ChasNote

Excerpt from today’s NY Times:

Online advertising in the United States is expected to increase 28.5 percent this year, according to eMarketer, a research firm. AOL’s ad revenue increased 16 percent in the last quarter after gaining 40 percent in the previous quarter. Revenue at Yahoo, the No. 1 Internet portal, rose 8 percent in the latest quarter.

Part of the challenge for portals is that people are starting to approach the Internet in a different way. A new generation of Web users has grown increasingly adept at finding what it wants online and is less reliant on portals for guidance. What is more, younger audiences are spending more time on social networking sites and less time on traditional Internet portals.

“Just like Yahoo, AOL is fighting MySpace, Facebook and others for audience and ad dollars, and those are tough competitors,” said Jordan Rohan, an analyst with RBC Capital Markets.

Social networking sites are not the only culprits. Thousands of smaller Web sites, like blogs, news collectors and niche content sites, are also attracting growing numbers of Internet users and advertisers.

Steven Finch at Crenk speculates that advertising on FM sites leads to healthy B Round investments:

“KickApps have recently been advertising on some of the worlds largest technology blogs such as Gigaom, Mashable and Read/Write Web, this i think was done through Federated Media and it seems to have grab some attention. It has been reported by Mashable that the social network builder has raised a large $11 million Series B round.”

Well, it’s true that KickApps advertises on those sites, and it’s true that tech investors, VCs and bankers read those sites, but I’m not sure I’d make such a direct connection between their ad campaign and the $11 million infusion.  But, hey, the campaign probably didn’t hurt their fundraising efforts!  Thanks for the kind speculation, Steven.

According to TechCrunch, Glam is raising another $200 million, and expects to generate $21 million in 2007 revenue.

“But the company is driving that revenue by selling ads for partner websites, not on their own page views. A minimal amount of research into their business shows that the company is an ad network, not a content site.”

From CNET:

“The largest software company is hosting its Financial Analysts Day at its Redmond, Wash., headquarters, where Ballmer described Microsoft’s strategy as making several big bets on emerging businesses while drawing more revenue from its mature desktop and server software franchises….. ‘We are hell-bent and determined to allocate the talent, the resources, the money, the innovation to absolutely become a powerhouse in the ad business,’ Ballmer said.”

FM’s Conversational Marketing Summit is offering early-bird discounts, register here. The speaker roster is filling out, too:

Jay Adelson; CEO, Digg.com.
Heather Armstrong; Founder, Dooce.
Jon Armstrong; Founder, Dooce.
Paul Beck; Senior Partner, Ogilvy.
Barak Berkowitz; CEO, Six Apart.
Matt Cohler; VP Strategy, Facebook.
Laura Desmond; CEO, Starcom MediaVest Group/The Americas.
Scott Donaton; Publisher, AdAge.
Sarah Fay; President, Isobar US.
Shawn Gold; SVP Marketing & Content, MySpace.com.
David Grubb; Worldwide Media Director; Microsoft.
Curt Hecht; EVP, Chief Digital Officer, Starcom MediaVest Group.
Carla Hendra; Co-CEO, Ogilvy North America.
Casey Jones; VP Marketing, Dell.
Patrick Keane; EVP, CMO, CBS Interactive.
David Lawee; VP Marketing, Google.
Ross Levinsohn; Former President, Fox Interactive Media.
Daina Middleton; Dir, Global Interactive Marketing , Imaging and Printing Group, HP.
Jon Miller; Former Chairman & CEO, AOL Inc.
Kent Nichols; Writer, Performer, Beatbox Giant Productions.
Greg Ott; VP, Global Marketing, Ask.com.
Randall Rothenberg; President & CEO, Interactive Advertising Bureau.
Suzie Reider; Head of Advertising Sales, Youtube.
Douglas Sarine; Writer, Performer, Beatbox Giant Productions.
Tina Sharkey; Chairman and Global President, BabyCenter, LLC.
Suhaila Suhimi-Waldner; East Coast Director, Digital, OMD.
Rishad Tobaccowala; CEO, Denuo.
Johnny Vulkan; Founder, Anomaly.
Jeff Weiner; EVP, Network Division, Yahoo!

Kevin Rose announced big news for Digg: They’ve signed up Microsoft to sell their banners and text-link sponsorships. (FM will keep doing what we’ve been doing — the integrated sponsorships, custom programs and conversational marketing.) From Kevin’s post:

“We’ve signed on Microsoft as our new partner to sell and serve the ads on Digg. It’s a deal similar to the one Facebook signed with Microsoft last year. This move gives us an advertising partner with a larger organization and a more scalable technology platform to keep pace with Digg’s growth. Best of all, it lets the Digg team completely focus on new feature development. Federated Media, which has been an awesome partner for the last year and a half, will continue working with Digg focusing on integrated sponsorships and custom programs like the Arc project in labs.”

Here’s Battelle’s comment at FM’s blog:

“Today our partner Digg and our new partner Microsoft announced a deal to work together on advertising across Digg’s burgeoning site. At FM, we’re proud of our partners, and particularly proud when we’ve helped prove their businesses’ value. It’s no secret that Digg is the kind of property - like Facebook - that was bound to get the attention of the Big Guys as they continue to play an ever more fascinating game of Internet chess. That’s why I’m even more pleased that FM is continuing to work with Digg and with Microsoft to further Digg’s goals.”

And here’s the official press release from Microsoft, including news that FM and Microsoft will be collaborating around conversational marketing stuff:

“Microsoft and Federated Media Publishing, Digg’s current advertising partner, plan to collaborate to bring integrated programs to Digg’s users and advertisers. ‘Federated Media has unique advertising sales assets that dovetail with our efforts, and we look forward to working with them,’ Berkowitz said. [Steve Berkowitz is Microsoft's SVP for the Online Services Group, ed.]”

Congrats, all around!

Here’s the press release. Reuters says the deal is $275MM in cash.

Nick Carr’s recent column for Guardian Unlimited is called, “How corporations still control the marketing conversation.”

I like the implied admission that these conversations — what we used to call publications — are controlled at some level by the corporations who pay the bills through advertising. (Excluding, of course, Ms Magazine and Consumer Reports.) Hey, admitting the problem is a great place to start! He even turns the mirror on his own sector of the media business:

“Even in traditional media, the line dividing marketing and editorial content has long been a blurry one. Many newspapers and magazines publish in their pages advertorials written by companies, even though they know that many readers don’t distinguish the paid content from the articles written by journalists.”

But, ironically, he concludes with this:

“It has long been assumed that the internet, by democratising media, would level the playing field, shifting power away from corporations and to individuals. A lone person, using a computer and a web connection, could broadcast his opinion about a company or a product to the entire world. There’s truth in that, but it’s not the whole truth. As the line between media and marketing blurs further, corporations are finding that the web may give them more power to influence what people see and do. In the end, conversational marketing is more about marketing than about conversation.”

When the NY Times let ATT wallpaper the print pages of the business section in January 2007, horrified readers didn’t have an easy channel to voice their feedback. Or when it has launched new sections of the newspaper — such as Automobiles or Small Business — not because there was suddenly more news about those topics, but because advertisers would pay the Times more if they wrote more stories on those topics, there was no forum for public discussion. When the Wall Street Journal promoted Dell advertorial videos as video news coverage (with another tech vendor’s commercials running before and after the advertorial, to make the ruse complete!) the traditional journalists at the Journal and its competitors looked the other way. When CNET, ZDNet, PC Magazine, CNN, Fortune, or Car and Driver have lent their voices, words, logos and names to advertisers for use in ad creative — it’s something we consumers just have to deal with, quietly.

When websites — especially the new generation of “conversational” sites that , oh my!, make it easy for their readers to express themselves right there in the publications (attached to the story itself, not on page 28 where “letters to the editor” are hidden) — explore more relevant approaches to advertising, they DO open themselves up for criticism, actively. They invite it, in fact, because they recognize their survival depends on listening to reader feedback and improving from it. Conversational media and conversational marketing certainly “level the playing field” and “shift the power away from corporations” more than old school media and marketing ever has. It ain’t perfect yet, but it’s a move in the right direction.

Congrats to Gil and the gang at Wikia! Today they announced a relationship with Looksmart for search, backfill ads and the technology to manage the display ads and conversational marketing programs us FM’ers are selling across the many Wikia sites. From the release:

“The LookSmart solution is comprised of a full-service ad serving and yield optimization platform and corresponding services to handle all forms of ad units and payment types (CPM, CPC and CPA). The platform and services will support Wikia’s sales of both CPC and CPM ads directly to their advertisers and will help Wikia optimize revenue and page yield among its various ad sources. Wikia will also become part of LookSmart’s distributed ad network, which provides relevant backfill for its partners to augment their own ad sales efforts.”

It sounds like my colleague Bernie Albers lit it up at last month’s “Innovators Roundtable Dinner,” hosted by the IAB.  He proposed an eBay-style rating system for ad agencies where publishers and other partners would vote them up for good service (frank and open communication, etc.), or vote them down for poor service (delinquent payment of invoices, late delivery of creative, etc.)  Scandale!!

But perhaps it’s more likely — and beneficial — than it sounds. Industry by industry, the internet has forced a new level of transparency to business practices that have been intentionally obscured from consumers and business partners. Inflated brokerage fees and retail pricing met this fate in the 1990s, thanks to online discount brokerages and comparison shopping engines. Google has begun the process of “rationalizing” direct-response ad rates online; and, ironically, their own black-box approach to sharing revenue with publishers is facing inevitable pressure.

As we saw in other industries, best-of-class agencies will force this issue — since a system that rewards better-than-average service gives them competitive advantage in winning new business. Change can be uncomfortable, especially for the incumbent leaders. But I say, bring it!