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Social networking is next step for online ads - SF Chronicle 02/16/09

From: Catherine B.
Sent on: Monday, February 16, 2009 11:03 AM
Hey Folks,

This article is from today's SF Chronicle. It may be old news to some of you but new news to others. Enjoy.


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Social networking is next step for online ads
Verne Kopytoff, Chronicle Staff Writer

Monday, February 16, 2009

(02-15) 16:06 PST -- Bombarding consumers with online banner ads, the flashier the better, has been a mainstay of Internet advertising for more than a decade.

But increasingly, marketers and the agencies that cater to them are borrowing from the social-networking craze and infusing their sales pitches with invitations to leave comments, take opinion polls and share funny video clips with friends.

The goal is to give people more of a reason to notice, click and interact with the ads. If the message is compelling enough, Internet users will recommend it to others, the theory goes, increasing the marketer's reach and credibility.

Called social, engagement or conversational advertising, the niche is still in the experimental phase. Most participating marketers are devoting only a fraction of their overall ad budgets to the idea while gauging its promise.

The ads take a variety of forms. At their heart is a similarity to features on Facebook and MySpace, which have drawn millions of users with a mix of entertainment and friendly banter.

A banner for Dice, the technology job board, that appeared on various technology sites called on readers to rant about their worst job experience. Comments left by others scrolled down the ad, enticing visitors to pay attention for a longer period of time.

Facebook, in Palo Alto, is introducing ads that invite users to give virtual gifts to friends, answer opinion polls and become a fan of a marketer's Facebook page. The ads are intended to be a soft sell and more of an amusement than a call to buy something.

Job board was the first to test the Facebook opinion poll, which was introduced on Jan. 27, in an effort to promote its TV commercial that ran during the Super Bowl. Users who answered the question, "Which team will win this weekend?" could find how their friends voted and see their photos below their responses.

Moving to the mainstream
Jim Calhoun, chief executive of PopularMedia, an online ad company in San Francisco, is hoping to lift social advertising from the experimental to the mainstream. His firm introduced a standard banner last week that marketers can use as a blank slate on which to design their social ads and then have them run on any Web site.

A consumer who watches a movie trailer in the ad, for example, can invite friends from their e-mail contact list or on Facebook to watch it, too. Calhoun said that such a recommendation is like a seal of approval that makes the ad more effective.

"The marketer tries to create something that is fun and of value," Calhoun said. "It's getting people to advocate through their social networks."

Other companies in the social advertising niche include San Francisco's Federated Media Publishing, which designs social ads, and Palo Alto's Gigya, which builds what are known as widgets, or small modules, for advertisers to implant on social networking sites.

Marketers aren't entirely enamored with traditional banners, introduced about 15 years ago. Success is sometimes difficult to measure, because the ads often are intended to increase awareness of a product or merchant rather than inspire an immediate sale.

Growth in banner sales has slowed amid the weak economy and advertisers have been shifting their budgets to search ads, which can be more easily tailored to potential customers. Spending on banners is expected to reach $4.93 billion in the United States this year, up 6 percent from 2008, according to research firm eMarketer, far less than the double-digit growth in previous years.

Bernard Luthi, vice president of marketing for Newegg, an online electronics retailer based in Southern California, said he is waiting to see what happens with social advertising before investing much money in it. He likes the idea, calling it the next wave, but said that his company takes a conservative approach to marketing.

Newegg's marketing includes search-engine advertising and a network of partner sites that get a cut of every sale they refer. Both strategies, along with a few offline, already reach shoppers who are interested in buying and not just browsing, he said.

Instead of spending money on social ads, Newegg has experimented with adding social components to it own Web site. Creating a message board for customers and asking how customers first heard of the company were among them.

Other approaches
Melissa Chapman, brand and public relations manager for Esurance, the San Francisco online auto insurer, said that social advertising lacks the reliable measurements that the company needs to gauge success. Instead of paying for social ads, Esurance has tried creating its own home pages on Facebook and MySpace, and inviting "Star Trek" fans to submit videos about their obsession as part of a broader sponsorship deal the company has for an upcoming "Star Trek" film.

In any case, Chapman said, taking a more indirect approach on social networking sites is best.

"Social networking is a kind of a safe haven for people," she said. "They don't want to see advertisements shoved in their face, and there's a fine line between being invasive and actually engaging in the conversation."

Slowdown in online ad growth
Growth in U.S. spending on online banner ads, or display ads, is expected to slow this year amid the economic turmoil.

2008$4.63 billion

2009$4.93 billion

2010$5.45 billion

2011$6.18 billion

2012$7.18 billion

Source: eMarketer

E-mail Verne Kopytoff at [address removed].

This article appeared on page C - 1 of the San Francisco Chronicle

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