Does Truth In Advertising Still Apply To User Generated Ads?

from the legal-permutations dept

From a purely academic standpoint, it really is fun to see how modern technology is making life difficult for those who rely on old and potentially obsolete laws. However, the decisions made concerning these laws may have a pretty wide impact. We've discussed in the past the pitfalls of asking fans to create "user-generated" ads, but a new lawsuit raises a very interesting legal question. If you ask people to make their own ads for your product, how do truth in advertising laws apply? It's probably not much of an issue if fans are simply going out and creating an ad for fun on their own -- but what if you encourage it? Plenty of big name brands have been setting up contests, getting people to create commercials for them. Yet, when sub shop chain Quiznos did that, competitor Subway sued them, claiming that many of the ads made exaggerated in false claims about Subway's sandwiches. Quiznos, for its part, claims that thanks to the safe harbors of the Communications Decency Act, it's not liable for the content created by the participants in the contest. Subway, on the other hand, argues that by encouraging such actions with a contest, Quiznos has overstepped the boundary, and violated its trademarks. While you can see the reasoning behind Subway's argument, it's hard not to side with Quiznos on this one. No one is going to take most of the user-generated ads seriously -- knowing that they're designed to poke fun at Subway. Also, any attempt to expand "truth in advertising" type rules to fan-created ads is going to cause all sorts of unnecessary problems. Still, when politicians were first writing up trademark laws and truth-in-advertising laws, I'd imagine the possibility of user-generated advertisements never even crossed their minds.

Filed Under: advertising, safe harbors, truth in advertising, user generated content
Companies: quiznos, subway

Surprise, Surprise, Social Networking Ads Suck

from the as-expected dept

One of the questions that came up last week in Edinburgh was whether or not social networking sites were really the big moneymakers they claimed to be. In the discussion, what we agreed on, was that the social networking sites had done a good job in doing an "upfront" monetization, with MySpace getting a guaranteed ad deal from Google and Facebook getting a guaranteed deal from Microsoft. However, all the details suggested that on the backend things were pretty ugly. It's not hard to figure out why. Ads work on Google because people are looking for information. They do a search, and if the advertisement shows information that helps with the query, that makes everyone happy. However, when it comes to a social network, usage is quite different. People aren't looking for information about products -- they're looking to communicate with friends. In that environment, ads are seen as an intrusion -- which is the exact opposite of ads in a search world. That explains why Facebook was so focused on its Beacon offering, which was designed to try (rather unsuccessfully so far) to make an advertisement about communicating with your friends.

With all that said, I estimated that within a year, advertisers would begin to back away from social network advertising, unless some new, more effective, mechanism was found. I figured it would take about a year, because the mindset of advertisers would still be focused on just getting ads on these "hot properties" and it would take some time before they realized that no one looked at the ads. Apparently, my estimate was wrong. Brands are already staying away. At least, that was a major point behind Google missing its earnings estimates. It seems unlikely that this situation will get much better, unless social networks really do come up with a different form of advertising. They need to recognize that simply throwing up ads doesn't work any more. An advertisement can't be intrusive. It can't be annoying. It needs to be relevant and wanted.

Filed Under: advertising, earnings, social networks
Companies: google

ISPs Able To Use Your Surfing Data To Insert Their Own Ads Everywhere

from the privacy?-schmivacy dept

Earlier this year, we wrote about the fact that many ISPs were making good money selling your clickstream data to various companies for tracking purposes. Now there's a new advertising company that's come along to take advantage of this. The Associated Press has an article about NebuAd, a company that works with ISPs to use your clickstream data to better target advertisements to you. These aren't tracking cookies, which can easily be blocked, and depend on which websites you go to. This is your ISP, who has access to where you're surfing, using that data to insert more targeted ads. To its credit, the company has tried to be quite careful about keeping data private and setting it up in a way that it believes is impossible to trace the data back to an individual user. However, we've all heard stories about "anonymous" datasets that turn out to not be particularly anonymous. The company does also offer an "opt-out" solution, but how many people are even going to realize that their ISPs are a part of this program at all? It's also not entirely clear from the article where these ads are inserted, since most users spend little (if any) time on an ISPs own sites (however, some folks who have seen the ads suggest they appear... well... everywhere). While it's an extreme idea, just imagine an ISP combining this idea with something like what Rogers was caught doing in Canada (adding content to Google's page) and you could see how a greedy ISP might start putting its own, highly targeted, ads everywhere it wants, including places like Google's homepage. Hopefully, most ISPs recognize that this would lead to consumer outrage (and a lawsuit from Google), but would it be that much more complicated to be a bit more subtle and simply "replace" banner ads on certain sites without anyone really noticing? Yet another reason to encrypt all your traffic using a VPN or something to keep your ISP's prying eyes away from what you do.

Filed Under: advertising, clickstream data, isps
Companies: nebuad

New AllAdvantage Meets Same Fate As Old AllAdvantage

from the we're-shocked dept

We've said before that bribing users to watch ads isn't a good strategy. If an ad is relevant or entertaining, users will pay attention to it without financial inducement. And if it's not relevant or entertaining, it's not likely to be effective no matter how much you pay users to watch it. The latest example of this principle is Agloco, a reincarnation of the bubble-era AllAdvantage. Agloco, like AllAdvantage, paid users to display a window with advertisements on their screen. Also like AllAdvantage, it was a pyramid scheme where users would get paid a bonus for signing up other users. And now TechCrunch is pointing out that, like AllAdvantage, Agloco is going belly-up. It seems that their revenues are "not enough to support operating costs." When we covered Agloco's launch a year ago, we wondered whether the reincarnation of AllAdvantage was a sign of a new bubble. Their failure suggests that the markets are more rational this time around. The problem with the original bubble wasn't just that bad companies managed to get funding. It was that their stock values got inflated to ludicrous values and then crashed all at once. This time around, poorly-conceived companies like Agloco are able to get funding, but they run out of money relatively quickly and go out of business without dragging the rest of the market down with them.

Filed Under: advertising, content, paid advertising
Companies: agloco, alladvantage

Labels Concede That File-Sharing Isn't So Bad After All

from the a-little-late dept

Imeem, a social networking site that was in the recording industry's crosshairs earlier this year for allowing file-sharing on its network, has pulled off an impressive feat. This summer it settled its lawsuit with Warner Music by promising to give Warner a cut of advertising revenues from the site. Now the Wall Street Journal is reporting that it's signed similar deals with all four major labels, meaning that Imeem is now the first website whose users have the music industry's blessing to share music for free. What's especially striking about this is that for the last decade, the fundamental principle of the labels' business strategy is that sharing music without paying for it is stealing. They drove Napster, AudioGalaxy, Grokster, Kazaa, and other peer-to-peer file-sharing services out of business on that basis. As we pointed out way back in 2000, all this accomplished was to drive file-sharing underground where the recording industry couldn't get a cut of the profits. Had they approached Napster in 2000 the way they approached Imeem this year, they could have been collecting ad revenue from every file-sharing transaction over the last seven years. Instead, they wasted a lot of money on lawsuits, angered a lot of their customers, and ultimately still had to concede that music sharing might be OK as long as they get a cut. The only significant difference between Napster and Imeem is that Imeem only allows you to play music on its website, whereas Napster allowed you to download songs to your hard drive. But this isn't as big of a difference as it might appear at first glance. The Imeem website doesn't provide a "download" button, but there's no DRM involved, and it's quite easy to download music files from Imeem using third-party tools. And because Imeem's site doesn't use DRM, Imeem downloading tools are probably legal under the DMCA. So what we have here is the de facto legalization of Napster-like sites, as long as the record labels get a cut of the advertising revenue. It's an exciting development, albeit one that should have happened seven years ago.

Filed Under: advertising, file sharing, p2p, record labels, riaa
Companies: imeem, napster, riaa, universal

What Made Beacon A Bust?

from the too-big-to-make-it-work dept

There's no question that Facebook's Beacon initiative has taken a beating over the past few weeks. The feature automatically collected and published users' activities at partner sites, and almost immediately attracted criticism. MoveOn launched a campaign in opposition to Beacon. Horror stories of accidentally disclosed purchases — like engagement ring purchases and Christmas presents — began to circulate. The early word was decidedly negative, prompting some partners to begin to jump ship. Facebook has weathered similar storms before: its minifeed feature was met with a hostile reception, but is now emulated by virtually every new social network. But this time they caved: on Wednesday founder Mark Zuckerberg wrote a rather contrite blog post:

We've made a lot of mistakes building this feature, but we've made even more with how we've handled them. We simply did a bad job with this release, and I apologize for it.

...

Last week we changed Beacon to be an opt-in system, and today we're releasing a privacy control to turn off Beacon completely.

It remains to be seen whether users will opt out en masse — there are indications that many may still not be aware of Beacon. But the negative press seems likely to scare away potential partners. So while it would be premature to declare Beacon a failure, it seems very unlikely that it will ever achieve its intended net-spanning potential.

I think there are three reasons why this happened. First, Beacon's simply not a feature that people — as opposed to companies — were clamoring for. Facebook noticed its users expressing opinions about products and saw a great opportunity to make money. But they couldn't resist removing the messily inefficient human portion of the opinion-expression process. Unfortunately, users didn't get much value from having that process automated.

Second, and perhaps most obviously, Facebook bungled the deployment of the feature. As Zuckerberg admits in the above-linked post, the company didn't think hard enough about how users would respond, and was too slow to react to how they did.

But the third factor may be the most problematic for Facebook: they're just too big. I don't mean to call MoveOn's anti-Beacon campaign dishonest, but it's not exactly in keeping with the organization's style. It's hard to imagine they'd have undertaken the effort if there wasn't plenty of free press attention to be had by attacking Facebook. The social network has achieved a level of popular attention that makes them an attractive target (and, if you subscribe to the nightclub theory of social networking, one that could presage a no-one-goes-there-because-it's-too-crowded problem).

Of course it would be silly to spend too much time doomsaying — the site's pageviews continue to grow at a healthy clip. But in the wake of the partial collapse of Beacon, it's hard to imagine Facebook launching another initiative as ambitious — and it's even harder to imagine them launching one successfully.

Filed Under: advertising, beacon
Companies: facebook

AOL Learns That You Can't Just Go 'Free, With Ads.' You Need To Give People Reasons To Visit

from the business-model-101 dept

It's been a little over a year since AOL made the big decision to go free. It was about the only thing the company could do at the time. It's subscriptions were dropping rapidly. It held little to differentiate itself from the many free services out there. It had failed to build a real broadband strategy for years. The problem, though, was that the decision to go free was made way too late and, most importantly, without much additional strategy behind it. It seemed like the strategy was basically just "if we go free, we'll sell ads." They left out the important middle step though: the company needed to actually give people a reason to visit and give advertisers a reason to buy ads. Without that step, it really isn't surprising that the company is realizing its "free, with ads" strategy isn't working as well as planned. On the same day that AOL officially bought another online ad company, it was revealed that the growth in ad revenue has been slowing, and it lost a big advertising partner. This is a good reminder, though, for other companies out there who are trying to figure out how to embrace "free" as a part of their business model. You can't really neglect the rest of your business model.

Filed Under: advertising, business models, free
Companies: aol, time warner

Advertising: The Revolution Won't Be Through Friend Requests

from the skip-this-step dept

Yesterday Facebook announced its long-awaited advertising program. This was inevitable: if you're going to justify a valuation just shy of Iceland's GDP, you've got to eventually propose a means of generating revenue. Facebook will no doubt earn quite a bit of money at the ad game. But the initiatives disclosed yesterday are likely to be a mixed bag — and not at all as innovative as founder Mark Zuckerberg would have you to believe.

The most straightforward of the new offerings is Facebook's contextual advertising system. Drawing on the vast amounts of data provided by its users and supplying metrics and query capabilities will no doubt prove to be lucrative. Much has been made of Facebook's particularly rich user data — perhaps too much. Although that data is likely to be better structured and therefore easier to leverage, it's not obvious that Facebook will be able to target ads to its users more precisely than, say, Google does within Gmail. Still, it's hard to imagine these ads being anything less than a huge financial success.

The same can't be said for Facebook Pages, which will provide brands with profiles on Facebook. Facebook has already tried this approach with Wal-Mart, and the results were disastrous. Not only did the nominally back-to-school-oriented page fill up with complaints about the retailer's business practices, but — perhaps more tellingly — many users attacked Wal-Mart and Facebook for bringing corporate shilling to their beloved social network. MySpace's brand profiles have met with a similarly lackluster response: An Inconvenient Truth's MySpace page was something of a marketing coup, but once the novelty wore off the practice failed to produce anything of significance. Although other companies will attract less ire than Wal-Mart, it's hard to imagine users being any more keen to engage with them (except, perhaps, for already-elite brands like Apple or Nike).

The final and most interesting prong of Facebook's strategy is Beacon, a system that will allow partner sites to post users' actions back to Facebook. Having your Amazon purchases or Netflix selections displayed in your mini-feed are the sorts of applications that are being hyped. As you might imagine, Beacon carries privacy concerns, as well as worries that the move will result in a further dilution of Facebook's already annoyingly low signal:noise ratio.

But to my mind the biggest unknown is whether the new data will be considered meaningful by consumers. There's no question that endorsement of a product by a peer is the most effective form of advertising available. Beacon is built with the hope that there are many marginal cases in which users would be willing to recommend the products they're consuming, but can't be bothered to take deliberate action to do so. But does purchasing a product necessarily mean a user wants to endorse it? Or do consumers prefer to curate their public purchases, picking and choosing the brands that they want to use to define their online identity?

It's not clear what the answer is, but I think there's reason to be skeptical of any initiative that attempts to automate individual peer recommendation. After all, genuine human enthusiasm is the sole reason why such recommendations are so effective.

Filed Under: advertising, brands, endorsements, privacy, social networks
Companies: facebook

Should Facebook Users Worry About Ad Snooping?

from the probably-not dept

The New York Times's Bits blog points us to an interview with Esther Dyson in which she raises questions about the way social networking sites (especially Facebook) are planning use customers' data. She seems like she might be lumping together two different issues that ought to be kept separate. If she's simply saying that Facebook should get permission before sharing private user data with advertisers, it's hard to argue with that. But she seems to be making the broader claim that Facebook shouldn't even use private information to choose ads on its own site without getting the user's permission first. That doesn't make a whole lot of sense to me. The information is already on Facebook's servers, so it's not likely to create new security risks to have the advertising algorithm take the information into account. Moreover, targeted ads can be chosen without ever giving advertisers access to anybody's private information. A shoe store might, for example, ask to have its advertising displayed to every Facebook user who's under 35, female, and within 50 miles of the 63105 area code. The shoe store would never get a list of Facebook users who met that criteria, nor would they be given the specific age or zip code of people who click on the ad. Rather, Facebook's own software would automatically display those ads and then bill the shoe store based on the number of impressions or clicks that were generated.

Filed Under: advertising, behavioral targeting, esther dyson
Companies: facebook

Do Not Track List Won't Make Advertisers Happy

from the resistance-is-futile dept

Just as Facebook is looking to launch its own behavioral advertising network, AOL and some privacy groups are pitching the idea of a "Do Not Track" list that would effectively let people opt-out of behavioral advertising tracking. It's a challenging issue to deal with. Advertisers, obviously, want more data and information about who is viewing their ads, as well as having the ability to better target those ads. At the same time, the theory is that people are much more receptive to highly targeted, relevant ads. The problem, though, is that many internet surfers have no idea how much information they're handing over and how it's being used (and many would argue that the more relevant ads aren't actually appearing). If they knew how much data was being collected, however, many would probably be quite upset. The purpose of the Do Not Track list would be to give them back some control. Advertisers, of course, won't like this idea at all, as they often feel it's their divine right to have as much information as possible. They'll also complain that without this data, advertisements will actually be less relevant and less useful -- which might actually be true. In the end, though, it seems like while a "Do Not Track" may get lots of publicity, but how many people will actually sign up? Certainly I'd expect techies who are more concerned about this kind of thing to sign up -- but the average consumer? Unlike the "Do Not Call" list, most people don't even realize that they're being tracked, and so are much less likely to have the incentive to opt out of being tracked.

Filed Under: advertising, behavioral targeting, do not track
Companies: aol