Where to Spend Your Time

If you're building an online advertising business or one supported by advertising, the numbers released by eMarketer today--their forecast of online advertising spend over the next few years--might be of some help in deciding what kind of advertising spend to target.

Here are the subcategories and the compound annual growth rate of each category from 2006 through 2011, sorted by CAGR:

 Rich media/video  35.6%
Lead generation   22.9%
Paid search       19.5%
Classified        17.8%
Display ads       17.3%
E-Mail            13.3%
Sponsorships       0.6%

   All            20.0%

Rich media/video advertising is pretty competitive, but there's not nearly as much energy being spent making lead gen a better business.

Bad News is Bad News and Good News is Bad News Too

I wasn't really planning on talking about the impact of the credit crisis on online advertising anymore, but I just read Blodget's take on the news that online financial advertising was up 10% in the third quarter (compared to the third quarter of last year) while online advertising in general was only up 1.3%.

The beauty of blogging versus other forms of writing is that I can flog my personal beliefs no matter what the evidence. So can Henry. Personally, I try to let my beliefs change when confronted with evidence to the contrary. Henry prefers "anecdotes" that support his conclusions.

Things can always change, but it remains my contention that advertisers will respond to difficulty in finding new customers by increasing ad spend in accountable media. Like online.

The mortgage crisis is the result of mortgage lenders seeking customers who were bad risks. Fees for servicing these subprime mortgages are high and the borrowers are eager to borrow so easy to find. The non-risk-adjusted ROI on subprime borrowers is astronomical. Risk-adjusted: not so good.

The appropriate response by mortgage lenders is to tighten credit standards and give money to a smaller segment of borrowers, those more likely to pay. To find these borrowers, the lenders still have to advertise to the same pool of people because the amount of money spent targeting potential subprime borrowers specifically was a small piece of the ad pie. The ROI may decline, but the dollar spending doesn't.

Some financial firms will stop advertising, sure, because the impact of their prior mismanagement will leave them unable to invest in the future. The ones who do this should be put high up on the list of likely bankruptcies.

Every Hundred Years Media Changes...

...And it did, some six or seven years ago.

Read Dare Obasanjo commenting on Danny Sullivan's article in Advertising Age on what is evolution and what is revolution in online advertising.

The bottom line: the revolution is helping the consumer find what they want, not in finding better ways to get the consumer to buy what you're selling.

Facebook Got Gamed

As Homer Simpson says: "I'm no super-genius... or are I?"

About thirty seconds after reading the news about Facebook's new advertising initiatives I blasted them as "overreaching." I think that was obvious to anyone who's involved in advertising and seen the various privacy debates and debacles over the years.

So why did smart marketers like Coke lend their name to the initiative if they knew it was going to fail?

Probably because they didn't know it was going to fail. They probably suspected it was going to fail, but they couldn't be sure. If I was the evil genius running marketing at Coke (no offense, Joe, Carol) my thinking would be:

1. If Facebook succeeds, Coke gets a premier spot at the table and a brand boost for being savvy about the intertubes thing;
2. If they fail, we back away slowly and say they misrepresented what they were doing and we would never be involved in anything so disrespectful of our customers, never.

And, even if Facebook gets beaten up for their overreaching, next time around the public is more used to the idea that their privacy is an illusion. The erosion of our expectations of privacy has taken place slowly over the past hundred years, two steps forward, one step back.

In other words, Facebook was cannon fodder.

The Facebook partnership with Coke was no partnership, it was a free option for Coke and the other "landmark partners." Coke almost certainly knew how this was going to play out before they agreed to participate. They didn't throw Facebook under the bus after things went sour, that was the plan all along.

What is Privacy?

My grandmother used to tell me never to do anything that I wouldn't want to see on the front page of the newspaper. Maybe she lived up to this ethical standard, but she'd be the only one. Substitute "internet" for "newspaper" and here we are.

In today's NY Times, there's an article about Facebook backing off its too aggressive advertising policy. No surprise.

The article had an interesting comment from an exec of a top interactive agency:

Isn’t this community getting a little hypocritical?... Now, all of a sudden, they don’t want to share something?

Well just because they want to share something doesn't mean they want to share it with you. I often have to remind my five year old of that.

More generally, though, the issue isn't revealing personal facts--people do that all the time in every human venue--the issue is having control over the personal facts you reveal.

There is a certain hypocrisy at work, but it's not a 50-million-strong mass hypocrisy. It's the hypocrisy of the media companies that back off personal targeting when it is exposed to their users but keep doing it when it's "behind the scenes, where consumers do not notice it."

Into the Open, Into the Closed

When Fred Wilson said "open is the new closed" he was echoing Seth Goldstein's "closed is the new open", even if it sounds like he wasn't. I had a long incoherent post (what else is new?) about opening a few weeks ago. Here's a summary: every opening exposes something else that's closed.

Opening up a platform allows closed apps to better utilize it. The exposure of new closed opportunities creates new companies, creates new markets. This is good. It commoditizes the open layer--lowering prices--while creating the monetary incentive to innovate in the new closed layer.

There are two ways to play the opening: creating the open and riding the open. Seth rides the open by building a company that creates, distributes and monetizes closed widgets. Fred and USV creates the open by funding new, disruptive, businesses that commoditize the previously closed. Bug and Clickable are two good examples of companies that won't earn the rents afforded the closed but might garner smaller margins on much larger volumes.

Matchbox Branding

Kids' toys are an interesting business. The velocity of the viral marketing of kids' chatter is exceeded only by that of currency traders' jokes, it seems. One day every kid in town is playing on Club Penguin, the next they're all on WebKinz.

My kids are pretty impressed with brands in an enforcing-important-social-norms sort of way. Playing with the same toys is a way of building community, I suppose, much like listening to the same sorts of music or watching the same TV shows is for adults.

My son got a Matchbox car on Saturday, a Mini-Cooper. How much does Matchbox pay to license the image of the car? I'm sure Matchbox does pay BMW something. But shouldn't it be the other way around? It's the ultimate in product-placement. Every time I look at one of my son's Matchbox replicas of a late 60s muscle car, I get the sort of product lust I never get from ads, left over from the Matchbox cars from when I was a kid. What better way to create product pressure for high-end cars fifteen years from now than molding the brains of five year old boys?