Nobody's surprised: Internet-advertising revenues fell slightly in the first half of 2009, according to numbers released Monday by the Interactive Advertising Bureau and PricewaterhouseCoopers.
The trade group found that online-ad revenues dropped 5.3 percent to $10.9 billion year over year, representing a total loss of $610 million. That's an understandable loss, given how much the media business has had the wind knocked out of it, thanks to the recession. But the slide in digital advertising isn't nearly as dire, when compared to the overall ad industry, which fell 15.4 percent.
The IAB also brought up numbers from Nielsen indicating that online advertising is essentially flat--and that the only sector of the ad industry that is growing is cable television.
PwC partner David Silverman called online advertising "a vibrant, sustainable industry," and he reiterated that it's an "industry that really didn't exist more than 12 years ago."
There was not much talk about social-media advertising, which has made somewhat of a breakthrough in recent months: after much criticism that it would never be able to make much money, social ads got a boost from Facebook's announcement that it had reached a cash flow-positive status several quarters earlier than expected.
The social network, which now has more than 300 million active users, has been dipping a toe into virtual-commerce revenue streams but is still supported primarily by advertising.
A coalition of advertising industry trade groups have agreed on new guidelines for privacy related to behavioral targeting on the Web. Officially released on Thursday and expected to go into effect early next year, the set of principles concern what advertisers can do with personal data collected in order to zero in on target audiences.
The groups involved are the American Association of Advertising Agencies (4A's), the Association of National Advertisers (ANA), the Direct Marketing Association (DMA), and the Interactive Advertising Bureau (IAB).
The guidelines take the form of seven principles, ranging from a commitment to better consumer education about behavioral targeting, to a focus on keeping potentially sensitive data secure.
"Consumers deserve transparency regarding the collection and use of their data for behavioral advertising purposes. I am gratified that a group of influential associations--representing a significant component of the Internet community--has responded to so many of the privacy concerns raised by my colleagues and myself," Federal Trade Commission (FTC) commissioner Pamela Jones Harbour said in a release.
"These associations have invested substantial efforts to actually deliver a draft set of privacy principles, which have the potential to dramatically advance the cause of consumer privacy. I commend these organizations for taking this important first step."
Lawmakers have paid close attention to the evolution of online behavioral targeting over the past few years, especially as the vast amount of personal data on social networks makes it possible for advertisers to target more and more specific niches. Some have even suggested that behavioral targeting should be opt-in by default.
Last month, several subcommittees of the U.S. House of Representatives Committee on Energy and Commerce hosted a hearing about behavioral ad standards, and executives from companies like Facebook, Yahoo, and Google testified. At least one of those companies has come out publicly in support of the new guidelines.
"One of the key strengths of the principles is the fact that they apply to a broad range of companies participating in online advertising--advertisers, publishers, and ad networks," a post about the new measures on Google's public policy blog read.
NEW YORK--"Social media is killing Internet advertising," said Seth Goldstein, co-founder and CEO of SocialMedia Networks, as a roomful of ad-industry types at midtown Manhattan's Roosevelt Hotel put down their BlackBerrys and pulled out their pens and notebooks.
They were eager to hear Goldstein, whose keynote kicked off Monday's User-Generated Content and Social Media conference organized by the Interactive Advertising Bureau's IAB Leadership Forum. That's because nobody in the ad industry has figured out how to turn the social-networking craze into a real moneymaker. Silicon Valley-based SocialMedia, an ad network that touts itself as a company "creating new ways for advertising to work within social media," is one of the start-ups that says it has the answers.
In a presentation full of classic TV clips and quotes from Facebook founder Mark Zuckerberg, Goldstein said that traditional advertising strategies--yes, including those from the earlier days of the Internet--just don't apply anymore.
"People started to become more interested in each other and less interested in the ads," he said, displaying a chart revealing that click-through rates on display ads have been tanking. In the world of social media, "you can't stand on the sidelines and put up a big banner and say, 'Click me.'"
He referred to Facebook platform manager Dave Morin, who insists (as paraphrased by Goldstein), that "you have to provide, easily, a social context on everything you do," when it comes to Facebook. Putting a Madison Avenue spin on it, Goldstein said that "the challenge is for advertisers: How do you do the same thing?"
The bigger picture
Display ads on social networks make about 5 cents per click. Within social applications, it's more like 10 cents to 80 cents, Goldstein estimated. But he, and plenty of others in the ad business, want to keep moving. "As an industry, we have to march beyond a dollar CPM," he said, referring to the term for cost per thousand.
Goldstein didn't talk much in the way of concrete answers for the ad industry. (After all, that's what he gets paid to do.) But he gave some hints: the solutions include uber-targeting along the lines of Facebook's Social Ads, "brand lift" from "trusted referrals," and capitalizing on the social application craze by creating "appvertisements" and sponsoring existing apps like SuperPoke or Food Fight.
He acknowledged that plenty of the popular applications on social platforms are pretty silly. "They're not important because the content is serious; they're not important because they're high-utility; they're important because people are spending an ungodly amount of time using them."
Sure, but that'll change if people start getting sick of throwing pregnancy tests at their friends.
He added that while individual applications may fade away (can Zombie Bites please disappear already?), the developer platform is here to stay.
"I would think about applications like songs. You rarely have a song that's popular forever, but you have bands that are popular and singers that are popular for a long time," Goldstein said. "We have 5,000 applications in our network and about a thousand developers across the world. The best developers are constantly making applications."
Rehashing Beacon
When asked about challenges facing the industry, Goldstein talked unsurprisingly about Beacon, Facebook's ill-fated advertising program. "You have to be really mindful of privacy. Obviously, Beacon was a setback, not just for Facebook but for the industry." He described the program as "pioneering," but acknowledged that user backlash and bad press and PR caused it to be seen as an invasion of privacy. "The ability for people to share their commercial experiences across networks is a powerful one," he said.
SocialMedia will be releasing a product in a few weeks called "Social Banners," designed to make ads "more like trusted recommendations and endorsements than simply display ads."
Overall, his message is that the ad industry must start thinking smaller, down to the individual consumer. "People are talking to each other and they're having lots of little conversations, and so advertising needs to become small like that," he explained. "I don't think any one thing is going to improve your life, but I think lots of little things will."
Goldstein added that he and his wife originally bought the domain Socialmedia.com when they came to the realization several years ago that the media industry was growing more social.
"It's been great to have that domain recently," he riffed.
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