Seth Goldstein

This post is  from my co-founder Dave Gentzel and is in regard to our recently released “Social Banners”.  I will be sharing some additional thoughts in coming days on how to innovate in social advertising while keeping users in control.

Change. We hear the word frequently. It’s utilized by politicians, elite business people, and millions of others around the world. Because with change comes the promise of something better. Something revolutionary. Something that will change the world! Or, at least something that sucks substantially less than it did before.

Since the beginning of time (currently known as May 24th, 2007), it has been SocialMedia’s passion to understand the dynamics of social applications, and specifically, how to help developers make money from them. In doing so, we’ve explored many different angles of monetization, ranging from virtual currency incentives back in June of last year, to AdSense-like ads currently, and everything in between. So, now that it’s been over a year, what have we learned?

Simply put, traditional advertising and social media environments don’t really mix.

Now, we mean no disrespect to the dancing ladies of many mortgage ads, whose killer moves have lured millions into saving money. Nor do we wish to offend Mr. Monkey of punch the monkey, as he’s undoubtedly accumulated enough angst to unleash a world of clicking furry on the internet. And Google, the king of kings. If developers were creating tech blogs or web hosting review sites, AdSense would be in heaven. But, unfortunately, “fun wall” and “hug me” keywords aren’t in huge demand.

And thus, we at SocialMedia realized something had to change.

For the past many months, we’ve been tidying up our ad serving, washing and drying our metaphorical dishes, and working away to bring you revolutionary things! So, on this day, can we proudly proclaim we’ve solved social media monetization and changed the advertising world? Not to the extent that Google has solved search monetization. But, we have made great progress. And with little doubt, we can stand up, raise our arm in jovial assertion, and confidently proclaim, “In social media, everything must be social — even the ads — and we’re going to help make it happen!”

Uh oh. Now we’ve done it. We just used “ads” and “social” in the same sentence. Sound the alarms! Unleash the privacy brigade! All ur data are belong 2 us!

Or not.

Below is a concrete example of a social banner. It’s an ad, presumably sponsorable by a company seeking to spread the word about its new-found greenness. So, without further ado, here’s a our user violating, privacy busting, all your data in a social banner, banner!

Blog Reader: “Umm…wait. Is this a trick? My data has to be in here somewhere. I know! It’s hiding under the alien! Oh, no. That’s silly. Wait! You pulled my facebook interests to stereotype me as a certain type of user, thereby populating the buttons with choices that would appeal to me, thus increasing ad CTR!”

As Winnie the Pooh would say, “Oh bother.”

Your data isn’t in there. Not at all. But, let’s say you do opt to share why you’re green with your friends by clicking on a button. This is what your friends would see, except replace this dude’s picture with yours.

Blog Reader: “OMG I’M IN THE AD! You mean when I choose to share why I’m green with my friends, my friends will actually see it?”

It’s rather difficult to share something with your friends when we can’t tell your friends the thing you wanted to share. So, yes, that’s precisely what we did.

Blog Reader: “Wait, did you just spam all my friends too?”

No, we didn’t.

We did not post a news feed item to your friends on your behalf.

We did not invite your friends to an application.

We did not email your friends.

We did not send your friends a notification.

We did not IM your friends.

We did not post a message to your friends walls.

We did not send your friends a facebook message.

We did not post anything to your profile.

Nor will we be sending your daily email reminders about your green status, and that you should update it.

In short, we did not do anything other than wait for your friend to show up in an application that uses SocialMedia’s advertising services, and then display the message you explicitly chose to share to your friends. And, we did not access your data from Facebook, other than making a call to get your 50×50 pixel picture, which you can control via facebook’s privacy controls. We also have our own opt-out mechanism.

Blog Reader: “You know, this thing seems very familiar to a lot of applications on facebook I have installed before.”

You mean the ones that did spam you and your friends in every which way and had access to every little bit of your data, and every little bit of all your friends data? Yes, I’m familiar with those.

Blog Reader: “I seem to have forgotten why I was so angry. Oh yes. BUT I’M IN AN AD!”

The fundamental reason people dislike advertising is because they think it takes advantage of them. This is especially true when individuals are inside ads. But, our goal is not to put people inside of ads as a gimmick, as gimmicks die and provide little value to anyone. Instead, we want to facilitate real conversation and interaction around certain products and brands.

We don’t get paid to put you in ads. We’re getting paid to present you with the opportunity to interact with a product socially. And, if you choose to do so and we can display this interaction to your friends, then we’ve done half our job. The other half is ensuring that the social experience was well received by you and your friends. It’s a different type of adverting that pulls from the core of the social graph in a distributed manner that is neither invasive nor annoying. Essentially, we’re building mini-apps inside your apps, available when you want them, empowering you to share and communicate with your friends wherever you go (inside of facebook, of course!).

That’s SocialMedia’s mission, and that’s how we plan to bring change to the advertising industry.

Concomitant with the debate about Facebook’s valuation ($5… $10… $15…$100b…?) is a somewhat more restrained discussion about the value of applications being built on Facebook’s platform and the value of the users that interact with these apps. Despite the fact that more than 40 million people use Facebook– 50% of them daily– there remains skepticism about the long term value of these users to advertisers.

Historically, Social Networks have generated tons of page views but have had a hard time monetizing these impressions. “Professional” content properties focused on deep verticals, such as C|Net and BabyCenter.com, regularly attract $20+ CPM ad rates, whereas “amateur” social media sites like Digg, MySpace and others are lucky to generate CPMs above a few dollars with any consistency.

Three primary critiques have emerged in recent months that call into question the viability of social media being produced on top of open social platforms, exemplified by Facebook:

1. Facebook apps are not real media

A few weeks ago Kara Swisher dismissed Facebook apps as a “children’s hour:”

And if that is all there is, can Facebook really build a viable and long-lasting business on what is essentially a bunch of games that will ultimately become wearying for users? Doesn’t it need more robust apps that actually are useful and relevant and make Facebook the service that Zuckerberg has often told me was a “utility”?

Kara suggests that real social media apps would be robust, useful, and relevant; not the inane, ephemera of super poking, graffiti walls and food fights. Despite the apparent lack of utility of Facebook apps, they are exceedingly popular. Take Slide’s suite of apps (led by TopFriends), or Rockyou’s, or Grafiti, or the hundreds of apps across our Social Media network- together all of these apps are generating hundreds of millions of page views each day. And none of them existed six months ago. It is curious to think whose media is being displaced by all of this new attention: Are people turning fewer pages on MySpace? Spending less time reading blogs in their feedreaders? There is little doubt, in 2007, that MySpace (Fox) and Blogs are legitimate forms of media. Which begs the question: is media defined based on something innate in terms of its form, or is it instead defined based on its usage?

There are interesting parallels to Facebook apps t0 be found in the recent history of blogs. In 2003 and 2004, blogs were dismissed by traditional Internet media as being nothing more than narcissistic ruminations about the vagaries of everyday life. After all, who really cared about what Fred Wilson listened to at his Amagansett beach house? Flash forward a couple of years and blogs have become big business. Although my blog and your blog together might only generate a few dollars a month via AdSense, “professional” blogs such as Huffington Post and Engadget are generating millions of dollars of revenue and taking reader-share from NYTimes, MSNBC, and others. John Battelle and his team in Sausalito are building a viable media franchise representing premium blogs such as BoingBoing to advertisers looking to participate in “conversational media.”

Just like the post is the expression of the blogger (and the article is the expression of the journalist), so the app is the expression of the developer. Unlike blogs and traditional Internet media sites, however, apps do not provide content. Instead, they provide a structured, social environment where content can be created. The media, in this case, only comes to life through the social interaction of two people. Facebook’s open social platform is a printing press not a book. The app is the book in the social media universe. Just as with books, apps focus on certain themes and relate to specific audiences. The author of the app- ie the social media developer- publishes code that facilitates a certain kind of collaboration among a target group in her social graph.

The first products of this new kind of printing press may well end up looking trite and ephemeral, with the benefit of some longer historical perspective.  But so were most of the first books, and Internet sites, and blogs.  But there is no doubt as to the viability of even these early experiments as legitimate media properties.

Coming next:   #2: “Facebook apps are all head, no tail.”

If there ever were a post where the title said it all, this is the one.

For weeks, months, I have been working with my team at SocialMedia building applications inside of a clean well-lit, hermetically sealed social network called Facebook.

Here is what we now know about this platform:

• It’s has an “open” API that exposes its “closed” social graph.
• It shields each of its 30 million users behind a cloak of absolute privacy, where every social connection is required to opt-in.
• It maintains total control over the syntax and organization of every single one of its pages.
• It is starting to dominate the time spent online by its users, stealing click-share from every other web site and service.
• It holds captive the rich behavioral data of its audience.

Fred almost threw me out of his office a few weeks when I suggested that “closed was the new open.”

I had challenged him on his logic for investing in Twitter by asking “what is the role of Twitter when Facebook has commodified the status update?” and he replied that the entire USV portfolio was built on the premise of openness. As a co-founder of AttentionTrust and co-organizer of the Open Data conference, I am, of course, a strong advocate for users needing to own copies of their own data and for them to be able to easily move it around and see how it is being used by others.

That being said, I sense that users (including the 57,000 blogosphere alpha dogs) are increasingly tired of copying and pasting javascript code into their blogs and manually organizing their online identities. The beauty/horror of Facebook is how incredibly easy it is to add applications with a single click. Once again, convenience seems to be trumping data conservation.

Just as AOL consolidated its position in the early 90’s by offering a far more convenient, user-friendly interface to the online world (despite the reality that it was a proprietary walled garden written in rainman), so now is Facebook doing the same by offering a better interface to your online world.

The openness that Facebook enables is really simply the opportunity to build closed ecosystems on top of its social graph. This is the story, for example, of Slide’s Top Friends network, which in less than two months has established a proprietary social graph on top of Facebook’s own proprietary social graph.

More on this in the days to come.

In the meantime, check out our new blog.socialmedia.com for commentary about an important new meme, NFO: News Feed Optimization.