MOUNTAIN VIEW, Calif.--Reality check: half of the social media start-ups at Tuesday's Under the Radar Conference won't exist next year.
That was the dour prediction of an advertising executive after a day of start-up presentations from a tongue-twisting list of tech companies--including Verismo, Mytopia, Loud3R, Jacked, Sometrics and PutPlace.
Not that the start-up pitches were boring or hard to swallow. It's just that similar to the dot-com heyday (and eventual bust), the success of many social media companies is tied to online advertising spending. And guess what, after nearly 10 years of hand-wringing over Internet advertising models, traditional brands are still not spending the many millions of dollars online that they regularly do on TV commercials.
Even more relevant to social media is that traditional advertisers are especially cautious when it comes to the idea that their brand logo might appear next to an image of a marijuana leaf posted by a 16-year-old. Never mind that Facebook's audience rivals that of some television networks.
"Take a look at history, and the way Web 1.0 worked...publishers didn't make it until the ad dollars started to scale. The same mistakes are being made in the social media space today," said Jeff Stiers, senior vice president of business growth for JWT, a major traditional advertising agency that was founded in 1864.
His skepticism--and hope for Internet advertising--was matched by other ad executives on the panel, which included Tom Bedecarre, CEO of digital advertising agency AKQA, and Chris Colborn, executive vice president of its rival R/GA. Internet companies must take the hand of traditional advertisers to get them to spend online, the executives said. But they agreed that there's continued uncertainty in interactive advertising and reluctance on the part of big advertisers.
Like with Web 1.0 companies, one of the biggest problems social media companies have in the market is that they're technology driven, the executives said. Tech companies often fail to hire media-savvy executives at the top who can sell brand advertising.
Another Web 1.0-like problem: many social media start-ups are marketing the idea that they have tons of data on people's demographics and preferences. The start-ups believe that that data will lure brand managers seeking to reach new customers. Not true, executives said.
"I can't imagine a large agency giving a rat about a small firm's data. Advertisers are looking for aggregation of data...and someone at a very high level to give an overview (of what it means)," said Bedecarre.
One member of the audience, an executive from news site Topix, asked the panelists when a major advertiser would announce plans to spend $20 million sponsoring AOL or Facebook. Bedecarre answered that that kind of deal doesn't translate on Facebook because brands are too used to ads that broadcast to, instead of engage, audiences. They're still not willing to spend many millions of dollars on major Web sites, he said.
"It hasn't happened yet because big advertisers and agencies haven't let go of advertisements. They like to buy lots of ads," he said, referring to commercials.
#####MOUNTAIN VIEW, Calif.--News aggregation, licensing rights, and user-generated content. Every publisher has grappled with one or all of these issues as they've built online operations in the age of social media.
They're also potentially ripe markets for innovation. Or at least that's the hope of four Web publishing start-ups that presented business models here Tuesday at the Under the Radar Conference, a one-day confab on social media.
Four companies--AudioMicro, GumGum, Keibi, and Loud3r--delivered a six-minute elevator pitch to an audience of executives and three judges. Judges included Charlene Li, vice president at Forrester Research; Rob Hayes, partner at First Round Capital; and Jason Oberfest, vice president of business development at MySpace.
Here are the online publishing hopefuls:
AudioMicro
What it does: licenses music or soundtracks for $1. Launched last week, the company hosts a marketplace for independent artists to upload and license their music for $1. People who've produced a YouTube video, for example, could license an audio track from AudioMicro's collection of artists to sync the music with their video. Or movie studios could use the site to find music and offset production costs, according to founder Ryan Born. "We crowd-source content from unknown artists around the world and sell it for a dollar," Born said during his elevator pitch.
But First Round Capital's Rob Hayes pointed out that the company has a chicken-and-egg problem. It needs artists to attract major licensors, and it needs major licensors to attract artists.
AudioMicro, based in Los Angeles, is looking to raise a series A round of funding to grow fast and market itself.
(Credit:
GumGum)
GumGum
What it does: Flexible licensing of photos, text, and video over the Internet. GumGum, which was founded in February, has created a marketplace for content--audio, pictures, articles, and video--that publishers can license per use, or for a share of advertising revenue. (Independent content creators post their material on GumGum, which is based in Santa Monica, Calif.) "We aggregate, post, and distribute content via widgets," according to the founders.
Gawker, for example, can pick up a cut of code for a photo on GumGum and paste it to its site, then pay a set price each time that photo is viewed from its site. Or it could allow GumGum to wrap an ad around the photo and collect 20 percent of the revenue. Gawker is an early public customer.
The challenge? Adoption.
Keibi
What it does: Technology for moderating user-generated content on sites like MySpace and Facebook. The two-year-old company is trying to solve one of the biggest problems that social networks face--how to make major brands comfortable with advertising near potentially questionable content posted by members of these networks. Keibi's answer is to sell an enterprise software platform that helps social networks moderate photos, text, images, or video before they're posted to a site.
Jason Oberfest (of MySpace) and one of the judges asked how well it integrates with social networks' existing software infrastructure. Paul Remer, CEO of Keibi, said that it has a plug-in and is working with companies like Salesforce.com on integrating its technology.
Keibi charges customers between $2,000 and $20,000 a month to use its software-as-a-service platform. So far, the company has raised $6 million; and it's in the process of raising a series B round of financing, Remer said.
(Credit:
Loud3R)
Loud3r
What it does: news sites for sneaker heads, dog lovers, and martial arts geeks. And that's just a drop in the bucket. Loud3r develops technology to scour the Web for specialized news and social content, and then aggregates that material into a branded Web site. It owns 25 different sites--New3R (for gadgets and technology), Glaci3r (environment), and Putt3r (for golf)--but it plans to have at least 250 by the end of 2009. The company plans to make money by selling brand advertising around its targeted topics, and license its technology to third parties for five figures monthly.
"The Internet is a noisy place. Loud3r is the solution for the noise," said Lowell Goss, founder and CEO.
Still, the judges were skeptical about whether the Web needs another news aggregator. One judge asked specifically if Loud3r is late to the party. Lowell's answer: "Google wasn't the first search engine."
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