Union Square Founder: New Online Ads Will Employ 'Native Monetization'
Traditional banner ads have long been the whipping boy of the online ad world. Ubiquitous but ignored, the display ad on the right side of the page has given way to a new generation of social-media formats blurring the distinction between advertising and content and promising higher levels of interaction.
That's the theme Union Square Ventures co-founder Fred Wilson struck in a morning keynote address at OMMA Global on Monday. Wilson said the newer forms of advertising fit into what he termed "native monetization systems" for Web properties. "This is not putting up banners on the right side -- this is the opposite of that," he said.
As examples, he pointed to different Web properties that have tailored their ad units or other features to the particular nature of content or services they provide. That includes Google paid-search ads linked to search keywords, Facebook "Likes," promoted tweets on Twitter and special deals offered through Foursquare. (Union Square is an investor in Twitter and Foursquare.)
Wilson underscored that the advertising in his examples often mirrors the look and feel of the site in which it served. A promoted tweet by Kiva, for instance, looks much like any other post on Twitter, and sponsored stories on Facebook appear in the news feed and incorporate users' status updates, "likes" and other social actions.
Streaming audio is another emerging segment where ads have been shaped by the content, offering formats that provide a combination of audio and visual elements suited to Internet radio. When combined with traditional radio campaigns, it can boost results by 3.5 times, according to Wilson. Likewise, other research has shown Facebook's sponsored stories deliver 46% higher click-throughs at 18% lower cost per fan than the site's standard units.
Because newer ad types are specifically built to fit with the underlying functionality of their sites, they deliver higher performance than traditional display ads, said Wilson. In another example, a pilot program that American Express ran with Foursquare at the South by Southwest conference in March that offered special deals locally showed that cardholders involved in the test spent 20% more on average than those who did not.
That doesn't mean online advertising will become any easier to master. "Now, if you want to be an online marketer, you have to operate like you're in a NASA control room," acknowledged Wilson -- with buying spread over different types of digital media and devices and tracking multiple sets of analytics. The media world is fragmenting, and it's only going to get worse. "We're not all just on Google and Yahoo any more," said Wilson.
Gearing advertising to specific platforms to improve performance also increases reach; users migrate away from Web portals to social-networking sites, blogs and more narrowly crafted content niches online. While many marketers may be eager to push into social media, they may not be quite as sold as Wilson on the results.
Twitter, for instance, only began rolling out ad programs last year, so it may take testing over a longer period for companies to feel confident that their ad dollars are well spent there. Questions have frequently been raised about Facebook -- the extent of analytics provided and the value of Likes as a standard metric for interaction on the site. Even if Facebook doesn't use term "display" advertising internally anymore, much of its ad revenue still comes from small ads on the right rail that look like banners.
Still, Wilson says it's important to embrace emerging digital formats as the Web audience continues to splinter across more specialized and socially driven forms of media. "There's no single channel any more. That's just the way the world is going ... and marketing opportunities are fragmenting equally," he said.