Social, Video Sites Duck Some Old-Style Pitches And Go for Interactivity
As concerns mount that the slowing economy may hurt the online-ad market, Silicon Valley Web start-ups are developing new approaches. Companies such as online-software venture Slide and video and social-networking site Bebo are trying to run ads that appeal to a younger audience -- one that often turns up its nose at old-fashioned online ads, such as traditional "banners" trying to promote brands.
When a user clicks on a small version of this ad on Meebo, it expands and plays a snippet from the television show "Dexter". That footage also can be shared with friends.
Worries about a slowdown in Internet ad growth have added urgency to the push for advertising models that can reach this audience more effectively. Consumers are flocking to social-networking sites like Facebook and Meebo, but many still aren't clicking on the ads that such companies are banking on to generate revenue. Start-ups that have raised cash from venture capitalists but haven't produced much revenue yet -- let alone profit -- are hurrying to develop ads that are more interactive.
Some efforts show early signs of working. Slide, which sells programs that people can use to decorate their pages on sites such as Facebook, has launched campaigns with advertisers including Energy Brands' Glaceau Vitaminwater and Estée Lauder.
One campaign lets Slide users send virtual representations of different-flavored bottles of Vitaminwater to friends online through an application called "Top Friends." In eight days, Slide says, users sent 10 million "bottles" of Vitaminwater.
Meebo, which offers instant messaging and chat rooms, announced last week that it had raised $25 million in financing. To generate more revenue, the company will start selling ads this quarter that users can forward to friends or even shut off, unlike traditional ads that stay on the computer screen. Some spots may contain movie trailers or computer games, which can be enlarged on screen and shared with friends.
The new Meebo ads can also be used to customize a user's Meebo page -- by substituting a photo of a movie star or a new CD cover for one's own "buddy icon" on the site, for instance. The company says that in trials, the spots have had much higher "click-through" rates -- the percentage of users who see the ad who actually click on it -- than traditional, more-static display ads.
For social sites like Meebo, "it's very clear that regular display ads are not the answer" to making money, says Martin Green, Meebo's vice president for business. Users accustomed to interactive content online -- chatting with friends, or sharing photos on Google's YouTube -- will respond better to more interactive ads, Mr. Green says.
Social-networking sites have to work harder than Web-search sites to make money from advertising. Unlike people visiting a Google or Yahoo search page, users of social-networking sites aren't there to seek out other sites or to buy things, which might make them more receptive to ads. And because many of these people construct elaborate personal home pages on sites like Facebook and News Corp.'s MySpace, they may not want ads encroaching on their space. At the same time, some marketers have been hesitant to advertise alongside unpredictable or racy content posted by users.
The economy isn't helping. Though online advertising has been growing rapidly over the last few years, some investors predict growth will slow as big companies start cutting their ad budgets in the face of a possible recession.
Jim Breyer, a venture capitalist with Accel Partners, which backed Facebook, said he would be "absolutely shocked" if some of the companies he's funded don't see slower growth in online-ad revenue soon. "Companies that aren't experimenting will be left far behind," he says.
Slide is also worried about how advertisers will respond to the likely recession; it also faces the obstacle of competing with huge sites like Google and Yahoo for ad business. As well as testing more-creative touches like the Vitaminwater ad, it is trying to come up with other ways to make money from customers, such as subscription fees.
Bebo, which Time Warner's AOL recently agreed to purchase, is also trying out new ad models, including more-sophisticated product placements inside video dramas running on the site, such as the popular series "KateModern." MySpace and Facebook are trying to tailor ads to people based on interests they highlight in their online profiles; someone who expresses an interest in cars might see an ad from Toyota Motor, for instance.
Other Web start-ups are using video-ad technology developed by fellow start-up VideoEgg. To promote its Office products, Microsoft has tested new VideoEgg technology that places ads containing videos or online games on a network of social-media and gaming sites. It says it is pleased with the results.
Not all these efforts work. Facebook stumbled badly last year when it introduced a program called Beacon, which allowed users to track their friends' activities on other Web sites. The service, which was designed partly to highlight brands and products that Facebook users were buying, was criticized as too intrusive, and Facebook Chief Executive Mark Zuckerberg later publicly apologized for problems the new system had caused.
By: Rebecca Buckman and Emily Steel
Wall Street Journal; May 5, 2008
