November 3, 2009

Scamville and four thoughts on online advertising

TechCrunch's Scamville articles about the use of less than forthcoming offers for virtual coins in Facebook games and the following industry debate are good reads. Even more interesting reading, at least if you're running an app or a site, are How To Spam Facebook Like A Pro: An Insider's Confession and Are social gaming offers scamming users? A detailed analysis of Techcrunch’s Scamville article.

Some quick thoughts:

* To reap value from online advertising a party (publisher, middleman or advertiser) needs one or several of the following things: user intent that can be converted into action (Google AdWords), homogeneous audience at scale (largest site in a category), data on user interest/behavior/demographic and targeting technology, a good sales force, niche content and category advertisers (example: travel sites), knowledge about mis-pricing not known by other parties (buy cheap/sell for more "arbitrage opportunity"), advertisements that generate high response (good creative execution, incentives, design that trick users into clicking or similar)
* There are a lot of murky things going on in online advertising. Buyer beware. However, most online marketers can learn new methods and strategies from working with aggressive affiliates. A bit like outsourced marketing R&D (thanks to good friends for describing this way of working with affiliates to me)
* Advertisers will, over time, pay less for incentivized leads if the quality of leads are lower due to the incentive
* Companies running widely used games, sites and applications hurt themselves significantly if users feel cheated when trying to buy from them (even if it is a third-party offer). It's likely smaller players that over time will have a more difficult time getting away from the shadier, but often higher paying, offers.

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