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Microsoft continues to wrestle with the e-commerce side of its search engine, Bing, in an effort to more effectively compete with Google’s dominance.

The company discontinued Bing Cashback as of July 30. Bing Cashback was a novel way for shoppers to save money by earning a percentage of the price paid for an online product as “cashback” – in essence, an instant rebate. The cashback was paid out of proceeds from search advertising fees from participating stores. Consumers received cashback payments through PayPal, direct deposit, or mailed checks.

George Michie, CEO & Co-Founder of The Rimm-Kaufman Group, a search engine marketing firm, tells Internet Retailer, “Cashback was a big win for merchants and users, but I don’t know how big a win it was for Bing in terms of buying market share.” According to Microsoft, while Bing Cashback attracted over a thousand merchant partners, it “did not see the broad adoption that we had hoped for.”

Bing is trying to remove the sting from killing Cashback with the launch of Bing Shopping, which appears as a navigational link on the Bing home page. Bing Shopping is following Google’s lead in offering online retailers free clicks from the Bing Shopping page. Microsoft confirmed that a product feed service for merchants was being offered without charge, so product listings and images show up in search results as essentially free placements. Eventually, Microsoft is expected to add paid advertising to the mix.

Bing Shopping is a nicely organized shopping portal, with featured products, featured stores, and “products people are talking about.” It will offer some new search marketing features; for example, “shopping slide shows” allow consumers to click through product photos and purchase a product of interest, directly through the portal. Bottom line, however: Bing Shopping is basically similar to Google Product Search, with some added functionality.

Bing Shopping will also be similar to Google Product Search in ranking products. Rick Backus, co-founder of CPC Strategy, an online data firm, tells Internet Retailer, “Bing’s data on search clicks will be part of its overall algorithm that ranks product search results, giving popular retailers an advantage.”

But the big question about Bing Shopping is whether the search engine can drive enough traffic to build the numbers merchants want, especially in terms of sales conversions. Bing Cashback presented a pretty compelling reason to shop because of attractive rebate offers. Bing Shopping has no such built-in incentive.

Bing Shopping needs to do two things quickly: get as many merchants as possible to participate, and get as many shoppers as possible to visit. Launched last summer, Bing has seen increases in traffic, but its U.S. market share is under 10 percent, while Google’s is over 71 percent. Microsoft has also been losing money in its Online Services division.

If Bing Shopping can’t make the cash registers ring for online retailers, dumping Bing Cashback may come back to haunt Microsoft.

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Will Shoppers Click with Bing Shopping?

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The BlackBerry Torch 9800 is being introduced this week on the AT&T network. The reviews are in and they are, at best, mildly enthusiastic. Essentially, reviewers seem to agree that RIM, BlackBerry’s maker, is just keeping up with the Android and iPhone, rather than leaping ahead.

While the Torch isn’t likely to light a fire under the Android and iPhone, the phone is significant because of what it represents about our smartphone future. BlackBerry, after all, has been the market share leader in mobile phones for business use. The Torch 9800 is BlackBerry’s acknowledgment that:

1. Such “consumer” features as a touchscreen keyboard can’t be ignored, the Torch has both a touchscreen keyboard and the more traditional BlackBerry keypad.
2. Apps matter.
3. Seamless Web connectivity is essential. The Torch, says its maker RIM, features “expanded messaging capabilities with intuitive features to simplify the management of social networking and RSS feeds” and integrates access to the BlackBerry Messenger, Facebook, Twitter, and MySpace, as well as dedicated YouTube and Podcast applications.

Perhaps even more intriguing than the BlackBerry Torch introduction is this breaking news: Bloomberg is reporting that the three leading cell phone networks in the U.S., normally arch-rivals, are cooperating to potentially create a new smartphone payment system that could replace credit and debit cards.

AT&T, Verizon Wireless, and Deutsche Telekom’s T-Mobile USA are supposedly involved in a venture that “would let a consumer pay with the contactless wave of a smartphone.” The system, which may involve Discover Financial Services and Barclays bank as financial providers, is planned for testing in four U.S. cities.

Richard Crone of Crone Consulting, an industry consultant, told Bloomberg, “This is definitely a game-changer.” Mobile carriers, Crone said, “are the biggest recurring billers in every market. They are experts at processing payments.”

The implications of this venture are enormous. For one thing, the move directly threatens the decades-old domination of Visa and MasterCard as the only credit/debit games in town. Discover, always a credit card laggard behind these two companies and American Express, could have much to gain.

Such a capability would finally bring the United States closer to Europe and Asia in terms of sophisticated smartphone usage. Contactless technology using smartphones to make store purchases is already available in the U.K. and Japan. Retailers would probably be only too happy to accept a new payment competitor, since they have fought with Visa and MasterCard over transaction fees for years.

While the new technology applies primarily to the store environment, it has an impact in the online world as well, since mobile payments without relying on credit cards could streamline e-commerce even further.

Reportedly, Visa and MasterCard are working on their own mobile payment systems. Some banks are also testing new technology. According to Bloomberg, Citigroup launched “MasterCard PayPass” stickers in June that, when affixed to the back of a mobile phone, can be used to make a contactless payment at some 230,000 U.S. merchants. Alternative payment solutions are also being offered by a number of start-ups, including Bling Nation, Boku, and Zong.

Payment systems are just one area that will change with the advent of ever more sophisticated smartphones. QR codes, which I’ve discussed in a previous post, are another. QR codes (they resemble a square barcode) embed information that camera-enabled smartphones can read with a “QR scanner” app. Magazine ads or window signs with QR codes can be scanned to receive promotional information.

For the upcoming Fall television season, for example, the Fox network is using “Fox Codes” in magazine ads to offer viewers access to Internet-based information about the network’s shows, including videos and cast interviews. CBS is reportedly using QR codes for some of its shows as well.

“Geo-triggered” applications are also in vogue. The Android and iPhone run such applications in the background and can alert users to a specific event. For example, DailyCandy, an email newsletter for women, just implemented “Stylish Alerts” as an Android app. When a consumer is near a current local event, such as a designer sale, the app can send an alert to the shopper’s phone. The service is only available in New York City for now, but will likely be expanded to other cities.

With today’s smartphones, we are finally witnessing the convergence of mobile communications with the Internet. From a marketing perspective, this puts an individual consumer within reach, just when that consumer is ready to shop and make a purchase. Major new opportunities for retailers and online marketers alike to connect with consumers will now be available. In fact, the smartphone of the future is just around the corner. Are you ready to take advantage of it?

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Pondering The Future of Smartphones

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In today’s digital world the hottest new thing often has a lifespan that is equivalent to how long buzz about it trends on Twitter. Certain movements that were once cutting edge fall to the wayside or become part of the daily routine without much fanfare.

Blogs seem to have fallen into that element of routine. Since 2002, Technorati has indexed over 133 million blogs, and over three-fourths of all Internet users read blogs, according to Technorati’s “State of the Blogosphere 2009” report. With the wide adoption of blogging, there is rarely any buzz about blog technology itself.

Recently, however, Tumblr has managed to create some buzz worthy news boasting 25,000 new accounts daily, according to The New York Times, and serving up 1.5 billion page view monthly. For those that don’t know, Tumblr is a microblogging tool that essentially allows users to send anything quickly – including audio clips, images, videos, and of course, text. Other users can instantly “reblog” anything they receive, adding an important viral component to the service.

But Tumblr’s game is more about influence than numbers. David Karp, Tumblr’s founder, tells The Times that unlike Facebook and Twitter,

“Who is following you isn’t that important. It’s not about getting to the 10,000-follower count. It’s less about broadcasting to an audience and more about communicating with a community.”

Karp says creative expression is important on Tumblr as well – it isn’t just about publishing links to other articles and blog posts. Indeed, Tumblr offers the ability to choose from hundreds of themes or create an original theme, post virtually anything with minimal effort, create “photosets” or digital photo books, use a “Bookmarklet” to share anything you’re looking at on the Web, email or text posts from any mobile phone and, of course, publish to Facebook or automatically send a tweet.

Currently, Tumblr is gaining traction with the media because it gives them a means of communicating in a novel way with Tumblr’s primarily youthful user base. According to The New York Times, media outlets that have opened Tumblr accounts include The Atlantic, The Huffington Post, National Public Radio, Newsweek, The New Yorker, and Rolling Stone.

Alexa Cassanos, PR director for The New Yorker, told The Times that the magazine used Tumblr to promote its July 5 cover concerning the Gulf Coast oil spill. “We can highlight graphic content like photo essays or slide shows to an audience that may not read the magazine,” says Cassanos. “You just couldn’t do that, visually, on Twitter or Facebook.”

Another benefit of Tumblr for publishers is relationship building. James E. Katz, professor and Chair of the Department of Communication, Rutgers University, tells The Times that the typical interaction a publication may have had with a reader years ago was limited to a letter to the editor. Now, he says, publishers are realizing “there is a lot of expertise, wisdom and ideas in their readership.”

It may be overly simplistic to think of Tumblr as “Facebook and Twitter’s new rival,” which is what the headline of The New York Times article proclaims. But Tumblr does prove one thing: If you think you’ve seen it all in social media, just wait a minute and you’re sure to see something new.

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Adoption By Media Give Tumblr High Hopes

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Rather than build their way into social gaming, Disney opted to acquire Playdom who is the creator of Mobsters, the #1 game on MySpace, and a lesser player on Facebook. It’s an easy move to second guess and say that Disney should have bought a larger social network game company. While that was indeed an option for Disney, that line of thinking ignores the leverage-able market positions available to them and focuses on an assumption that Disney will not be able execute.

Disney’s experiments in the micropayments market

Back in 2005, Disney was involved in a micropayments market experiment, and I was in the fortunate position of running the marketplace behind that experiment which also included Microsoft and HMV music among others. In that experiment, there were two major categories of content: branded and unbranded. I’ll focus on two components of those, music and games moving forward.

In the music category, we featured an independent music provider with a catalog of over 1 million songs alongside music provided by HMV music. Single songs were priced from $0.25 through $1.25 for indie tracks, set by the artists, while HMV music tracks were at approximately $1 or $1.50. When we measured sales across both music providers at the end of each week of the trial, branded HMV music outsold indie music some weeks by 10 to 1.  Personally I was guilty of the same bias, since I tended to favor branded artists as well.

We also had games from other indie developers and publishers alongside games published by Disney in the marketplace. Again, we saw Disney games outselling non-branded games by at least 2 to 1 and often more. What was surprising was that even the best indie games rarely beat the Disney branded titles. Even more surprising, one of most frequent complaints was that some of the branded games were ‘crap’, and when we investigated further, people reported that they just bought the game because of some Disney character name they saw on it.

Why Disney branded games will triumph

Now, how does that behavior apply today? I ask you to name any character from the games by Zynga, Crowdstar, or Playdom. Can you name any strong traits of any characters in those games?  Let me change the question up a bit. If your friends, or daughters played DisneyVille, would you play too? What about an X-men Wars game?

Wait you say, it’s about game play! To that I ask, what game play is so compelling on these social games? Do the cute characters have an impact? Is the music that important? Is cross marketing important? To that I say, you may soon play a game with Nemo and “Finding Nemo” movie related music, where you can get power-ups and virtual goods with your happy meal from McDonald’s where you also get Disney character figurine.

Is the social engineering going to be lacking? Probably not. Not even mighty Zynga could knock Playdom out of the #1 spot at MySpace, so Playdom must have been doing something right. Oh, and don’t forget that MySpace is still more about entertainment than Facebook. While many people don’t use MySpace as their primary social network, including myself, I can still find and access music and videos an order of magnitude faster and efficiently there than anywhere else. So while I might read status updates on Facebook, I find music, videos, and bands on MySpace – AND, I play games on both platforms.

So if games are supposed to be about entertainment, and Disney is about entertainment, then the Disney-Playdom deal has the potential to rock the social game world. In addition to the standard Disney stable of characters, Disney’s Marvel Studios also has the rights to 5000 Marvel characters as well.  If the Playdom team made an X-men game that played across the entire comic’s time-line, would that have draw? If you think strategically about where a well executed plan from Disney would take you – it’s not a hard stretch to see integrated marketing dominating the cross-sells of the near future.

A Disney game campaign imagined

So what could this mean? How vast would this power be? Imagine the following scenario:

Imagine Disney creates a game. Let’s call it Happy Nemo World. The game  the characters of Nemo, plus a few more personalities from the Finding Nemo movie. The following steps would come natural to a company that is versed at leveraging brand relationships to create advertising opportunities and buzz:

-As an in-game advertising deal, Disney partners with McDonald’s to launch with Nemo based happy meals w/partner McDonald’s, includes codes for special power-ups in the happy meal.
- ABC has a 2 hour holiday special featuring Happy Nemo World, adding the new characters, also offers special codes on TV.
- Disney radio also promotes the holiday special, game, and offers power up codes for special items.
- Disney stores nationwide find a new opportunity to sell Nemo plushies but this time with power-up codes.
- Disneylands and DisneyWorld introduce a new ride with characters from the game and special power-up codes on the ticket
- Disney introduces a new movie on DVD (like the nearly endless Aladdin series) – “Nemo finds a friend”, continuing the Nemo story, introducing characters from the game, and also providing power up codes.
- Disney runs a Twitter campaign where everyone who posts a link to the game also receives special gifts, with a similar one on Facebook
- Playdom games on Facebook and MySpace offer a cross-sell to the new game, and discounted movie tickets if you use play the new game.

Imagine the above scenario played out across Disney’s properties each already with their built in fanbase. Who else has that kind of marketing leverage and power to make those deals happen quickly? Certainly not Zynga. If/when Disney really wants to make an impact, they could bring to bear a tidal wave of marketing and leveraged brands that has yet to be seen in the social game space.

Disney is rapidly moving into a position where it will have the chance to dominate the entire social game industry by bringing recognizable brands and characters to new or even existing games, followed by cross-marketing in film, TV, radio, and other games. Such an endeavor is ambitious, requires massive cat-herding management skills from within Disney, but is well within the reach of the technology, business units, and existing footprint of its properties.

I say it’s Disney’s game to lose by failure to execute. It won’t be easy, but it’s usually dangerous to bet against the mouse.

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Disney To Use Playdom Acquisition To Redefine Social Games And Crush Zynga

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Companies are learning a tough lesson about customer empowerment: give your customers reasons to communicate and they’ll do so willingly, sometimes in ways you can’t control.

American Express recently released findings of a customer service survey the company conducted online among a random sample of 1,000 U.S. consumers age 18 and over. The same survey methodology was used in Australia, Canada, France, Germany, India, Italy, Japan , Mexico, the Netherlands, Spain, and the U.K.

The findings indicate, not surprisingly, that nine in ten Americans consider the level of customer service important when deciding to do business with a company. But only about one-quarter of them believe companies value their business and will go the extra mile to keep it.

Good News / Bad News

The good news is that, contrary to a commonly held belief, customers will talk more about a positive experience with a company than a negative one. Three-quarters of respondents said they are very likely to speak positively about a company after a good service experience, while 59 percent said they are very likely to speak negatively about a company after poor service.

But here’s the bad news companies need to consider: nearly half (48 percent) of respondents report always or often using an online posting or blog to get others’ opinions about a company’s customer service reputation. What are they looking for? Negative opinions.

According to American Express’ survey over half of respondents (57 percent) say they believe more in negative reviews than positive ones on blogs, and 48 percent believe more in negative reviews on social networking sites. Jim Bush, Executive Vice President, World Service for American Express, explains:

“The Internet has made service quality more transparent than ever before. In the online space, positive recommendations are important, but people often give more weight to the negative. Because consumers can broadcast their views so widely online, each and every service interaction a company has with its customers becomes even more crucial.”

Even more telling is the fact that Americans are seemingly losing their patience with poor service. In fact, 81 percent of respondents have decided never to do business with a company again because of poor customer service in the past. Half of the respondents say it takes just two poor service experiences before they stop doing business with a company.

According to Brand Reputation CEO Graeme Crossley:

“A customer that has a good experience will typically tell 3 to 5 people, but a customer who has a poor experience will tell more than 20. When this is trend occurs via the web, these numbers can rapidly multiply and could spell disaster for brands that don’t have strategies in place to combat online negative chatter.”

How should consumer ratings impact your social initiatives online?

When it comes to consumer ratings for a product or company, for example, should a company stay silent in the face of a negative review? Given the implications of this survey, probably not. Maybe a company can ask satisfied customers to post positive reviews on the same site, or respond to the review if allowed.

A similar strategy might be wise when it comes to social media. Companies need to be proactive and react quickly to both negative and positive feedback with the objective of both engaging a consumer in a dialogue and deflecting any negative follow-on.

Gatorade recently set up “Mission Control” (video below), a central facility that’s being used to monitor the sports landscape, monitor online discussions, track sports trends and buzz, track brand attributes, track media performance, and do proactive social media outreach. Obviously, not every brand marketer can afford a sophisticated “Mission Control,” but this is an example of how seriously big brands take social media – and it’s a good lesson for every company.

Click here to view the embedded video.

Combine perceptions about poor service with reliance on blogs and social networks for opinions about companies and you can see a conundrum looming for marketers. It becomes ever more important to not just provide good customer service, but also to monitor online complaints and do whatever possible to resolve them quickly and to the satisfaction of the consumer.

When a consumer takes the time to complain about a company’s customer service online, that company had better pay attention – because it appears that’s what other consumers are doing.

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American Express Study Finds Consumers Seek Out Negative Opinions

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AOL is offering a robust platform for political advertising, called the Politics hub, that will allow marketers to create targeted campaigns across AOL’s growing properties across the web. The move should be one of many as ad networks work to take advantage of spending by political groups.

According to Jeff Levick, President of AOL Global Advertising and Strategy, the goal is to create a clear resource in AOL for political marketers to use:

“Our Politics hub lets campaigns and issue advocacy groups take their messages directly to voters and key influencers in a proactive way through display advertising, and we make the on-boarding process something that is simple, easy and intuitive.”

AOL’s network has grown as the company has concentrated on acquisition of new content sites hitting specific niches and creating content for those sites to draw more users. The result is a network of more than 80 sites and an audience of more than 250 million.

One figure sure to attract political marketers is that according to AOL, 83 percent of voting age Americans use the Internet. The platform will feature display ads that will take advantage of geo-targeting, being able to focus down to the congressional district level, and make no mistake local is the key to all of this since political battles usually ebb and flow district to district. Combined with targeting AOL is hoping to leverage their more traditional user base combined with their in-display to provide a political marketplace that most sites short of Google won’t be able to match.

Political Advocacy Groups Have Adopted Social and Search, Will They Adopt Display?

Facebook has already seen an influx of political advertising because of the network’s ability to slice up user data by sex, age and other lifestyle interests allowing political marketers to more accurately select the type of audience they want to target.

“This cycle, we don’t have a major Republican candidate who isn’t asking about Facebook or isn’t doing it,” said Peter Pasi, the Executive Vice President of Republican online consulting firm Emotive LLC, in an TechPresident article.

The Supreme Court’s recent ruling to loosen limits on corporate spending coupled with the successful blueprint of online and social media outreach which helped vault President Obama into the White House in 2008, should create a large push in political dollars this year online. Republicans in general are taking a page out of President Obama’s playbook and investing in online outreach. The Tea Party activists found success on the conservative side with social networking activity. It helps stretch the advertising dollar.

As Lauren Dugan of SocialTimes looks at it:

“Dollar-for-dollar, Facebook advertising money might not directly equal more votes. But with larger budgets, politicians are able to do more with their online presence and ultimately increase their visibility, attractiveness and reputability on social networks like Facebook. New media, including social networks like Facebook, might not actually be all that “new” in terms of how politicians reach the people, with higher campaign budgets bringing in more supporters in the end.”

AOL is looking to be the next choice for those advertising dollars after Facebook as it can sell eyeballs that are reading very narrow content while at the same time bringing bring more strategy and campaign assistance to the table. It also has a slightly more conservative base than Facebook another point that AOL is banking on to win some dollars.

While Google still sits at the top of the political advertising food chain, AOL’s move highlights the trend of another traditional vertical moving away from traditional media in order to find green pastures online, thanks to rich metrics. As long as traditional media offers sketchy information about who is watching and who is engaging, online advertising markets will increasingly hold the edge.

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Recently Amazon announced that it has sold more copies of e-books for its Kindle e-book reader compared to hardcover books. While cynics might dismiss the announcement as a counter to Apple’s attempts to position its iPad tablet computer as the de facto reading device; the announcement does signal a shift in consumer habits and perhaps a tipping point in how we read.

With recent moves such as slashing the Kindle’s price from $259 to $189 it’s clear that Amazon believes such a tipping point has happened and is banking on digital editions of books to drive its growth.

Everyone’s happy right?

Maybe not. Cost is a big factor. The $189 cost of the hardware is a fixed investment and a barrier to entry given that walking down to your local used bookstore and picking up a book is going to set you back around $10. Plus, there is always the library. If I were to buy the Kindle or iPad, I’d expect to buy enough books to at least equal the cost of the reader, to make the device purchase worthwhile.

In its press release, Amazon’s claim that “Amazon sold more than 3x as many Kindle books in the first half of 2010 as in the first half of 2009“ is not a useful statistic given that its base number of sales in the first half of 2009 isn’t given. Look a little closer at Amazon’s announcement and you’ll see that e-books have outsold hardcover books. There’s no mention of paperback books. As The New York Times points out: “Amazon does not specify how paperback sales compare with e-book sales, but paperback sales are thought to still outnumber e-books.”

Going by my personal buying habits, I’d say that I’m typical of the average book reader, about 10 percent of my books are hardcover editions and the other 90 percent are paperbacks. If that’s a similar stat for Amazon’s sales figures, Kindle sales would have to grow another 800 percent to be anywhere near knocking physical books off their pedestal.

A Reading Paradigm shift?

One thing I’ve noticed is that major shifts in technology seem to sneak up on you – the changes are gradual and are usually only noticeable in retrospect after you’ve already converted to it. Whether it’s the shift from DVDs to blu-ray discs, buying music from iTunes instead of a CD or streaming videos over your Internet connection from Netflix, instead of renting Blockbuster, these changes can be sneaky.

In the broad scheme of things e-books might eventually win out over their physical counterparts and if they’re able to solve some of these challenges:

●     E-book readers will have to drop below the $100 price point, preferably $50 or below.

●     Mass availability of book titles: It’s not enough to have only 630,000 titles in the Kindle store. I want to have the choice to buy the digital equivalent of any physical book or magazine, even if I might only buy 100 such titles.

●     With fiascoes like the fallout around 1984, Amazon and others still have to resolve the question of ownership in Digital Rights Management (DRM).

●     How will e-books deal with such issues as censorship, whether through hacking or through the manufacturer?

●     Battery life: charging your Kindle every 2 weeks might be nice for some. The killer app might be battery life of 6 months or once a year.

This wishlist might take Amazon or Apple sometime to fulfill and it’s unlikely I’ll buy an e-book reader until this happens although I might end up eating my words at some point. Until that point is reached, the Kindle e-books still need to make up some of that 800 percent gap with their paperback counterparts before there is a true paradigm shift.

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Despite Amazon Fanfare Kindle Not the Final Chapter on Paperbacks

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Between the potential of Facebook Ads and the launch of Apple’s iAds, many are wondering what’s next for Google. Despite the rumors around Google Me and the potential of Google Android, it looks like the company’s very next move might not be into social or mobile advertising. Rather, the company might be looking at additional ways to middle-man more of the ad-purchases across the net.

Some recent moves by Google and its properties indicate that the company is moving to address the concerns from investors that it has limited short-term growth potentials. Specifically, the company seems to be pursuing three distinct sets of short-term strategies for monetizing more of the third-party content on the web.

Three Short-Term Revenue Solutions

Although Google posted a 25 percent gain in Q2 2010 over the same quarter the previous year, Google stock has dipped 21 percent since January, suggesting that investors are beginning to lose faith in the company’s ability to move beyond click revenue. Google seems to be reacting to these trends by aggressively pursuing three additional ways of capturing online ad dollars and monetizing third-party content:

1. New ad sales partnerships for Adwords
2. New ad software acquisitions
3. Added ad product development

On the sales partnership side, Google has struck a deal with Omnicon to bolster its display ad business. As the WSJ reported, Google will get guaranteed sales from Omnicon, and Omnicon will receive added technology and analytics support:

Under the deal, Omnicom [...] is expected to spend hundreds of millions of dollars to buy display ads for its clients through Google over the next two years [...] In return, Google will work with Omnicom to build a global “trading desk” that allows the company to buy display ads more easily on Google’s ad exchange, an auction-like system that matches ad buyers and sellers to advertising space across large groups of websites.

Omnicom says it was already buying ads on Google’s exchange using its own technology system.

As part of the deal, Google [...] will provide analytics services to Omnicom to help it understand how its display ads are performing [...]

As for new software acquisitions, it looks like a recent acquisition by Google may be integral to providing Omnicon with the aforementioned “trading desk.” Specifically, Google recently acquired technology that would allow them to middle-man ad buys on content and ad network beyond their own. As Adage reported:

Google recently acquired Invite Media, a company that specializes in software allowing advertisers to buy across multiple advertising networks, or what is known as a “demand-side platform.” Though he did not mention that acquisition, (President of Global Sales Operations for Google Nikesh Arora) suggested a trading desk-type system would be required to streamline the process for advertisers, which accurately describes how Invite Media’s software operates. “It allows very effective buying across the network,” he said of Google’s latest display efforts, “and every player in that ecosystem can get their fair share.”

Finally, some added product development seems to be coming to Google Ventures-backed Pixazza. The start-up has been on the campaign trail again, recently raising an addition $12 million for their crowdsourced “Adsense for images” platform. This new round of funding brings it closer to leaving private-beta, meaning that Google can soon be generating commissions from the third-party images that generate third-party sales. As TechCrunch reported:

Pixazza’s tagging technology is [...] compelling; the startup crowdsources workers to list products and tag them with the appropriate link to a retailer. Additionally, Pixazza shares advertising and affiliate revenues with publishers.
[...]
The company has also announced that it reaches more than 25 million unique visitors per month through its 75-plus publishers, which include US Weekly and Access Hollywood. Of these visitors, more than 70% are based in the U.S. Additionally, Pixazza says that the startup delivers commerce-enabled photos at a rate of 8 billion image views per year, a 60% increase in the last three months.

Pixazza plans to use its new fund fuel product growth and expand to international markets.

Although this last pursuit is admittedly longer-term than the previous two, it still rests on a product that has an established market presence, revenue model, and client/partner base (unlike Google Me or any potential Android ad platform). Of course, the service will have to come out of private-beta before any final call could be made.

Short-Term Survival

It seems that Google has no shortage of options for bolstering its short-term revenue growth. Two of the three options, moreover, rest on expanding the potential of the already proven Adwords platform. These two should be sufficient to sustain investor confidence until the next big product roll-out.

That being said, the looming question is what that next big product roll-out will be. Facebook has such a lead on “social graph” data that it might be reckless of Google to invest too heavily competing with Facebook Ads. However, iAds also has the advantage of tapping into the data of 150 million iTunes users, 4-5 million iPhone users, and 225,000 iPhone apps.

So, yes, while Google has to still expand its revenue sources in the very immediate short-term, its market predominance will still depend on the development of some new longer-term product. In addition to developing the potential of existing products to their full potential, the company must still seek to innovate new technologies if it hopes to retain its prestige and dominance.

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RockYou and Facebook announced a deal where RockYou will exclusively use Facebook credits and where Facebook will keep 30 percent of the revenue from the credits. In the same press release, the two firms discussed a “Deal of the Day” project where RockYou issued 6 million Facebook credits to users who interacted with ads.

What just happened? Did RockYou just admit defeat? Did RockYou single-handedly inflate the credits market? Did RockYou publicly admit to radically changing their business model?

RockYou’s agreement to exclusively use Facebook credits at the standard 30 percent cut to Facebook says several things:

1. RockYou didn’t have enough power to negotiate better terms than the 30 percent cut for Facebook
2. RockYou seems to be betting the farm on Facebook, as they’ve just foregone revenue from potential non-Facebook users
3. RockYou is admitting that its star may not be shinning as brightly as in the past and may not shine as bright in the future in their applications business

RockYou is far larger than the other two exclusive users of Facebook credits, Crowdstar and LOLapps, and a bet of this type usually only happens when you’re options are dwindling. Add to the mix the new focus on “branding and promotional” opportunities in the RockYou press release boilerplate, and you see that things are changing for RockYou.  No wonder. Just consider what it means that they serve 15 billion impressions a month or 500 million impressions a day to a social networks with combined populations of over 600 million registered users (sum the user base as listed on Wikipedia for each social network shown on the RockYou home page). That’s less than 1 impression per user per day.

And what about inflation? RockYou and Facebook flooded the market with 5 million Facebook credits in four days. but more recently, every game player I know (half of my Facebook friends) received 20 or 15 free Facebook credits sometime over the last two weeks. So in a not-unlikely scenario, it would seem that Facebook issued 250 million x 15 credits, or 3.75 billion credits. So, yes RockYou did contribute to inflation, but there’s a bigger inflationary pressure.

3.75 billion Facebook credits = $375 million value at the stated “15 credits, a $1.50 USD value”, or $0.10 per credit. If Facebook actually paid developers for these credits when used, that would be the equivalent of 70 percent of $375 M, or $262.5M net to developers. Whether that cash is actually paid out or not, that represents $260+ million of equivalent cash value on the market that didn’t exist before.  Why does this matter? Suddenly the cash equivalent of Zynga’s 2009 revenues (per Jeremy Liew) were dumped on the market. In commonly accepted money supply theory “There is strong empirical evidence of a direct relation between long-term price inflation and money-supply growth, at least for rapid increases in the amount of money in the economy”. This inflationary pressure can drive down real monetary value, making it more difficult for application developers tied to Facebook credits to grow revenues.

The Facebook application economics are changing, and vendors who are exclusively tied to Facebook credits are at the risk of both short and long term fluctuations on the value of Facebook credits and at the mercy of any Facebook credits promotions run during the period of exclusivity. While it may seem that Facebook has enough power to hold its developer partners over a barrel, you have to give them credit for successfully executing a strategy to lock in partners and extract money from their partners’ businesses.

As for RockYou, it may look grim, but look at the fine print of the press release. I’m hopeful that they haven’t really admitted defeat as they state that they will use Facebook credits as “the exclusive virtual currency in RockYou’s social games and applications”. While it does lock them into Facebook credits for virtual currency for their social games and applications anywhere they are distributed, it doesn’t sound like they are actually precluded from using real currencies such as PayPal and credit cards.

So is the RockYou deal the harbinger of bad deals to come, leading developers to lower income and inflation while Facebook reaps the benefits? It could be, and it’s definitely limiting, but the real test will come as more developers start to accept Facebook credits and take a long hard look at the agreements and the limitations on their distribution and revenues that come with such deals.

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RockYou At The Mercy Of Facebook Credits For The Next 5 Years

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Today, online marketers try to find out as much as they can about customers, sometimes “paying” them to reveal personal information.

Rewarding a consumer for being forthcoming about their likes, dislikes and preferences may be one way to get valuable marketing intelligence. At the same time, it could reduce concerns about privacy, since the marketer would openly request such information and provide an incentive to get it. But it still leaves open the issue of consumer control.

A start-up company called Bynamite has a different idea: why not let the consumer collect and review personal information that’s floating around on the Internet and make sure it represents their interests accurately? By doing so, the consumer may someday be in a position to package and sell that information himself.

Ginsu Yoon, a co-founder of Bynamite, tells The New York Times:

“There should be an economic opportunity on the consumer side. … Our view is that it’s not about privacy protection but about giving users control over this valuable resource – their information.”

Bynamite enables a user to track personal information about themselves via a browser plug-in, currently available in a free beta version for Chrome and Firefox only. Bynamite monitors ad networks and e-commerce sites, collecting and assembling data that’s available about the user. Bynamite then classifies the data into categories, such as travel or shopping and the categories are prioritized according to the frequency the user visits sites or makes purchases within a category.

The purpose of all this is to give the user a picture of what online marketers “know” about them. Yoon characterizes this as a “mirror,” according to The New York Times, “showing users how the commercial Internet sees them.” If the user thinks some of the data collected is presenting a picture that isn’t accurate, the user can change the mirror by modifying the data received.

Ultimately, Bynamite hopes to convince users that they can “use their portfolios of interests as virtual currency.” Yoon terms it a “consumer’s Preference Wallet.” Some day, he says, “a person’s profile of interests could be the basis for micropayments or discounts.” Yoon adds, “I’m absolutely convinced that the direction [of Bynamite] is right, giving people a way to identify and use this store of value that is their personal information.”

That may be the pot of gold that awaits us – the notion that consumers can essentially package and market their own data. Ideas like Bynamite could represent a new way of doing business online. The consumer keeps watch on personal data and refines it so that it accurately reflects personal interests. Meanwhile, online marketers willingly offer incentives to consumers who make this information available.

This could present online marketers with an attractive alternative to the current practice of collecting information without a consumer’s explicit permission – which is the heart of the online privacy issue. That makes Bynamite a very intriguing idea.

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There is nothing like a short URL to help increase retention in branding. Today Overstock banked on that announcing the purchase of O.CO and associated domains for $350,000.

The move helps Overstock in two ways. It allows them to highlight further the O in their name which they have built a lot of branding around. From a pragmatic standpoint, in a time where the adoption of shortened URLS for web and mobile is ever increasing, dropping to a smaller URL has definite benefit. Expect to see a lot of O.CO on Twitter.

According to Patrick Byrne, Chairman and CEO of Overstock,

“The O is such an important and recognizable part of our brand. In the new era of the Internet, where short and memorable web addresses are critical for capturing the attention of mobile and socially connected Internet users, our O.CO web address will help to reinforce our brand and expand our business among these audiences.”

Overstock’s brand already enjoys strong recognition among consumers but this might be step to spin off part of their brand as more upscale. Especially since O.CO plays very well from an aesthetic design standpoint.

One has to wonder whether Oprah feels she missed out.

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Breaking News: Overstock Purchases Single Letter Domain O.CO for $350,000

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Foursquare came roaring out of the box less than six months ago and has, by all accounts, become the leader in location-based services. But that isn’t stopping Gowalla from aggressively going after its rival.

According to CNET, Gowalla has just launched some new features Foursquare doesn’t have, plus a couple of high profile promotions that are designed to boost its credibility and usage.

One Gowalla promotion is a collaboration with Nike and Lance Armstrong’s cancer-fighting Livestrong foundation that ties in with the Tour de France. Messages of inspiration submitted by the public are reviewed, and some are selected for a kind of instant printing along the cyclists’ route using a robotic “chalkbot” machine. Gowalla’s role in all this is that the chalkbot will check in with its location on Gowalla, and it will post photos of the painted messages as well. Users of Gowalla can also check into Nike retail locations and receive a Tour de France virtual “pin.”

A second Gowalla promotion is tied in with the tenth anniversary of crowdsourcing t-shirt site Threadless.com. The “Threadless Everywhere Tour” is making its way across the country this summer in a converted Airstream trailer. The trailer will be a mobile Gowalla spot, employing a GPS to update its location automatically. A Gowalla user who checks in on the Airstream could receive a free limited edition t-shirt.

These promotions notwithstanding, Foursquare seems to have a big jump on its competitor. Foursquare has gained traction with big advertisers and even publishers.

Foursquare also has a lot more users and is apparently growing faster than Gowalla. Analytics firm RJMetrics monitored Foursquare and Gowalla APIs for the past four weeks, and the results indicate that Foursquare has over 1.9 million users to Gowalla’s 340,000 or so. Foursquare’s daily percentage growth rate is 75 percent higher than Gowalla’s, according to the analysis. Foursquare has approximately 5.6 million venues to Gowalla’s 1.4 million venues.

As might be expected, other competitors are popping up in this space, and some of them could be players. Brightkite, for example, was compared with Foursquare and Gowalla in the “Check-in Services Bug Battle” conducted by more than 300 uTesters from nearly 40 countries. Kevin Tofel analyzed the results for GigaOM. He found that while Foursquare was tops in Ease-of-Use and Social Media Integration, Brightkite came in second over Gowalla in both those categories. Gowalla, however, bested Foursquare and Brightkite in Location Accuracy. Tofel points out that there are other competitors to consider, including Geodelic, MyTown, and Where.com.

Location-based services are really poised for growth. In mid-June, Twitter announced Twitter Places for geo-tagging and said the new feature would soon link to Foursquare and Gowalla. The just-introduced Yelp 2.0 has location check-in services. Google Buzz has location capabilities. Facebook isn’t sitting on the geolocation sidelines, either.

Location-based services and advertising is a hot new field. It would be wise to keep an eye on Gowalla and Foursquare to see what innovations and changes they bring in the next few months.

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Pick Your Corner: The Battle Over Check-Ins Has Just Begun

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Last week, Missy Ward, co-founder of Affiliate Summit, reignited the age-old discussion about what we call our industry. Is it affiliate marketing or performance marketing? Are we affiliates or publishers? Are they merchants or advertisers? Either you think this is important or you are thinking What?! Who cares?!? Still I think the topic is worth a few minutes of your reading time.

What’s in a name?

In years past, I didn’t want to be called an affiliate for two reasons. I don’t really care much about one reason anymore. That one is that there are so many people who give Affiliate Marketing a bad name. There are bad actors everywhere. We’ve come a long way to marginalize these guys… yes, but we still have a long way to go. Either we clean it up or someone else will do it for us.

The more important issue then, and HUGELY important today has to do with what the term affiliate means and how it is being used against us. I am not an affiliate because affiliate links are just one way that we monetize our sites. Why focus on that reason? Of course, the last time I brought this up, Shawn Collins, co-founder of Affiliate Summit, expanded Affiliate Marketing to include just about everything that we could include for monetization. I don’t think that AdSense is an affiliate program but Shawn does (or at least did). I don’t think that we’ll ever agree and entering into a cyclical argument is pointless.

Enter the California State Legislature… and many other states as well

When we went to Sacramento to lobby against AB178 (aka the Advertising Tax) we were told by our advisers not to focus on monetization types or compensation. It seems that to create nexus under the Advertising Tax, an affiliate needs to be compensated on a percentage of sales basis (aka cost per acquisition or CPA). So if we have a link on Cashbaq to a product being sold at Overstock and Overstock pays us a percentage of sales for that product, Overstock would have nexus in California and would be required to collect California sales tax if the Advertising Tax were to pass.

If you drive two three miles down the road to Shopzilla, you would see their nice offices. They too are located in the city of Los Angeles, but they won’t create nexus for Overstock with a link to that same product at Overstock for the same price. Why? Because a link to that same product at the same store for the same price would be compensated on a Cost Per Click (CPC) basis. Shopzilla isn’t an affiliate because of the way it gets paid. That’s advertising.

Are you following this? Neither are our state legislators, such nuances are beyond them. While there is no logic to the taxation we can follow the consequences of such actions to their logical conclusion.

The Logical Conclusion

Ultimately, I don’t care what as an industry we are called. Legislators will define us in their own terms regardless of whether we call ourselves performance marketers or affiliates. The threats to our industry are more important than a debate about what shingle we hang out. Should the Advertising Tax pass and become law in California, many Web-only stores will terminate their relationships with their affiliates. Pure and simple.

The largest ones will be able to switch to a CPC compensation and keep their relationships with their advertisers (Note that loyalty sites will have great difficulty under this scenario and will have to have fewer stores, move out of state or shut down). That means smaller companies will bear the brunt of the burden of such a tax. Many will be forced to shut their doors. Of course, the irony is that small business are generally the ones that lead the economies out of recessions; and California is so heavily tech dependent.

A Personal Note on Dinner

Oh and Missy, dinner is at 7:00. Don’t be late!

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When Colorado Governor Bill Ritter signed HB 1193 into law he heralded it as a landmark bill, the first of its kind to put teeth behinds its attempt to collect sales tax. Initially the law targeted Amazon, who quickly terminated Colorado affiliates upon the bill’s passing, but then morphed into a convoluted mess, imposing burdensome and unconstitutional reporting requirements for in-state sales for out of state merchants. To all sides a legal challenge seemed only a matter of time.

The Direct Marketing Association delivered that challenge via a letter to its membership base. According to the letter the DMA will file suit against the state of Colorado in Federal Court on behalf of its members so “no one business has to feel the brunt of any recourse from the Colorado Department of Revenue.” The DMA is calling into question the constitutionality of HB 1193 through this lawsuit.

The DMA claims that the reporting required by the law could cost internet retailers up to $4,000 per year on 1st class mail notifications alone. While this total seems a bit arbitrary, it is clear that providing a yearly report to the Colorado Department of Revenue, as the new law requires, detailing the total amount of all purchases made by Colorado residents on which sales tax was not collected; is not only burdensome but poses a potential consumer privacy nightmare.

Although Amazon has not sued Colorado yet, it has sued North Carolina over similar legislation that demanded the disclosure of “all transaction details, including names and addresses, involving state residents.” It will be interesting to see whether Amazon will publicly support the lawsuit, whether DMA members will rally to the cause, and whether the Performance Marketing Association will follow the DMA’s lead.

The fact that similar legislation, modeled after Colorado, may appear in Tennessee and California should be enough to have retailers and publishers concerned.

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The gargantuan numbers being generated by Facebook, Twitter, and YouTube are of paramount importance for marketers.  These numbers set the tone for why social media has already changed the manner in which major advertisers are now defining their media strategy. More and more companies are realizing the potential social media may have.

Famecount.com is a British website that reports on usage trends across Facebook, Twitter, and YouTube. Famecount uses data reported via the APIs of the three services and then categorizes that data to create rankings.

The leading Performer of the moment is Lady Gaga, with over 8,475,000 Facebook fans, over 4,500,000 Twitter followers, and over 303,000 YouTube subscribers. Those are awesome numbers, but she’s an entertainment phenomenon, after all. Let’s take a look at something a little less hip – commercial brands – to see which companies are making the grade in social media.

According to Famecount’s popularity index, which is an aggregate of all three of the leading social media, the top three brands in social media worldwide are (1) Starbucks, (2) Coca-Cola, and (3) Skittles. Starbucks has over 7,700,000 Facebook fans, over 920,000 Twitter followers, and more than 6,600 YouTube subscribers, to Coke’s 5,700,000 Facebook fans, 32,000 Twitter followers, and more than 9,500 YouTube subscribers. Starbucks comes in at 68.81 percent to Coca-Cola’s 52.54 percent on the Famecount index. Lady Gaga, by the way, is 100 percent on the index.

Starbucks and Coca-Cola leading the pack may be expected, but some of the ten most popular brands might surprise you. They include a remarkable range of industries: food (Oreos), drink (Red Bull), airlines (JetBlue Airways), technology (Dell), supermarkets (Whole Foods Market), and online retailers (Zappos.com and Woot.com).

Over my years in marketing, I’ve learned to take numbers with a grain of salt, so I don’t necessarily agree with the notion of a popularity index, which might skew the data and show a somewhat arbitrary ranking. For example, Whole Foods has just 264,000 Facebook fans, but because of its 1,770,000 Twitter followers, the company ranks as the number four brand according to the Famecount index.

But let’s put that aside and consider the implications of the raw numbers. Consider Starbucks’ 7,700,000 Facebook fans, for example. That number is more than the circulation of Better Homes and Gardens magazine, the third largest magazine in the United States. It’s about 10 percent of the worldwide viewers of CSI: Crime Scene Investigation, the world’s most watched television program in 2009.

For any company to generate interest from almost eight million people is, from a marketing perspective, nirvana.

That’s why you see Fortune 500 companies scrambling to gain a presence on Facebook and Twitter. That’s why you see Starbucks soliciting ideas from customers, and why you see companies like Pepsi and Coca-Cola trying to outdo each other in the social media arena.  That’s why you see companies like Visa using YouTube instead of television advertising during the World Cup.

For marketers, it is all about numbers. And when marketers look at social media, they see the kind of huge numbers that make them want to shift their promotional dollars from traditional media to social media.

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