Ad Innovation Check In

When did I start using Innovation non-ironically? Wow. I've been a business reporter too long.

At any rate...per my earlier post 2008 is the year for ad innovation in the Web world, and I'd argue that's harder than product innovation. Why? Product innovation is fun, first off. By its very nature you are working to give people something that will delight them. It's a time when anything is possible and you are your users are totally on the same side. But when it comes to finding new, clever and affective ways to deliver ads over the Web you're inherently at odds with a user that doesn't want to be interrupted, tricked or otherwise profited from. With Web 2.0, community-based sites this is typically where the whole mob uprising thing comes in. (See ch. 5 of my book, or even just the chapter title: "The Mob Giveth and the Mob Taketh Away.")

It also can require a different skill set: Is a product innovator always a good business innovator?

That's a big reason YouTube sold to Google. Amid the iPhone hype yesterday, a lot of people missed a story in AdAge about Eric Schmidt's latest YouTube advertising idea. First off, even Google-- the king of online business model innovation or at least execution-- has not been able to crack the YouTube nut. As the story says, video views swelled to an insane 4 billion in March, even as revenues were just $90 million, according to Bear Stearns. That's a pretty big disconnect. Schmidt has said it's priority no. 1 for Google this year and rightly so. As has been documented extensively by every analyst and business reporter on the planet, Google needs a second act because it can only gain so much more market share in search and on Wall Street it's all about obscene growth. (In the years Oracle-- and a good many other business software companies-- were in Wall Street's dog house they were still indecently profitable.)

The new plan basically lets content makers sell ads on their own video "channels." It's a page out of Ning's playbook-- currently the wiliest business model in Web 2.0 IMHO. Ning from day one told users trey could pay a monthly fee for your own social network, sell your own ads or have them sell ads on your page. No free lunch, means not having to come back and charge for lunch later.

I think it's one of the smarter strategies for YouTube so far.

Video is a huge part of where web entertainment and media is going and everyone is grappling with the monetization issue. Since even professional video networks like Revision3 use YouTube as a platform it gives them a way to recoup more of their costs seamlessly-- the same thing Google did for blogs with AdSense. Google has rightly learned that you can share revenues and still make a bundle. Also, content producers are clearly more amenable to ads that interrupt the user experience if they're making something off of it. Of course that still leaves users to be annoyed, but when there's money to be shared by all parties, my guess is there will be more innovation on how to make these ads minimally disruptive.

Whenever I write about online advertising, I ignore what a lot of people from Mark Zuckerberg to John Battelle are saying-- that people don't have to hate ads. They may even enjoy them. That's because I'll believe it when I see it. Everyone cites Google here-- again-- saying that paid search ads are frequently just as helpful as Google's algorithmic results. That's true, but as has been written about at length, paid search is a very unique form of advertising. When I go to a search engine, I am looking for information, and I am telling Google what I want. That's pretty easy to give a value-added ad against. Like, say, the Yellow Pages. Do I care if the Honda Dealership pays to tell me its phone number?

But with video- or social networking- I want to be entertained or hang out with friends and that's incredibly hard to advertise against without being annoying. (Think even the friendliest telemarketer offering me something I want while I'm eating dinner.) Everyone from American Express to Budweiser has tried to make "entertaining" ads but come on...would you chose to watch them over say 30 Rock or that hilarious Family Guy clip?

Given that, I still like the idea behind Beacon, because it potentially melds advertising with learning things about my friends-- the reason I'm ostensibly on Facebook. Of course, I was never quite as freaked about this as others-- or well, as MoveOn.org. (I still don't know many actual users who got upset about this.)

Mashable had a piece also yesterday that raised the issue of microcelebrity advertising. The idea being  Facebook's wouldn't work because the average person only had 40 or so friends, so perhaps the real money was having someone like Robert Scoble endorse your product. (Can't link to it. Mashable seems to be down this morning at least on my browser.) I think this idea totally misses the mark on why Beacon is potentially powerful. It's an old way of thinking: That a celebrity who I respect is paid to promote something and somehow that leads me to buy it. The point with beacon is that friends-- people I know and share things in common with-- are actually buying something. That your mom can sell you a dryer better than Kelly Ripa (who Mashable calls "buxom"...time for glasses or a dictionary!) Facebook is merely telling me about it. It's something that could come up in conversation naturally, only made more efficient and immediate. It's still a hard one to crack, but still the most innovative concept to me.