Editor’s note:  This guest post is written by Seth Goldstein (@seth),  the Co-Founder of socialmedia.com, which is building the first ad server based on people not pages. Its platform provides authoring, serving and reporting across different types of social media. All of its ads are real messages from real people. Seth is also the Co-Chairman of the IAB’s Social Media Committee.

Social Media and Identity

We are witnessing a profound change in the media and advertising industries due to the emergence of social media.  Companies that did not exist ten years ago, like Facebook and Twitter, have captured significant share of the attention economy from traditional publishers.  Underscoring this trend is the fact that at the same time that Businessweek was selling for less than $5 million (plus assumption of debts) to Bloomberg, Foursquare’s pretty cousin Gowalla drove up Sand Hill road and collected $8.4 million for a minority stake.

Amidst this disruption, media companies are chasing after “their” audience in order to continue to broker the attention of that audience to marketers.  But just at the moment that media has mastered the art of blogging, search engine optimization and CPM yield management, they are now faced with a new set of consumer behaviors that elude their programming faculties: mobile devices, location-based services and the social graph.

Driving this change in consumer behavior is the emergence of social media as a means of content production.  Social media started more than ten years ago with online personal communications tools such as Evite, Shutterfly and Blue Mountain Arts.  Since that time, systems have been built to support broader and more subtle social interactions.  This has been achieved primarily by the introduction of new creative formats that make it easy for individuals to express information about themselves (such as status updates, tweets and check-ins) and new distribution models that enable this personal information to be shared easily among friends and followers.

Social media’s ascent has led to an Internet experience based less on pages and more on people.  As a corollary to this (and counter to Marshall McLuhan’s thesis), the medium is no longer just the message.  The permanence of words and images and their meaning in context has long been promoted as a foundation of media theory.  In an increasingly real-time environment, however, content gives way to identity, and traditional contextual analysis gives way to dynamic social interactions.

The medium is the message . . .  is the member.  This is why there can be no discussion of social media without a simultaneous discussion of identity, and why the growth of social networks such as Facebook and Twitter are one and the same with the growth of identity systems online.  There are a number of technology and business trends that are converging around this thesis.

Here are some that seem to be of particular importance as we head into 2010:

• The only check and balance for Facebook is Twitter.  Twitter is significantly smaller than Facebook in terms of users, and its social graph is asymmetrical and therefore looser.  But what it lacks in terms of the size of its contributors, it makes up by offering a broadcast media model.  Celebrities find it easier to reach large audiences directly by using Twitter.  Even though Twitter follows far more of a media model than Facebook, it too is being pulled into the identity space by  Google who is unlikely to integrate Facebook Connect under any condition. Google is bringing the Twitter API to the fight (while Yahoo and  MySpace drop their identity ambitions and happily incorporate Facebook Connect).  The interesting question here is Microsoft.  Although it is impossible to imagine Microsoft siding with Google on anything these days, integrating Facebook Connect may end up doing to Windows what Microsoft itself did to IBM many years ago.
• Agencies are tired of being treated like commodity procurement organizations.  They want to increase their margins through the application of data to media and become demand side platforms (DSPs).  This is the strategy of IPG’s Cadreon unit and Vivaki’s “audience on demand network” which both look to add proprietary data from sources such as cookie exchanges and re-targeting databases. In addition to leveraging new data to better target existing creative assets, agencies wish to also transcend the one-off  “give me a big campaign idea” business.  Consumers will increasingly ignore the high-bandwidth, homepage-takeover distraction tactics of traditional online marketing.  The average social media users have trained themselves to focus on real messages from real people.  Agencies will need to learn how to produce low bandwidth advertising content that can be shared and distributed in lots of different ways by lots of different social groups, all the while preserving some underlying essential brand equity.

• Publishers don’t want their quality audiences sold cheaply outside of their sites.  Their expensive sales organizations have no chance of maintaining high CPM rates from an agency that can offer the same audience to its client at a fraction of the price by sprinkling some cookie data on top of a remnant ad network buy.  This will embolden premium (top 100) publishers to align themselves with consumer advocacy groups looking to erase cookies and anonymize users.  ESPN and the WSJ would love it if all of their readers were rendered anonymous as soon as they clicked away.  This echoes Murdoch’s supposed interest in removing his content from Google’s search engine index. The value of “free” distribution is materially impacted when the distributor is able to separate a user’s identity from the context of his consumption.

• Advertisers will recognize that they have a fiduciary responsibility to maintain their own social graph.  Until now social media has been an ROI-free playground for brands looking to experiment with new formats.  Marketers have built Facebook and iPhone apps, only to learn that distribution is not free.  Now they are managing Twitter accounts and Facebook brand pages that deliver more scale, but still with limited insights that they can own and apply to the rest of their marketing initiatives.  Consumers, meanwhile, are constantly talking about brands within their communities and are expressing their affinities for commercial products and services.  Advertisers can no longer afford to cede knowledge about these interactions to the social networks within which they are occurring.  Inevitably, companies will require their own social graph data that includes all mentions of their brands and information about the identity of users (and their friends) discussing them.

So what are media companies and advertisers to do as the former audience use their social identity as a fulcrum for content creation?  To prepare for this change in the media economy, companies need to establish an identity framework that integrates Facebook Connect and/or the Twitter API.   And in order to profit economically, startups might want to address one of the agency, publisher or advertiser challenges listed above.

The ads are a variation on SocialMedia.com’s powerful Friend to Friend social ads, which the company first rolled out in March. The idea behind them is simple: if I visited a page on MySpace Music, an ad could ask me if I preferred Rock or Rap, with a pair of checkboxes where I could indicate my favorite genre. Then when my friends visited MySpace, they could see an ad that said “Jason likes Rock and Roll! Which do you like?” This level of customization may seem a little strange at first to users, but the ads tend to be far more engaging than typical banner ads. I won’t be surprised if ads that pair user interaction and the social graph become the norm over the next few years.

This news is obviously a very major win for SocialMedia.com – not only is the company running campaigns from major brands, but MySpace itself is working in tandem with the company to sell the ads. It’s also good to see MySpace working with third parties to maximize revenue opportunities, especially as its user growth begins to stall.

Editor’s note: Nick Gonzalez is a Director of Marketing at SocialMedia.com, which makes “People Powered Ad” products.

Before the advent of ad standards from the Interactive Advertising Bureau (IAB), the online advertising world was fragmented between any number of display formats. When the IAB launched IAB standards in 1996, an agency could buy media across numerous properties without adjusting the creative.

Buying online media became more efficient. Importantly, it freed up advertisers to focus around the message and not the format of the advertisement.
Today, the IAB has once again stepped in to help bring clear standards to online advertising with a new set of best practices for social media advertising. It’s a welcome change because advertising has been far behind the consumer space with respect to implementing the kinds of social functionality that has made social media properties like Twitter, MySpace and Facebook so popular.

As part of a company that makes social ads, I’m excited that the IAB has released a new set of social advertising best practices to help bring consistency to the marketplace, similar to the way IAB standards brought efficiency to online advertising back in the 90′s.

The best practices, which were announced at a conference today, include definitions of social ad elements, examples of social ads, recommendations for consumer opt-in, and guidelines for privacy standards. The IAB defines a social ad as:

An online ad that incorporates user interactions that the consumer has agreed to display and be shared. The resulting ad displays these interactions along with the user’s persona (picture and/or name) within the ad content.

The ingredients of a social ad can include profile data, social targeting (by encouraging people to pass ads along to their friends), and social interactions within the ad itself, such as sharing or commenting. The IAB’s guidelines are clear that consumers should have control over what data is shared with their friends, in what context, and that social ads should be explicitly opt-in, with the option to opt out at any time:

Since it is essential for social ads to be trusted in order to achieve broad adoption, it is important for consumers to have visibility and control of what can be shared with their social connections

The standards were developed as part of a 151-company committee with 218 members (yup, that was fun) including MySpace, Microsoft, Google, Facebook, SocialMedia.com, CBS, Accenture, PriceWaterhouseCoopers LLC, Condé Nast Digital, IDG Entertainment, and Nielsen Online. You can see one of the many example ads above, and the entire document embedded below.

http://viewer.docstoc.com/
Social Media Ad Standards –

SocialMedia, an advertising company that has largely concentrated on social network advertising until now, is looking to change this. The company is releasing a suite of new interactive advertising products, collectively being called “People Powered Ads” that look to help brands create more engaging ads by tapping into the social power of the web. Alongside the launch the company has announced that publishing giant IDG is its first partner, and that IDG will be rolling out advertising campaigns and selling customized versions of ‘People Powered Ads’ under its own Amplify banner.

The first set of People Power Ads revolves around Twitter – a platform that is at once very appealing and terrifying to most brands. The flagship ad unit is ‘Twitter Pulse’, which will display some of the most recent Tweets highlighting a company’s product or brand name (it’s essentially a custom emeddable Twitter Search). For example, Apple could create an ad unit for the iPhone, presenting the five most recent tweets that mention the popular device. This kind of ad can be quite engaging, but it is also scary for brands, as it could potentially display a tweet that is deriding the product. To compensate for this SocialMedia will allow brands to create their own filters to weed out profanity or negative remarks, or to only show tweets from selected users.

SocialMedia is also offering a product called ‘Twitter MegaPulse’ that allows brands to create entire microsites dedicated to their customized feeds. And finally there’s ‘Twitter Sparq’, which allows brands to syndicate ads to Twitter clients, inviting users to tweet about a particular product (which would then likely show up in their Twitter Pulse).

The second set of new ad units is called ‘Friend to Friend’. SocialMedia rolled out a similar product called “Word of Mouth” ads in March, inviting inviting users to interact with ads, which would then be customized with their responses when they were shown to friends. This product does essentially the same thing, but also allows brands to tap into content on their Facebook fan pages. And if a user grants SocialMedia permission though Facebook Connect, customized ads could appear on sites outside of the social network.

Finally, there are community products, which aren’t reliant on any outside social networks. An ad unit called the ‘Community Poll’ asks users for input on a topic, and then presents the current results to other visitors. The last product is the ‘Community Stream’, which allows users to leave comments about a certain product or brand (it’s similar to the Twitter Pulse above, but allows visitors who don’t use Twitter to leave remarks.

It seems inevitable that the majority of online ads will eventually be customized to suit your personal preferences and those of your friends, and SocialMedia seems to be ahead of the curve in this respect. That said, even with the filter options it will likely still take many brands far longer than it should to warm up to the idea of ads customized with user-input, so it may still be a while before this becomes widespread. And while SocialMedia asks users for permission before sharing their input, I wouldn’t be surprised if there is also some initial backlash as users begin to see their friends pop up more often in ad units.

SocialMedia, a company that specializes in advertising across social networks, has released a new form of advertising dubbed the “WOMI”, or Word of Mouth Impression. WOMI campaigns present visitors with ads asking them for some kind of input either though a multiple choice question or using a text field. SocialMedia then uses this input to customize ads which are shown to the user’s friends on the same social network.

For example, if an ad for Star Wars had a call-to-action asking if I was on the Light Side or Dark Side of the Force, it could take my response and then present my friends with an ad that said “Jason is on the Light Side, how about you?”. In turn, their responses are passed on to all of their friends, making this among the first kind of advertising with a viral element. This interaction makes the ads mini-social applications in and of themselves, and have proven to be very successful in trial campaigns.

Research firm Dynamic Logic found that over three months WOMI resulted in increased awareness, favorability, and purchases for the Fortune 500 company running the campaign. In fact, the campaign did so well that it placed among the top 20% of all social media campaigns ever analyzed by the firm, which has been in the business for nine years.

WOMIs are compliant with industry-standard IAB ad sizes, so they can be shown on most sites and social network applications without any customization needed. SocialMedia says that publishers outside of the social networks can also deploy the ads by tapping in vistors’ social graphs using services like Facebook Connect.

Finally, if this kind of personalized ad isn’t your thing, every SocialMedia WOMI will include a sidebar that will allow users to turn them off permanently. For more about WOMIs, check out the demo video below.

http://vimeo.com/moogaloop.swf?clip_id=3572059&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=&fullscreen=1

SocialMedia, one of the leading advertising platforms for social network applications, announced today that they’ve paid out over $8 million to developers since the platform’s launch last year.

The majority of this revenue has gone out to Facebook app developers, but the platform also supports applications running on OpenSocial. The money has been paid out to approximately 1000 developers that have used SocialMedia’s ad platform across 5000 applications (the money has not been evenly distributed, so it isn’t worthwhile to look at the average).

These figures may be encouraging to critics of Facebook’s development platform, who worry that applications can’t be easily monetized. During a talk at the Web 2.0 conference last April, members of an expert panel were predicting total revenues on the Facebook platform of as little as $10M this year – an amount that certainly wouldn’t be encouraging to the venture capital firms that have been pouring millions into some of these apps.

Around 20% of Facebook’s 29,000 applications have used SocialMedia to distribute ads (and contributed to the $8M total). While this is impressive, it only represents a fraction of the total revenue that’s being generated – clearly, there’s far more than $10 million to be had on these still-fledgling development platforms.

Later this month SocialMedia will be holding a pair of Facebook “Business Schools” (one in New York, one in London) to help encourage growth on the platform.

Nick started at TechCrunch in June 2006 and has worked along side of me, day and night, since then. For many months in early 2007 he was the only person other than me writing for the site. He was a perfect business partner, always steady emotionally as my temper flared at regular hosting outages, missed stories and pissed off readers. In addition to writing and general analysis, Nick also kept the site running and wrote any new code we needed. Basically, I worked him to death.

At some point late last year he simply burned out, telling me (jokingly?) “I just can’t write about another fucking startup.” I think we both knew at that point that it was time for Nick to move on to the next step in his career.

He soon had offers from a bunch of startups and venture capitalists, and I think he made an excellent choice with Social Media. I suspect he’ll give his reasons for joining, as well as some juicy gossip about TechCrunch, on his personal blog in the near future. For now, you can read his bio on our About page.

Nick joins ex-TechCrunchers Marshall Kirkpatrick (now at ReadWriteWeb), Natali Del Conte (now at CNET TV) and Ben Meyer (now at Facebook) who’ve abandoned us over the years. I miss working with all of them, and all are still very good friends.

You’ll be missed, Nick. Come by any time to write a post or two, for old time’s sake. And good luck at Social Media. They are very lucky to have you.

Update: Nick speaks.

SocialMedia Networks provides a suite of tools and services for developers building applications that run on social networking platforms including Facebook and MySpace.

SocialMedia Network’s Appsaholic sells click-throughs to other Facebook applications across a network of affiliated sites, a similar model to FBExchange’s link exchange model, but has more features (reporting) and seems easier to use (FBEx requires separate filings, Appsaholic can use PayPal).

George Zachary of Charles River Ventures said that the investment “underscores the significant opportunity for SocialMedia Networks to become the new standard for how social networks are monetized.”

It also shows the steady maturity of Facebook from a college network to a full on world network, where friendships, business contacts, family and other types of relationships need to be more fully described. And this is also as much about privacy as it is about organization – users will be able to limit the information that certain friend groups receive.

A few existing applications are going to be affected, like Slide’s Top Friends application, the most popular third party app on Facebook. Lots of other applications will likely need to be tweaked to work properly when this launches (so many of them access the friends list). And this will shut down at least one “startup” we’ve been tracking that was creating this exact feature as an application. At least they can quit now and stop putting good time and money after bad.

Building Facebook applications is a big dice roll. If it’s too popular or too obvious of an idea (even if it hasn’t been done yet), Facebook is just as likely to compete with you as pay a few bucks and just buy you (they are probably more likely to compete with you than buy you, actually).

Some developers will probably wonder if getting a cash grant from Facebook’s just-announced fbFund will lessen the likelihood of direct competition from the company. Only time will tell.

Update: Wired is writing about a slew of Facebook ad networks and the almost inevitable fact that Facebook will be competing with them directly, too. We’ve covered most of these: SocialMedia, VideoEgg, Lookery, fbExchange, and RockYou. Also mentioned are Cubics and Appfuel. Lots of brave souls racing to build a business before Facebook comes in and stomps all over the scene.

Appsaholic isn’t banner advertising like Lookery offers, or developers can get through traditional ad networks. Instead, Appsaholic sells click-throughs to other Facebook applications across their network of affiliated sites. It’s similar to FB Exchange’s link exchange model, but has more features (reporting) and seems easier to use (FBEx requires separate filings, Appsaholic can use PayPal). They have plans for other models as well, including a advertising that rewards users for engaging in advertisements.

How It Works

Developers become a member of the network by tracking their application on Appsaholic and adding some embed code to their application. The embed code adds an iFrame that serves paid links on their affiliates’ applications. The links go to the highest “AdRanked” advertising developer on their live bidding market. AdRank is determined by multiplying two factors, the offered price per click, and the advertising application’s quality score. The quality score is based on a function of the application’s clickthrough rate and viral growth within the network. The idea is that higher quality applications should be rewarded with cheaper advertising. This dissuades disliked apps from spamming the service.

So, for example, a developer whose application has a quality score of 60 and is willing to bid $.10 per click, has an AdRank of 6. Since ads are served in AdRanked order, the developer could boost his AdRank and position in the queue by bidding a bit higher. Currently PPC rates are 10 to 20 cents. Appsaholic takes 12-30% of that revenue.

How It Pays

While that doesn’t sound like a lot, people are still making some significant cash off the platform. Click through rates vary from 0.2%-3.0%, effectively paying about $0.60-$3.00 for every thousand visitors to your application. SocialMedia’s Seth Goldstein is optimistic and only sees these rates as the beginning.

The company cites Greg Thompson as one of their recent successes. Thompson, a contract programmer from London, Ontario, is known for making the popular Facebook application My Aquarium. The application has about 2.2 million users. Within less than a day of running SocialMedia’s ads Thompson made over $500. While CPM rates on VideoEgg can upwards of $8.50, Thompson found they had less inventory. Over the past three months, Thompson has made around $100,000 in Facebook advertising overall.

SocialMedia has shared their network’s revenue to date viewable to the right.

Going Forward

While Facebook hasn’t clobbered an application yet, they’ve definitely laid out some advertising plans of their own. Facebook has also shifted away from installs to engagement, thereby improving how users can discover applications and perhaps undercutting the need for affiliate linking to get big. There’s no telling if Facebook will directly take on advertising within applications. Playing in Facebook’s garden may be risky business, but Facebook need only look to MySpace’s dwindling approval amongst the developers to see what a heavy hand can ruin.