Cogblog

AOL acquires Bebo.  I know nothing about the deal and very little about Bebo, but I like the sound of it and I want to go on the record with that opinion.  Driving integration with AIM is a great idea and one they have already tried unsuccessfully with AimPages, but I think you have to keep pushing on this until you get it right.

Also, owning a big social network is good.  MySpace and Facebook are not owned by Google, MSN, or Yahoo.  So AOL has something they don’t have.  That is good.  And page views are growing (albeit low value views).

Realistically, I suspect that no one (maybe Google?) knows more about monetizing social inventory than Advertising.com.

We live in interesting times!

Compete.com launched a new product called Behavior Match that I read about in an advertisement cloaked as data driven article in Seeking Alpha.  (Reprinted (or originally) on their blog)
This comes dangerously close to my day job, so I want to be clear that I am just reacting to what I read in that article.  The product might be great.  Compete is certainly great.  Etc…..

Anyway, I have to say that I feel like they kind of miss the boat.  I have always felt like looking at the size of the target market and looking at the composition index can be misleading (less so if the composition index is off the charts).  So in the first example, Compete.com indicates that “Among this list, aol.com is the best advertising opportunity for Johnson and Johnson to reach young and expecting mothers”.

Is it really?  Probably, relative to a site like Yahoo, this is true.  The CPMs are likely comparable and the fact that AOL indexes higher implies that fewer impressions are wasted on poor fit.  However, if sites on the list like Myspace and Youtube have CPMs that are much lower (likely), the cost per relevant impression may be lower.

Let’s move on to the second chart.

Here, one of the stated conclusions is: “A campaign focused across many torso domains has the same reach opportunity as a larger internet property”.  (A torso domain being neither head nor tail of the Internet.)

Once again, that is a broad statement.  But what if all the people visiting hbwm.com also visit kidprintables.com.  Then you are not expanding reach, you are just uncontrollably increasing frequency.  You may run a campaign on all these torso sites and only reach 50,000 people.  Furthermore, you probably paid a premium price.

What is interesting about this is that much of this new product is seemingly available in comScore today.  In fact, comScore offers reach penetration reports that will show how many of the hbwm.com people also visited kidprintables.com.  Where comScore falls down, and a service that would have huge value to advertisers, is that their tool is overly simplistic.  I want to create bundles of sites and compare their reach in certain demographics and the aggregate composition index.

A tool like this would allow advertisers to make smarter buys and enhance our understanding of how a target market uses the network.

So everyone in the world is reporting that Facebook had an all-hands where they talked about 07 results. 2007 revenue: $150m.

I went on comScore and tried to figure out total page views. According to comScore (frequently cited as under-reporting): ~167b page views.

So the effective RPM of Facebook pages is theoretically: ~$0.89?

In the big scheme of things, that is neither here nor there. What I find really interesting is this other TechCrunch post: Lookery guarantees 12.5 cent CPMs for Facebook apps

That implies that this ad network is doing a much poorer job than Facebook of monetizing relatively similar inventory. Yow! Obviously, the next step is to drill down to the performance of the inventory, but I am bound by a variety of contractual pieces of paper to not discuss my findings here!

Update: More celebrity sightings!  Scott Rafer critiques my critique in the comments and then I agree with everything he says, which don’t deny my earlier points.  Definitely click through your RSS feed and read all about it.  Alas, he didn’t create a Lookery chart on Cogmap, so I had to.

It is always cool when people, whose blog you read, suddenly read yours for a moment.

Nick Denton introduces a commission on traffic with a guaranteed draw on all of his properties. Fun fun. Clearly the goal is for people to write insanely popular posts. If I were Valleywag, it would be one “Lindsay Lohan in scandalous pose with noted Silicon Valley VC - pictures after the jump” post after another. “Top 10 easiest VCs to raise money from” - many people have mentioned the desire to create more Diggbait based on this.

The real tragedy is that Paul never discloses the page rate that Valleywag people get paid. Knowing this and knowing the average CPM of the site would allow you to take a stab at the economic model getting applied here. People have pointed out a couple of interesting things:

1) The home page is “free page views” for Denton

2) When people quit, their page views become “free”

3) Denton does a poor job monetizing RSS feeds today. Those are essentially worthless views that he is getting for free. Once he starts to monetize those effectively, the value will have to be reflected in the page rate or in some other mechanism.

But the economic value of those page views could, at least partially, be redistributed to current employees by bumping up the marginal page rate for their views.

Blogonomics implies that new hires get the short end of the stick, but that can be easily remedied. First, sites that have more transitory news value can simply have higher page rates to compensate for less long term value per post. One would hope that on a site with breaking news that is valuable, the CPM is higher? Second, you could have a larger guaranteed draw to start, slowly reducing it over time. That is Sales force 101. Finally, maybe that is less valuable? Pages that never get link love and long term traffic probably are less valuable. Compensation reflects that.

What I don’t want: I hate Diggbait from non-experts. Reporters cranking out top 10 lists for momentary bursts of Digg love would upset me.What I want: I hope a reporter proves the value of doing good investigative work and demonstrates that it is worth spending more time than he would have at $12/post to do a bang-up job creating some great posts!

It will be interesting to see how such a visible experiment works out. Newspapers never directly compensated reporters for increasing readership. This is a great example of aligning goals that is only possible digitally.

One of the things I talk about when people start to talk bubble these days is the structure of the bubble and how different it is than the last bubble.  It seems to me like during the last bubble, many VCs were able to get their investments public and cash out, leaving it to public investors to take a bath.  This time around, M&A has slowed a bit and very few companies are going public.  There will be a lot of funds that fail to come out of the first decade of the 21st century showing good returns.

AdReady has now raised $12 million.  Can they really find a buyer that will give those investors 10x returns?

What is interesting about AdReady is that they do not own a network.  They are really a front-end tool for media, but it kind of assumes that all inventory is the same and that performance differences tend to be more about creative quality.  At Advertising.com, I would say that we tend to skew the other way.  We see performance differences in creative, but we also recognize that all inventory is not created equal.

For them to raise $10m, they had to convince Bain Capital and Khosla and others (smart money) that ad inventory is a commodity.  To me, that is a hard sell.  But then, the AdReady team is great and could sell ice to eskimos.   I love those guys, I just think these deals are hard to do.  Probably I think too small.

Great press release today from Advertising.com announcing their Facebook Application Ad Network.

Federated Media made an announcement the other day, AdBrite has made an announcement, also.

Sounds like tough times ahead for Cubics, Lookery, and Social Media. It is hard to imagine they have the scale to support strong RPMs on a significant amount of inventory. Large network’s strong marketplace of advertisers should position them extremely well to take share in this market. Once they start offering higher RPMs on more impressions, that will make it difficult for small networks to compete.

Popular applications that generate a lot of page views will not be able to get the same eCPM by doing a boutique deal on a small amount of inventory that they can getting significant fill rates from a large network. As the big guys commoditize the inventory, the ability to sell this in an interesting way for small networks should get tough.

Fledgling networks that started with a strong advertiser message by pricing on CPA (installs) like Social Media and Slide will find that the pricing they offer publishers rapidly becomes uncompetitive. The big guys have some of the best CPA deal structures in the world, they will simply have more competitive ways to fill inventory on an eCPM basis.

Crunch, crunch, crunch.

Stylehive used to be a go-to site for me when I felt like looking for home decorations or clothes for my wife. Unfortunately, I feel like that is no longer true. The front page now contains so much stuff, compressed so tightly, that it is no longer easy or fun to breeze through. It has been made super-efficient for the Stylehive power user. Also, they have worked so hard to incorporate text links into product pages that the user experience is virtually destroyed every time I look at a product.

Here is a screenshot:

Correct me if I am wrong, but half this page is ads and I have to scroll to see the full-size image of the picture I just clicked on. That’s awful! I can’t imagine that eHub is as proud to show this as they were the initial site design.

Why would Stylehive corrupt their own site? Well, they have taken $4m in venture capital. Probably hoping some revenue will offset anemic page view growth - here is the comScore data:

What’s crazy is that they are seeing strong unique visitor growth. comScore data:

I would maintain, because it selfishly serves my purposes and I know nothing about what I am talking about, that the page view growth is flat in the face of growth of uniques because visitors are coming to this site with good buzz and then are driven away by the morass of advertising.

With $4m in capital, they need to get to breakeven pretty quickly or start to show the kind of revenue ramp that might make people pay more than $50m for this company. Ouch. We have talked a lot about how easy it is to build a company with a little capital today. The downside of raising a little capital (and in this instance we will consider $4m little) is that you can never run out of cash. So if you aren’t getting to profitability and the looming threat of bigger and bigger raises with what is, in many instances, essentially niche sites that probably won’t justify 9 figure valuations, the real concern that a company has an unsustainable business model emerges.

I go to Stylehive less and less and today I could not figure out why I should ever go back. They are pushing community features out the wazoo, but I am not interested in being part of the community, I just want to find out what the hot new stuff is. Before, I knew Stylehive would give it to me. Now, I feel like Stylehive tells me about communities I don’t care about then tries to get me to click an ad.

I am reaching here, but it is how I feel. It is a shame they make me feel this way.

Amazingly, I saw a new, great relevant post right after my post on comScore versus site side measurement.  Boxes and Arrows writes a great article about the reasons why site side measurement is wildly inaccurate.  I had never heard about AOL IP address issues, that is a new one!

Yardley points to a great article on 24/7’s ad network getting hijacked by hackers.  What I find interesting about this is how it illustrates that we put lots of things on our sites that don’t belong to us.  Advertising networks daisy chain together so the ad you serve may be from a network you don’t contract with.  You might invoke web services from companies like Amazon.  You may install Google Gadgets.  You may pull RSS feeds for syndicated content.  There are a million different ways that we give up control of our applications to gain additional functionality.

In many ways, this is reminiscent of a security debate that has gone on for decades.  And of course, generally, I fall on the side of “open it up and hope for the best”.  Given that, we must be exceptionally tolerant of the occasional security breach that transpires.

Everyone else has blogged about it, I will also: Great New York Times article on site relationships with comScore.  It is amazing that, even with todays amazing server logs that track every file download, it is not possible to really use that data to create apples to apples comparisons of user surfing habits.  comScore fills three crucial gaps in the data gathered by sites to paint a different picture of online use:

1. Discard international traffic
2. Aggregate work/home traffic
3. Overcome cookie deletion to identify multiple instances of the same user

Is comScore imperfect?  Sure.  What is really bitter is that all of these issues also plague ad servers such as Atlas or DART, so the way campaigns can be delivered may differ from the picture that comScore says is possible on a site.  And it is amazing that you should expect discrepancies between comScore and sites - after all, they use different methodologies, but you would not expect such big differences between advertiser ad servers and sites.  The methodologies should be synced up there.

There is clearly still a lot of foundational work to do here.  Having said that, these discrepancies stem from the fact that more data is available in this medium than ever before.  If an agency announces that it wants to sit on the sidelines until these metrics get reconciled, than other arbitrageurs will step in to fill the void.  On a performance basis, I still believe that most online advertising offers great value!