latoga labs

Earlier this week I dropped in on ad:tech in San Francisco.  ad:tech is an interactive advertising and technology conference and exhibition that happens in different cities around the world through out the year..  This past week it was happening in San Francisco and I borrowed a badge from a friend to take a look at the exhibit floor.

This conference was focused around online advertising.  The most surprising, maybe I should say annoying, thing to me was the overload of all the advertising.  Unfortunately, what you encountered the most was the overloaded, poor messaging that is typical of technology trade shows.  I walked thru the entire exhibit floor and all the vendors and booths blended together after about 15 seconds.  I was annoyed by the large percentage of vendor’s booths who failed the 15 second test…after 15 seconds of reading their signage, I didn’t understand what they provided or why I should care.

Of all the vendors exhibiting at the show, there were only two that really stood out from the crowd: Casale Media and Hydra.  And the reason they stood out was their booth design.  Both utilized the concept of empty space to draw you into them.  A concept that you would expect more companies who would attend an advertising based trade show to understand.

I almost hate to say it, but I think ad:tech needs more ad people and less tech people.

Unfortunately, there were a number of great sessions on social media, advertising, and the building of brands in the digital age that I wish I could have attended.  Maybe next year…

I read an interesting article in today’s Wall Street Journal that talked about the correlation between advertising in the Super Bowl and stock performance: Super Bowl Sponsor’s Stocks Tend to Outplay S&P 500 in Week Following Big Game (login required). Researchers from the University of Wisconsin found a correlation between the companies that advertise during the Super Bowl and those same companies stock prices during the week after the big game. Those companies that ran ads during the bowl outperformed the S&P 500 during the week following the game in 10 of the past 12 years.

Does this mean that the $2.7 million for a 30 second spot is worth the money? For some, it might. As long as you have discretionary marketing budget to spend on that advertising, you can capture a lot of eye balls during the game. The one time during the year when you don’t want to Tivo the game to miss the commercials.

This reminded me of the 2000 Super Bowl. At the time, I was working for a company that produced software to manage the web traffic on the largest websites of the day. One of our new customers was a startup called OurBeginnings.com (yes, during that era when companies name was also their web address). They spent a large portion of their funding to do a Super Bowl advertising launch for their online invitation and card printing service (think wedding invitations and the name starts to make sense).

The week leading up to the game was a scramble to get their new data center and infrastructure installed, tested, and operational. During the game, we had a staff of people watching the site from different parts of the country, myself included. It was quite amazing to watch their logo come up during the 15 minute pre-game session they sponsored and then watch the traffic to their website go up. The most impressive was the 30 second ad spot they bought; as soon as it finished playing and as fast as I could switch my eyes from the TV screen to my laptop screen, I literally watched the website traffic go up and to the right. We were monitoring the site in real-time and I witnessed the spike as it happened.

The image to the right is a screen capture that I took of the statistics the next morning. It is quite amazing how the Super Bowl ads can have such an immediate impact on the viewers. The large spike is right after the 30 second ad ran and you can see that the volume of visitors is considerably above average for the few hours after that spike (click the image for a larger view).

So, I’m not surprised that those Super Bowl ads were impacting people still for a week after the game. Just think about how many times you have talked about the best ads from the game during that week? I’m sure there are a lot of marketing executives who love to point to this study to justify the investment.

(Oh, about OurBeginnings…just like Pets.com, Ameriquest, and others that have advertised during the Bowl and then disappeared…they went out of business about a year later, after having passed up a $40M acquisition offer. )

Update:  I was reminded by my friend Richard Lewis, who was the CTO of ActiveIngredients which was behind OurBeginnings, that they sponsored a 30 minute segment of the pre-game show, ran 5 ads during the Super Bowl (the first one aired is what generated that huge spike), and were offered $45M for the company.

Close on the heels of my side box comments about NewCorp’s influence being felt at the WSJ.com, I listened to an interesting discussion on KQED’s Forum about the Future of Newspapers on Friday. It was an interesting discussion that included Phil Bronstein, the departing editor of the San Francisco Chronicle.

The discussion about how newspapers make money and can continue to make money today was quite interesting. Especially when you extend the same concepts to online services and this mentality of free advertising supported services. My biggest complained about my recent visit to WSJ.com was that there were all these animated advertisements that started to jump out at me. It was very distracting and frustrating, I felt like I had to work extra hard just to find and to read the article I went to the WSJ.com to read.

We find ourselves in an interesting catch-22. Ideally, you create a product or service that others find valuable and willing to pay for. With advertising, you create a product or service that can attract a lot of eyeballs and then sell advertising to support it. Who cares if the product or service is hard to use or requires you to spend more time on it than you should to accomplish a task…that’s more eye balls, more clicks, more advertising revenue.

I have thought that mixing the internet advertising technology with the newspaper would be the best way to support that business. Have customer configured ala-cart services and advertise within those services that helps pay for these services. Customers get to read what they want and the advertising helps pay for it. But, how do you allocate the advertising resources out to pay for the content? that could lead to popular content thriving while the meaningful, but less popular, content being starved.

So then, how do you pay for the services that our society as a whole really needs? How do newspapers pay for the in depth reporting on social topics that are important (even if us readers don’t realize it yet)? Is it enough to have the popular content pay for the not so popular content?

This is a constant battle that most founders and CEOs of web2.0 like startups are dealing with every day…pay for service or advertising paid service. The parallels continue…

Today a colleague and I were chatting about some random topic (so random I can’t honestly remember what it was) that spun into a discussion of that “SeatGuru Guy”. My colleague mentioned the Fortune article that talked about how the guy behind SeatGuru makes $120k/year (back in 2004) from advertising on his website that he originally started as a hobby.

This then lead to a discussion of my friend’s HotSpotr community driven wifi database site. Andre built this web application as an exercise in Ruby on Rails development, made it accessible to anyone to add hotspot info into it, and then began telling his network of contacts about it. About 4 months later, it has grown into a DB of 1100-ish wifi spots from around the country. Andre has invested a bit more time to add new features to it and the site’s community continues to grow. Now, in itself, this application isn’t anything unique in nature…wifi database sites have been around for a while and there are a number of them that have many more hotspots listed than Andre’s. But I still use Andre’s.

Why? Because it’s the best functioning wifi application I have found! It’s mashed-up with Google Maps, provides useful ancillary information about places with free wifi, allows me to find what I’m looking for with only two page views, and recently even provides a mobile interface (which I have used a number of times while on the road). It works, it works very well, and it’s getting better. So I tell everyone about it and give back to the community by adding new spots when I find them. (Keep up the great work Andre!)

At this point, it’s still advertising free. Andre did this as a project to learn a new technology in his spare time but also to develop something that he hoped others could use. Back in the early days of the web (the Mosaic era), I created something similar–a free service listing Freenets/Community Networks around the country. I did it because I was involved with my local Freenet, and thought others would find the service valuable (they did, I even won a few of the early “web awards” for the site). This is the altruistic root of community…and what makes most great community web sites great.

My concern here is that we are loosing our understanding of what is meant by community. How many of the other hotspot sites out there make money off of their service though the advertising fees? There is nothing wrong with that in itself. I’m sure most of these sites started off just like Andre’s. But when these sites start focusing more on the form of how to drive more advertising revenue (i.e., make users visit more pages before they find what they want, plaster as many ads on the page as possible to drive up the revenue per view) versus the function of how to provide great value, they lose sight of why they started. Form wins over Function. The trust of the community is broken.

[I'm using Andre's site as an simple, personal example. You can see this same thing in the histories of a number of the Web 2.0 companies. The most successful (the measurement of which ranges from number of users to acquisition cost) understand this battle and have walked the fine line of pleasing their community by still providing value while having the community fund them in a fashion that doesn't alienate the community.]

In the debate of Form versus Function, I’ll side with function every time. However, I’m also a pragmatist…I have a mortgage to pay just like others and I understand the reason behind placing ads on a site. If Andre’s site becomes popular enough, I wouldn’t blame him if joins Google’s AdSense network. It’s when the Form starts taking precedence over the function of the service originally offered that I’ll have to have a little conversation with Andre (most likely over drinks…Delusion Andre?).

This leads me a new little twist in the eternal battle of Form versus Function…Gimme Some Candy. Gimme Some Candy is the way zefrank, my current favorite vloggers, funds his video blog the show with zefrank. I stumbled across his vlog when a fellow business travel showed it to me in the concierge lounge of our hotel during a recent trip. zefrank created this idea to fund his vlog without advertising by simple letting people donate money to him if they like what they saw. Each episode, you can give him some candy by donating to sponsoring his show. The more you donate, the bigger and flashier the icon you get. These icons (and any text message you want to share with the world) are then displayed on the following episode. So not only is zefrank funding his show, he is providing a way for the community to rate his shows and also allow the sponsors to do some advertising (the text appears as a tooltip for your icon) .

(pssttt…ze: bring back your “favorites” list of the shows that brought in the most candy…)

What I love about his concept is the simplicity and elegance of it. Function wins with a creative nod to Form. The community supports the service and service provider (capitalism at it’s best).

In a word….Brilliant!