The Future Of Silicon Valley Is On Madison Avenue
The past seven years saw tremendous innovation in the way people interact with the web. It stopped being a “read only” format and invited a whole new group of users to contribute. Sites like Wikipedia (2001) enabled users to push a wealth of knowledge into the Internet’s collective consciousness. Delicious (2003), Digg (2004), YouTube (2005), and countless others turned those contributions into conversations between millions of people. Sites like Twitter and FriendFeed makes this evolution toward conversational, or social, media even more atomic and poignant.
In the valley, the community has become experts at developing technology to enable these conversations. In some cases we’ve become “too” effective and users have become more interested in each other than branded content.
You can see this shift if you look at what is happening to the Internet’s top destinations. Older sites are integrating new social media technologies into their sites. New social media properties are growing. The two top social networking sites (Facebook and MySpace) command about a third of the monthly unique users Yahoo does across their properties (500 million).
The trouble is that these sites are lacking an improved revenue enabling technology. However, this technology is not about enabling conversations between users, but enabling conversations between brands and users. 1999’s banner ads just don’t cut it and enhanced targeting doesn’t increase the value of the advertisement, just the value of the audience.
But we believe we’re on the path to the answer.
SocialMedia Enables Social Media Monetization
SocialMedia’s advertising system has been one of the principle enabling technologies for the Facebook platform. Appsaholic, which grew out of our founder’s initial experiments on the platform, enabled developers to monetize their applications and reward them for their efforts. To date we’ve powered thousands of applications and paid out millions to developers. We’ll reveal more information in future releases. It’s also enabled our company to operate profitably without having to take more venture financing.
Connecting Silicon Valley With Madison Avenue
However, that’s only the start. If we’ve been quiet in the valley, it’s only because we’ve been shouting on Madison avenue. Geeks are already connected with geeks. Now our primary role over the past couple of months and even the next decade is to help connect Madison avenue to Silicon Valley. Ad agencies and brands aren’t technology companies and have been seeking our advice on how to participate in this latest evolution of the internet called social media.
A lot of the conversation is taking place on the other coast. Earlier this week Seth Goldstein gave a keynote address at the New York IAB Social Media Summit (coverage) where we joined a panel of other social media experts like Rich LeFurgy, Rock You, and Facebook. Next week Federated Media will be holding a Conversational Marketing Summit in New York.
BMW, NBC’s American Gladiator’s, Newline’s Harold & Kumar, and Disney are just a sample of the advertisers we’ve been engaging with users through social applications. The campaigns have followed a spectrum of offerings, including promotion, sourcing application development, sponsorship, and customized targeting along application categories and demographics.
Search Doesn’t Sell Brands
Facebook may not have Google’s profit engine, but they are doing 300mm in revenue in their fourth year. Google’s advertising system is great at selling products, but doesn’t sell brands. As our CEO Seth Goldstein puts it, “Brands are experienced in terms of emotional benefits which keywords have a hard time conveying.”
Applications, regardless of criticism, remain a widely used medium (15.4 million users est. in Jan.). The content might not be so pretty, and it might favor subjects that are risque (friends for sale, fluff friends, superpoke, naughty gifts…) but they are intimate interactions between two trusted sources, which in advertising terms might be called “persuasion.”
A brand can pay more than $10 cpm to reach a dwindling television audience, or they can pay a fraction of that and reach a growing mass market of 75 million friends and over 100 million on MySpace.
Advertisers Are Responding To The Change
Large corporations are mobilizing to respond to the change. Procter and Gamble now has an internal group called “The P&G Social Media Lab” that we, among a number of social media startups are a part of. GroupM, which is WPP’s online media organization, spends more than $4 billion of online display advertising. This number is going up not going down, as even within a recession marketers are shifting their budgets online.
As Rob Norman, the head of GroupM contends….. The vast majority of advertising spent is at the top of the funnel to activate and engage consumers, whereas the bottom of the funnel is more about conversion. Despite Google’s growth, they remain at the bottom of the funnel. Which is why they bought Doubleclick and their display network to climb up the funnel.
Marketers are realizing that the top of the funnel, online, is inside of social networks. This is where the next people magazine, Seinfeld, MTV is being born, and where the mass market (100mm+) audience is converging, and where billions in brand advertising is starting to flow.
Madison Avenue has “poked” Silicon Valley, and Silicon Valley needs to poke back.
Tags: advertisers, developers