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Apr 17, 2009

@aplusk vs @cnnbrk 2 1m - Does Twitter Challenge the Credibility of New and Old Media?

Last night, the contest between Ashton Kutcher and CNN to be the first to reach one million followers came to a climax. Today, Oprah started her tweets and followers have been jumping toward the million mark. 

Twitter wins, big. 

This contest raises a big question. Does Twitter challenge the credibility of old and new media? 

The Personal Twitter Experience

Our group has been quietly blogging for 14 months. In six months, Google Blogsearch listed this particular blog as the top answer for 'Economics of Advertising'. A belated thanks to all the cross-links from thousands of followers. 

We've influenced ideas used by leading blogs, without their acknowledging the source. As a new source, these brands did not bother to crosslink - and perhaps it's understandable as they maintain Google pagerank parity among legacy blogs and websites. 

We did receive thousands of compliments from readers. Again, a belated thanks to the loyal readers. 

Now, our Twitter followers have grown to #3 position in Silicon Valley. We've passed 95% of the technology blogs except Techcrunch, Mashable, and AlleyInsider. 

What does this have to do with Ashton versus CNN?

@aplusk @cnnbrk - First to one Million

In humor, Ashton characterized the contest as personal versus the bureau credibility. He appealed to his audience to overcome a following, brand, and distribution disadvantage --- and won. 

Is there an issue that legacy media cannot deliver results? Why did the broadcasts of the contest to millions not influence the advantage for CNN? 

Let's come back to this.

Live Tweeting the Contest

Last night, we called the contest with technical details.
  • Some blog reported a bug preventing the unfollow of these contestants. This was repeated throughout the blogsphere. It was not a bug. Twitter planned the pre-emptive challenge to accurately measure the one million-th user. If thousands unfollowed and followed again to become the one million-th, the answer won't be definitive. We did tweet the right information to our followers.
  • Ashton and CNN both gained about 100 followers per minute. Thus, we predicted crossing the million mark at 10:30pm PST. It occurred at 10:15pm.
  • New users provided 99% of the growth of followers. Most followed both without knowing the consequences of the contest. Thus, the numbers reflect the growth of Twitter, not the relative popularity of these brands. Why didn't these new users know about the contest?
  • Ashton had a live video broadcast and appealed to his followers to get the word out. The Twitter feed was filled with tweets about Ashton Kutcher Live and Oprah, little about CNN. That made the difference as @aplusk caught and passed @CNNbrk.
  • We unofficially identifed and twittered the one millionth follower. Let's wait for Twitter to announce the formal answer.
During the live tweet, thousands read and RT'd to pass on the information. 

Passing Major Media with Followers

Our efforts have led to dramatic growth of followers at Twitter, passing what I had considered major brands. However:
  • We discovered some major brands following us at Twitter to get us to return the follow. This is not unusual, but they dropped the follow to make themselves look popular at our expense. Stupid pet tricks. Narcissistic behavior at it's worst.
  • Most don't even return the follow of their faithful readers. These actions block their followers from crossing the 2,000 follower level themselves. No media has reported this mathematical and social flaw at Twitter.
  • Many brands are clueless with Twitter etiquette, simply connecting an RSS feed to their twitter account.
Raising Credibility Questions

If someone writes about social media and Twitter, do they need to demonstrate competence?
  • How can one write and express opinions about a subject where they have no successful experience?
  • With their legacy publishing advantage, shouldn't they be able to drive readers to follow them at Twitter?
  • If they can't, are they showing weakness with their readers? Are they under-serving their advertisers in the same way? Is that why eCPM's are so low?
Ashton beat CNN, but CNN fairly presented the story as human interest - without pushing their own interests. 

However, does Twitter present a new challenge to media. Without success at Twitter, media credibility among advertisers become issue one?

I don't know the answer, but the future of Twitter is assured. 

Apr 16, 2009

Terminology Matters: Why 'Social Media' Sucks

Here's a New Lexicon to Help You Think Clearly

Josh Bernoff
Josh Bernoff

As I speak with companies that want to engage with their customers in the online social world, I continually find people confused as soon as they begin talking about "social media." The reason is the baggage that comes along with the word "media."

Media is something that media companies control, and media is overwhelmingly one-way. The online social world is about as two-way, multi-way, any-way as it can be. Nobody controls it, not even Facebook, which found it can't even change its own terms of service.

Media is something people spend time with. So are online social interactions. That's a pretty tenuous reason to call it media. And while, as in media, you can advertise in social network sites, that is the least interesting use for them.

Here are some words you can use to think more clearly.

If you want to refer to the whole world of people connecting and drawing strength from each other online, you can call it the "social web" or the "social internet" (or you can call it the "groundswell," if you wish). It includes huge sites such as MySpace, communities, YouTube, the blogosphere and so on. (You could call the whole thing "Web 2.0," but people often use that term to refer to a set of technologies -- not the best way for advertisers to focus -- and it doesn't get directly at the people-to-people aspects.)

If you want to build an environment where consumers or other customers connect with you and each other, call it a "social application." It could be a community, a user-generated-content site, or even adding ratings and reviews to your site. By calling these applications, you remind yourself that 1) it's going to take some effort to build it right, and 2) people will interact with it. And you may even remind yourself that 3) it could last a long time, rather than coming and going quickly as advertising campaigns and media do.

If you're going to participate in a big social site (Facebook, MySpace, Twitter, YouTube), call it a "social-network site" (or just a "social network," for short). And you're often better off with a channel or a profile or an identity than an ad in such an environment.

But no matter what you do, the sooner you stop thinking of the social web as media, the better off you are.

~ ~ ~
Josh Bernoff is the co-author of "Groundswell: Winning in a World Transformed by Social Technologies," a comprehensive analysis of corporate strategy for dealing with social technologies like blogs, social networks and wikis, and is a VP-principal analyst at Forrester Research. He blogs at blogs.forrester.com/groundswell.

BK's Square-Butt Spot Makes Viral-Chart Debut in Third Place

Ed: With channels like Youtube, do advertisers need to buy time on TV? Does the media buyer become superfluous as the creative, social media agent takes over the media buying role?

What People Watched the Week of April 6, 2009

NEW YORK (Ad Age.com) -- The King likes square butts -- and web-video viewers sure like his crooning about them. The Crispin-produced video promoting Burger King's SpongeBob SquarePants kids meals, which is also airing on TV, entered this week's viral-video chart in the No. 3 spot with more than a half million views, according to data from video-measurement firm Visible Measures.

It wasn't quite enough to catch the leader (for the third week in a row), Samsung's video of LED-strapped sheep. And T-Mobile's "Dance" also showed staying power, maintaining a top-three ranking and even gaining 2%, despite having made its debut way back in January.

Also new to the chart: a cheeky video from Wilkinson Sword called "Mow the Lawn" (ahem) and a Kia spot that uses hamsters to show off its compact Soul model.

Last WeekBrandCampaignAgencyCurrent Week Views*% Change in Views**Watch the Spot
11SamsungExtreme Sheep LED ArtThe Viral Factory1,114,491-33%Samsung: Extreme Sheep LED Art
23T-MobileT-Mobile DanceSaatchi & Saatchi, MediaCom742,120+2%T-Mobile: Dance
3NewBurger KingSpongeBobCrispin Porter & Bogusky549,717New to chartBurger King: SpongeBob
44CadburyEyebrow DanceFallon438,407-7%Cadbury: Eyebrow Dance
52GeicoIt's the Gecko/ Numa NumaThe Martin Agency, Horizon Media388,569-72%Geico: It's the Gecko/Numa Numa
66McDonald'sTalking Filet-O-FishArnold373,292+60%McDonald's: Talking Filet-O-Fish
7NewWilkinson SwordMow the LawnJWT, New York261,441New to chartWilkinson Sword: Mow the Lawn
87E-TradeE-Trade BabyGrey, New York229,799-1%E-Trade: Baby
9NewKiaKia Soul: HamstersDavid & Goliath, KMA215,090New to chartKia Soul: Hamsters
105DurexGet It OnFitzgerald & Co., SuperFad201,566-37%Durex: Kama Balloon Animal Sutra

Apr 15, 2009

Boom! Twitter More Than Doubles Unique Visitors To 9.3 Million In March

If it seems like Twitter is growing faster and faster each day, that is because it is. ComScore has released its March numbers for the U.S., and it estimates that unique visitors to Twitter.com grew 131 percent between February and March to 9.3 million visitors. Not only did Twitter more than double the number of people that go to its site in a single month, but it accelerated its growth from the 55 percent rate it experienced in February. These numbers do not include international visitors, nor do they include all the usage on desktop and mobile clients, which is significant in Twitter’s case.

Internet on its way to overtake TV

Marion Geiger on April 15, 2009 at 12:03 PM
The Internet is set to overtake television as a main form of media consumption in 2010 says a report by Microsoft called"Europe Logs on: Internet trends of today and tomorrow." The report covers Italy, France, Spain, Germany, the UK, Belgium, Austria, Switzerland, Denmark, Sweden, Netherlands, Finland, Norway Turkey, Gibraltar, Cyprus and Greece.

If the current growth trends continue, Microsoft states the turn could occur in June 2010 with a weekly average of 14.2 hours on the web and 11.5 hours on television. The report also states that TV will continue to be a strong source of media, however it will be experienced in new ways. Already, online videos are shown to be the most popular entertainment feature with 1 in 4 Europeans watching all kinds of videos.

The study found that Europeans are spending an average of 9 hours a week online, more time than they spend reading print media. They found that 65% of online activity was dedicated to news websites, social networking and email.

In the United States, online news consumption overtook print media, yet local television remains strongest. With cable, local and network TV combined, TV lead at 70% of news consumption, according to Pew Research Center's State of the News Media 2009 report. The report also stated that with the current growth of Internet, it will eventually pass television.  

Apr 14, 2009

Study: ROI May Be Measurable in Facebook, MySpace After All

Ed: Ironically, how much did it cost to figure out the ROI on this campaign? Sounds expensive and time consuming.

Package-Goods Brand Earns $1.28 Million in Sales From $1 Million Social-Media Campaign

What it reaped
MySpace marketing ROI for unnamed personal-care brand:
  • Total consumers exposed: 76.9 MILLION

  • Percentage of internet population: 40%

  • Total impressions: 1.1 BILLION

  • Media outlay: $1 MILLION

  • Offline sales generated from campaign: $1.28 MILLION
Sources: ComScore, MySpace, Dunnhumby
Recent research from ComScore, MySpace and Dunnhumby presented at the Advertising Research Foundation's Re:Think 2009 conference in late March suggests that even relatively small outlays on social networks by package-goods brands can result in offline sales impact and deliver positive return on investment.

Generally, the ROI tool of choice for consumer package goods -- marketing-mix models that rely on econometric analysis of changes in retail scanner data -- can't pick up the impact of the relatively small five- and six-figure outlays package-goods brands make on digital media.

To overcome that, MySpace teamed with ComScore, which uses a panel of more than 1 million people in the U.S. to track internet usage, and Dunnhumby, which runs loyalty programs for supermarket retailers and has access to loyalty-card purchase data from 59 million people in the U.S. The two panels include 60,000 people who are part of both databases, creating a single-source database that allows a definitive look at how internet ads affect offline purchases.

ComScore Chairman Gian Fulgoni last year approached fellow Information Resources Inc. veteran John LaRocca, VP-U.S. insights at Dunnhumby -- which runs the loyalty program for supermarket heavyweight Kroger Co., among others -- about combining efforts to measure digital campaigns.

Measuring sales
One of the first studies was for an unnamed personal-care brand that ran a $1 million campaign on MySpace last year, including a contest in which members submitted videos of themselves and friends for others in the network to vote on, said Heidi Browning, VP-client solutions at MySpace. The program also included online couponing.

By the standards marketers sometimes use to measure digital-ad effectiveness, the MySpace effort wasn't overwhelming. Of 76.9 million people exposed to the campaign in four months, as estimated by ComScore, only 765,000, or fewer than 1%, visited an advertiser page on MySpace, though roughly half who did (358,000) visited the advertiser's website.

But by the measure that matters most, sales, the campaign appeared to pay off nicely. It produced $1.28 million in offline sales, as measured by Dunnhumby, which compared purchases among shoppers not exposed to the campaign with purchases among those who were. That amounted to a 28% return on investment, not counting returns from repeat sales among consumers the brand won via the campaign. Only about 17% of the sales were of products advertised in the campaign; the rest of the sales lift went to the parent brand, in what's frequently called the "halo effect."

Particularly by package-goods standards, that $1 million digital outlay with one site was large. But Dunnhumby has run similar studies with smaller digital campaigns.

"Just about every one has seen some positive results," Mr. LaRocca said. "And the ones that have had negative results ... just had a poor message or poor targeting."

Promising method
While a campaign that reaches nearly 77 million people is certainly large enough to generate a read in marketing-mix models, the combination of the ComScore and Dunnhumby panels into a single-source database -- assuming the numbers are correct -- holds promise for more-accurately measuring many smaller efforts, said Gregg Ambach, managing director of the Cincinnati office of research firm Analytic Partners.

The bigger question is whether the ROI will hold up for bigger efforts, he said, justifying budgets similar to what consumer-package-goods brands spend on TV and magazines. Digital is "incredibly efficient, because the cost per thousand is low," he said. "But it's just not moving a lot of volume yet. And, of course, what you always grapple with is if they suddenly went [from $1 million] to $10 million in digital, would the return stay where it is? In my heart of hearts, I think the answer is no."

But it's also a question he said no CPG brand appears to have tried to answer yet.

NYT offers ideas for what readers might be persuaded to pay for online

  • Branding - can the NYT become a global brand?
  • Solving a problem - Filtered water, shifted TV viewing, luggage handling, and legal music download solves problems. What problem does subscription news solve?

Posted by Emma Heald on April 9, 2009 at 9:54 AM
In light of recent debate over whether paid online content has the potential to save the newspaper industry amidst falling ad revenue, New York Times journalists Richard Perez-Pena and Tim Arango posed the million-dollar question: how do you get consumers to pay for something they have grown used to getting for free? They cited several examples from industries that have pulled it off: Coca-Cola successfully sells filtered tap water under the name Dasani, people subscribe to premium television services such as TiVo, airlines have introduced charges for luggage and meals, and iTunes has got at least some people to pay for music. 

So what can newspapers learn from this? "All of these success stories offered the consumer something extra, even if it was just convenience," is the conclusion the NYT has come to. And indeed, the journalists point out, news organisations have been trying to persuade their readers that they can provide something more valuable than an aggregator or blog, by adding features such as e-mail alert services, high quality video or discussion forums. 
However in most cases, all these features have been added free. According to Eric J. Johnson, a professor at Columbia Business School, this is not the way to go. "Before you add something to your site, you should say that if consumers really want it, that should be part of a package that you could charge for," he said. If the readers feel they are getting something extra on top of what they had received free, they should be more willing to pay. 

If this is the case, then maybe newspapers should be looking at what features or services they could add and charge for, rather than contemplating charging for their present offering. This is just what the Wall Street Journal seems to be planning, by adding extra premium services, or what the Christian Science Monitor is doing by providing a subscription-based daily email.

Analyst: Yahoo Could Net Almost $2B In Profit With Microsoft Deal

The Yahoo-Microsoft (NSDQ: MSFT) talks have been one of the great soap operas of the internet world over the past year. But Jeffries & Company analyst Youssef H. Squali believes that the likelihood of a deal between the two powerhouses (Yahoo (NSDQ: YHOO) would outsource its search operations to Microsoft and sells Microsoft's display ad inventory) is now real enough that it's time to crunch the numbers. Here are the financial benefits for Yahoo, as he sees them.

Outsourcing its search operations would save Yahoo $1 billion to $1.3 billion in costs. With the long-term importance of search, Squali points out that Yahoo would be smart to retain the right to take its search operations back at some point and to use its search data for better display-ad targeting.
—Given Microsoft's $300 million to $400 million in display revenue during the fourth quarter 2009 and an assumed 50/50 revenue share , Squali estimates Yahoo would earn about $600 million to $800 million in extra revenue a year -. (But he concedes that the display market may be no better in 2009 than it was in the fourth quarter of 2008).

The bottom line: Yahoo would net about $2 billion in extra profit per year. For comparison this would represent a little less than one-third of Google's operating income in 2008. Squali also points out that Microsoft's additional display inventory would make Yahoo the largest display network online, which would enable it to increase CPMs. But it's unclear if more inventory would actually meaningfully increase CPMs since advertisers tend to pay more of a premium for targeting rather than scale.


Apr 13, 2009

No Buttons, Nice Profits: Apple Spends $22 To Build $79 iPod Shuffle

from Silicon Alley Insider by 

Apple (APPL) can make each of its new, button-less iPod shuffles for only $21.77 worth of materials, according to a new iSuppli report summarized by BusinessWeek. That's a $57 gross profit on every $79 unit, or a 72% gross profit margin. (Does not include shipping, manufacturing, marketing, distribution, etc.)

How does that fit into Apple's overall business? Assuming Apple sells 21 million iPod shuffles over the next four quarters, as Piper Jaffray analyst Gene Munster estimates, that's around $1.2 billion of gross profit on $1.7 billion of revenue (at the current retail/component prices). Not bad.

iSuppli's teardowns are just estimates, but it's possible the new iPod shuffle is one of the more profitable pieces of hardware in Apple's portfolio. Previous iSuppli reports estimate other iPods and the iPhone 3G around a 50% gross margin.

Join the conversation about this story »

See Also:

Apr 12, 2009

Has the Wall Between Church and State Crumbled for Publishing?

Lots of buzzwords about new media. As I read the meaningless words, the bigger issue of publishing credibility raised its ugly head. Traditionally, editors and circulation work independently from ad sales. Has the wall between church and state crumbled?

There is no intent to accuse anyone of foul play, but here are the observations.
  • Did Mashable and Techcrunch gain Twitter recommendation - in return for favorable blog mentions? Like tech events sponsored by leading publications, the partnership can be implicit or explicit. Which is the case here? Winer is whining below.
  • Facebook is adding recommendated friends. Is this an effort to reduce the negative publicity for Facebook? Negative press could lead to the removal of a respected blog from Facebook's celebrity list.
  • Some twitters have received money for their tweets. In the past, bloggers have received money and free products in return for favorable mentions. Arrington has accused Winer of receiving funds. Is this a problem?
  • With thousands of whales at Twitter (i.e. users with over 10,000 followers), are they editors, promotional consultants, or just friends of friends? As an aggregate group, do they replace new media?
  • PR and social media consultants now have 70,000 personal followers at Twitter. Isn't that equivalent to the circulation of legacy magazines? Do these numbers help or hurt the credibility of these media consultants? After all, if they have sooo many loyal followers, why do they need credible publications like Techcrunch? Can't they produce results for their clients using their own followers? 
I remember the policies at IDG where editors could not receive a casual, free lunch, the good old days. Today, we can't separate the press agents, media editors, and advertising promoters among the millions of operators. 

Just asking questions. Has new media gotten ugly?

Does Mashable have credibility re Twitter? 

from Scripting News
A picture named skittles.gifThis article by Pete Cashmore at Mashable is now the top item on TechMeme.

Cashmore is one of very small number of users who Twitter includes in their Suggested Users List, which has resulted in huge growth in their number of followers. 

Three months ago, he had 28,621 followers. Today he has 417,347. In the same timeframe my Twitter feed grew from 16,062 to 21,108, which represents something of a baseline for users not gifted by Twitter with placement on the SUL. (Source:twittercounter.com.)

Did Twitter favor him with this gift because they like what he says about them, or to encourage him to be more favorable in his writing? Or some other reason? Did he pay for this placement? (Note that would, imho, be the ethical thing to do, and the same deal should be offered to everyone.)

Would Cashmore withhold or temper criticism of Twitter because he fears they may cut him off?

Would a reader question his impartiality? (This reader does. I can't see how he can help but be influenced.)

Does this kind of favoritism hurt Twitter as a medium for journalism?...

Can the Statusphere Save Journalism?

by Brian Solis on April 11, 2009

Recently, I enjoyed a refreshing and invigorating dinner with Walt Mossberg. While we casually discussed our most current endeavors and experiences, the discussion shifted to deep conversation about the future of journalism in the era of socialized media with one simple question, “are newspapers worth saving?”

Walt thought for no more than two seconds and assertively replied, “It’s the wrong question to ask. The real question we should ask is if whether or not we can save good journalism.” He continued, “Think about it. Of the hundreds, thousands, of newspapers around the country, there are really only a few that matter. Good journalism and journalists, on the other hand, are worth saving.” ...

As Walt said, “there are truly only a handful of media properties in print worth saving, the rest is comprised of great journalists and recycled national news.”

So what of those brilliantly articulate, passionate, and scintillating writers whom we identify, admire and connect with in each article they share?

It’s not unlike the renaissance currently underway in the music industry. Artists are discovering that they have a Direct-to-Consumer (D2C) channel to reach fans and cultivate relationships. Those in touch with technology and the cultures of online societies can bypass traditional music production and distribution altogether.

I guess I’m saying that at a time when traditional routes to journalism careers are being questioned, exceptional journalists can create their own destiny. Their future is in their notepads (or laptops), ready to escape from paper to online and the real world.

The connection with readers, once established, multiplied, and fed, is seductive and unquenchable....

The Statusphere is the new ecosystem for sharing, discovering, and publishing updates and micro-sized content that reverberates throughout social networks and syndicated profiles, resulting in a formidable network effect of activity. It is the digital curation of relevant content that binds us contextually to the statusphere, where we can connect directly to existing contacts, reach new people, and also forge new acquaintances through the friends of friends effect (FoFs) in the process.

Twitter, Facebook News Feeds, FriendFeed and other micro communities that define the Statusphere, are driving action and determining the direction and course of individual attention. It is inducing a more participatory, engaging, and enlightened community of media-literate information socialites.

I’d also argue that the Statusphere will ultimately replace bookmarks and RSS feeds as a traffic driver for the masses, as we increasingly rely on friends and peers to serve as our social seismograph for relevant and contextual data....

Microsoft Lands a Big Cable Fish as Clients Clamor for New Ads

By Dina Bass

April 13 (Bloomberg) -- Microsoft Corp. beat Yahoo! Inc. and Google Inc.’s YouTube for a seven figure advertising campaign with Discovery Communications Inc., its first to simultaneously combine Internet, mobile and video-game ads.

To promote Discovery Channel’s fifth season of the crab fishing documentary “Deadliest Catch,” Microsoft came up with a package of ideas it has never tried before. Ads will take over the MSN.com and MSN mobile homepages and 90 percent of ad space on MSNBC and Fox Sports sites. Microsoft will run sweepstakes in video-games like ‘Shaun White Snowboarding’ and send text- message reminders to phones to watch or record the show.

“Microsoft just came in like rock stars on this,” Donna Murphy, the Discovery Channel’s vice president of marketing strategy, said in an interview. “They were the first ones to really blow it out in every direction.”

It’s a victory for Microsoft, which is fighting for sales of display ads in an online ad market expected to post the slowest annual growth since 2001, according to Sanford C. Bernstein & Co. With Google having virtually locked up the market for ads that appear next to Web search results, Microsoft and Yahoo are fighting for a display market that will only grow 1.5 percent this year, compared with 37 percent in 2007, Bernstein said.

Separate Teams

Microsoft couldn’t have pulled off a campaign like this until recently, said Keith Lorizio, a vice president in Microsoft’s ad sales group. Separate teams handled Web sites like MSN.com, MSNBC and Fox Sports, ads on mobile phones, video- games and the Xbox Live Internet service -- and usually didn’t work together. Account representatives lacked expertise in newer mobile and video-game ads, so they pushed the same old banner ads on MSN.com that they knew best, Lorizio said.

“If Discovery would have come to us in the past, the ball would have gotten dropped in the handoff of trying to go across all these different properties,” he said. “We never would have had such a diversified campaign.”

Microsoft MSN’s share of the display market fell to 8 percent in the fourth quarter, from 12 percent a year earlier, according to Nielsen Online, which tracked how many times ads were shown to users. Yahoo’s share increased to 30 percent from 25 percent. The average price Microsoft charged for ads also fell, according to Bernstein.

Microsoft, based in Redmond, Washington, rose 48 cents to $19.67 on April 9 in Nasdaq Stock Market trading.

Frosted Mini-Wheats

To promote the premiere of “Deadliest Catch” tomorrow night, Discovery will take over MSN.com, MSNBC and Fox Sports, the first time those sites have devoted so much space to a single advertiser. A mobile-phone contest will give away points that can be used to purchase video-games and movies from Microsoft’s Xbox online service.

Another campaign the company says is a model for the future is a promotion for Kellogg Co.’s Frosted Mini-Wheats, where Microsoft created an online community for the cereal brand that let moms discuss children’s education.

Microsoft says it needs more campaigns like those. “People are not doing a good enough job coming into meetings with creative ideas,” said Scott Howe, a Microsoft corporate vice president promoted in December to oversee ad products. “It will take time to improve.”

The display ad market overall is suffering as competition has pushed down prices by an average of 30 percent to 40 percent in the past year, Lorizio said.

Recession Pressure

Display -- including banners and animated ads -- will account for a quarter of global Web-ad revenue this year and grow 1.5 percent, according to Bernstein. Those categories don’t include things like classifieds and direct e-mail offers, as well as newer areas such as mobile and ads in online TV shows and YouTube videos. By comparison, search comprises 35 percent of the market and should grow 11 percent, Bernstein says.

No single ad vendor has figured how to dominate in display and clients are still trying to determine how to make these types of ads consistently profitable, said Discovery’s Murphy. The recession is increasing the pressure.

“There are fewer dollars in the market right now and everybody is having to get innovative in terms of how are we going to make everything work a little harder,” she said.

In the boom years for Internet advertising, clients automatically put Microsoft, Yahoo, and other big Web sites in their campaigns, Howe said. Now companies that had grown used to an industry expanding more than 20 percent a year must fight for a place.

‘Bread and Butter’

Microsoft’s display revenue, the “bread and butter” of the company’s $2.46 billion ad business, is now increasing at a rate of less than 10 percent, according to Robin Domeniconi, Microsoft’s head of U.S. ad sales and Lorizio’s boss.

“I don’t think we’re going to see double digits until the economy turns around,” said Domeniconi, a former publisher of Real Simple magazine hired in November to inject more creativity and focus into Microsoft’s display business.

Microsoft may be having a hard time partially because competitors offer software with more advanced features for tracking ad viewers closely and measuring the effectiveness of ads, Microsoft and clients say. It’s been too hard to mount a campaign across different Microsoft sites, phones and video- games. Clients who do manage it can receive four different bills, Howe said.

Yahoo Distraction?

David Kenny, who oversees online advertising for Paris- based Publicis Groupe SA, the world’s fourth-biggest ad company, said that as Microsoft spent months last year on a failed bid to acquire Yahoo and its search business, there seemed to be less of a focus on display. That made him reluctant to funnel his clients’ business to Microsoft.

Howe was surprised when told of that sentiment: “If that’s the signal we’re sending out, I have to rethink what I’m saying to the market.”

Kenny, whose clients include General Motors Corp. and Procter & Gamble Co., has been spending more with Google, whose software can do things like show ads only to customers who have access to credit and have used it in the past, he said.

“Microsoft’s ability to come to us with interesting ideas just went by the wayside,” he said.

Range Online Media, which develops campaigns for companies like Gap Inc., has also switched to Microsoft’s rivals to target ads. For example, when a user looks at sandals at an online shoe store, Range needs to keep track of that user as they visit other sites. That way, Range can keep showing ads for sandals. Range also wants to automatically show that user related ads for a set period of time following the shoe-store visit.

Targeting Features

Neither of those strategies can be done with Microsoft’s software, says Camille Ip, account leader at Range.

Microsoft does have some targeting features, but they’re not available across all of its many properties, said Range President Misty Locke. Locke praisedMicrosoft for being receptive to Range’s concerns. She just wishes the improvements would come faster.

Microsoft is playing “catch-up” said Lorizio, and plans a new release of software for targeting and analyzing campaigns this year.

“It’s a very performance-oriented, data-driven business and we should be better,” he said. “It is absolutely critical for us to improve. Every marketing executive needs to be able to turn around and show the return on investment for using us.”

AQuantive Purchase

Microsoft, which spent $6 billion to purchase Howe’s former company, AQuantive Inc., in 2007, needs to integrate its acquisitions to make it easier for clients set up broad campaigns, Howe said. That, rather than more acquisitions, will be the unit’s focus for the next 18 months, he said.

The company has already spent nine months reorganizing its ad sales force so account managers can turn to specialists in areas like games and mobile phones without making the customer do the legwork. In the case of Discovery, as many as 14 Microsoft employees worked on the “Deadliest Catch” campaign but Discovery only had to deal with their account representative, Lorizio said.

As for the multiple-bill problem, Microsoft has made headway with that too. “Discovery won’t get four bills,” Lorizio said. “But they will get more than one.”

To contact the reporter on this story: Dina Bass in Seattle atdbass2@bloomberg.net

CLIP Does Google Really Control The News?

  • Google Search can be up to 80% of a site's traffic source.
  • Traffic deep-links into a site, bypassing the home page. 
  • Users read 1.x page and leave, arriving another day via search.
  • Google has become the primary navigation for a website. Sophisticated navigation for a website serves little purpose.
  • Few publishers understand the reality of how news distribution has changed.

Once again, Google is the favorite bogeyman responsible for the rapid deterioration in the health of the news industry. This time it is Nick Carr doing the finger-pointing, describing Google as the most powerful middleman in news:

When a middleman controls a market, the supplier has no real choice but to work with the middleman - even if the middleman makes it impossible for the supplier to make money.

So how powerful is Google when it comes to parceling out traffic to news sites? If you are talking about Google News, the answer is that it is not quite as powerful as you might think. In the U.S., Google News is overshadowed by both Yahoo News and even the sites controlled by the New York Times (which includes NYTimes.com, Boston.com, HeraldTribune.com, and several other newspaper sites). According to comScore, Google News attracted 16.2 million unique visitors in the U.S. in February, compared to 42.3 million for Yahoo News and 46.2 million for the sites operated by New York Times Digital.

So Google News is not the middleman here. Let’s just put that notion to rest. Yahoo News is three times as large, and Yahoo sends even more traffic to newspaper sites from other parts of Yahoo through its onlinenewspaper consortium.

The bigger question is whether Google as a search engine is controlling access to news sites. That really seems to be Carr’s main concern, although it is not clear because he uses a Google News search as his main example. Nevertheless, Google’s main search engine is certainly a major source of traffic to information sites of all stripes. At TechCrunch, for instance, it is the single largest source of traffic, accounting for about a third of the total. I have no idea whether this is representative of other news sites, but it wouldn’t surprise me. Google search is a very important middleman indeed.

Does that make Google like Wal-Mart, as Carr suggests, a middleman of such might that it squeezes everybody else’s margins? Does that give it “monopoly control over content distribution,” as Scott Karp tries to argue? Not exactly. Information economics work slightly differently than retail economics. Let me stick with the TechCrunch example. One third is a lot, but it is not a monopoly. Google sends us all of that traffic because many of our posts rank highly for the topics they cover. We don’t pay them for that traffic. We are not buying keywords.

Yes, Google makes money from other ads shown besides any searches where TechCrunch posts shows up as results. But the money Google makes from those ads does not detract from our revenues. Quite the opposite. Those searches send a considerable amount of traffic to our site, where we have our own ads. The more people who see those ads, the more we can charge for them. It’s all good.

Google does not control the news, it exposes it.

The retail/distributor analogy is all wrong. Information is not the same as a flat-screen TV or a blender. It does not become less valuable the more available it is because all news is not the same. Information dissemination is not a zero-sum game. Carr and Karp would have you believe otherwise. Karp writes:

The more content there is on the web, the less money every content creator makes, and the more money Google makes by taking a piece of that transaction.

Again, that is not how it works. Google doesn’t force suppliers of information to charge less for it as Wal-Mart does with suppliers of packaged goods. The money Google makes from its search ads is not necessarily money that would have otherwise gone to a “news” or content site. If Google didn’t exist, those ad dollars might have gone to an e-commerce site or a travel site or a real estate site or any number of other places. News sites have no claim to those search advertising dollars. It is incumbent upon each of us to attract an audience by having something original or interesting to say. When news sites do that, other sites link to them, and then they rank more highly in Google search results, which sends new readers their way.

And then once those readers do find a news source they trust, you know what? Some of them actually keep coming back on their own volition without Google telling them what to do. That is called direct traffic. Or they come through other sites. Google isn’t the only one who benefits from all those links. If you want to be known as an authoritative source of news, it is no longer good enough to simply proclaim yourself to be one.

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