations for industry:

  • Put consumers at the center of your business and boardroom.
  • Convert consumer data into competitive advantage.
  • Give control to get share.
  • Deliver experiences, not just content.
  • Leverage virtual worlds.
  • Innovate business models.
  • Invest in interactive, measurable advertising services and platforms
  • Redefine partnerships, while mitigating fallout.
  • Shift investment from traditional business to new models.
  • Create a flexible business design.

In a society where consumers want to create unconstrained by distributors’ conditional access controls, IBM suggests industry incumbents should review the timing and completeness of response to “prosumers” (and partners), offering opportunity for growth and experience instead of conflict.

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