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.

Platform-A, the AOL owned advertising network which has the largest reach of any network based on the number of pages their ads are shown on, has announced that they will begin offering social application developers on Facebook and Bebo a guaranteed rate. Platform-A already advertises on AOL Instant Messenger and Bebo but this extends them into third-party applications. This is a similar strategy to Lookery who guarantees 12.5 cent CPMs (cost per thousan impressions) globally and 25 cents in Europe.

According to Larry Dignan, Platform-A’s CPM rate will probably be closer to the 70 to 80 cent range. PaidConent is reporting a much lower rate at around 40 cents. This is still extremely low for most developers and the overall industry is finding it extremely challenging to boost the CPMs much higher. The move by Platform-A into this space emphasizes how this is an industry wide problem and not just confined to a small group of application developers. It is ultimately in everybody’s best interest to figure out a way to boost the CPMs.

Last week at the Digital Media Conference in Virginia, Lynda Clarizio, President of Platform A, stated that she expects a substantial amount of consolidation in the industry. Ultimately, having countless advertising networks is not really sustainable. Over the next 12 months we are going to see new monetization models pop-up but it will still be a challenge to try and increase the overall industry returns. Do you know of any networks providing higher CPMs?

One of the most significant challenges facing advertisers is the lack of control of what content their advertisements are displayed next to when advertising on social networks. Yesterday while attending the Digital Media Conference in Tyson Corner, VA, I listened to Lynda Clarizio, President of Platform-A, speak about systems the company is building to protect advertisers.

Through leveraging AOL’s parental controls technology Platform-A will have a tool which automatically determines whether or not there is offensive content on a page and will determine whether or not to display an advertisement. I spoke with Lynda and the communications director at AOL, both of which said that there was mention of this technology in their press release about their Bebo acquisition.

Apparently I glanced over that part of the release! This type of technology would prove to be extremely valuable. The only question is how effective this technology is. Ultimately, each advertiser has custom demands for what content their advertisements are not displayed next to. The complexities of such technologies have created a hurdle for most social networks to get through.

Last year Vodafone, Orange and Virgin each pulled advertisements from Facebook. Google also stated that they decided to cut ads from Orkut due to “complaints in Brazil about offensive content.” The issue is an industry wide problem and this filtering technology is the first I’ve heard of which moves in the right direction.

Whether or not the filtering technology works, social networks need to figure out ways to reduce the risks that advertisers face while placing their advertisements next to user generated content. Have you heard of any other technologies that help protect the advertisers?

Google, once foreign to targeting based on social data, has launched Google Ad Planner. The service is targeted at media buyers and enables them to select ad placements on various sites based on demographic information as well as traffic data. Currently the service is limited to 4 types of demographic data: age, gender, education and household income.

Compare that to Facebook which currently offers targeting based on 8 variables: location, gender, age, profile keywords (found in interests, favorite music, movies and more), education status, workplaces, relationship status and what gender they are interested in dating. While Facebook offers more variables, Google’s information is broken down in to the categories most frequently targeted by media buyers.

The real question is if this is going to cut into Facebook’s ad revenue or prevent them from attracting marketers more effectively. Fox Interactive Media has a similar offering to Facebook’s called HyperTargeting which leverages MySpace profile to segment users. According to MySpace advertisers have been increasingly demanding HyperTargeting which has also been producing higher CPMs.

Google needs to figure out a way to capture some of this market and their new Ad Planner service appears to do that. While the social web continues to wait on a breakthrough advertising service, Google is using traditional advertising segmentation to make spending easier for media buyers. Do you agree that this new service will reduce the attractiveness of SocialAds?

Today at the OMMA Social in New York City, Seth Goldstein, founder of social media advertising network SocialMedia, announced a new service for advertisers called “Friendship Ranks.” The new service combines data related to peoples’ interactions on Facebook applications to generate more effectively targeted ads. Seth also formally announced “social banners”, a service the company has been experimenting with over the past few months.

The “social banners” are an opt-out advertising service which resides within Facebook applications. Sound familiar? The whole Facebook beacon “fiasco” (as it was coined by the press), was due to it being an opt-out service. SocialMedia has been able to figure out a way to display your friends within advertisements that are present on applications. Technically, they’ve also figured out a way to display a fair amount of this information outside of Facebook.

Two weeks ago while attending the Graphing Social Patterns East conference, one of the attendees approached me to show a page on SocialMedia.com’s website that was able to display targeted ads to me based on information they had collected. I have included a screenshot below. Initially, I chose not to write a post on the issue because I wanted to make sure I got all the facts right.

I have since reached out to people that deal with privacy at Facebook about the issue but haven’t heard back yet. I’m guessing I’ll hear something from them in the near future though. So how does SocialMedia display these targeted ads outside of Facebook? Through a collection of data via applications in combination with images obtained via user public profiles and unique cookies they can piece together who you are and who some of your friends are. This is off of Facebook.

There are a number of issues at hand and many of them are extremely complex. Let me first say that I believe that social advertising has an extremely promising future. While it has yet to be perfected, I think that one day social advertising can generate more effective ads then traditional banner (and comparable) advertising.

This area must be explored further though because the industry as a whole is entering uncharted territory and one slip up could negatively impact the entire industry. In my own experience, arriving at an external site that knows who my friends are is shocking. My guess is that the average user will also be slightly creeped out about how that information was obtained.

After dwelling on the topic of privacy and transparency for third-party ad networks for the past couple weeks I’ve come up with a number of issues. First of all, it is clear that Facebook is having a tough time monitoring third-party ad networks but they feel obligated to maintain a healthy ecosystem for these companies. It has become somewhat of a conflict of interest and Facebook will need to become more transparent about their privacy discussions with third-parties to maintain trust with their users.

Users must be aware of companies that have access to their personal information when they are installing applications. There are other ad networks which would like to mimic some of the functionality that SocialMedia offers in their “social banners” but they are hesitant to create similar offerings because this has clearly become a gray area.

The combination of publicly available information and information within Facebook through the use of automated systems becomes a really fragile subject. There is a serious need for public discussion about the issue of privacy on the Facebook platform and competing platforms before we have a disaster on our hands. The industry is walking a thin line and keeping the discussions behind closed doors could irreparably damage everybody involved.

What are your thoughts about the current state of privacy with third-party applications? How can we get the conversation about privacy started? Also, what types of privacy standards do you think are important to protect users?

This morning I walked in to the OMMA Social conference at the beginning of a panel on monetization. The panel included Jim Nail of TNS Media Intelligence, Steve Jang of imeem, Seth Goldstein of SocialMedia, Brian Wieser of MAGNA Global and Jeremy Helfand of Classmates.com. There was a healthy debate over how and if it is possible to monetize social media effectively.

In discussing whether or not there is substantial money in social media, Seth Goldstein brought up a rumor of a large computer company recently spending a $10 million insertion fee to get into this space. So yes, there is money but Seth also emphasized that social media advertising is currently experimental.

In response to a question about whether or not social media monetization is sustainable, Jeremy Helfand says that this was the same discussion that took place years ago for interactive as a whole. Fortunately, we no longer need to prove the medium itself (internet advertising), but need to spend time educating the companies on social media.

Seth Goldstein focused on the early stages of interactive advertising. He said that car companies helped drive the initial online advertising industry and the entertainment industry has been doing the same in social media. Seth used a recent campaign for the Incredible Hulk movie investing heavily in social media. For now, the entertainment and media companies will provide the initial liquidity.

Brian Wieser, SVP of MAGNA Global was the naysayer on the panel. He believes that this isn’t a massive business because it doesn’t cost much to run campaigns currently. To contrast that, Steve Jang pointed to another example of a large brand investing in social media. While he couldn’t name the brand he had the opportunity to discuss advertising expenditures with that brand on the flight to NYC this morning.

One other interesting topic was brought up by an audience member who asked: how do brands protect themselves when social media is mostly made up of unfiltered user generated content for the most part? I was actually surprised to hear the responses. Steve Jang said that imeem actually filters out content manually to ensure that ads aren’t displayed next to offensive content.

While I don’t agree that this is an effective model for protecting brands I do agree with Steve when he reframed the discussion. He suggested that it is better to instead focus on advertising which is effective in a dynamic environment that has user generated content. He also emphasized that it is important that the company is able to segment the content effectively.

One of the last questions asked to the panel was how can advertisers maintain their lifestyle when when CPMs are in the toilet. Seth Goldstein responded that the industry average CPMs should hopefully bounce off of penny CPMs and hopefully move up toward $1 and $2 CPMs over the next couple years. Jeremey Helfand thinks that the industry first needs to figure out what is being measured before the CPMs are increased.

Overall the discussion was a lively one with a lot of discussion about where this is going. The overall consensus appeared to be that social media advertising is still in the early and experimental stages. While Brian Wieser doesn’t think that this will turn into a large industry, the majority of the other panelists seemed to disagree.

Among all the discussion of the opening of the social web, one thing continues to be a sticky issue for social networks: the lack of a revenue model. While there is advertising revenue being generated on social networks, it is still a fraction of the amount being generated on sites like Yahoo! and Google. Om Malik points out that the lack of a solid revenue model comes with continued signs that the social networking space is slowing domestically.

While there is continued growth abroad, it is much harder to monetize foreign inventory. As such, the social networking industry is in an interesting position. Social platforms have helped generate more inventory but it has also made it more challenging to monetize that inventory. There are people that have developed creative ad campaigns but unfortunately that’s not filling their entire inventory for an extended period of time.

While Facebook and MySpace have been working on targeted ad solutions to help increase their effective revenue generated per active user, there is still too much inventory and extremely low CPMs for the majority. Either social network inventory will continue to attract cheaper advertising or a new advertising model will be developed to increase the effective CPM.

Other variations of advertise include attempts at monetizing “engagement” but really nothing has been developed to increase returns. Among all the buzz, the limited domestic social network growth means that it’s time to start focusing on new solutions for revenue generation. Do you think the industry will find any new solutions or will social networks continue to generate less valuable inventory?

I had a potential client make an inquiry to me yesterday afternoon. They asked me about developing an application which would ultimately be used to gather phone numbers. The one problem with the model is that the proposed system didn’t provide much value to the user in exchange for them providing the phone number. Somehow though, the application was supposed to spread virally to the masses who would all in turn enter their phone number. It didn’t make much sense to me.

Society is Focused on Overnight Success
I can’t tell you how often someone calls me to request the development of an application that will instantly spread to the masses. When I ask them what the application is going to provide to the user, they say that they don’t know but they just want it to spread virally. People are focused on being successful for the sake of being successful. Too frequently they don’t think about the value being provided to the user, just that they want to be “successful” and get lots of users.

This is clearly the wrong attitude and I choose not to work with people that focus on the end game and not how they’re going to get there.

Marketing Just Got Harder, Not Easier
For large organizations, marketing and advertising used to simply consist of large advertisements plastered on billboards, printed in magazines and newspapers and played on radio and television. While this is an oversimplification of marketing and advertising in the past, one things is for sure: marketing is no longer simple.

There are now countless channels to interact with the consumer and choosing which one to use is a balancing act. Social marketing requires building relationships with the customer. Building relationships is not easy, it takes time. Anybody that thinks they can simply slap up a simple application and have millions of users that eventually become paying customers is definitely misguided.

There’s Still a Huge Opportunity
While marketing and advertising may now be more complex, there is also more opportunity to directly interact with your customers like never before. By leveraging social marketing via social applications, blogs and blog outreach, Twitter and other social tools, you can directly reach out to your potential customers and existing customers to help build brand awareness.

Twitter versus Facebook
One thing that I’ve been thinking about recently is leveraging Twitter versus Facebook for marketing purposes. Let’s say that there are customers talking about your product on Facebook and Twitter. How are you going to find those people on Facebook? You can do a search for groups and fan pages but that’s about it. How about wall posts and status updates of people on Facebook? Unfortunately you can’t track those.

On Twitter though, you can find each individual that has mentioned your company and reach out to them directly. I have previously written about my experience with Comcast on Twitter. Zappos and a handful of other companies are also playing it smart when it comes to Twitter. The best part is that you can reach out to every individual that ever mentions your brand.

Can You Control It?
As I mentioned at the beginning, too often are people focused on instant success while not focused on providing amazing value. The benefit of social marketing is that products and services spread virally. This is really nothing new given that word of mouth marketing was around prior to the internet, it’s just that we have new ways to spark word of mouth campaigns and track what people are saying about us.

The reality is that you can’t control social marketing, you can only participate in the conversation and participating frequently means starting the conversation. Provide value and amazing customer service and people will talk about your company. You can then use web-based social marketing channels to monitor the spread of your brand and help magnify the signal by interacting directly with your customers. Do you think it’s possible to control social marketing?

An interesting study was published today suggesting that “so-called ‘influencers’ might have less clout than some marketers think.” This is not really surprising but I would suggest that there is a spectrum of influence in marketing and advertising. Along that spectrum is our close friends and family which provide the most influential personal recommendations and at the other end of the spectrum would be advertising such as billboard ads.

As Marshall Kirkpatrick suggests, this means that the infamous “Tipping Point” that Malcom Gladwell created may not be accurate. To suggest that the majority of people make decisions based on a select group of people is somewhat ludicrous. The study stated that:

Of more than 1,100 adults polled in December, nearly 80% said they were very or somewhat more likely to consider buying products recommended by real-world friends and family, while only 23% reported being very or somewhat likely to consider a product pushed by “well-known bloggers.”

So does this mean that there is no point in investing in the “well-known bloggers” when executing a marketing campaign? I don’t think so. Ultimately marketing and advertising is about diversification so spread it out based on the impact of each of your marketing investments. This study also shows that Facebook’s SocialAds system could theoretically have a substantial impact. If our close friends and family are using something we are more likely to buy it.

Leveraging click-thru data of individual advertisements on Facebook to monetize our influence makes a lot of sense. Why not get paid for something that you’ve worked hard to build?
The study adds that determining influence is not simple though:

“Understanding real influence, you have to look at a number of factors from the type of audience someone attracts, where their expertise lies, and the context in which other sites are linking to them.”

While it’s not easy to track all of the factors of influence are, I would say that Facebook is currently the closest to calculating our digital influence. Do you think there are other companies that will succeed at this sooner? Do you think monetizing influence makes much sense?