Webware

Google has entered into an agreement to acquire online ad-optimization firm Teracent, the search giant announced in a blog post on Monday. The transaction is subject to several closing conditions, but is expected to close by the end of the quarter.

Google said it has been "busy releasing new features and products to help improve display advertising on the Web," according to the blog post. After examining Teracent's technology, the company felt that it fit "neatly" into its display-advertising goals, the blog said.

Teracent certainly brings something new to Google's advertising efforts. The company's technology tweaks images, products, messages, or colors to optimize ad units based on the viewer's location, what language they speak, the kind of content they're viewing, the local time, and how well particular units have performed in the past. It does all that work in real time as the algorithm examines the ad's environment.

"This technology can help advertisers get better results from their display ad campaigns," Google wrote in a blog post. "In turn, this enables publishers to make more money from their ad space and delivers Web users better ads and more ad-funded web content."

Teracent should be integrated into Google's advertising efforts by the end of the quarter. Neither company divulged how much Teracent was acquired for.

Offerpal Media, one of the companies at the center of a bitter dispute over misleading advertisements on social networks, on Thursday launched a revised policy designed to "forbid any offers that are misleading, deceptive or otherwise objectionable."

Companies like Offerpal are enlisted by many of the big gaming companies built on social networks like Facebook; they help those companies make money by letting game players earn points and virtual goods by completing offers and surveys rather than paying real money.

They make a lot of money doing so. So do the game companies, like Zynga and Playfish (recently acquired by Electronic Arts), which in turn advertise heavily on the likes of Facebook to recruit new players.

But then the negative press started to emerge: many of these "free" offers and surveys actually had hidden costs attached to them that weren't adequately disclosed. Some companies like Zynga started backtracking and going so far as to ban offers altogether. Facebook and MySpace, the two biggest social-network platforms, made very public revisions to their policies. But the controversy continued, and both Facebook and Zynga were named as defendants in a federal class-action lawsuit.

Offerpal, which replaced its CEO amid the controversy, has now come out and said that while it's setting a basic standard for advertisement quality, game makers and publishers enlisting Offerpal's services can opt to be even more stringent. "Offerpal will rate all offers by quality and allow its partners to select a quality level of compliance ranging from 'Level 1' for minimal restrictions to 'Level 5' for highly conservative restrictions," a release explained.

Will the new restrictions keep angry bloggers and consumers--not to mention lawmakers--at bay? More importantly, are they going to amount to anything more than smoke and mirrors? We'll see.

When the long-expected development of smartphones and handheld devices into primary computers reaches maturity, Google wants to make sure it occupies just as strong a position on the small screen as it does on the big one.

Google set the stage for that future Monday when it announced a $750 million all-stock deal to acquire AdMob, which is considered one of the strongest ad network providers for the mobile-computing world. It's a familiar strategy; just as Google bought DoubleClick in 2007 to blend search ad expertise with display ad expertise, so it plans to add AdMob's network of partners to its own mobile search ad efforts.

For all the work Google does in other areas--Google Apps, Android, Google Voice--advertising has always been, and will likely remain, its most important source of cash. It dominates the most lucrative segment of online advertising (search) and wants to expand its efforts in display advertising as well with a revamped DoubleClick Ad Exchange and increased efforts to court the major advertisers of the world.

But unlike the PC-based Internet, the mobile Internet-advertising business is still very small and very fragmented, with dozens of companies claiming to play a leading role. AdMob founder and CEO Omar Hamoui said he had no idea how much market share his company had in the business of providing mobile ads to Web site publishers, although AdMob is considered by outsiders to be one of the strongest companies in this area due to its work with ad units for iPhone applications.

Google's AdMob deal is about blending the respective advertising strengths of the two companies in a fast-growing market.

(Credit: Google)

Few doubt the staying power of mobile computing, however. Even with mobile advertising accounting for just a fraction of overall online advertising in 2009 ($416 million out of a total online spend of $24 billion according to eMarketer figures quoted by Google), AdMob has been cash-flow positive for about a year as advertisers show increasing interest in trying out mobile ads on smartphones like the iPhone and Android-based devices.

Google said it thought getting AdMob's 140-person team inside its company was "a pretty unique opportunity," said Vic Gundotra, vice president of engineering at Google, in an interview following the announcement of the deal. Gundotra and Hamoui both cited the cultural fits between the two companies as helping to streamline a deal; San Mateo, Calif.-based AdMob counts three Google veterans among the 10 executives listed on its management page.

It's not clear yet how Google will integrate AdMob into its existing structure. Google already operates DoubleClick Mobile, an ad delivery service that allows publishers to sell mobile ads directly to advertisers through a variety of ad networks, including AdMob's. What it doesn't have is its own display ad network with the reach and heft of AdMob's 15,000 and growing name-brand advertisers, which allows mobile publishers to essentially outsource their ad sales.

AdMob's success with iPhone ad sales has gotten it to this point.

(Credit: AdMob)

It's also not clear whether AdMob will now become "the" ad network for DoubleClick Mobile customers, but that might exclude a lot of business: Google lists its own AdSense, the MBrand and Decktrade networks from Millennial Media, and AdMob as just some of the ad networks if offers for DoubleClick Mobile customers.

In addition, Hamoui said AdMob would continue to sell ads across many different types of phones, rather than focusing on Google's Android. The whole reason AdMob has grown to the level it has was because it was able to separate its technology from specific phones like the iPhone or Android, which gives advertisers a much broader reach than if the ad network focused on any one phone, he said.

Google is now positioned to offer a one-stop shopping experience for companies interested in online advertising, combining search and display ad possibilities on both regular Web sites and mobile sites and applications. As has been the case for so many Google products and initiatives this year, that will likely raise an eyebrow among federal regulators.

As such, Google said while it doesn't expect to encounter significant regulatory issues with the AdMob purchase, "closer scrutiny has been one consequence of our success. On that basis, we wouldn't be surprised if there were some regulatory review before the deal closes." Google said it hoped to wrap up the deal "in the next several months."

Google took great pains Monday to point out how small a deal this was in the grand scheme of the advertising market. It created a Web site devoted to the deal where it quoted competitors in support of its point that mobile-ad budgets are tiny at the moment compared to the overall amount of money spent on online ads.

But Google's willingness to cough up $750 million in stock--making this its third-largest acquisition once it's finalized--shows just how important it thinks this market will become over the next decade.

When asked how quickly Google might see a return on this deal, Gundotra emphasized the future possibilities over short-term financial concerns.

"Getting that group of talented people into our company is an unbelievable return," he said. "It's likely lead to products and innovations we haven't even thought of yet."

Facebook head of communications Elliot Schrage posted a company blog entry on Thursday inviting members to review proposed updates to the social network's privacy policy, and much of it deals with what happens to the content of accounts that members have opted to delete.

"Specifically, we've included sections that further explain the privacy setting you can choose to make your content viewable by everyone, the difference between deactivating and deleting your account," and the process of memorializing an account once we've received a report that the account holder is deceased," Schrage wrote. Earlier this week, Facebook detailed the process of "memorializing" an account, which leaves the profile intact to current friends but hides potentially sensitive information.

Now, in the proposed new policy, which members are invited to review and comment on until November 5, Facebook explains to users that they can "deactivate" their account, which hides it but keeps information stored for potential reactivation, or alternately choose to delete it for good.

"Even after you remove information from your profile or delete your account, copies of that information may remain viewable elsewhere to the extent it has been shared with others, it was otherwise distributed pursuant to your privacy settings, or it was copied or stored by other users," the new wording explains. It's referring to content like posts and comments on other members' profile 'walls.' "However, your name will no longer be associated with that information on Facebook."

It's been a long and twisted road for Facebook's privacy regulations. The new policy was put into place after a complaint from the Canadian Privacy Commission called into question what would happen to member profile data if a user deactivated an account.

That fiasco followed outrage over changes to Facebook's terms of service that implied Facebook claimed an "irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license" to member content even if the account had been deleted. One privacy advocacy group readied a federal complaint, and Facebook backed off and returned to its old terms of service.

In July, Facebook cleaned up its user privacy controls as it prepared to open up more of its profile content to public access and search engines.

But the Canadian Privacy Commission had also taken issue with how much Facebook profile information could potentially be shared with third-party developers or advertisers. Facebook made additional modifications to its user privacy controls in August in response to concerns about the developer platform, and in Thursday's post about the new privacy policy Schrage highlighted that the social network does not intend to share personal data with advertisers.

"The information we provide to advertisers is 'anonymized,' meaning that it can't be traced back to you as an individual in any way," Schrage's post explained.

Guess what? Facebook is tweaking its home page design yet again--something that invariably seems to tick off members at first before they realize they actually don't mind that much. The company seems to have been previewing the new look to advertisers, one of whom forwarded the details along to industry blog Mashable.

It doesn't look too different. The biggest change is that Facebook's home page news feed will now be divided up into "top news" and a more real-time "recent activity" view.

The explanation:

"Facebook is simplifying the user experience on the home page by introducing Top News and Recent Activity streams. Now, when users log on to Facebook for the first time in a while, they will see the most important stories that they missed while they were away. From there, users can navigate to the real-time stream and toggle between both views throughout their sessions. In addition to making it easier for users to view content that is most relevant to them, this change also speeds up the time it takes for the home page to load and makes birthday reminders more prominent."

A screenshot from a document that Facebook sent to brand advertisers about an impending redesign.

(Credit: Facebook)

Note the mention of birthday reminders. On a given member's birthday, a pop-up version of Facebook's "gifts" application appears on that user's profile so that friends can purchase virtual gifts to display. The "gifts" feature is also currently the center of the fledgling e-commerce plans that Facebook has been bouncing around for quite some time now: It's currently the hub of its "credits" virtual currency, and advertisers can purchase sponsored gifts that members can give to one another. These have also been tested out with a select number of nonprofits.

For users, it sounds like Facebook is correcting some of the changes that members seemed to complain about the most with its last redesign. "Facebook has also put information back into the stream that people have asked for, including photo tags, friend acceptances, relationships, event RSVPs and group memberships," the explanation obtained by Mashable read. Also in there will be information about what a user's friends do on brands' "fan" pages, potentially increasing the exposure for advertisers and marketers looking to jump on the social-ads bandwagon.

Why so much redesigning? Facebook's executive team likes to pitch the company as a living, evolving product. At an event last week in Palo Alto, Calif., Chief Operating Officer Sheryl Sandberg underscored Facebook's belief in constant "iteration," a term you'll also often hear CEO Mark Zuckerberg using.

"The great thing about Facebook is (that) we are constantly evolving the site and constantly evolving the usage," she said. "People protested the new home page redesign, but engagement went way up and users continued to grow."

An advertising industry association--backed by four of the world's largest ad agencies--sent a letter to the Department of Justice Monday endorsing the Microsoft-Yahoo search deal, saying it "enhances competition."

Four major ad agencies would like to see the search deal signed by Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer come to pass.

(Credit: Yahoo/Microsoft)

American Association of Advertising Agencies President and CEO Nancy Hill posted the open letter Monday, which was also signed by Maurice Levy, chairman and CEO of Publicis Groupe; Martin Sorrell, CEO of WPP; Michael I. Roth, chairman and CEO of Interpublic Group of Companies; and John Wren, president and CEO of Omnicom Group. "We believe that Yahoo and Microsoft's proposal to combine their technologies and search platforms is good for advertisers, marketing services agencies, website publishers and consumers," they said in the letter.

The pending deal between Microsoft and Yahoo that would see Microsoft become the exclusive provider of search technology on Yahoo's Web sites will require regulatory approval to move forward, because the government tends to take a closer look at any deal that involves two of three major players in a given industry joining forces. Some have argued that the high barriers of entry in the search market might lead the DOJ to consider restrictions on the deal, such as the sale of Yahoo's search technology to a third party.

Advertisers, however, like the deal because a combined Microsoft-Yahoo search product has the potential to serve as a powerful check on Google's dominance of that market. More money is spent on search advertising than on any other form of Internet advertising.

"A healthy, competitive market for search and search advertising is crucial to the Internet's future," the advertisers said in the letter. "As leading members of the advertising and marketing services industry, we urge the Department of Justice to bring its antitrust review to a speedy conclusion. This proposal enhances competition, and should be allowed to take effect as soon as possible."

The real-time search company OneRiot is launching an advertising play for Twitter. The new feature, called RiotWise, lets content companies push links to their stories on the OneRiot search result pages. It's unlike every other online ad play out there in that the advertisements are for content, not commerce.

Say you're doing a OneRiot search for "Paris." Instead of seeing ads for airfares and hotels, as you would on Google, you'll see instead links to "Featured Content" about Paris from content producers -- news sites, blogs, and online magazines.

For the user, these are useful links, and thus valuable. But pulling this off for content is harder than it is for commerce, both financially and technically.

RiotWise will display "featured content" alongside natural search results.

(Credit: OneRiot)

On the money side, online content pays less, per page, than commerce. A single click on a news story is monetized primarily by advertising. A good news page makes a few pennies per page view. Most make far less. A commerce page designed to sell something, clearly, can make a lot more.

And on the tech side, there are vastly more content pages than there are ads, so matching a story to a search result page means that the OneRiot system has to do more than just let advertisers say which page goes with which keywords. OneRiot has to read in content feeds from its advertisers in near real-time, and pitch to users only the best and most current stories from partners, based on user search terms and content inside the stories.

OneRiot CEO Kimbal Musk (Elon's brother) says that the company's advertising customers will find the incoming links from his service's users valuable, since OneRiot users are likely to redistribute (re-tweet) or forward stories along, thus increasing a story's presence.

It's a unique plan to monetize Twitter, but it's a delicate balance. Essentially it's an arbitrage model: Musk is asking publishers, who are paid by advertisers, to themselves pay for advertising on OneRiot to get more traffic, thus increasing their revenue yield per page. There's nothing fundamentally new about the concept (TV shows are advertised on TV all the time), but it's a bit of a tightrope. (Disclosure: I have heard that CBS is a partner of OneRiot, but Musk would not confirm this with me. CNET News is published by CBS Interactive, a unit of CBS. Update: More recently, I learned there is no such relationship between CBS and OneRiot.)

RiotWise ads will run on the OneRiot.com site, but the real potential for this plan, according to Musk, lies in the integration of RiotWise into Twitter apps. Potential customers are Tweetdeck, Seesmic, etc. In two weeks, a new application programming interface will let developers embed RiotWise suggestions into search results. OneRiot will share revenues with app developers for these paid links.

This is a smart play. Advertising will continue its move to the Web. When the economy begins to really turn around and general online advertising increases, the online pubs hosting these ads will need to generate additional pages to make good on their commitments to customers to deliver clicks. Thus OneRiot's plan may just work. It's not likely, however, that it will remain independent or unchallenged. This technology belongs at Google, or Microsoft. I expect it will end up there, one way or the other.

MOUNTAIN VIEW, Calif.--Among the tech industry's up-and-coming, ad-supported business models appear to be out of fashion. Or at least that appears to be the trend among the companies that just graduated from the annual Boulder, Colo.-based incubator program TechStars. Representatives from some of those start-ups convened for an "Investor Day" at a Microsoft-owned auditorium here on Wednesday morning.

Founded by venture capitalists David Cohen and Brad Feld three years ago, TechStars accepts a total of 20 participants in both Boulder and Boston for a summer of development, seminars with industry veterans, and a small amount of seed funding. Thirteen of those 20 companies were advanced enough to earn spots at Wednesday's Investor Day, in which they offered short presentations to more than 100 members of the venture capital community who are actively interested in making early-stage investments.

And not a single one was offering a strictly advertising-supported business model, something that would've been pretty unthinkable not so long ago.

"(These companies) are the future of the entrepreneurial ecosystem as it evolves," Feld said to the audience midway through the morning. "We think these are all very fundable companies. In fact, most of the companies that you're seeing today are either well down the path of closing financing, or have closed financing, but for many of them there's still room."

Unlike the TechCrunch50 start-up pitch event earlier this month, none of these companies were actually launching out of a total stealth mode. Some had already experienced a sort of PR blitz--travelogue site Everlater generated some buzz when people were using it to map their plans for airline JetBlue's "All You Can Jet" promotion, and unofficial Twitter app store OneForty experienced the usual tech-blog mayhem earlier this week when it launched in private alpha and set off a flurry among the early-adopter crowd as people scrambled for invites.

But like TechCrunch50's array of start-ups, most of the TechStars lineup had productivity on the brain. Gaming and entertainment companies were limited to TakeComics, which aims to bring an iTunes-inspired business model to the digitization of comic books, and AccelGolf, a decidedly hardcore set of mobile and Web-based applications for avid golfers.

Business-focused applications were far more commonplace. Retel Technologies has built security-camera software enhanced with data and analytics, NextBigSound tabulates bands and musicians' popularity on social-media and music sites to roll up into a product sold to industry professionals; SendGrid offers e-mail marketing services to businesses at a variety of price points; and HaveMyShift, built by a former Starbucks barista, offers an exchange for hourly employees at major chain stores to swap and pick up shifts.

The companies were a mixed bag, and so were the entrepreneurs behind them: many fell into the young-entrepreneur stereotype of puppy-faced young men who could use a haircut along with that seed funding, but others strayed from the norm. OneForty's Laura Fitton is already a respected Twitter consultant; Raj Aggarwal, CEO of mobile data start-up Localytics, is an Apple veteran who had helped construct the original business model for the iPhone; and the founders of mobile contact management company Sensobi professed to earlier entrepreneurial experience in the chocolate industry.

Of the entire lineup, Everlater--founded by two childhood friends who had quit their Wall Street jobs to found the company--offered the closest thing to the typical ad-supported consumer model that was so ubiquitous in Web 2.0's heyday a few years ago, and even still, the founders plan to sell customized scrapbook and postcard products as well as offer branded packages to travel companies hoping to get their name out there.

A few other TechStars presenters said they hoped to use a free, ad-supported model as an entry point for the subscription services where they plan to make more significant money: video-based language learning system LangoLab, for example, hopes to strike deals with online video hubs like Hulu and then charge for access to lessons based around that "premium" content, and open-source forum software Vanilla charges for the hosted version of its product.

Granted, these business models still have their pratfalls: namely, the fact that they actually have to find individuals or companies who are willing to pay, something that often requires the formation of a solid marketing or sales department before profits can start to roll in. That was why many of them said they were looking to close early-stage funding rounds soon.

But those solicitations for funding were not lofty. Almost all of the TechStars presentations provided a target amount that they were seeking for their angel or Series A rounds (a few had closed rounds already), and the vast majority were south of $1 million--far south, in some cases.

Pretty much everyone in the audience at Sheryl Sandberg's talk on Tuesday morning as part of New York Advertising Week understood the meaning of the slide she displayed that read "Nielsen and Facebook are in a relationship." A nod to announcements on Facebook's homepage "news feed," the "in a relationship" phrase is now a recognizable slice of Internet culture--much as social network Facebook itself has become ubiquitous.

And Sandberg, Facebook's chief operating officer, hopes it will be just as ubiquitous in the advertising world. Her goal on Tuesday was to formally announce the social network's "strategic alliance" with data and audience measurement firm Nielsen, starting with the launch of a product called BrandLift, a market research tool that can measure audience response to advertisements on Facebook "in a matter of days."

Nielsen Online CEO John Burbank joined Sandberg on stage to detail the basics of BrandLift. "We recognize just how increasingly important Facebook is within the whole ecosystem of media," he said, adding that it would be "crucial in building (marketers') confidence in using the Internet as a tool."

Sheryl Sandberg (file photo)

(Credit: Corinne Schulze/CNET)

Burbank confirmed what he told CNET News last night, that BrandLift measurement would eventually reach beyond the hugely popular social network. "(Brands) have asked us to extend this tool beyond Facebook," he said. "Working with Facebook, we expect to do that, too."

But for now, it's all about the social network. Sandberg pitched Facebook to the ad industry audience, as she has done in the past, as a hub for meaningful connections and communication. "Facebook is where people go when they want to share, when they want to connect, when they want to reach out to the people they know," Sandberg said, and she brought up instances as varied as grassroots activism in Iran and the two girls in Australia who updated their Facebook status messages rather than calling emergency services when they were trapped in a storm drain.

"I thank them, and we're glad, we're especially glad they got rescued," Sandberg said, noting that the girls' choice of crisis communication highlighted just how important Facebook is to personal connections in members' lives. "(But) next time you use emergency services, 911. Better option for sure."

What she also talked about: How fast Facebook has been growing. Last year at Advertising Week, she said, she announced that the social network recently had hit 100 million active users. This month, Facebook hit 300 million. And a full 50 percent of them still return to the site every day, Sandberg said, something that surprised her because she'd assumed that late adopters would be far less active than early adopters.

More numbers: Facebook's mobile applications are used by 65 million people. The average user spends 5.75 hours on the site per month. And the average user now has 130 friends, up from 120 a year ago.

Competition and skepticism
Sandberg had good reason to persistently highlight both Facebook's staggering growth and its newfound cultural significance: The advertising industry simply hasn't had a whole lot of faith in social media. "We've had some stumbles, some of our own making, and I think it's fair to say we have more of our fair share of critics," Sandberg said, mentioning that she'd once gotten a phone call from her parents asking whether she was looking for a new job because they'd read a report that Facebook was running out of money.

Facebook has also had to compete for marketer attention with the (at least for now) more buzzworthy Twitter, which rose to fast fame amid celebrity endorsements, a high-profile role during last year's U.S. elections, and the seemingly ubiquitious placement of "tweets" on cable news programs. A Twitter profile and a Facebook fan page can be directly competing products.

But the real skepticism surrounding Facebook's potential as a moneymaking power--at least as long as it remains supported primarily by advertising--comes about because, at least until this point, there has been a lot of marketing buzz-speak but not a whole lot of concrete numbers to measure its actual success.

"You want measurement, measurement you can rely on, measurement that you believe is valid," Sandberg said. That's why Facebook approached Nielsen as a respected third party, she explained.

Brands have found significant success with Facebook fan pages, which are free to create, she said. But adding paid advertisements through Facebook's "Engagement Ads" product can enhance those brand pages significantly, Sandberg explained. (It also means Facebook gets paid.)

"A year ago we introduced Engagement Ads. Rather than having to go to different sites or go to landing pages, consumers were able to engage with marketers directly with the ads themselves," Sandberg explained. "(They can) RSVP to the event, 'fan' a page, watch a video and comment, send a branded gift, or respond to questions from a marketer." As part of Tuesday's announcement, Sandberg announced that Engagement Ads have been expanded to include an easy way for Facebook members to request free product samples.

There were some skeptical questions from the audience, notably one that inquired about the poor searchability and indexing features on Facebook profiles and fan pages. The audience member asked whether this was potentially being upgraded.

"The short answer, is do we want to take content and make you more easily able to find it, find it now, find it later?" Sandberg responded. "Of course. And it's something we're definitely working on."