Consumers are increasingly socializing their shopping decisions and product reviews on Facebook or Twitter as e-commerce intersects with social media. In fact, half of all online shoppers look on a social network site before making a purchase decision. Launched today at TechCrunch Disrupt, Compass Labs is a social e-commerce startup and ad network that aims to provide targeted advertising on social networks like Twitter and Facebook around what users intent to purchase.
So Compass Labs looks at Twitter streams and tries to determine when someone has an intent to purchase something, then it serves up related ads either through direct messages or through banner ads on third-party Twitter clients. So if you Tweet, “I’m looking for a Canon camera” it will reply in stream or on a banner with an ad from a camera retailer for that camera. Compass Labs uses natural language processing to parse out the Tweets that have serious intent versus just talking about a product generally. Campaigns can be set to target people at different parts of the purchasing cycle, from exploratory to ready to buy right now.
While there are a number of companies innovating around advertising within the Twitter stream, Twitter just revised its Terms of Service around advertising. Twitter says it will not be allowing any third party to inject paid tweets into a timeline on any service that leverages the Twitter API. And the company plans to charge start-ups and publishers monetizing off of its platform.
But Compass Labs says that it complies with Twitter’s TOS because it serves display Ads, which are not in-stream and simply uses real-estate on a publisher site. In fact, the startup expects that Twitter will actually embrace Compass Labs’ solution as an example of how to monetize while benefiting the entire Twitter ecosystem.
Founded by Google and Yahoo veteran Dilip Venkatachari (he led Google’s mobile ad business), Compass Labs has raised $1.1 million in funding, with New Enterprise Associates participating.
The business model for Compass Labs is obviously based on an ad network model. The startup shares revenue with both third party clients and with advertisers.
RS: Are you able to hook this in to other services besides Twitter?
DV: Yes, we can use our technology on other platforms.
JC: Would Seesmic integrate your service to show ads?
DV: Yes, we are an ad network. So Seesmic would use us. In terms of Facebook, we are focused on Twitter now but may expand to Facebook if they let us access the data.
JH: What are your CTRs?
DV: We found that our conversions was 50 percent higher than regular ad mechanisms, compared to CPA.
JH: What is proprietary in what you do?
DV: We have to be accurate in what we do. When we start scoring a consumer’s intent, we look at words and what words you use frequently on twitter, we look at the context of how many people are following you. We are trying to adjust the criteria.
RS: how would you deal with the Twitter resistance.
DV: What we are doing is serving users more relevent ads. Our ads are shown on a client.
Q&A Round 2
JC: At what time do you switch from CPM to CPA?
DV: We might focus on CPM for brands.
RS: What is the volume of supply?
DV: The Average intent is 42 to 72 hours.You need freshness of data on ongoing basis.
JH: Do you have a sense of the magnitude of the advertising model?
DV: There are about 50 million tweets published per day, with around on percent of Tweets showing intent. Several billion dollar market.