Earlier this week Triana Global, a social platform ad network, contacted me to let me know about a new offer they are providing: a $0.15 CPM or $0.08 CPC guaranteed payout for all social network application publishers. It’s an offering that Lookery has offered developers since early on. Personally I haven’t heard of Triana Global but they are based in Sydney, Australia which may be one reason I haven’t heard of them.

What’s unique about Triana Global? Based on their website there isn’t really anything that unique. Just like numerous other ad networks they are promoting that they are one of the first ad networks on social platforms. The company currently provides advertisers with geo-targeting, application targeting, and demographic targeting. Oh and they also provide one other thing: consulting and development services.

What?!? Apparently Triana Global hasn’t heard the term “conflict of interest”. While it’s not a clear conflict of interest, offering to develop applications which build inventory for your network detracts from the time their staff could be focused on selling the available inventory. As such we have seen partnerships like the one recently announced by Social Media and Buddy Media in which Buddy Media builds the applications and Social Media helps promote them.

Hey Triana Global, you might want to focus on advertising not on development! Who is currently in Triana Global’s portfolio? We have no idea! Also, why would you go with Triana Global’s guarantee when a company like Lookery, which has been around for over a year, already offers the exact same deal? Again, we have no idea. Let us know if you can find the answer to any of these questions!

Last year when Facebook opened there platform there was a sudden influx of brands looking to gain access to a new channel for branded exposure. The demand was significant and just in the past couple weeks we have seen an increasing number of applications come out from companies like Context Optional and Buddy Media. How do these new applications differ from websites of the past and how what new opportunities do they provide?

What are the Opportunities?

Facebook and all the other social platforms have provided brands with a new way of engaging with their customer. As social media has provided a channel for direct engagement, social platforms have provided brands with a central location for a large number of users. Companies (brands) in turn get direct and targeted exposure to their end consumer and it builds brand awareness.

The one problem with these new channels? Monitoring ROI is extremely challenging. While you can get users to download an application or most users on social networks are not in a state where a direct purchase will be made. As such these new branded applications are much better at building awareness and building “engagement”.

What Types of Things Are Being Built?

There is a wide array of applications that are being built. Some also work and some don’t which makes many of these applications a crap shoot without some sort of expertise and the purchase of individual installations. Some of them are being hailed as great successes though and the two primary companies I know that are doing a good job are Buddy Media and Context Optional.

Today Buddy Media announced the release of the Bacardi Mojito application. Yesterday Context Optional announced the release of a few applications as well including Today I’m Toasting by Miller. The place where I see the most room for growth is on new platforms like the iPhone. For instance, Audi released an extremely successful application on the iPhone which was one of the most downloaded applications for at least a week.

Today the application is the 5th most popular free application according to Apple. You can’t find a single branded application among the top applications on Facebook or any other platform. While this has to do a lot with the timing of this application, I would suggest that this Audi application probably ranks among the most downloaded applications all together.

What Does the Future Hold?

There is clearly an increasing demand for branded applications but the biggest question is if these brands feel that the investment is worth the return. Most likely a large number will have successes but as some brands generate a less than satisfactory result we will see those advertising dollars go to other channels. Fortunately we are still extremely early in this process and trying to figure out how all of this will pan out.

The reality is that brands need to try experimenting in this space and hopefully over time social networks and other non-traditional channels can prove that they are worth serious advertising dollars.

Over the past few months I have been speaking with countless professionals in the social media space about the state of advertising within the industry. Over the past year I have attended countless conferences and spoken to countless individuals all of whom appear to have a firm grasp on what’s taking place in regards to social advertising. Over the past few months I have tried to articulate it on this blog but I don’t think I’ve succeeded at aggregating all of this information into a single post.

While this post is not an attempt to aggregate all the various offerings, I hope that it sufficiently articulates the dynamic between advertisers and social networks currently.

Poor Job of Advertiser Education

“Have I got an opportunity for you! Imagine being able to reach out to your exact target audience and influence their conversation about your product or service,” the social networking sales professional says to the brand manager. “How do I correlate these advertisements directly to my sales,” the brand manager asks.

“You can’t! This is a new form of engagement advertising which is changing the way your customers interact with your brand,” the sales professional replies. “Well I’ll tell you what,” the brand manager says cautiously, “since your name is Facebook, we’ll give it a shot with $5 million in advertising and see how it goes. If good results are produced, perhaps we’ll try it out again.”

While this may not be the exact exchange that takes place between the average social network sales team and the advertisers, this is essentially what’s taking place in the industry today. While it was a great day for the sales person that closed the deal, the sustainability of this type of advertising is questionable especially when the advertisers don’t understand what they’re buying.

Ask anybody what results they are producing from social advertising campaigns and the response is usually along the same lines: “We are getting great client feedback and many have returned to run new campaigns.” What was the rationalization of their clients decision to return? You’ve got me but whatever numbers are being produced they appear to be sufficient for a select few.

What types of numbers are being produced for those clients though?

Inconsistent Offerings

Companies from Meebo to Facebook to MySpace are all coming up with new types of offerings for clients in which engagement hold a high value. Some reports will count the numbers of conversations about a topic, while others will determine how many new “fans” a company attracted. Whatever the model, they are not traditional and they are not the same from one company to the other.

While there is the urge of the social media/social network expert to produce new types of metrics for clients, “Most every ad agency in the U.S. and Europe are still 100% attached to impressions and clicks” as Ted Rheingold of Dogster pointed out in the comments earlier this week. Ted continued with a great statement, “They are becoming less scared of non-traditional clicks (such as contests, Groups, virtual gifts, etc.) but that’s only because they can still tie it to a user and a click.”

There are currently CPM, CPC and CPA advertisements that the advertisers are aware of but there is no current metric that are used for “engagement ads” (which is what leading social networks are currently offering). In order for the industry to move forward as a whole, some sort of standard metric needs to be developed for social advertising. Otherwise, each service is simply competing against the other and the reality is that we are competing against search and traditional advertising.

Social Advertising Can’t Beat Search Anytime Soon

Absolutely everybody in this industry is looking to “revolutionize” the way advertisers interact with consumers. We all sense the increased connection that can be generated between brands and consumers via social media and social networks but most can’t seem to find the perfect solution. When Facebook reverts to “engagement ads” as their “new offering”, it becomes clear that everybody (even Facebook) is struggling to find an answer that will help advertisers better relate to this new form of advertising.

While I personally cannot answer whether better advertiser education or better offerings by social networks (and social products in general) is more important, it’s clear that advertisers still don’t understand what’s being offered. If those selling social advertising can’t even track the diverse offerings that exist, how can the advertisers?

If I was an advertiser looking into social advertising offerings, I would most definitely end up reverting back to my other advertising solutions (search and more traditional channels). That’s because for now, social advertising is inconsistent and overly diverse. The real question now is do we just continue down our own paths unassisted or is there a way for competing social advertising providers to work together?

If you’ve gone to any of the industry conferences in the past year, you’ll have heard the same pitch from all the companies: “We’re selling engagement.” We understand that there is inherently value to brands when consumers engage in various activities within a branded environment. How much value is provided through that engagement? Nobody knows. How do you measure engagement? Also an unknown.

New Solutions Emerge

Last week news of Facebook’s new “Engagement Ads” emerged and at first it didn’t click with me but the sound of it is pretty ominous. Today MediaPost posted an interview with Facebook’s VP of Media Sales, Mike Murphy in which he says “Over the last few years, Web advertising has been all about demand fulfillment.”

The article continues, “he believes that Facebook users aren’t necessarily seeking to execute tasks or fulfill specific demands, and by nature are less inclined to click on ads that take them away from the site.” What Mike Murphy believes is something that isn’t theory, it’s fact: users on social networks do not click on advertisements and this is why Google continues to reign in the majority of online advertising dollars.

Direct sales is what advertisers want and it’s not surprising. When you can put in money into specific advertisements and you can track that advertisement to a sale, why wouldn’t you purchase more or look for other channels that can do the same thing? That’s what most are doing, but a few brave souls are beginning to explore new territory.

Engagement Advertising as the 4th Type of Web Based Ad

You are a brand manager. You are sitting at your desk trying to process a ton of data and make a decision about the next quarter’s advertising budget. You have a bunch of options including: television, newspaper, radio, mailers and online. Online is broken out into banner advertising, search advertising, email marketing, and more recently “social media” which nobody has figured out how to classify it.

If Facebook agrees with what many others are saying, the new categorization should be “engagement advertising”. Meebo has already been offering these types of solutions (as they will discuss at the upcoming Social Ad Summit) and a number of others are beginning to do the same. Ultimately all engagement advertisements boil down to one thing: the conversation.

In public relations, marketing and advertising firms there have been a number of solutions to track buzz such as Cymfony and Nielsen BuzzMetrics. These new “engagement advertisements” ultimately produce similar results. At the end of the day, Meebo or Facebook will come back to the advertiser and say “X number of people interacted with your advertisement and Y number of people are now talking about your product in comparison to Z people before.”

Still Very Early

Just as brands are cautious to enter this space, social media evangelists should be equally concerned about this hesitancy. While we alway have “attention economics” to rely on, soon enough every social media site is going to be pushing this new type of advertisement. The only problem is that the industry is still learning how to measure all of these things.

Metrics is not a new phenomenon, it’s just that technology has made it easier to measure things. Unfortunately all of us are trying to figure out ways of packaging and measuring this “new type” of advertising while at the same time selling it “as is”. Fortunately for the industry there are brands that are willing to experiment and test the waters but the windfall profits we are seeking from social media may no longer be just over the horizon.

Rather than just measuring the impact of advertising on direct sales we are now entering a phase where we monitor the impact of advertising on conversation. While there are already systems in place to monitor the conversation, it was previously challenging to influence the conversation on a large scale. What social networks are now providing is a way to influence consumers’ conversation en masse.

The real question now is: can influencing the conversation on a large scale result in sales? If it can, how do we measure the correlation between conversation and sales? Is this really the secret key to social networks generating large amounts of revenue?

Yesterday Google announced that OpenSocial now reaches 350 million users, suggesting that the competition is still on to become the largest social platform. The competition may be slowing though as Stefanie Olsen suggested this morning. Rather than a large influx of new competitors, the “buzz has turned to a worrisome hush” and venture capital funds are drying up.

I’m not so sure that the lack of venture funding for Facebook application companies is big news. Technically social applications are not the same as widgets but that doesn’t really matter to marketers who are spending money in the space because they don’t know what any of this means. It’s now become the job of the sales and business development teams to sell the idea to marketers and advertisers.

There is also a lack of advertiser education and as such, even the large companies are finding it more challenging to extract a lot of revenue out of advertisers. This doesn’t mean that the interest in the area has died, it just means that it’s time to get back to basics and figure out how to generate substantial revenue (this was one of the primary drivers behind the launch of Social Ad Summit).

The biggest challenge for the space? Even the venture capitalists investing in these companies aren’t so sure. As Navin Chadda, “a venture capitalist with the Mayfield Fund, which invested in Slide and widget distribution network Gigya” said, “Can one application company on Facebook build a few-hundred-million-dollar business? I’m personally skeptical.”

Some of these companies have have more eyeballs looking at their products than television channels have but the advertising dollars simply aren’t stacking up. It’s time for the industry to get back to basics and figure out how to start extracting the big dollars.

If it wasn’t clear enough, advertising is the core source of revenue for all companies in the social web. As I wrote this morning, advertisers provide “the revenue for four out of the five primary types of companies in the social web economy”. In another article posted this morning on Alley Insider, Vasanth Sridharan revealed that RockYou will begin launching advertisements from car advertisers.

Car advertisers are some of the largest advertising spenders in the U.S. In the first quarter of 2008, General Motors spent $536.5 million, Toyota Motors spent $350.4 million and Ford Motors spent $330.2 million on advertising according to Nielsen Monitor-plus. The auto industry was also one of the first entrants into banner advertising and they are also one of the early entrants into social media.

What Matters More: Monetization or Users?

One of the classic statements in the social web industry is “our company is not currently focused on monetization”. The creators of technology products love to spend time focusing on refining their products while building the user base. In the early stage this makes a lot of sense because if only a few thousand users are coming to your site, it doesn’t really make much sense to try to generate revenue.

The strategy of “grow first, monetize later” seems to make sense for a lot of venture-backed companies because they have the luxury of time. Unfortunately though, I really don’t think these companies have as much time as they think. In a world of limitless inventory, investing the majority of a company’s resources in building more inventory doesn’t seem to make much sense.

Social Media Advertising is Nascent

This industry is still young though and advertisers are slowly (extremely slowly) beginning to understand what social media has to offer them. Spending money on a television advertisement does not generate as much interaction with your end consumer. As such we are seeing a number of creative ways to advertise in social media.

At the end of the day though, isn’t advertising just advertising? Advertisers want to invest money in promoting their products and services and they want some way of justifying their expenditures. Early on, social media campaigns provided little data in terms of return-on-equity (ROI). We are beginning to see that change though as new social analytics companies emerge and new forms of metrics generated.

It’s time for social media companies to invest more time in developing advertising solutions rather than their user base. Until someone comes up with a new way of making money through social media, it’s the only way to generate revenue.

This morning there was a post in BusinessWeek which discusses Twitter’s lacking monetization model and the possible ways the company could generate revenue. No matter which way you look at it, the most obvious way for Twitter to generate revenue is through some sort of advertising. Whether it’s banner advertising or in message advertising, advertising appears to be the quickest path to monetization.

So what type of advertising will be effective for Twitter? If you look at other social media destinations on the web, each service provides custom advertising solutions. For example, Facebook provides news feed advertisements (which typically have some sort of social relevance) that significantly contrast traditional banner advertisements. Meebo also provides an interesting solution and it’s one that I think Twitter should copy.

The advertisements are rich-media advertisements with the addition of user personalization. For example, Meebo’s advertising demo displays the Incredible Hulk advertisement. Users can easily switch their buddy icon to an Incredible Hulk branded icon as well as the site wallpaper. Users can also view video trailers and share those trailers with friends.

Meebo then reports back to the advertiser what sort of impact the advertisement had on conversations taking place across the service. Given that Twitter’s closest technology is chat, this form of advertising seems like a perfect solution. So far advertisers seem happy with Meebo’s offering so why wouldn’t they be happy with a similar offering on Twitter? They would!

The quickest path to monetization is to duplicate the monetization offerings of similar solutions. The only thing preventing Twitter from providing such a solution is the lack of a sales team. I’d be willing to bet that the company isn’t far from hiring one! Can you think of any other monetization solutions for Twitter?

Within our individual lives there is currently a division between the activities we do online and the activities we do when we aren’t connected. Just as online privacy is beginning to fade away we will soon witness the destruction of offline privacy. Last night I was speaking with a friend of mine from Webster Hall in New York City when an idea clicked.

If all of your general activities at an event could be tracked back through Facebook (or alternative social media services), there would be a huge advertising potential. Imagine reading your Facebook News Feed and seeing a story that says “Nick and 3 of your friends just entered the Smirnoff Vodka booth at the Everclear concert.” With the power of Facebook connect and competing services, we will soon see these types of activities become public.

Rather than just accepting a terms of service and privacy policy when you register for a site, you will begin to do the same thing when you register for events. How will this work? Through leveraging readily accessible technologies you can track the locations of people attending an event. This means that ads being displayed to them can be targeted and it also means you will soon be able to target those ads toward their friends.

Some of these concepts begin to sound like those out of recent science fiction movies. Malls for instance will soon become entire branded experiences. The moment you enter a store, your friends on Facebook and other social platforms will immediately see that you’ve entered. There are clear privacy issues with these forms of broadcast advertising. There are also questionable business practices at hand.

Should individuals be paid for this new form of referral-based advertising? Also, shouldn’t the consumer be able to opt-in to the public display of this information? The concept of the “social web” eventually begins to fade away as all of our offline and online activities become merged. We are only months into the launching of Facebook Connect, MySpace Data Availability and Google Friend Connect.

The recent “Congressional scrutiny over the intrusiveness of online advertising and behavioral targeting” that Erick Schonfeld points out will become increasingly important as the technologies transform advertising. So when has advertising gone to far? While many of those focused on monetizing the “social web” are willing to try anything to increase ad revenue, consumer interests may become a secondary concern.

Is there a line to be drawn when it comes to new advertising techniques? Will Congress be able to stop many of these activities prior to a multi-billion dollar industry being built around this?

Last month I hung VideoEgg out to dry after hearing a number of developers complain about VideoEgg’s inability to fill inventory and their rapidly decreasing CPMs. To put all the blame on VideoEgg isn’t completely fair though. There is an industry-wide problems which is that CPMs seem to continue going down, not the other way around. This is the exact reason I announced Social Ad Summit. Perhaps, if we get a bunch of brands, media buyers, social network execs and ad networks in a room, something positive will come out of it.

Either way, back to VideoEgg. Yesterday, VideoEgg announced a few new advertisements which as Catherine P. Taylor puts it, helps VideoEgg have another model beyond “engagement.” There are five new types of advertising solutions:

• One solution enables advertisers to include live updates to advertisements via RSS feeds.
• The second is “local mapping, which advertisers can use to provide store locations to users based on their zipcode.”
• Third is a multi-clip capability. This is pretty straight-forward. It means that each advertisement can have multiple videos in each ad placement.
• There is a mini-store “which allows marketers to display DVDs or other items for sale below the video player, and
• Finally, a share and syndicate feature which enables users interacting with an advertisement to immediately share the video within that ad on Facebook and other social networks or email it to a friend.

Last time I came out with guns blazing against VideoEgg. It may not have been totally fair considering that at least they are consistently developing new advertising solutions, some of which are completely innovative. The problem of low CPMs or not being able to fill inventory with quality advertisements is not limited to VideoEgg. Everybody in the industry is facing this problem.

While there are companies that are attacking the problem from all angles, nobody has yet to come up with the perfect solution. It’s time to put our heads together and come up with one!

Privacy is increasingly becoming a topic of discussion in the world of online advertising. As new tools emerge to target advertising based on user behavior as well as provide social relevance, privacy is becoming a critical issue. Whether it’s the tracking of users via cookies or the monitoring of their activities throughout “the social graph”, we are in a new era in which the lines between personal and public lives have become blurred if not eliminated.

Today, Chris Kelly, the Chief Privacy Officer of Facebook spoke to the United States Senate Committee on Commerce, Science and Transportation about the “Privacy Implications of Online Advertising.” A full transcript of Chris Kelly’s testimony is available on the Senate’s website. On the topic of differentiating between personally identifiable information and non-personally identifiable information, Chris Kelley stated:

The critical distinction that we embrace in our policies and practices, and that we want our users to understand, is between the use of personal information for advertisements in personally-identifiable form, and the use, dissemination, or sharing of information with advertisers in non-personally-identifiable form. Ad targeting that shares or sells personal information to advertisers (name, email, other contact oriented information) without user control is fundamentally different from targeting that only gives advertisers the ability to present their ads based on aggregate data.

Chris Kelly also gave an overview of Facebook’s SocialAds and their Beacon program. From the initial glance at this hearing, there is not much significant revealed. What is clear is that the govenment is actively involved in discussing the privacy of internet users and this arrives at a critical time. Advertising networks are racing to develop systems that target users based on their friends and activities and in some cases it is pushing the limits of privacy standards.

I frequently discuss the privacy of social network users on this site and the implications that these new advertising systems have in regards to their privacy. It is excellent to see that the govenment is quickly to discuss what it taking place. Personally, I hope that we see a global set of privacy standards and rights developed in the near future.

I’d imagine that one day we will have an enforcement organization that monitors the activities of many of these companies.