• by Steve Smith , Staff Writer @popeyesm, February 1, 2008

Until just last week, Rich Frankel was widely known in the behavioral targeting community as Yahoo's leading expert on the technology and senior director of product marketing. Newly appointed as COO of SocialMedia Networks, Frankel is moving his vast experience and knowledge into the social networking space, and so we asked him to reflect on how BT will work in social media applications the company helps developers build and deploy. Joining the discussion is Seth Goldstein, CEO of SocialMedia, who says that social networks are causing a demonstrable shift in online behaviors.  

Behavioral Insider: What is your view about how BT has evolved?

Rich Frankel: ...There are a lot of different things consumers are doing that help identify them as being interested in a product or being relevant for advertisers. There are a lot of different threads of activity and approaches going on. But at a high level the story is about different ways of understanding consumers' activities in ways that are helpful for advertisers and are acceptable for consumers.

There are a lot of privacy concerns. But I think relative to those privacy concerns there is also a tremendous understanding and [acceptance] by consumers about what is happening online and why they get so many great services for free. The thing that drew me to Social Media Networks was, I saw a great opportunity to leverage these new ways of understanding consumer activity, and I thought that the application space was especially interesting. In the early days of social media, consumers were using it for light communication. With the advent of the applications there was a huge explosion of innovation in ways for consumers to communicate among their friends. That dynamism I thought engendered an opportunity to do some really fun and new things.

BI: What has social media done so far?

Frankel: It started out with a bunch of applications like ‘Happy Hour' and ‘Food Fight' [Facebook apps] and morphed into building a network for other application developers to help them be successful and enable them to build more applications and more fun things. The company went through a transformation from being an application developer to being a network of application.

 
BI: In what forms do ads run through these apps?

Frankel: The most common is a text ad format, which was designed to fit in simply with the Facebook environment, look and feel. It has done quite well -- but advertisers are looking for more flexible formats, and we know that consumers are interested in a variety of ad formats.

BI: Many marketers seem to dream of making their own branded widget or app that spreads the message virally. But does everyone really want a Nike or Snickers widget?

Frankel: There's not a final word in this area. What we have found is that consumers love engaging, fun applications that allow them to engage with their community and their interests. Very heavily branded, commercially-oriented applications we haven't seen do all that well, except in a few areas that are more entertainment-oriented.

But if you are going to build applications, you have to get people to come to them. When you start to think about the integration of the promotion of the applications with the application, then you realize that the promotion itself can be a very successful tool. We think that for some advertisers the ad itself can retain the elements of the applications and create an engaging experience.

Advertisers are sometimes too focused on applications now. In order for an application to be long-term successful, consumers [have to] want to come back to them over and over. For commercial applications, they may not want to come back or use it every single day. In movies or in TV, where an audience is engaging frequently, then the application can make a lot of sense. In other cases that are more transactional, an application may not make as much sense, and advertisers may be better served focusing on putting the key elements into their advertising.

BI: What sort of return path or back channel of information about the consumer is available from social network apps?

Frankel: Widgets and applications are still built using the basic building blocks of the Internet. So we understand response in applications, if the consumers tell us things about themselves that are interesting. We make available to advertisers and publishers information about what consumer are doing in the applications, what kinds of activity leads to higher levels of engagement with the application and more frequent use. We are also experimenting with new metrics, because I think that as advertisers are trying to understand what is happening in applications, some of the old metrics like click-through rates are becoming less important than some new metrics like frequency of use or time spent.

Seth Goldstein: There is a distinction between widgets and apps. Apps carry a lot more social metadata in terms of the interactions that goes on within it. So-and-so has reviewed a film and wants to share it with his friend, or he has configured a car and wants to test-drive it with his friends. The beauty of applications is that all those social actions that happen within them are typically available to networks and advertisers. These immersive social experiences are driving pretty considerable behavioral change and a ton of page views.

BI: How so behavioral change?

Goldstein: One of our investors, Marc Andreesen, who started Netscape, and I were chatting, and we noticed that we would expect a drop-off in social activity after the new year, as one usually sees after the holiday shopping season. Instead we saw the opposite, a tremendous uptake in page views across all these social networks.

Facebook seems to be becoming more mainstream and more embedded in daily use. Facebook calls itself a social utility, and that is what is happening. People are spending more and more time inside of these social networks. They aren't spending as much time reading blogs or using instant messaging. A lot of those discrete behaviors have been displaced into this environment. You are inside Facebook and can get everything you need to get done with anyone you want within it.

The content niche Web sites are enjoying their $10 and $20 CPMs, and the social networks are seeing CPMs sometimes under $1, but the audience is moving to the latter rather than the former. You don't have to be [an] analytical scientist to see that there is a huge behavioral shift into social networks and Facebook in particular, and that there is a really valuable audience spending more of their time away from niche content sites and away even from the blogosphere. How do you get your brand message in the midst of that? It's not simply about putting up a banner, because people ignore banners. There is a considerable audience here. I think the money will follow. I have no doubt.