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ConversionRater A discussion of online advertising, web entrepreneurship, and personal ramblings from Pat McCarthy.

Monthly Archives: August 2006

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The Power of one Light Bulb

August 30, 2006 10:39 am / Leave a Comment / Pat McCarthy

I’ve known about the benefits of compact fluorescent bulbs for a long time, but this new article in Fast Company points out some interesting statististics about the impact it would have if each American household just swapped out one bulb.

Additionally, seeing the plans of Wal-Mart to change the bulb industry towards the better environmental choice is interesting, especially coming from a company that has not traditionally been the biggest friend of the environment. It’s also promising that companies are moving in this direction even though CFL bulbs last longer meaning they are going to lose sales in the long term as people won’t have to replace light bulbs as often.

Posted in: Random

Long Tail? Or the Meaty Middle?

August 29, 2006 12:42 am / 2 Comments / Pat McCarthy

One of the hottest ways to think about the new “2.0 economy” has been Chris Anderson’s original article, blog, and book about The Long Tail. If you want more background try any of the previous links, but the quick summary is:

The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail.

The Long Tail is often used to talk about the success of newer web business models like Itunes, Rhapsody, and Google Adsense, and it’s probably been used in hundreds of business plans for Web 2.0 applications being pitched to venture capitalists.

I agree with the general model of the Long Tail, but in a recent discussion with a coworker and friend about what portion of the web publishing market my team’s product RMX Direct was going after, he brought up the idea of the Meaty Middle.

What is the Meaty Middle? Let’s take a look at the Long Tail graph:

tail.jpg

On the left we have the “hits”, or in the music industry example the top of the radio charts and the most well-known artists. On the right in yellow is the long tail where the rest of the smaller artists in the music industry make up a large amount of business when taken together.

But really, is it that simple? Can we really group them in these two groups? Isn’t there a significant difference in the music artist who sells 100 thousand copies of an album and one who sells 100 copies? On that premise, we have the Meaty Middle:

middle.jpg

We now see the green Meaty Middle in the graph which takes up quite a bit of area. As I mentioned above, this is a different type of music artist than the ones further down the tail. They are legitimate bands, not household names, but definitely different from the struggling artist few people outside of their friends or local town would recognize.

Let’s get more specific with the web publisher industry since that’s where the idea originated. On the left side of the graph you have your Alexa top 250 publishers. This includes:

  • Portals: Yahoo, MSN, AOL
  • Top News Sites: CNN.com, New York Times, Washington Post, etc.
  • Social Stars: Myspace, YouTube, Flickr, Digg, etc.
  • Specialty Content: ESPN.com, Weather.com, Match.com, etc.

In the advertising world these top publishers are all enterprise level advertising clients with their own ad sales teams selling premium campaigns, and they usually still have a serious amount of remnant inventory that they sell to direct marketing advertisers or they work with ad networks to resell. More and more of them are moving to the exchange model for that inventory, but that’s another story.

Then on the other side of the industry it’s always been talked about how Google Adsense dominates because of the Long Tail. You know, how so many blogs and niche publishers use Adsense and when you add them all up together it equals a lot of inventory and a lot of money.

That’s true, but too simple. Adsense, and the other ad networks you’ve heard of like Yahoo Publisher Network, Valueclick, Casale, Tribal Fusion, and Burst really do their damage in the Meaty Middle. Why do I differentiate it? Because the publishers in the Meaty Middle are different and require different things.

When RMX Direct was mentioned in TechCrunch, we received hundreds of signups for publishers who I’d classify as “long tail”. They were primarily bloggers and focused websites with a small amount of traffic. After a hundred of these publishers started using our tool their inventory adds up to less than one Meaty Middle publisher I called on the phone and signed up to use our service.

Why is this critical to know? If we focused exclusively on the long tail publishers, we’d fail. The support and management that some of them require make them a losing financial effort, while that one Meaty Middle publisher I signed up requires little to no support at all. That isn’t always the case, but there is definitely not a correlation between the amount of support a publisher requires to the amount of ad revenue they generate.

This is one of the reasons why many traditional ad networks have a minimum volume requirement. We’re not requiring a minimum volume for the long tail small publishers because we love them and taken as a whole they do provide a good chunk of business.

The key point is that we recognize that the Meaty Middle exists, it’s a huge chunk of the market, and it’s a different type of publisher with different needs. If we resorted to just thinking about the Alexa Top 250 and the Long Tail alone, we’d be building and marketing towards the wrong thing.

As I’ve examined other industries I think it’s clear the Meaty Middle exists in most cases. There’s usually significant differences between the item at the top of the curve, the middle, and the tail. The Long Tail theory isn’t wrong, it’s just too simple of a breakdown for my taste.

Posted in: Ad Networks, Advertising, Direct Media Exchange, Publishing, Right Media, Web 2.0

Are Pageviews Obsolete?

August 28, 2006 11:06 pm / 6 Comments / Pat McCarthy

Evan Williams of Odeo has a recent post where he theorizes that due to AJAX, RSS, Widgets, and other enhancements that page views are an obsolete metric. Others such as Marshall Sponder have been singing a similar tune.

Are they right? Well, I’d say that page views are less important than they once were, especially when trying to gauge general site reach and usage. As Evan points out in his post, Myspace and Blogger reach a similar amount of users:

Myspace and Blogger

But Myspace just crushes Blogger when it comes to pages viewed:

Myspace vs. Blogger

And because Myspace’s “bad” design promotes multiple pages being viewed, it’s not a true reflection of the site’s usage and popularity.

This is all true. But I’m not sure I’ll be so negative about Myspace. As Marshall Sponder writes:

What’s weird is that Wall Street is rewarding the crappy design because some might have looked at MySpace’s PageViews a measure of visitor demand (and eyeballs, to some extent) which it’s not. It’s always strange to reward lousy coding with more money – but I hear it happens(happened) a lot, esp in the late 90’s.

Well here’s the thing, in the advertising world, page views still equal revenue. There’s the big gotcha in this “page views are obsolete” idea. They aren’t obsolete for any site running advertising. Generally, each page view is a new set of ad impressions depending on how many ads are shown per page. So while some chastise Myspace for it’s bad design that creates so many page views, it’s one of the keys as to why Myspace is as valuable as it is.

One might argue that if Myspace just accomplished users goals quicker and in fewer page views that the ads they do show would earn a higher CPM, and it is true that the more ads a user sees the less those ads pay. However, I feel comfortable guessing that if Myspace cut their page views in half by making their site easier to use, their revenue would take a big hit. What you’d have to hope for is that the easier to use site would lead to more people using Myspace, and I’m not really sure that I’ll buy that there is really a large set of users out there not using Myspace because it’s hard to use. I’m betting that the people complaining about Myspace’s design are all technology/web people who probably wouldn’t spend much time on Myspace anyway.

So, am I recommending that site’s intentionally create more page views than necessary to make more ad revenue? No, I’m not. I don’t think that’s a good thing for usability and the general success of the web. However, if your site is going to be used no matter what, it can actually help your revenue to generate additional page views, thus not making it an obsolete metric.

In the coming couple of years the proliferation of AJAX, RSS, and widgets will mean that advertising metrics will also have to change to reflect this change in the ways users interact on the web. The premise is correct, I just wouldn’t call page views obsolete quite yet.

Posted in: Advertising, Random, Web Analytics

Microsoft Parties at Facebook’s Dorm

August 25, 2006 3:15 pm / 1 Comment / Pat McCarthy
It was announced earlier this week that Microsoft has won an advertising deal with Facebook, and terms weren’t disclosed. Shoemoney seems to have a source saying the deal came in around $850 million, others hear it’s more like $200 million, but without knowing exact terms beyond it involving display advertising and sponsored listings it’s hard to really analyze the details too much.

Techcrunch thinks the most interesting part is that the deal wasn’t with Google. I disagree, I think the most interesting part is that Microsoft is working on becoming an ad exchange.

According to the New York Times:

Steve Berkowitz, senior vice president of the online services group for Microsoft, said ads would be made for Facebook, but they could also be aimed at any of MSN’s various Internet properties, which have a total of 400 million users worldwide. At the same time, ads running on MSN properties may also appear on Facebook, depending on what audience the advertiser wants to reach.

Also according to the Times:

Phil Leigh, president of Inside Digital Media, a market research firm specializing in digital media, said of the deal. “But Facebook is also a legitimate test bed, a place where Microsoft can test new technology in a commercial context,’’ he said.

“What we’ll see is Microsoft attempt to do some fairly leading-edge type of things, involving banner ads, animation and interactivity,’’ he added. “Whatever technology they develop and use effectively in Facebook, they’ll be able to use it elsewhere.’’

Couple those with Steve Ballmer’s quote back in May from Red Herring:

“…think of us as becoming the eBay of advertising where we will bring together buyers and sellers in an online marketplace.”

Looks to me like Microsoft just made the first big play towards their exchange marketplace, and Google’s really had their own “private” exchange for a while with Adwords/Adsense.

Already I see some difference in Microsoft’s ideas from other exchange marketplaces out there, and that they are exclusively representing Facebook’s advertising inventory. Is that really the best thing for Facebook long term? Sure, it helps with their guaranteed cash flow if Microsoft will throw hundreds of millions at their inventory up front, but doesn’t that mean in an open advertising marketplace they could make even more money if anyone could buy from them directly?

Microsoft is going to be taking a sizeable cut of any ad showing up on Facebook. Is that really the most efficient and profitable thing for Facebook? How much incentive does it provide for Microsoft to work their asses off when they’ve got the inventory locked up? What if Microsoft had to continually compete with others to win access to Facebook’s inventory?

Based on these things, I’d say Microsoft is the winner in this deal providing that Facebook’s inventory is worth what they’re estimating.

As Microsoft, Google, and others continue to move into the advertising marketplace/exchange space over the next couple of years, I hope people realize that buying exclusive access to inventory does not constitute providing a true advertising exchange.

Posted in: Ad Networks, Advertising, Microsoft, Publishing, Random

Sorry About My Ugly Mug

August 24, 2006 12:21 pm / Leave a Comment / Pat McCarthy

Robin Good of MasterNewMedia.org recently interviewed me online about RMX Direct and put up an article as well as some video clips.  It provides a quick overview of RMX Direct, and it’s interesting to be involved in an interview where one party is in Eugene, Oregon, while the other is in Italy.

It was a good experience, and I thank Robin for the opportunity.

patandrobingoodvideo.jpg
Posted in: Ad Networks, Advertising, Direct Media Exchange

Salesforce for Google Adwords

August 22, 2006 6:05 am / Leave a Comment / Pat McCarthy

Interesting, according to Techcrunch Salesforce has launched a tool on their AppExchange called Salesforce for Google Adwords that allows search engine marketers to monitor their Adwords performance.

Techcrunch provides some screenshots, and apparently it allows advertisers to create, track, and measure campaigns, and it provides an important ROI calculator.

What’s curious to me about this is that Salesforce has primarily been used by sales employees at most companies who use it, who for the most part might not really be the ones managing search marketing. I guess in some cases it could be, as search marketing is often used to create leads, but it doesn’t seem like a natural fit.

The cost of $300 a month also seems pretty steep when you already need to have a paid Salesforce license, especially in a market that has lots of competitors, and many of those competitors provide the ability to manage Yahoo Search Marketing and MSN AdCenter accounts as well.

Posted in: Random

ClickTracks Merges with JL Halsey

August 22, 2006 5:49 am / 2 Comments / Pat McCarthy

ClickTracks has announced a merger agreement with a family of internet companies called JL Halsey.  Other companies in the family include Lyris, EmailLabs, and most recently, Hot
Banana
– a Web content management company.

ClickTracks will remain a corportation as a wholly-owned subsidiary of JL Halsey.  The full ClickTracks team will remain on board, and John Marshall will remain as CEO of ClickTracks.

JL Halsey will provide investment and resources, and work with ClickTracks on various integrations with their other families of products in creating a full online marketing suite.  Some cool opportunties exist like integrating ClickTracks with Hot Banana so changes to content and site structure can automatically be tested and tracked.

I’ve posted before about how I think it would be beneficial for many of the different type of analytic applications to be all in one product suite, so this is somewhat of a step in that direction.

Posted in: Web Analytics

CrazyEgg Launches

August 21, 2006 7:31 pm / 3 Comments / Pat McCarthy

Visual click-tracking application CrazyEgg has now left their private beta and is open for new signups.

It looks like a pretty interesting service, and perhaps the first click heat map application I’d heard of, but I’ve seen a few others out there already.

I plan on reviewing CrazyEgg in more detail in the next couple of days, in the meantime Solution Watch has a pretty good review.

Posted in: Random, Web 2.0, Web Analytics

Have We Reached Biz Dev 2.0?

August 17, 2006 11:56 pm / 5 Comments / Pat McCarthy

There are a few posts out there discussing the notion that there is a new form of business development that has been coined Business Development 2.0

The “old” way of doing business development consisted of making partnerships and relationships with other companies through phone, email, meetings, networking, conferences, and the golf course.

The Business Development 2.0 way is using the APIs, data, and services of companies that provide them for your product without really needing to have a relationship with these companies.

Are we there yet? I say we’re only part way there, and I question exactly how much we WANT to be there.

Yes, I think it’s fantastic that Flickr was able to build their product without doing business development relationships, or that YouTube made Flash embed code that just took off on Myspace without having a relationship with Myspace. These are definitely good things.

However, there are some problems:

1. What happens if the company you’ve got a “2.0 relationship” with changes what they’re doing? What if Myspace suddenly decided they weren’t allowing YouTube code anymore. Since they had no formal relationship, this is quite possible, and in fact it actually happened for a brief period. Traffic for YouTube dropped dramatically, but users complained so much Myspace allowed it again and chalked it up to a “misunderstanding”. But, when you have no formal relationship based on either contracts or just personal ties, you run the risk of other companies zigging while you’re zagging.

2. Is the integration as deep as it could be? If I just grab a company’s data and start working with it, maybe I can use it in my product and have some success. But if I took the extra effort to reach out to them personally, perhaps they’d make it easier for me, throw in some promotion or a deeper partnership, and I’d benefit that much more. If we simply rely on Business Development 2.0, will we miss out on these opportunities?

3. APIs and data aren’t as open as they should be. As an example, we’d love to use the Google Adsense API in RMX Direct to allow publishers to manage their Adsense account while we also pull Adsense reporting data to automatically update what Adsense is bidding in the auction for their inventory. However, the Adsense API requires applying for it. I did so a month ago, no response from Google. It’s their loss as they are missing out on business because of it, but if their API was open, we could have proceeded. Because it’s not open, I’ll need some sort of old school business development in order to prove to them it’s in their benefit to allow us API access.

4. Sometimes regular business development is required. One of the key components of RMX Direct is the eight ad networks that are participating directly in the auctions for publisher inventory. None of these networks would have been involved had we sat back and just hoped they’d notice us and “integrate” somehow. It required business development, phone calls, emails, meetings, and long conversations to make it all happen. The relationships are deeper because of it as well.

So, the bottom line is that I’m all for Business Development 2.0, but I don’t think we’re there yet. Nor should we ever really leave Business Development 1.0 behind. 2.0 is just a new opportunity for companies to work faster and more efficiently. That’s a good thing.

Posted in: Direct Media Exchange, Web 2.0

Netscape “Scape This” Feedburner FeedFlare

August 17, 2006 12:47 am / 1 Comment / Pat McCarthy

Along the lines of my previous Feedburner FeedFlare creations of a Reddit FeedFlare and Newsvine FeedFlare, I just created a FeedFlare for submitting content to Netscape called “Scape This”.

Netscape has rocketed on the scene recently as the newest competitor in the social news space, and it’s received quite a bit of attention for the uprising of some vocal longtime Netscape users, and leader Jason Calacanis’ offer to pay social bookmarkers for their work.  Seems like a pretty good business move to me, we’ll see how it works out.

To add the “Scape This” FeedFlare to your blog posts, log into your FeedBurner account, go to the Optimize tab, choose FeedFlare from the right column, and then scroll down to the Personal FeedFlares and add the URL: http://www.conversionrater.com/netscape.xml.

Posted in: Blogging, Random, Web 2.0

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