SAN FRANCISCO--Marketers convened here this week to figure out how best to reach teens on the Internet. The answer: It's all about the mobile phone.
Advertisers are clamoring to reach teens in digital environments because that's where they're spending much of their time--either online, with cell phones or playing video games. What's more, teens wield an estimated $200 billion annually in discretionary spending.
Fuse, a marketing agency based in Vermont, talked in recent weeks to senior technology executives from companies such as Sony, MTV Networks, Yahoo, and Nokia to find out what the future of technology will look like for the teen market.
Among the predictions: Mobile phones in the United States will surpass the popularity of desktops for teens. Only an estimated 20 percent of teens currently own a smartphone such as the iPhone, but mobile phone and content companies are counting on the idea that smartphone adoption will spread fast among teens in middle America and other areas.
"The iPhone is just the beginning of the all-in-one device. Uses of mobile devices will expand to include all kinds of bar code applications and prepaid debit card payment methods," said Bill Carter, a partner at Fuse, who presented the findings here at the YPulse 2008 National Mashup, a two-day conference on teens and technology.
That's likely why geographic ad targeting to teens via the phone is expected to explode in the coming years. Right now, mobile phone providers analyze an estimated 4 billion Internet Protocol addresses to provide street-level targeting to consumers. Companies like U.K.-based Blyk, for example, are reaching teens through the phone with ads and information on nearby nightspots. Teens sign up for the service.
"When you combine this new technology with teens giving their permission to market to them, the growth could be exponential," Carter said.
But, he said, mobile phone providers likely won't succeed as the entertainment leaders for the phone, despite their efforts to sell ringtones, games, and music. Other companies like Apple, Google, and Yahoo will be more effective at "side-loading" the cell phone with services.
Case in point: Most teens download music to their iPod that's been ripped from a friend's collection as opposed to bought from the iTunes music store. "There's a natural gravitation to get content on a device that's different than the one the manufacturer intended," he said.
As a corollary, he said that most teens will eventually buy subscription-based music services, much like the cable TV model. He predicted that Apple's iTunes will offer an unlimited monthly download service for music. Mobile phone companies, too, will launch music subscriptions on the smartphone.
Another prognostication: Other technology platforms will save, not kill TV networks, Carter said. The analog-to-digital conversion will make it possible for teens to watch live TV on portable devices. The technology will help the television networks target programming to specific audiences, and that will buoy the cost of advertising, he said.
"The device is inconsequential compared to the content," he said.
Hurt by declining ad sales and cutbacks, local newspapers have seen better days.
That's why at least two charitable organizations are funding projects designed to spur innovation in journalism and ensure people's access to regional news.
On Monday, the John S. and James L. Knight Foundation said it will spend $24 million over five years to fund challenges for innovation involving access to local information. Its project, called the Knight Community Information Challenge, asks community foundations across the country to propose new ideas on how to serve people information on their local area.
Also Monday, philanthropist Leonard Tow said he would donate $8 million to two colleges toward the study of ensuring the survival of newspapers on the Web and training new-media journalists, according to a story from The New York Times. His foundation, the Tow Foundation, pledged $5 million to Columbia University's Graduate School of Journalism and $3 million to the City University of New York's Graduate School of Journalism.
The funding follows word that print newspapers are facing double-digit declines in advertising revenue this year because of an economic slowdown and continued migration of ad spending to the Web, according to The New York Times. Research firm TNS Media Intelligence recently reported that newspaper display ads, only one piece of the ad pie, were down more than 5 percent in the first quarter compared with the previous year. Newspapers apparently aren't getting enough of the ad spending that's flowing to the Web for their online versions.
Meanwhile, Internet publishers are continuing to experiment with new ways to serve readers. The Huffington Post recently said it would begin covering local news, starting with the Chicago area. And in a Web role reversal, The New York Times said this month that it would offer Facebook-like social-networking features to its online readers.
Local print journalism may be in its death throes, but these investments show that people see value in retaining their access to daily regional news.
Parascale said Monday that it raised $11.37 million in Series A venture funding from Charles River Ventures and Menlo Ventures, the latest in a string of cloud computing investments.
The Cupertino, Calif.-based Parascale, which provides storage in a networking "cloud" for digital content providers, said it plans to use the money to develop and market its upcoming Parascale Cloud Storage (PCS). PCS is an application that "aggregates disk storage on multiple standard Linux servers providing one highly scalable storage cloud," according to the company.
Charles River partner Bruce Sachs and Menlo's John Jarve will join the company's board of directors. The company was founded in 2004.
In April, Benchmark Capital invested $4.5 million in RightScale, a software service provider for applications that run on Amazon.com Web services.
Despite having access to a treasure trove of data about people's hobbies, demographics, and friends, social networks can find it tough to sell banners ads for more than the price of a stick of gum.
So ad start-ups such as 33Across are trying to take advantage of profile data on social-network members to create the next generation of behavioral ad targeting. Or behavioral ads 2.0. (For a portrait of another start-up targeting the intersection of social networks and advertising, with an announcement due Monday, see "SocialMedia to unveil 'friendship ranks'.")
New York-based 33Across has developed an analytical engine that can look at behavior patterns of members of a social site in order to track who, in the so-called social graph of friends, is most influential to others. It examines things like how many messages a person sends or receives, how many people he or she has befriended, or whether that person tags photos, blogs, or forwards links to friends.
With that information, it can pinpoint who are so-called viral propagators, or the people most likely to "start a viral cascade" about a product or service, according to CEO and founder Eric Wheeler, a former ad executive from Ogilvy.
"We understand where a person sits among their friends and friends of friends...and the likelihood of how viral they would be," Wheeler said.
Meebo partnership
In recent weeks, 33Across signed its first major customer, Meebo, a social site that synthesizes multiple chat applications into a single browser interface.
Martin Green, Meebo's vice president of business, said the company is using 33Across to provide better analysis and research for advertising clients such as Universal Pictures. It is not using the 33Across self-service ad technology to target ads yet, though it is talking to 33Across about adding that functionality.
In a nod to potential privacy concerns, Green said Meebo is prepared to disclose its practices to members and give them a way to opt out.
Under the deal, Meebo gives 33Across information about its roughly 36 million monthly active users, excluding names, phone numbers, and addresses. With that data, Meebo and 33Across can see how a marketing promotion spreads throughout the members of its service by looking at which members are sending links to friends on the The Incredible Hulk, for example.
Meebo can study those users' demographics, how many "buddies" they have, whether they're influential among a group, and whether they typically shy away from sending links but are apparently inspired by a certain campaign.
"We're giving advertisers more information on how their ads are pervading the network," Green said. "We're looking at the nature of the people who shared that studio's trailer or content with friends. Are they (the) same 'connectors' in the network? Or did you appeal to people who don't normally act on promotions?"
Whereas most advertisers pay as low as five cents to reach a thousand viewers on an ad network, Meebo is charging a list price of $12.50 per thousand impressions using 33Across' technology, Green said.
Tracking social patterns
Technologists have long talked up the ability to track people's behavior across the Web, create individual profiles, and then better target ads for higher rates. And the trend took off with behavioral-ad start-ups like Revenue Science and Tacoda Systems, the latter of which has since been bought by AOL. Now, with the rise of social networks, a new crop of companies is trying to mine even more profile data about people by analyzing their social patterns.
33Across, which has raised more than $1 million from backers such as First Round Capital and former Tacoda CEO Dave Morgan, eventually plans to use data on people's relationships and influence in social networks to better target ads to them on mainstream sites.
33Across' Influence Map shows more influential people in warmer colors (red, orange, yellow) and less influential in darker colors (blue).
(Credit: 33Across)Wheeler said 33Across cross-site tracking would work like behavioral ad targeting, in which partners of 33Across would place a tracking pixel on their page and that piece of technology would call its servers to place a cookie. The cookie would identify that person without linking his or her name, address, or phone number. That way, 33Across could target an ad to a person on a hypothetical partner site such as eBay, based on the behaviors at Meebo, for example.
Wheeler said today, people don't need to opt out of 33Across' site-wide ad program because it's not in operation yet. But the company plans to announce new partners in the coming weeks, and that could prompt the start of its cross-site tracking and ad delivery system. When that happens, he said, 33Across will give people the ability to opt out of the service at its Web site. (He did not say that program would be imminent, however.)
So how does all this friend and influencer targeting work? Much of it is based on machine-learning algorithms for social networks that have yet to be proven.
One issue with this technology is that it can be hard to track down who's most influential in a group. That person may be influential among friends, when it comes to autos, but he or she might not hold sway, when it comes to travel. Pinpointing expertise can be tough, and influential people might be the same for each category.
And then there are the privacy qualms.
"The issue with social networking and advertising is largely not a technical problem; it's a cultural one. When you're out there with your friends and interacting, people are somewhat resistant to ads. It's a different context, and people can get pissed off," said Jeffrey Davitz, program manager and director of the social-computing group in SRI International's Artificial Intelligence Center.
At SRI, Davitz has researched machine learning in social networks as part of a multimillion-dollar project funded by the Defense Advanced Research Projects Agency, or DARPA. Specifically, he developed an application that could automatically monitor people's interests and influence in military communities such as Company Command (for captains).
The idea was to identify influencers who care about specific topics, such as attacks involving improvised explosive devices in Iraq, and then ensure that they see relevant information in a news feed to that topic, such as an officer posting a document to the site pertaining to explosive devices.
That's what's called "smart push," he said. The technology is currently deployed on three military sites, but SRI is looking at commercial applications for it, not related to advertising.
"You clearly can learn more about people from MySpace and Facebook," said Davitz. "The question is whether or not people will accept that kind of advertising. People feel it's kind of creepy," he said.
Know how to win friends and influence people? Advertisers want you to peddle their stuff to peers on Facebook and MySpace.
Internet start-ups out to crack the problem of advertising on social networks are developing ad technology that can analyze which people are most influential to their friends on social networks so that they can target those people with pass-it-on messages about Apple's latest iPhone or The Incredible Hulk movie.
The upstarts are basically scouting for the social-media equivalent of a Typhoid Mary who can spread a message, with effectiveness, to friends on sites like MySpace or Facebook.
Two such start-ups, SocialMedia Networks and 33Across, are on track to deliver those influencer services with the goal of becoming the advertising players of the social-media age--that is, if they can carefully navigate privacy concerns. Though they have different business models, their technology is part of a lineage of online ad targeting.
"We're trying to make ads suck less in social networks," said Seth Goldstein, founder of San Francisco-based SocialMedia Networks. (Are SocialMedia and 33Across on a collision course? Read more about 33Across here).
On Monday, Goldstein is expected to announce "social banners," or display ads that turn you or your friends into the hook of a marketing message. In tandem, SocialMedia will announce that it's developed a patent-pending algorithm called FriendRank to power those social banners. It's like Google's PageRank, but instead of ranking pages for their popularity, it ranks friendships.
The company looks at how people interact with Facebook or MySpace applications--those 5,000 widgets in its advertising developer network--to determine who, among someone's 100 or so friends, are most important to them. It might infer relationships by seeing who you've played Scrabulous with or turned into a vampire. (The company said that it works within Facebook's terms of service so as not to collect and store someone's profile data.)
"FriendRank basically helps us choose which friends to put in the ad," Goldstein said in an interview. Beyond that, he wouldn't describe the secret sauce behind the technology.
For example, instead of a banner advertising The Incredible Hulk movie, a social banner would ask which of your close Facebook friends, among a short list, you'd like to invite to see the movie. Or a social banner might inform you that a friend Jim just ranked Iron Man with three stars, and it might ask to "click here to buy tickets at Fandango."
Understanding people's relationships
Of course, online advertising has taken many shapes over the years, and this is just the newest twist. Companies have targeted Web ads to people's demographics, geographies, and behaviors. They've also targeted ads--and it's met with the most success--to keywords typed into the search box or the content of a story page. Those ad models are still in practice, but now that social networks are taking up so much of people's time, a new breed of advertising is taking shape.
"The next step is to understand people's relationships," said Martin Green, vice president of business at social instant-chat site Meebo. Last week, Meebo signed an ad partnership with Mountain View, Calif.-based 33Across to monitor the effect of advertising promotions from Universal Pictures. 33Across is helping Meebo understand which types of people--mavens or influencers--respond to which ads.
Certainly, everyone from Google to Facebook to widget makers is trying to figure out how to better sell ads on social sites, at higher rates than their lows of 5 cents per thousand impressions.
Despite the millions who regularly spend hours on social networks and sites like Flickr or YouTube, advertising spending in the category is worth less than $2 billion annually. (Projections from research firm eMarketer were recently downgraded because of an expected ad shortfall from MySpace.) That's less than 2 percent of the total advertising spending in the United States.
The problem with social advertising is twofold. People aren't very receptive to advertisements in the first place, but they're even less so when "hanging out" with friends virtually on MySpace or sending photos on Flickr. Traditional advertisers, the big spenders on commercials and brand advertising, are cautious when it comes to placing their logo next to racy or potentially inflammatory images. Technology and media companies must find a way around both of these issues.
Goldstein, a veteran Internet advertising entrepreneur, founded SocialMedia in April of last year to initially be a widget developer for social networks. One of its first widgets, Appsoholic, measured how people respond to other applications on the site. With that data, the company realized that it would be better off helping other developers make money from their applications, given that the popularity of widgets can be fleeting.
So it built an automated ad system to sell banner, text, or Flash ads for as many as 5,000 applications running on Facebook, among others. SocialMedia advertisers can target people based on "appographic" parameters like people who've installed dating, car, or travel widgets.
Typical run-of-site banner ads on social networks can cost as little as 5 cents per thousand people they reach, or cost per thousand (CPM), and can go as high as 20 cents per CPM for targeted ads based on someone's profile or interests. Application ads can run as high as 50 cents, according to Goldstein, who's trying to break the dollar mark with social banners.
SocialMedia has tested social banners with BMW in a campaign worth more than $100,000. It created an application for the car company that allows people on Facebook to customize the features of a BMW 1 Series, or create a "dream ride." The related social banners, for example, advertised to Seth's closest friends in their news feeds that "Seth is taking a joyride in a BMW 1 Series on the Autobahn. Would you like to join him?"
SocialMedia's also been experimenting with the ads for Universal Pictures, among others. In early tests, the company has shown that people are 200 times more likely to respond to the social ad. (A non-social ad might command a click-through rate of 0.15 percent vs. a social banner at 0.5 percent.)
Possible privacy concerns
Still, with its social banners, SocialMedia could run into the same privacy concerns that Facebook encountered when it launched Beacon. Late last year, Facebook teamed with sites like eBay and Yelp so that when Facebook members performed an action on one of those sites, like buying a pair of shoes, Facebook would automatically alert their friends to it in their news feeds. After members reacted badly, the company backed off and made the program entirely opt-in for members.
SocialMedia isn't drawing data on people's behaviors from third-party sites, but it is using friendship data it collects to seed marketing messages. That could tick people off. Leslie Harris, president of the Center for Democracy and Technology, said the main issue with social ads like these is that people need to know how they're being targeted and be given the ability to opt out easily.
"People need to have clear notice and the clear opportunity not to participate," Harris said. "The lesson of Beacon (Facebook's controversial targeted-messaging project) was that people have no expectation that they will be linked to or targeted in any way outside of a social network."
Goldstein said SocialMedia will be sensitive to people's privacy, partly because of the backlash prompted by Facebook's Beacon program. People will be able to click a tab on a social banner to read about how it works and how to easily opt out of the program, he said.
At recent social-media conferences, Goldstein has said that programs like Beacon are the future of this type of conversational marketing.
"Technically people are collecting cookies all the time," Goldstein said. "What Beacon has shown us is that when you try to cross information between networks, the psyche isn't ready. But over the years to come you'll be able do this in any forum."
In true Internet-foolery fashion, someone is having a little fun at Yahoo's expense following its latest executive exodus.
By visiting the newly created site Yahoorezinr.com, current Yahoo employees can expedite their resignation to Yahoo Chief Jerry Yang with a host of Mad Libs-style pull-down menus.
For example, the site reads: "It is with great 'sadness/glee/self-interest' that I ask you to accept this letter as my official resignation from Yahoo!
"As you know, for some time now I have been desiring 'more time with my family/a more challenging position/you guys quit destroying all my net worth' and thus I feel the time has finally arrived for me to 'move on/take a new direction/tell you to go f*** yourself.'"
Though it seems like the site could have easily been created by a disgruntled Yahoo employee, Network Solutions Whois registration data points to a Mathew Honan, who could be a contributing editor at Wired. An e-mail to Honan was not immediately returned, so it's unclear if it's his creation.
Still, some points in the letter are obvious hyperbole. In one of the menu options, the letter suggests that Yahoo doesn't understand how to run a taco truck, much less a $30 billion business. The company's not worth quite that much.
The rants may reach Yang himself, but that's unclear, too. The form letter is addressed to Jerry Yang @ Yahoo (without the typical "inc" at the end of the address) with the subject line "Get bent."
Matt Cohler, employee No. 5 at Facebook, will leave the high-flying social network this fall to join venture firm Benchmark Capital as its youngest general partner at 31 years old.
Matt Cohler
(Credit: Dan Farber/CNET News.com)Cohler, whose job description, as written on Facebook, is "ensuring that Zuck (Facebook founder Mark Zuckerberg) never makes it back to Harvard," has been the company's technical adviser, recruiter, and business strategist since 2005, roughly a year after the company started from a dorm room at Harvard University. Cohler said he will remain a special adviser to "Zuck" and the executive team at Facebook even after he moves to Benchmark as an investor in early-stage Internet start-ups. (Facebook does not have an advisory team, so the adviser role will be new to the company.)
Many early employees of companies such as Google and Yahoo are hearing the siren call of venture investing, but this is a first for Facebook. When it comes to executive moves, the social network makes many more headlines for new executive hires. Still, Bryan Schreier, a former Google employee, not too long ago joined Sequoia Capital, an early investor in the search giant. Jeff Weiner, a longtime vice president at Yahoo, recently joined Accel Partners and Greylock Partners as an entrepreneur-in-residence, following former Yahoo colleagues.
Cohler, a graduate of Yale University with a bachelor's of arts, has a healthy track record of picking promising start-ups and entrepreneurs, a talent that Benchmark partner Peter Fenton believes will translate well to venture investing. "He's worked at the center of social media and he's established himself as a go-to person for young entrepreneurs," said Fenton, 35, who's known Cohler for several years.
Cohler met the Facebook founders in 2004 through Peter Thiel, a PayPal co-founder and Facebook's first angel investor. He was introduced to Thiel through Reed Hoffman, the founder of business social network LinkedIn, which this week raised $53 million for a valuation of $1 billion. Cohler joined LinkedIn as a member of its founding team and a general manager.
Menlo Park, Calif.-based Benchmark, which now has nine partners, is known for its early investment in eBay, Handspring, and Red Hat Software. Despite its eye for promising young companies, it does not have an investment in Facebook. (Cohler said that he has not talked with the venture firm about it taking an investment in Facebook.) Benchmark's portfolio includes Zillow.com and OpenTable.
As for his experience at Facebook, Cohler said, "I've loved Facebook, the people, the product. I just knew my long-term trajectory would be to be an early stage investor."
Cohler's Facebook status on Thursday? "I'm excited for LinkedIn!"
Mochi Media, an advertising network for casual game sites, said Wednesday that it closed on a $10 million series B round of funding from Shasta Ventures and Accel Partners.
The San Francisco-based company, which launched three years ago, had previously raised an undisclosed sum from Accel Partners. It plans to use the new funds to develop its fairly new advertising platform MochiAds for game developers. Since the network was launched last October, it has expanded to reach more than 60 million unique visitors per month on multiple gaming sites.
Online gaming is attracting more large investments of late. Earlier this month, Turbine, creator of online games like the Lord of the Rings, closed on $40 million in equity financing from Time Warner and GGV Capital.
Ever the publicity hound nipping at Google's heels, Ask.com has issued an open letter to the public about adding a privacy policy link to its home page.
The letter highlights the fact that, weeks ago, several privacy groups asked Google to play up the privacy policy on its start page. The search giant didn't immediately add the link.
So Ask, the No. 4 search company, said Wednesday that it will take the step first.
"As of today, Ask.com has added a direct link to our privacy policy via a 'Privacy' link prominently placed right on our homepage...We've also made sure that the 'Privacy' link appears on the landing pages across most of Ask's verticals as well, which cover almost all of Ask's search traffic," according to its letter.
The company put a fine point on the act, too: "We strongly encourage others in the search marketplace and online industry to do the same."
Three groups including Georgetown University teamed up Wednesday to develop a new way to measure the glucose levels of diabetes patients without a finger prick to draw their blood.
The technique involves the use of disposable skin patches (embedded with a wireless sensor chip) that can monitor glucose levels, and then transmit that information to a cell phone. With the data, the mobile phone could conceivably control an insulin pump remotely, according to the researchers.
The organizations involved in the project are Georgetown, Gentag, and Science Applications International Corporation (SAIC), a technology development company. Also a tech research firm, Gentag has developed an RFID-sensor reader platform for cell phones. And with funding from the Defense Advanced Research Projects Agency, researchers from Georgetown and SAIC created the skin patch technology, initially to monitor soldiers on the battlefield.
As part of their agreement, the groups will combine their respective intellectual property to develop the new application for diabetes patients. The patches will be able to monitor patients' blood every hour for a 24-hour period, and transmit that data to a device that's already familiar to many diabetes patients. The phones also include geolocation technology in the case of an emergency.
"We expect that this new, painless, disposable, wireless glucose sensor technology will significantly improve diabetes monitoring worldwide," Gentag President John Peeters said in a statement.
The organizations did not set a specific launch time for the technology.
