Friday, February 16, 2007
Can E-Tailers Cash In on Video Clips?
It was just a matter of time. Online retailers have begun capitalizing on the YouTube craze, offering a video platform for product demonstrations, rants and raves, sentimental messages and just plain bizarre behavior. At this point there is little question that the videos, on sites like 1-800-Flowers.com, Buy.com , Blendtec.com and many others soon to come, have novelty value. Whether they will help build customer traffic and sales over the long term, though, remains an open question. "The scary thing is that we don't know the financial implications of this," said Jim McCann, the chief executive of 1-800-Flowers, which recently began two initiatives to post user-generated videos on the site. "Does it have any benefit for sales? I can't answer that. We're just going on a leap here."
McCann said the company would announce Monday its "Video Valentine" service, where users go to the site and upload photos, write messages and choose musical themes and graphics. The site then meshes the various elements into a 60-second clip that, while not strictly video, includes enough motion and sound to approximate the experience. The site allows users to send the valentines for free, and, after employees review them for inappropriate content, they may post the valentines on the site for others to view and rate. Users will be able to integrate full video files in the coming months, said McCann, who caught the video bug after a conversation last year with Chad Hurley, one of YouTube's founders. In the meantime, the site is relying on YouTube to broadcast other video clips from customers, through its Reconnections initiative. With that, 1-800-Flowers asks users to film testimonials about instances when a gift from the site has caused or highlighted a reunion in the customer's life. One video the site will soon post features a man who had lost touch with his high school sweetheart after the Korean War. Through the Web site, the man sent the woman a replica of the prom corsage he gave her 50 years before.
The happy ending: 1-800-Flowers supplied the bouquets for their wedding. The Reconnections clips, which carry the company's logo and links, are carried on YouTube, but links to the videos will also appear on the 1-800-Flowers site. McCann said he would feature the most popular videos in television ads and has begun training employees in video production techniques to help customers refine some of the more promising testimonials. The effort, he said, falls in line with the company's increased focus on soliciting customer involvement on the site - whether through suggested gift card phrases or less formal interactions with customer service representatives, where the site's employees solicit feedback from consumers on product variations they might like to see.
"The irony is that we're using technology to be much more personal with our customers, and recreate the relationship I had 30 years ago, where I knew all the customers that came into my shop on First Avenue," McCann said. The business itself is on the upswing. Late last month 1-800-Flowers announced record revenues of US$330 million for the most recent quarter, an increase of nearly 19 percent from the same period in 2005. The company's stock jumped by more than 10 percent last month to top $7.00, after dropping below $4.50 in August.
For at least one company, user-generated videos have led to a measurable boom in business. Blendtec, a manufacturer and seller of blenders based in Orem, Utah, started late last year posting videos of the company's chief executive, Tom Dixon, blending random objects, including wood, marbles and Dixon's iPod. The company posted the videos on its own site as well as on YouTube, and promoted them on various message boards and blogs. The marble video quickly rose to prominence on YouTube's entertainment section, and since then, according to Blendtec's marketing director, George Wright, the company's 30 videos have been viewed more than 11 million times. "We've seen wonderful improvements in sales," Wright said. "Online, we've absolutely eclipsed our records, and it just continues to grow and grow." Still, the runaway success of the program has included some potentially troubling side effects. Users have taken to posting their own "extreme blending" videos, with about 600 such clips last week featured on YouTube.
Other sites, like the golf and tennis retailer Golfsmith.com, are employing user videos for reviews. According to Matthew Corey, the company's vice president of marketing, Golfsmith.com will soon allow users to post clips talking about products for sale on the site. Corey said this year's new golf clubs include even bigger drivers than before, some with square heads. "It's going to take people some time to understand the features of these," he said. "What better way to do that than with videos?" Sites may need to offer incentives to entice users to post videos, according to some executives, because users are less willing to do the extra work to post videos than photos or text reviews. Corey said Golfsmith is considering rewarding users who create popular videos.
Videos also help increase Internet traffic. The more Golfsmith offers videos and reviews of its products, Corey said, the better the chances Google and other search engines will point users to Golfsmith when they type a product name into a search box. Corey will still have to brace himself for the possibility of users posting mock video reviews on YouTube showing, say, the destructive capabilities of a club. But on Golfsmith.com, all reviews will be screened by BazaarVoice, an Austin, Texas-based technology vendor that helps Web sites post user reviews and screen them for offensive or inappropriate content. Brett Hurt, the chief executive of BazaarVoice, said his company would start helping three of its 60 clients to solicit, review and post video reviews. "I'd expect a majority of our customers to adopt this," Hurt said. "It's just a matter of time before it becomes the norm online."
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McCann said the company would announce Monday its "Video Valentine" service, where users go to the site and upload photos, write messages and choose musical themes and graphics. The site then meshes the various elements into a 60-second clip that, while not strictly video, includes enough motion and sound to approximate the experience. The site allows users to send the valentines for free, and, after employees review them for inappropriate content, they may post the valentines on the site for others to view and rate. Users will be able to integrate full video files in the coming months, said McCann, who caught the video bug after a conversation last year with Chad Hurley, one of YouTube's founders. In the meantime, the site is relying on YouTube to broadcast other video clips from customers, through its Reconnections initiative. With that, 1-800-Flowers asks users to film testimonials about instances when a gift from the site has caused or highlighted a reunion in the customer's life. One video the site will soon post features a man who had lost touch with his high school sweetheart after the Korean War. Through the Web site, the man sent the woman a replica of the prom corsage he gave her 50 years before.
The happy ending: 1-800-Flowers supplied the bouquets for their wedding. The Reconnections clips, which carry the company's logo and links, are carried on YouTube, but links to the videos will also appear on the 1-800-Flowers site. McCann said he would feature the most popular videos in television ads and has begun training employees in video production techniques to help customers refine some of the more promising testimonials. The effort, he said, falls in line with the company's increased focus on soliciting customer involvement on the site - whether through suggested gift card phrases or less formal interactions with customer service representatives, where the site's employees solicit feedback from consumers on product variations they might like to see.
"The irony is that we're using technology to be much more personal with our customers, and recreate the relationship I had 30 years ago, where I knew all the customers that came into my shop on First Avenue," McCann said. The business itself is on the upswing. Late last month 1-800-Flowers announced record revenues of US$330 million for the most recent quarter, an increase of nearly 19 percent from the same period in 2005. The company's stock jumped by more than 10 percent last month to top $7.00, after dropping below $4.50 in August.
For at least one company, user-generated videos have led to a measurable boom in business. Blendtec, a manufacturer and seller of blenders based in Orem, Utah, started late last year posting videos of the company's chief executive, Tom Dixon, blending random objects, including wood, marbles and Dixon's iPod. The company posted the videos on its own site as well as on YouTube, and promoted them on various message boards and blogs. The marble video quickly rose to prominence on YouTube's entertainment section, and since then, according to Blendtec's marketing director, George Wright, the company's 30 videos have been viewed more than 11 million times. "We've seen wonderful improvements in sales," Wright said. "Online, we've absolutely eclipsed our records, and it just continues to grow and grow." Still, the runaway success of the program has included some potentially troubling side effects. Users have taken to posting their own "extreme blending" videos, with about 600 such clips last week featured on YouTube.
Other sites, like the golf and tennis retailer Golfsmith.com, are employing user videos for reviews. According to Matthew Corey, the company's vice president of marketing, Golfsmith.com will soon allow users to post clips talking about products for sale on the site. Corey said this year's new golf clubs include even bigger drivers than before, some with square heads. "It's going to take people some time to understand the features of these," he said. "What better way to do that than with videos?" Sites may need to offer incentives to entice users to post videos, according to some executives, because users are less willing to do the extra work to post videos than photos or text reviews. Corey said Golfsmith is considering rewarding users who create popular videos.
Videos also help increase Internet traffic. The more Golfsmith offers videos and reviews of its products, Corey said, the better the chances Google and other search engines will point users to Golfsmith when they type a product name into a search box. Corey will still have to brace himself for the possibility of users posting mock video reviews on YouTube showing, say, the destructive capabilities of a club. But on Golfsmith.com, all reviews will be screened by BazaarVoice, an Austin, Texas-based technology vendor that helps Web sites post user reviews and screen them for offensive or inappropriate content. Brett Hurt, the chief executive of BazaarVoice, said his company would start helping three of its 60 clients to solicit, review and post video reviews. "I'd expect a majority of our customers to adopt this," Hurt said. "It's just a matter of time before it becomes the norm online."
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Tools That Keep Online Customers Coming Back
Web analytics and personalization of Web sites have surfaced as key development initiatives for online merchants, according to a new benchmark report from Aberdeen Group, "Clicks to Customers: The Real ROI in B2C eCommerce." More than 44 percent of firms currently use Web analytics to evaluate customer behavior, researchers found. Fifty-nine percent of leading firms -- termed "best-in-class" by Aberdeen -- make this data actionable by strategically up-selling and cross-selling products using personalized collaborative filtering, also known as "affinity selling."
Companies personalizing home pages and delivering targeted content are the ones realizing the most value from their analytical evaluations, the report suggests.
Today's e-commerce solutions accommodate retailers on a number of different fronts. However, online shoppers are empowered with an abundance of competitive advantages, including product and pricing information. As a result, 59 percent of industry-leading retailers list keeping pace with competitors as a top driver for their online initiatives. Businesses will differentiate themselves on the uniqueness of their products, competitive pricing and the quality of their service operations. This is indicated by the fact that 47 percent of top-performing retailers identified gaining or maintaining market leadership by delivering innovative tools and solutions as a key driver to their success, according to the Aberdeen report. Ubiquitous tools such as site search and security/privacy encryption are the minimum prerequisites for a strong e-commerce experience, research shows, yet they do little for those trying to catch up to best-in-class online merchants in terms of sales lift.
As customers demand more from their e-commerce Web sites, their preference for consistency while shopping online must be satisfied. User interface features such as standardized navigation schemes, internal site search, and secure transactions are not just sufficient -- they're necessary.
It's also important to realize that consumers aren't necessarily buying from sites with elaborate bells and whistles; keeping it simple by providing standardized tools and technologies is often enough to attract customers to buy if content and products are relevant. Personalized customer loyalty incentives top the list for all retailers developing tools within the next 12 to 24 months. This majority feels the need to deliver targeted messaging to its customer base in order to improve sales and increase order size. What's interesting here is that 53 percent of best-in-class merchants list Web 2.0 technologies on their road maps for development initiatives in the next 24 months. No doubt, these retailers are seeking methods to attract new audiences, gain their attention, and keep them coming back to the online stores for more.
Tool that provide alerts and lists of recently viewed products follow Web 2.0 technologies as secondary initiatives. They allow relevance marketing in the form of personalized alerts, and they support consumers' use of the Web as a research tool prior to making purchases. Recently viewed product lists can be a time saver for online shoppers to pick up where they left off in their recent online shopping trips and to easily transact if they've decided that they're ready to buy.
Forty-two percent of all retailers strive to improve data integration processes by centralizing databases and sharing information throughout their enterprises, according to the study. This is increasingly becoming a necessity for multichannel retailers and many small to mid-sized businesses that utilize their e-commerce platforms as mini-ERP (enterprise resource planning) systems to manage their operations. Most e-commerce platforms facilitate the integration of multiple applications such as online storefronts, POS (point of sale) systems, real-time inventory tracking and customer analytics into a single management platform. This allows cost-conscious merchants to leverage the technology much like an ERP system to integrate disparate solutions and provide a centralized management interface. Alternatively, large enterprises look for solutions that snap into their existing infrastructure and integrate all of their legacy solutions. Luckily for retailers, both licensed software and hosted on-demand solutions available from the vendor marketplace hinge on integration, flexibility and scalability.
Leverage the use of analytics to determine online customer behavior, buying patterns and habits. When aggregated, these metrics can provide data on unique customers, as well as on entire customer segments. Savvy merchants will act on this data by providing relevant content to specific markets and capturing revenue through conversions. Adoption of online tools should facilitate interaction by customers -- e.g., interactive product imaging and site search. Tools that engage customers promote increased activity, and thus more data, which in turn generates insights obtained through analytics to create a better customer experience. Keep content relevant. Analytics and personalization are most effective when delivered to shoppers during key decision-making moments. Effective personalization and use of analytics as a dynamic function can lead to increased customer conversions, higher customer satisfaction and strengthened brand loyalty.
Click here to download a complimentary copy of the full benchmark report: "Clicks to Customers: The Real ROI in B2C eCommerce."
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Companies personalizing home pages and delivering targeted content are the ones realizing the most value from their analytical evaluations, the report suggests.
Today's e-commerce solutions accommodate retailers on a number of different fronts. However, online shoppers are empowered with an abundance of competitive advantages, including product and pricing information. As a result, 59 percent of industry-leading retailers list keeping pace with competitors as a top driver for their online initiatives. Businesses will differentiate themselves on the uniqueness of their products, competitive pricing and the quality of their service operations. This is indicated by the fact that 47 percent of top-performing retailers identified gaining or maintaining market leadership by delivering innovative tools and solutions as a key driver to their success, according to the Aberdeen report. Ubiquitous tools such as site search and security/privacy encryption are the minimum prerequisites for a strong e-commerce experience, research shows, yet they do little for those trying to catch up to best-in-class online merchants in terms of sales lift.
As customers demand more from their e-commerce Web sites, their preference for consistency while shopping online must be satisfied. User interface features such as standardized navigation schemes, internal site search, and secure transactions are not just sufficient -- they're necessary.
It's also important to realize that consumers aren't necessarily buying from sites with elaborate bells and whistles; keeping it simple by providing standardized tools and technologies is often enough to attract customers to buy if content and products are relevant. Personalized customer loyalty incentives top the list for all retailers developing tools within the next 12 to 24 months. This majority feels the need to deliver targeted messaging to its customer base in order to improve sales and increase order size. What's interesting here is that 53 percent of best-in-class merchants list Web 2.0 technologies on their road maps for development initiatives in the next 24 months. No doubt, these retailers are seeking methods to attract new audiences, gain their attention, and keep them coming back to the online stores for more.
Tool that provide alerts and lists of recently viewed products follow Web 2.0 technologies as secondary initiatives. They allow relevance marketing in the form of personalized alerts, and they support consumers' use of the Web as a research tool prior to making purchases. Recently viewed product lists can be a time saver for online shoppers to pick up where they left off in their recent online shopping trips and to easily transact if they've decided that they're ready to buy.
Forty-two percent of all retailers strive to improve data integration processes by centralizing databases and sharing information throughout their enterprises, according to the study. This is increasingly becoming a necessity for multichannel retailers and many small to mid-sized businesses that utilize their e-commerce platforms as mini-ERP (enterprise resource planning) systems to manage their operations. Most e-commerce platforms facilitate the integration of multiple applications such as online storefronts, POS (point of sale) systems, real-time inventory tracking and customer analytics into a single management platform. This allows cost-conscious merchants to leverage the technology much like an ERP system to integrate disparate solutions and provide a centralized management interface. Alternatively, large enterprises look for solutions that snap into their existing infrastructure and integrate all of their legacy solutions. Luckily for retailers, both licensed software and hosted on-demand solutions available from the vendor marketplace hinge on integration, flexibility and scalability.
Leverage the use of analytics to determine online customer behavior, buying patterns and habits. When aggregated, these metrics can provide data on unique customers, as well as on entire customer segments. Savvy merchants will act on this data by providing relevant content to specific markets and capturing revenue through conversions. Adoption of online tools should facilitate interaction by customers -- e.g., interactive product imaging and site search. Tools that engage customers promote increased activity, and thus more data, which in turn generates insights obtained through analytics to create a better customer experience. Keep content relevant. Analytics and personalization are most effective when delivered to shoppers during key decision-making moments. Effective personalization and use of analytics as a dynamic function can lead to increased customer conversions, higher customer satisfaction and strengthened brand loyalty.
Click here to download a complimentary copy of the full benchmark report: "Clicks to Customers: The Real ROI in B2C eCommerce."
Get The Guardian eCommerce Privacy SSL Seal.
The Growing Nuisance Of Click Fraud
Last year, the average click fraud rate of pay-per-click advertisements appearing on search engine content networks rose to 19.2 percent for the last quarter of 2006, the highest yet, according to Tom Cuthbert, CEO of Click Forensics. Internet advertisers and security pros are seeing increases in click fraud activities that siphon both sales and advertising dollars from vendors. Click fraud occurs when online advertisers pay search engine companies and advertisement Web publishers a fee for each click made by either real or phony would-be customers.
A more recent form of click fraud involves criminal gangs in foreign countries that set up rogue Web sites that run the same ads and hire people to click on these unauthorized ads, thus diverting payment to the rogue Web site owner. Click Tracking One recourse e-commerce vendors have is to use the resources of Cuthbert's ClickForensics.com, an independent click fraud reporting service. He started tracking click fraud four years ago and publishes quarterly fraud reports on www.ClickFraudIndex.com. "Click fraud is similar to what's been happening with spam . It gets worse. There were no aggregate figures to measure the size of the problem," Cuthbert said. "We found 14 percent of the clicks fall into a high threat category. That's about (US)$1 billion to advertisers annually." The Click Fraud Index monitors and reports on data gathered from the Click Fraud Network, which more than 3,000 online advertisers and their agencies have joined. The network provides statistically significant Pay-Per-Click data collected from online advertising campaigns for both large and small companies, Cuthbert explained.
Cuthbert's approach is to give his members a fighting chance by dealing with click fraud on two fronts. Armed with his click fraud data, e-commerce vendors can go back to the Web sites hosting their ads and demand a refund. Last summer, Cuthbert formed a trade group called the Click Quality Counsel. This is a group of 20 advertisers who meet monthly and press Web publishers with their recommendations for battling click fraud. "Results are moving along, but the outlook remains very dismal. It will take a few years," Cuthbert said about progress in fighting back. "The technical challenge to catch perpetrators is a really great." Online advertisers need to know they can fight back to hamper click fraud, he added. Cuthbert hopes to eventually see results similar to the success of ad monitoring agencies such as the Nielson ratings for TV networks and Arbitron ratings for radio stations.
Other technologies are also available to track down click fraud artists, Michael Caruso, CEO of ClickFacts, said. ClickFacts is a third-party auditing service that detects fraud differently than its competitors. Instead of relying on log analysis, Caruso employs a solution which captures a snapshot of organic and paid traffic to Web site advertising. ClickFacts puts a Java script on the ads its members place online. The Java script allows Caruso's organization to accurately track where else the ads appear and who is clicking on them. Members then use that data to prove the number of fraudulent clicks in pursuit of refunds from the ad publishers. "This provides a real view of the patterns. Not a lot of companies do this type of [click] auditing. Advertisers do not know where their ads go," Caruso said. This auditing process lets him identify the time of day a click was done, he said. It also sees through the click fraud perpetrators' efforts to conceal their location.
"Fraudsters can change the IP address [to mask their location] but usually do not change the language used in the botnet instructions and other virus coding," he added.
His approach is getting results through more than just click fraud monitoring. His customers are seeing improvements to their return on investment (ROI) as well, Caruso explained. This happens because they get a full account on how their current online search and cost per click (CPC) dollars are spent in comparison to how their customers behave, he said. "In many cases, the fraud percentage takes a back seat to behavior patterns. We've moved away from focusing exclusively on click fraud into verifying the click stream in its entirety and looking at the total online spend holistically across many platforms, not just per click by search engine," Caruso stated. ClickFacts charges its customers 2 to 3 cents per click. Caruso's company functions more like an ad source company, he said.
Online advertisers must become very vigilant in protecting against click fraud, according to Patrick Peterson, vice president for technology at security firm IronPort Systems . Malware, viruses and botnets are fueling click fraud crimes. "This won't stop until they are all blocked. The more we can learn about who is in the botnets, the more we can create easy tools [to stop it]," he said. "We need to filter out the bad Web sites for the advertisers. We need to suck the oxygen out of the criminal world." Automated botnets make it easy for criminals to monetize the pay-per-click process to their own advantage, Peterson said.
"The biggest source for click fraud is coming from South Korea, China and Asia in general. It is an international problem," said Caruso. Ad publishers have to do more to block international traffic for domestic-based ads. In addition, online advertisers can change their keywords to defeat botnets and can change the times of the day or night that their ads are displayed to coincide with times that produce apparent fraudulent clicks but no sales. "Pay per click is good business model. We need to develop a sense of trust among advertisers. It will take working together in the industry to solve this problem," concluded Cuthbert.
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A more recent form of click fraud involves criminal gangs in foreign countries that set up rogue Web sites that run the same ads and hire people to click on these unauthorized ads, thus diverting payment to the rogue Web site owner. Click Tracking One recourse e-commerce vendors have is to use the resources of Cuthbert's ClickForensics.com, an independent click fraud reporting service. He started tracking click fraud four years ago and publishes quarterly fraud reports on www.ClickFraudIndex.com. "Click fraud is similar to what's been happening with spam . It gets worse. There were no aggregate figures to measure the size of the problem," Cuthbert said. "We found 14 percent of the clicks fall into a high threat category. That's about (US)$1 billion to advertisers annually." The Click Fraud Index monitors and reports on data gathered from the Click Fraud Network, which more than 3,000 online advertisers and their agencies have joined. The network provides statistically significant Pay-Per-Click data collected from online advertising campaigns for both large and small companies, Cuthbert explained.
Cuthbert's approach is to give his members a fighting chance by dealing with click fraud on two fronts. Armed with his click fraud data, e-commerce vendors can go back to the Web sites hosting their ads and demand a refund. Last summer, Cuthbert formed a trade group called the Click Quality Counsel. This is a group of 20 advertisers who meet monthly and press Web publishers with their recommendations for battling click fraud. "Results are moving along, but the outlook remains very dismal. It will take a few years," Cuthbert said about progress in fighting back. "The technical challenge to catch perpetrators is a really great." Online advertisers need to know they can fight back to hamper click fraud, he added. Cuthbert hopes to eventually see results similar to the success of ad monitoring agencies such as the Nielson ratings for TV networks and Arbitron ratings for radio stations.
Other technologies are also available to track down click fraud artists, Michael Caruso, CEO of ClickFacts, said. ClickFacts is a third-party auditing service that detects fraud differently than its competitors. Instead of relying on log analysis, Caruso employs a solution which captures a snapshot of organic and paid traffic to Web site advertising. ClickFacts puts a Java script on the ads its members place online. The Java script allows Caruso's organization to accurately track where else the ads appear and who is clicking on them. Members then use that data to prove the number of fraudulent clicks in pursuit of refunds from the ad publishers. "This provides a real view of the patterns. Not a lot of companies do this type of [click] auditing. Advertisers do not know where their ads go," Caruso said. This auditing process lets him identify the time of day a click was done, he said. It also sees through the click fraud perpetrators' efforts to conceal their location.
"Fraudsters can change the IP address [to mask their location] but usually do not change the language used in the botnet instructions and other virus coding," he added.
His approach is getting results through more than just click fraud monitoring. His customers are seeing improvements to their return on investment (ROI) as well, Caruso explained. This happens because they get a full account on how their current online search and cost per click (CPC) dollars are spent in comparison to how their customers behave, he said. "In many cases, the fraud percentage takes a back seat to behavior patterns. We've moved away from focusing exclusively on click fraud into verifying the click stream in its entirety and looking at the total online spend holistically across many platforms, not just per click by search engine," Caruso stated. ClickFacts charges its customers 2 to 3 cents per click. Caruso's company functions more like an ad source company, he said.
Online advertisers must become very vigilant in protecting against click fraud, according to Patrick Peterson, vice president for technology at security firm IronPort Systems . Malware, viruses and botnets are fueling click fraud crimes. "This won't stop until they are all blocked. The more we can learn about who is in the botnets, the more we can create easy tools [to stop it]," he said. "We need to filter out the bad Web sites for the advertisers. We need to suck the oxygen out of the criminal world." Automated botnets make it easy for criminals to monetize the pay-per-click process to their own advantage, Peterson said.
"The biggest source for click fraud is coming from South Korea, China and Asia in general. It is an international problem," said Caruso. Ad publishers have to do more to block international traffic for domestic-based ads. In addition, online advertisers can change their keywords to defeat botnets and can change the times of the day or night that their ads are displayed to coincide with times that produce apparent fraudulent clicks but no sales. "Pay per click is good business model. We need to develop a sense of trust among advertisers. It will take working together in the industry to solve this problem," concluded Cuthbert.
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Monday, February 05, 2007
YouTube Users to Share in Ad Revenue
In a move that could have repercussions for all forms of social networking, especially online user-generated video, YouTube intends to begin sharing its advertising revenue with users who contribute videos. YouTube co-founder Chad Hurley disclosed the plans during the World Economic Forum in Davos, Switzerland. Hurley indicated that how the system will work is still being developed, but said the site has grown to a point where it can explore such an option.
"We are getting an audience large enough where we have an opportunity to support creativity, to foster creativity through sharing revenue with our users," Hurley told the audience. "We feel we are at a scale now that we will be able to do that and still have a true community around video."
The ad-sharing scenario likely means that YouTube wants to begin inserting ads directly into user-made videos, something that many observers said was all but inevitable when Google purchased YouTube last fall. Media 2.0 Hurley spoke in Davos as part of a panel on so-called Web 2.0 innovations, along with Microsoft Chairman Bill Gates and Catrerina Fake, the founder of photo-sharing site Flickr, which is now also owned by Google. Hurley said that when YouTube was founded, its developers worried that offering revenue sharing from the outset would alter the network by creating a group of people motivated by money rather than a desire to share their video creations. Currently, however, there are other considerations in play, including the need to keep the quality of content at the site high enough to attract more visitors and keep users coming back even after ads begin appearing in videos.
Google and YouTube will likely give users a menu of choices for what ads to choose, according to search engine expert John Battelle. He predicted some ads could be as short as three seconds, and users will also be able to select whether to run the ads at the beginning, middle or end of their video clips. "Ultimately, the audience will determine, through its attention to videos, whether YouTube succeeds or fails at this new ad gambit," Battelle said. "After all, producers of high quality video have plenty of options when it comes to hosting content these days -- it's cheap, and it's easy. No one has to post content to YouTube unless, of course, they want [to make use of] the distribution engine it has become." Will YouTube take the next step and require users to include ads in their videos in order to gain access to the site's massive distribution reach? Battelle said. In recent weeks, Google began integrating YouTube into its video search program, with searches on Google Video returning relevant YouTube videos as a top search result.
Of course, the social media -- or Web 2.0 -- phenomenon already includes an element of commercialism by those who participate. Blogging became increasingly popular, for instance, after Google and Yahoo (Nasdaq: YHOO) began allowing bloggers to join their ad networks, though only the most heavily trafficked sites earn significant revenue from those programs.
Other sites already offer users a cut of advertising proceeds in return for their creative content. Video site Revver offers a cut of its advertising income to both video creators and those who help propagate Revver-hosted videos across the Web via file sharing. Sharers can earn a 20 percent cut of revenue, while the creator and Revver split the remaining portion in half. Google is likely walking a tightrope with respect to YouTube -- it likely wants to demonstrate quickly that the purchase was worthwhile by showing revenue and profit from YouTube, but it also needs to avoid alienating the site's users by cluttering with ads what has been a pure community site to date.
"YouTube is a gem because it figured out what Google, Yahoo and all of the other video players in the marketplace couldn't -- that it's not about the video. It's really about the community that's around the video," Li said.
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"We are getting an audience large enough where we have an opportunity to support creativity, to foster creativity through sharing revenue with our users," Hurley told the audience. "We feel we are at a scale now that we will be able to do that and still have a true community around video."
The ad-sharing scenario likely means that YouTube wants to begin inserting ads directly into user-made videos, something that many observers said was all but inevitable when Google purchased YouTube last fall. Media 2.0 Hurley spoke in Davos as part of a panel on so-called Web 2.0 innovations, along with Microsoft Chairman Bill Gates and Catrerina Fake, the founder of photo-sharing site Flickr, which is now also owned by Google. Hurley said that when YouTube was founded, its developers worried that offering revenue sharing from the outset would alter the network by creating a group of people motivated by money rather than a desire to share their video creations. Currently, however, there are other considerations in play, including the need to keep the quality of content at the site high enough to attract more visitors and keep users coming back even after ads begin appearing in videos.
Google and YouTube will likely give users a menu of choices for what ads to choose, according to search engine expert John Battelle. He predicted some ads could be as short as three seconds, and users will also be able to select whether to run the ads at the beginning, middle or end of their video clips. "Ultimately, the audience will determine, through its attention to videos, whether YouTube succeeds or fails at this new ad gambit," Battelle said. "After all, producers of high quality video have plenty of options when it comes to hosting content these days -- it's cheap, and it's easy. No one has to post content to YouTube unless, of course, they want [to make use of] the distribution engine it has become." Will YouTube take the next step and require users to include ads in their videos in order to gain access to the site's massive distribution reach? Battelle said. In recent weeks, Google began integrating YouTube into its video search program, with searches on Google Video returning relevant YouTube videos as a top search result.
Of course, the social media -- or Web 2.0 -- phenomenon already includes an element of commercialism by those who participate. Blogging became increasingly popular, for instance, after Google and Yahoo (Nasdaq: YHOO) began allowing bloggers to join their ad networks, though only the most heavily trafficked sites earn significant revenue from those programs.
Other sites already offer users a cut of advertising proceeds in return for their creative content. Video site Revver offers a cut of its advertising income to both video creators and those who help propagate Revver-hosted videos across the Web via file sharing. Sharers can earn a 20 percent cut of revenue, while the creator and Revver split the remaining portion in half. Google is likely walking a tightrope with respect to YouTube -- it likely wants to demonstrate quickly that the purchase was worthwhile by showing revenue and profit from YouTube, but it also needs to avoid alienating the site's users by cluttering with ads what has been a pure community site to date.
"YouTube is a gem because it figured out what Google, Yahoo and all of the other video players in the marketplace couldn't -- that it's not about the video. It's really about the community that's around the video," Li said.
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eBay Cracks Down on Virtual Asset Sales
Online auction giant eBay is reportedly cracking down on the sale of "virtual assets" won in online games like "World of Warcraft," a move that comes as good news to other companies making money by hosting virtual asset sales and bartering. Millions of people worldwide are avid players of the online games. Over time, as they gain expertise, players acquire weapons, money and other goods coveted by less-adept or experienced enthusiasts. Spending real money, on eBay and other sites, was an easy way for some players to acquire the game assets needed to jump levels or otherwise advance. It also was a lucrative business for those selling the goods. So-called "game farms" exist where people play the games only to build up assets that can be sold.
However, the practice violates user agreements in most of the games. Those caught buying or selling virtual assets risked being banned from the online worlds. A Difference of Legal Opinion That isn't deterring companies such as IGE, however. IGE describes itself as "the world's largest secure network of buying and selling sites for massively multiplayer online game (MMOG) virtual currency and assets on the Internet." eBay's departure from the field should be good for IGE while only incidental for eBay, IGE Senior Vice President John Maffei said. "There seems to be wild speculation that eBay is pulling out of facilitating the trade of virtual assets via a secondary market," he said. "eBay is a huge, huge business. They have so many different things they are into. I cannot imagine, if you look at all the revenues generated by eBay, that this is more than a blip. But for us, it's our core competency and obviously, for us, this is a boon."
IGE is working to convince game producers, such as "World of Warcraft" maker Blizzard Entertainment, that they should embrace the real-world sale of virtual assets instead of fight it, Maffei noted. "There is some question about who owns these virtual assets," he added. "We strongly believe that if you go and play the game and collect those virtual assets, they belong to you. If you use Microsoft (Nasdaq: MSFT) Word to write a document, does the document belong to you or to Microsoft?" People pay monthly fees to play the games and they should be allowed to benefit from the time and expense, Maffei explained. "We tend to take a stance where we will support the consumers' rights to buy and sell these assets and we want to work with the publishers. We're trying to figure out a way to best partner with them because we think the secondary market is here to stay."
eBay obviously doesn't need the money from the virtual assets market and it also doesn't want to be involved in something with questionable legality, Edward Castronova, an associate professor of telecommunications at Indiana University said. Castronova found most interesting reports that eBay will not ban people from buying and selling assets acquired in Second Life, an online virtual world that actually encourages players to mix and mingle real world commerce with in-game life.
"Second Life isn't a fantasy game," insisted Castronova. "I'm really proud of eBay that they're making that distinction. There will be 3D, interactive environments that are extensions of the real world and they are designed to be that. Second Lifers conceive of it as an extension of the real economy and there's no point in saying people can't buy and sell virtual items from that."
eBay's ability to see the difference between Second Life and fantasy games is almost revolutionary, according to Castronova. "When a big company like eBay realizes they have to draw some lines, it's a big moment," he added. "The long-term impact of this awareness is very significant. It's a blue chip company recognizing ... and not saying these things are all stupid video games."
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However, the practice violates user agreements in most of the games. Those caught buying or selling virtual assets risked being banned from the online worlds. A Difference of Legal Opinion That isn't deterring companies such as IGE, however. IGE describes itself as "the world's largest secure network of buying and selling sites for massively multiplayer online game (MMOG) virtual currency and assets on the Internet." eBay's departure from the field should be good for IGE while only incidental for eBay, IGE Senior Vice President John Maffei said. "There seems to be wild speculation that eBay is pulling out of facilitating the trade of virtual assets via a secondary market," he said. "eBay is a huge, huge business. They have so many different things they are into. I cannot imagine, if you look at all the revenues generated by eBay, that this is more than a blip. But for us, it's our core competency and obviously, for us, this is a boon."
IGE is working to convince game producers, such as "World of Warcraft" maker Blizzard Entertainment, that they should embrace the real-world sale of virtual assets instead of fight it, Maffei noted. "There is some question about who owns these virtual assets," he added. "We strongly believe that if you go and play the game and collect those virtual assets, they belong to you. If you use Microsoft (Nasdaq: MSFT) Word to write a document, does the document belong to you or to Microsoft?" People pay monthly fees to play the games and they should be allowed to benefit from the time and expense, Maffei explained. "We tend to take a stance where we will support the consumers' rights to buy and sell these assets and we want to work with the publishers. We're trying to figure out a way to best partner with them because we think the secondary market is here to stay."
eBay obviously doesn't need the money from the virtual assets market and it also doesn't want to be involved in something with questionable legality, Edward Castronova, an associate professor of telecommunications at Indiana University said. Castronova found most interesting reports that eBay will not ban people from buying and selling assets acquired in Second Life, an online virtual world that actually encourages players to mix and mingle real world commerce with in-game life.
"Second Life isn't a fantasy game," insisted Castronova. "I'm really proud of eBay that they're making that distinction. There will be 3D, interactive environments that are extensions of the real world and they are designed to be that. Second Lifers conceive of it as an extension of the real economy and there's no point in saying people can't buy and sell virtual items from that."
eBay's ability to see the difference between Second Life and fantasy games is almost revolutionary, according to Castronova. "When a big company like eBay realizes they have to draw some lines, it's a big moment," he added. "The long-term impact of this awareness is very significant. It's a blue chip company recognizing ... and not saying these things are all stupid video games."
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School Barters Tuition on eBay
One student next term at Oklahoma Wesleyan University may have paid a lot less for tuition than his or her classmates. The university on Saturday kicked off an eBay auction of a year of tuition, room and board at the private college. The bidding had reached US$4,425 by 11 p.m. Bidders can buy the tuition for themselves or someone else. Among the bidders will be current students at the school, which has an enrollment of about 1,030 students. A year of tuition, room and board at Oklahoma Wesleyan costs about $23,000. The bidding will be open through Sunday, Feb. 11.
"I think it's a really neat idea," junior Emily Wright said. "I don't know why anybody wouldn't bid."
Mike Colaw, the university's special assistant to the vice president, said the school is looking to "create a buzz" surrounding the auction. The tuition recipient must meet the university's admission requirements.
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"I think it's a really neat idea," junior Emily Wright said. "I don't know why anybody wouldn't bid."
Mike Colaw, the university's special assistant to the vice president, said the school is looking to "create a buzz" surrounding the auction. The tuition recipient must meet the university's admission requirements.
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AdMomentum to Challenge Google, Yahoo
Like thousands of other Web sites, EDN.com relies on Google to handle a lucrative piece of Internet advertising -- the briefly worded links that produce revenue-generating clicks by targeting each individual reader's interests. The relationship has been profitable so far, but the managers of the technology Web site believe they could be making even more money if Google's system stopped serving up ads about potato chips or poker chips when a visitor is reading an article about computer chips. "We think we could extract more value from our advertising by not mixing potato chips with computer chips," said Stephen Baker, who oversees search-based advertising for EDN and dozens of other Web sites owned by London-based Reed Elsevier Group.
Although he has no plans to drop out of Google's network, Baker said he may try out a new advertising alternative being announced Monday by Fast Search and Transfer (Fast), a Norway-based company that specializes in providing search tools for businesses. Fast is marketing its platform -- dubbed AdMomentum -- as a solution for Web sites that want to become less dependent on Google and the other large advertising networks operated by Yahoo and Microsoft.
"It's like a digital marketplace in a box," said Sue Feldman, an IDC Research vice president who reviewed early versions of AdMomentum. "This gives Web sites an opportunity to become more independent and take more control over their revenue stream."
More money is rapidly flowing into "keyword advertising" -- the industry's description for the intuitive algorithms that quickly analyze search requests or other content displayed on a Web page before deciding which marketing messages to show. Annual spending on keyword ads is expected to top US$10 billion in 2010, up from $6.8 billion last year, based on estimates from eMarketer, which tracks the industry. With more money at stake, Fast is betting Web sites will be increasingly interested in developing their own ad systems so they won't have to share revenue with Google and the other networks. "Publishers are not going to want another hand in their pockets every time they are selling ads," said Perry Solomon, Fast's vice president of strategic market development. Solomon declined to discuss AdMomentum's pricing model.
Some Web sites already have embraced alternative channels. In one of the biggest examples so far, Walt Disney's ESPN.com dropped Yahoo as its advertising partner in September to sell the commercial links on its own, using a platform called AdSonar offered by Quigo Technologies.
AdMomentum figures to face an uphill battle in a market dominated by some of the world's most influential technology companies. Google looks particularly imposing, having raked in $20 billion from online advertising during the past three years. The company shared $6.7 billion of that amount with its advertising partners. Yahoo has spent the past two years tweaking its system so it does a better job of matching its marketing messages with readers' interests. The company plans to unveil the long-anticipated improvements Monday.
This isn't the first time Fast has challenged Google and Yahoo. For several years, it ran a general-purpose search engine called AlltheWeb.com that never made a dent in the market. Fast wound up selling AlltheWeb and several other affiliates in 2003 for $100 million to a company that was eventually bought by Yahoo. AlltheWeb now serves as a testing ground for Yahoo's alternative approaches to search.
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Although he has no plans to drop out of Google's network, Baker said he may try out a new advertising alternative being announced Monday by Fast Search and Transfer (Fast), a Norway-based company that specializes in providing search tools for businesses. Fast is marketing its platform -- dubbed AdMomentum -- as a solution for Web sites that want to become less dependent on Google and the other large advertising networks operated by Yahoo and Microsoft.
"It's like a digital marketplace in a box," said Sue Feldman, an IDC Research vice president who reviewed early versions of AdMomentum. "This gives Web sites an opportunity to become more independent and take more control over their revenue stream."
More money is rapidly flowing into "keyword advertising" -- the industry's description for the intuitive algorithms that quickly analyze search requests or other content displayed on a Web page before deciding which marketing messages to show. Annual spending on keyword ads is expected to top US$10 billion in 2010, up from $6.8 billion last year, based on estimates from eMarketer, which tracks the industry. With more money at stake, Fast is betting Web sites will be increasingly interested in developing their own ad systems so they won't have to share revenue with Google and the other networks. "Publishers are not going to want another hand in their pockets every time they are selling ads," said Perry Solomon, Fast's vice president of strategic market development. Solomon declined to discuss AdMomentum's pricing model.
Some Web sites already have embraced alternative channels. In one of the biggest examples so far, Walt Disney's ESPN.com dropped Yahoo as its advertising partner in September to sell the commercial links on its own, using a platform called AdSonar offered by Quigo Technologies.
AdMomentum figures to face an uphill battle in a market dominated by some of the world's most influential technology companies. Google looks particularly imposing, having raked in $20 billion from online advertising during the past three years. The company shared $6.7 billion of that amount with its advertising partners. Yahoo has spent the past two years tweaking its system so it does a better job of matching its marketing messages with readers' interests. The company plans to unveil the long-anticipated improvements Monday.
This isn't the first time Fast has challenged Google and Yahoo. For several years, it ran a general-purpose search engine called AlltheWeb.com that never made a dent in the market. Fast wound up selling AlltheWeb and several other affiliates in 2003 for $100 million to a company that was eventually bought by Yahoo. AlltheWeb now serves as a testing ground for Yahoo's alternative approaches to search.
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