In the world of online media marketing, 2007 will be remembered as a quantum evolution in "behavioral targeting" technology. In April, Google swallowed up DoubleClick for $3.1 billion, followed in May by Microsoft's $6 billion purchase of aQuantive and Yahoo's "me too" buy of Right Media for $680 million (yes million). Although these major players had been engaged in BT since at least 2004, the marriage of a search platform with the largest banner ad serving network for publishers has blurred the line between service provider and competitor. The major online players appear to be declaring a head on war with the old school Madison Avenue companies, although WPP appears to be with the curve following their acquisition of 24/7 RealMedia in May. As the next evolution of the internet gets underway, the concept of "Long tail theory" is all of a sudden a part of every ad executive's vocabulary.

The recent spate of acquisitions by the four horsemen of AOL, Google, Yahoo! And Microsoft (a.k.a. G.A.Y.M.) further validates the convergence of keyword driven ad relevance with real-time anonymous collection and tracking of consumer behavior. In Google's case for example, their acquisition of DoubleClick Media, which owns the massive online affiliate marketing network Performics, solidified their market share in the high 70% to low 80% range of online search. Furthermore and perhaps much more significant, it brought Google full circle in terms of profiling the behavior of consumers from the moment of search until they close their browser. Albeit this is an anonymous level of tracking, the implications are profound in many ways but for the sake of this article, I will focus only on the economic implications for advertisers and publishers. The counter arguments being presented by privacy advocates have thus far failed to impress me. These arguments focus on the potential to discriminate with this information, a concept I find alarmist and disingenuous for reasons I will discuss another day. Besides, there are ways for users to protect themselves by using a registry cleaner and removing tracking spyware . One of the Best Anti-Spyware Software’s I’ve used is made by Xsoft, plus Microsoft provides free access to Windows Defender, their version of anti-spyware.More...

The significance of Google's acquisition lies in their dominant market share of search traffic. By tracking the user through his or her I.P. address, Google is cataloging a mammoth database of user behavior. Doubleclick on the other hand tracks the user by placing a cookie on their computer. Combine the two and you have a full profile of most internet users at an individual level. Anonymous or not, that's valuable information and to have it will put Google in a position of even greater power, which may not be all bad as long as they are not "evil", most consumers will be better off. Web users are a fickle bunch. Google will always have to walk a tight line, similar to bumps in the road eBay faced as it was on its way of becoming the largest original user generated content (UGC) site. When eBay would make a management decision at the executive level, the repercussions in the event their user base disapproved were almost immediate. Google is walking this same line, and I believe the boys at Google headquarters are smart enough to realize that as long as they continue to innovate and provide useful services at zero cost to the consumer, they will retain their user base.

iMonetize - Traffic Drives the Internet. Who Drives Your Traffic

For now, if a user visits any major site on the internet where Doubleclick is serving banner ads, and the user got there using Google search, the company now knows what page the user came from, when the user was on other particular sites, where the user went from the site, and so on. This allows them to serve an ad at a later time customized for that user based on this data. Google is certainly at an important juncture and must find ways to continue growing revenues. This means that Google and all of the other major online players must expand beyond text-based search. But it is naïve to think Google has just now started to get into BT by acquiring Doubleclick. The G.A.Y.M bunch and most other middle tier players have been engaged in BT for several years, but in rather oblique ways. Furthermore, as Revenue Magazine points out, companies like Tacoda and RevenueScience would have been the prey if Google was after the technology. The bigger picture is what all of these tech giants are pursuing, as defined by "web 2.0" and "social networking". The name "social networking" is deceiving because it suggests some sort of communal gathering designed to sustain the whole without capitalism. The truth is more ironic as it should be called "social marketing".

Web communities such as MySpace and Facebook (and dozens of others popping up everywhere) have brought like-minded people together all over the world into hyper niche verticals that continually optimize themselves through rapid evolution. From the advertiser's perspective, each new social networking platform becomes a doorway to whatever psychographic and/or demographic being served by that web site. All the old fuss about "monetizing the social network" is being addressed by technology to deliver contextual ads to site readers. The megapixels on each individual monitor become the billboard for advertisers looking at a very specific form of content, such as a news article, e-book or blog. Advertisers are salivating at the chance for precision guided targeting of the consumer, and although some privacy advocates are making noise, there is not going to be much in the way of behavioral targeting + contextual ads becoming Silicon Valley's WMD in its attack on Madison Avenue.

This new "socialization" of the web brings together multiple niche communities with similar interests. But even though I have a MySpace profile and spend time on the site, it doesn't necessarily mean that I also like the same things as one of my MySpace friends. "New" media marketing is all about serving highly relevant ads to every single user on the site. Because it is now possible to serve different ads on the same ad spot at the exact same time, advertisers no longer monopolize a specific time zone or TV network. At any given time, if there are 100,000 unique visitors on a web site, and 10,000 of them are on the same page within that site, one could in theory serve 100,000 different ads from unique advertisers at the exact same time, all of them customized based on the users "web print".

Although behavioral targeting has thrived by allowing marketers to offer ads that are customized based on the web surfer's age, gender, location and online activities, in the immediate future not only will those variables be considered, but also the items the user may have been shopping for recently. For example, imagine you have searched for a specific bottle of wine from a shopping web site in the past couple of weeks, and were now on your favorite news site reading an article about foreign affairs. At the end of your article, you might see an ad from a wine merchant suggesting you take a look at their inventory and pricing. To go one step further in our example, the merchant that is serving you the ad has agreed to pay the advertising network a generous fee if that user clicks through and ends up purchasing a product. So the advertising network will be incentivized to track every single web user going through their network in a way that continually allows them to "guide" users to products that meet their real time interests. The convenience factor lies in that last term, "real time interests". But so does the "creepy" factor for some, again a topic I will save for another day.

Back to our example, say you visited the site but chose not to purchase anything. Tomorrow when you log into your Gmail account to check your email, you will find a digital coupon created just for you by a competing merchant offering the same product at a 10% discount. This is "long tail" marketing at its finest. The combination of statistical text analysis and clustering methodologies with semantic analysis procedures creates an outcome that can be different each time depending on multiple variations of subjects, keywords, and the unique relationships between them. In other words, each users screen becomes a dynamic megapixel billboard. Recently, while trying to compare broadband options for high bandwidth users, I was served an ad marketing 3000 Satellite Stations to my PC (free) . Although I ended up buying the product, the moment I noticed the ad I wondered how specifically I was being targeted at that moment.

The natural evolution of this technology will be based on smarter and smarter algorithms that will be able to predict the potential buying habits of a shopper based on their behavior during certain days, seasons, local weather, and just about any data point you can imagine, including the performance of stocks they looked up recently on their favorite finance site. Contextual advertising is for those of us that have learned to subconsciously tune out banner ads when reading a site. Imagine Tony Soprano sitting in front of his white Cadillac while doing peyote in the desert during the shows closing season drinking a can of coke. That diet Coke is there for brand awareness. With advanced BT combined with contextual advertising, online advertisers (to take the analogy a bit further) could swap out the diet coke for a can of Budweiser, or a bottle of water, or even a carton of orange juice depending on what that viewer buys when they go grocery shopping, which Church web site they may have visited, or nutritional supplements they have purchased.

Although this is not yet possible for video, if you tune out the banner ads when reading up on a geopolitical situation that you've been following recently, the words within the articles will become active hyperlinks linking to products and items you are interested in. The same technology is being used on this article as you are reading because even I find the technology convenient if it is actually providing me with a benefit. As an avid reader, I am thrilled when reading a very interesting article on the web which is embedded with hyperlinks to books being recommended by Amazon to me. It doesn't bother me to read the word as a hyperlink and I can read through or hover my mouse over the link to see what the book is. It's my choice. Furthermore, some words may hyperlink for me while other words will hyperlink for other readers based entirely on that reader's interest. This is the maximum level of efficiency an advertiser can achieve when targeting a consumer but for the publishers of the world, this is absolute heaven.

Publishing is all about creating quality content that people will want to read, thus giving the publisher advertising inventory to sell to merchants interested in that audience. By turning every word in their content into a potential ad slot, publishers can benefit from having knowledge of real-time market prices for certain keywords and can tune their sites to favor certain keywords over others. This is made possible by the anonymous auction systems being used for clearing ad inventory. The technology is similar to electronic crossing networks (ECN) used for stock trading. The ad ECN acts as a trusted intermediary between advertisers and publishers, allowing buyers and sellers to meet in a free market environment. We are at the cusp of this evolution from click (CPC) advertising to action (CPA) based performance marketing in the same way technology evolved from impression(CPM) models during the internet's early years. Thousands of web soldiers are out there trying to make a career from filling out online surveys in their pursuit of easy money. The only thing that baffles me is that some people are actually claiming to make several thousand dollars a month doing this, so either the surveys are serving some significant marketing purpose, or these are all just more fantastic claims which the internet is littered with.

Download a Trial Excel Spreadsheet Template for Portfolio Optimization

The economic opportunity is staggering. Total ad dollars spent thru online platforms is still in the single digits, and as the pie shifts in favor of the web thanks to social networks and other UGC sites, the market opportunity for smart players is going to be tremendously significant. The world of consumer marketing is about to turn on its head as it experiences what Andy Grove, the former Chief of Intel termed, a "Strategic Inflection". The fight between old and new basically comes down to the difference between a major consumer brand such as Gillette, Honda, or Budweiser spending $50,000,000 on a television commercial campaign during the Super Bowl, versus spending 10% of that amount on the web to achieve significant conversion rates from eyeballs to sales. The days of "branding" by putting the company's name in front of the consumer are being challenged by the opportunity to focus down to the person that is actually looking for a product the company offers on the web in real time at the exact moment they are searching. Yes a bit Orwellian, but once we get beyond the "novelty" effect, we will realize that this is another downward pressure point on inflation as it encourages competition and achieves efficiencies that will allow merchants to lower their prices for consumers in general.

Although opponents are banging the privacy drum based on discrimination, this movement away from carpet bombing the consumer to laser guided bombing of the consumer will improve the quality of the internet for everyone. Right now, the total amount of spam web sites all over the internet is overwhelming even the smartest search algorithms. Criminal elements in Eastern Europe and Asia continually find ways to beat the anti-spam efforts of the search giants. When people accuse Google of not caring about click fraud, they are being naïve and overly simplistic. If users stop trusting Google to provide relevant information, they will search elsewhere. It's very easy to change your default search engine. The shift to performance based marketing based on anonymous behavioral profiling of web users will put upward pressure on marketing costs in a way that will act to filter out some of the lower quality web sites which are thousands of pages of spam and most likely auto generated in a few minutes.

This also benefits internet marketing companies by streamlining the process of dealing with the ad networks and giving them access to quantitative data for analysis purposes. For the merchant that is advertising, if the equivalent "cost per click" were to increase in a manner that was accompanied by improved efficiencies and conversion rates, then the economic impact is positive. This new marketing medium is a byproduct of a socialized internet driven by psycho-graphic similarities. And as for the privacy concerns, in 2006 the ChoiceStream Personalization Survey polled consumers asking them if they would be willing to let websites track their clicks and purchases. There was a 34% increase from 2005. If we are going to see the ads, they may as well be highly relevant and actually save me money and make my life better. I just don't want to see them use this data to link a pattern of behavior, such as cross-campaign learning, to infer private information such as a person's health. On the other hand, if I don't have a cat then I don't want to see ads for cat food.

Keep an eye on the next wave of acquisitions by the major players. ValueClick, one of the few remaining independent behemoths, is likely to go next for a price in the low single digit billions. RevenueScience and Tacoda are also likely to be acquired but this will be from a traditional media giant such as News Corp. The big Madison Avenue firms are also likely to be circling their wagons and looking for bolt-on acquisitions as a chance to survive another wave of Creative Destruction.

By http://www.InvestmentCapitalist.com

Article Source: http://www.articlesbase.com/marketing-articles/social-capitalism-the-monetization-of-the-social-network-227498.html

Investment Capitalist presents a unique global macro perspective of financial markets, technology and the internet with an eye towards anticipating future developments rather than simply reporting on recent events. Founded by a former hedge fund manager and former market maker, both of which are schooled in the philosophy's of Ayn Rand's Atlas Shrugged and Fountainhead, Investment Capitalist brings insight into developments on the business front as they pertain to long term strategy and execution. How these developments will shape the competitive landscape for technology companies and what the impact may be from an economic perspective. With a broad palette of interesting subjects, all of which pertain to the fundamental principal of capitalism: "making money", readers will find their insights unique, often surprising, sometimes hilarious and almost always dead-on. The writers, Pejman Hamidi and Josh Hardin, are teamed up for a West Coast/East Coast tag teaming of the worlds financial markets, one tick at a time.