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Summary:

The web isn’t based around topics anymore. On an increasing number of web pages, it’s hard to align content along a tidy vertical and sell ads against it. Social networks, especially, are full of users chatting, musing, and relating to one another – and rarely does […]

The web isn’t based around topics anymore. On an increasing number of web pages, it’s hard to align content along a tidy vertical and sell ads against it. Social networks, especially, are full of users chatting, musing, and relating to one another – and rarely does that conversation confine itself to a sellable topic like travel or plasma displays.

Some people say the answer is a change in philosophy – instead of selling banner ads, why not teach a marketer how to trick out a MySpace profile? Another approach is finding new ways to match traditional ads with user-generated content.

One startup, Columbia, Maryland-based Lotame, thinks it can target ads better by analyzing behavior on social networks. The idea is to provide software that bolts onto ad servers and feeds in information about people’s cookies, member profiles, interactions with other users, and responses to ads.


“We’re not looking to be an analytics company that just has cool reports,” says Lotame CEO Andy Monfried, a former executive at Advertising.com. “We’ll make it actionable.”

Lotame, founded in March, has raised an angel round of between $1 and $2 million. It will launch its first customer, whose identity is not yet disclosed, on December 4.

Monfried argues that contextual advertising, a la Google AdWords, is best fitted to a web 1.0 world, where information flows in one direction. “In a two-way conversation,” he says, “the information on the page is not the most important thing. It’s relationships, comments, amount of time spent.”

Sites like YouTube and MySpace currently do some behavioral targeting. (Try logging into MySpace from a female account, and then a male account. Lots more boobs in the latter.) YouTube uses TACODA, which follows users across nearly 5,000 sites to serve ads that relate to where else they’ve been surfing. (e.g., someone shopping online for a car one day would continue to see automotive ads throughout the week.) Privacy-oriented Facebook, on the other hand, has declined to engage in behavioral targeting thus far.

TACODA founder and chairman Dave Morgan told us yesterday he thinks the “behavioral economy” will be immensely lucrative, but his company is not ready to scrape personal data from the long tail, a la Lotame. A former lawyer, Morgan is concerned about widgets of all kinds transferring data across sites and away from privacy policies. TACODA adheres to a strict standard of anonymity, and its customers are primarily media publishers who have clearly established ownership of their content.

The risk is, this kind of behavioral monitoring could easily become adware 2.0, wrapped up nicely in Javascript. But Monfried insists Lotame data will be stored and shared only in aggregate, and strictly according to privacy policies.

On the upside, as GigaOM contributor Robert Young puts it, “social media is not mass media.” Modifying and improving advertising for the new-and-improved web is the best way to keep it running.

  1. maybe i’m outside the target demographic, maybe i’m too cynical of all too ubiquitous ad-centric business plans … whatever, i do know in all my years on the internet i have never once clicked on an advert.

    someone needs to work out how to metric the value of subliminal advertising/charging on the web? i don’t click but it doesn’t mean i haven’t been ‘sold’ the idea/brand of something …

    good luck ;-)

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  2. I have no problem with advertising per se.

    The problem is that with the social networking model we are building on trust-based relationships.

    There is a fine line between basic monetization that increases the quality of service delivery exemplified by Craigslist, and the mind numbing brand assault that appears to be on the horizon on MySpace and You Tube.

    If these companies don’t calibrate their business model innovations with the needs of their Users then they threaten to alienate their membership and further erode the perceived credibility of internet advertising.

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  3. In response to the first post from Carl – didn’t we have that ad model? It’s called CPM and represents how all magazine, print, TV and radio ads are essentially bought and sold. And I agree, there is value for a publisher that takes up publishing space on a web page with an ad, even though it doesn’t get clicked. The simple answer is to move from CPC to CPMs, and charge advertisers for exposure whether a click occurs or not, or to tier the model and have an entry level CPM with a tacked on CPC.

    But it starts with not erasing the value of publishing in the first instance. We can all thank Google for that.

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  4. thanks, pete – very true – i just find so much of the online advertising very poorly designed and intrusive to the extent that any effect it does have on me is a negative one – unlike ads in old media such as magazine/papers/etc that you rightly refer to; their presence is discreet by comparison and so almost certainly subliminally effective.

    if i suspected any web site i went to was profiling me via my cookies i’d be rather amused (and i’d quit using the site) at how primitive its ‘intelligence’ was – they’d get a better idea of me and my family by rooting through my trash-can(!).

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