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Four Things to Consider Before Advertising on User-Generated Content Sites

By Greg Howlett.

A recent study from BlueLithium suggests that online retailers can find advertising bargains on Web 2.0 sites that feature user generated content.  While this initially seems like good news, there are additional factors that retailers should consider before jumping on the Web 2.0 bandwagon.

The study compared the cost per conversion between three different groups of sites—user generated content (UGC) sites, non-user generated content (non-UGC) sites, and highly authoritative editorial sites.  Both the non-UGC and authoritative sites had significantly higher click through rates and conversion rates than the UGC sites.  However, when factoring in the ad cost, the UGC sites had a lower cost per click and cost per conversion.

So how is this information relevant to your business?  Just as importantly, what information is not found in this study that you need to know before making advertising decisions about Web 2.0 advertising?  Here are a few thoughts.

  1. Trust is an issue on UGC sites.  Not surprisingly, the authoritative sites generated the highest click through and conversion rates, and were followed by the non-UGC sites.  UGC sites were way behind in these two areas.  This is a clear signal that visitors do not hold UGC sites at the same level of trust as other sites.
  2. UGC sites will only remain an advertising bargain as long as their ad rates are lower than rates on non-UGC sites.  Today, the vast majority of UGC sites have few options for selling advertising, but in the future, it is feasible that even small blogs will have the ability to get much higher ad rates.  If that happens, today’s opportunity may disappear.
  3. This study gives no insight on the “social buzz” phenomenon.  Viral marketing, paying for user generated content, and similar strategies were not addressed.  However, most experts believe that these strategies are where the real advertising opportunities exist with Web 2.0 sites.
  4. The easiest way to advertise on UGC sites is AdWords.  However, few advertisers seem to be able to make this work.  In fact, since Google started allowing advertisers to bid differently for AdSense websites, those bids are dropped drastically and many advertisers refuse to bid for placement on those sites at all.  Going directly to UGC sites to buy advertising does result in lower ad rates.  However, because UGC sites tend to be low traffic, putting together a large campaign is normally too time-intensive to be feasible.

If you choose to advertise on UGC sites with traditional advertising units such as banners or text ads, make sure you are getting as good a deal as you think you are.  It is quite possible that cheap ad rates are being offset by a low click through rate or conversion rate.  As with all advertising, good reporting is critical to identifying problems.

On the other hand, using UGC sites to create social buzz for your product line could be very cost effective and could even lead to dramatic results.  In my opinion, this is the better Web 2.0 alternative for most retailers.

Having launched two multi-million dollar online companies, Greg Howlett has been working in the trenches of internet marketing for over eight years.  He currently is the President/CEO of Vitabase, a leading health supplement company, selling hundreds of products under the Vitabase label.

How Not to Run a Campaign

The world of presidential Internet campaigns is new and largely uncharted. Unfortunately, some of the lessons will be learned the hard way—like Senator Barack Obama’s campaign learned this week.

It all started three years ago when an Obama fan, Joe Anthony, created a MySpace page for the then-candidate. The Senator’s presidential campaign team came across the profile and, with Joe’s cooperation, made it into the “unofficial” MySpace page for the campaign. The page amassed more than 160,000 friends, making Obama’s far and away the most popular of all the presidential candidates’ profiles.

But the site soon became unwieldy to maintain. Joe found maintaining it to be a large draw on his time, even though he’d given the campaign access to the page. He did what most Americans would do in the situation—ask for money. But not just a little money. According to the Wall Street Journal, he asked for $39,000 for the time and effort he’d put into the site over the years.

Did News Corp. Save MySpace?

Richard Rosenblatt, chairman-CEO of Demand Media and former CEO of Intermix, told AdAge that:

“MySpace was in an interesting stage of its development [when News Corp. acquired it],” he said. “It had a different type of capital structure and we weren’t able to make the type of investments for the infrastructure. Ultimately if we hadn’t sold to News Corp., MySpace wouldn’t be around today.”

Really? I think that it would certainly be different, but I would hope that MySpace could have found a way to monetize itself.

Then again, perhaps what Rosenblatt means is that without the major investment from News Corp., they wouldn’t have been able to strengthen the infrastructure and prepare for the 100+ million users today. I usually tend to focus on what MySpace is doing for News Corp., but I suppose that it probably goes both ways.

Del.icio.us Offers Better Search Results than Google?

I’m not sure if Rand was hoping to start a debate on this (if he did, it’s crafty linkbait) but he’s making the claim that the search results at Del.icio.us are better than those of Google.

Here are some of the examples Rand gives…

  1. Furniture vs. at Google
  2. Luggage vs. at Google
  3. Laptops vs. at Google
  4. SEO vs. at Google
  5. Web Design vs. at Google

Ok, so Rand does admit that the results from Del.icio.us are not perfect, but does suggest that they’re good enough to take on Google.

I tend not to agree with Rand on this one (friends can disagree you know). I think Del.icio.us is great for finding resources or information pages and is also better at finding fresh content, but I don’t think it’s better than Google, when it comes to product or service related search terms.

The Diggocracy Strikes Again

Muhammad Saleem at Pronet Advertising reported this morning on a story that got banned on Digg.

The story in question refers to, and asks the readers to spread the HD-DVD Processing Key for all movies that have been released in the format so far.

Digg pretty much had to block it because, as Muhammad points out, if they have knowledge of a copyright-infringing activity, they’re prosecutable.

Diggers, unsurprisingly, were unhappy with this. And, being Diggers, they struck back. Muhammad posts again about Diggers’ response: to post and digg the same numbers on different, non-banned URLs. He concludes:

This incidence only goes to show that the social web is a great tool in the hands of the masses, but in the absence of any moderation or regulation, the masses can become a mob; and this tool in the hands of the mob can lead to nothing good.

IAC Gives Teenagers a Virtual World for their Zwinky

Unless you’re a teen reader of Marketing Pilgrim, or happen to have a teenager in the house, you may not know anything about Zwinky. The IAC owned site allows you to create custom avatars, give them a wardrobe, hair, accessories and then add them to MySpace and interact with others.

Up until today, your Zwinky had a limited existence and didn’t get out much – probably too much homework. Now, thanks to the launch of Zwinktopia, your avatar can grab its iPod, skateboard etc, and head out into the real virtual world.

As TechCrunch explains

Today Zwinky will add a virtual world to the site called Zwinktopia – users can use their avatars to roam around the world, chat with other users and engage in activities to earn Zbucks, the virtual currency of Zwinktopia. Zbucks can be used to buy virtual clothing and other goods.

As Social Networking Rises, TV Watching Decreases

A new study from Marketing Evolution (commissioned by MySpace, Isobar & Carat) suggests social networking users between 14 and 40 years old are increasing their internet, email and instant messaging usage, while decreasing the amount of time they spend watching TV and playing video games.

Ok, which genius thought it would be a good idea to measure the habits of teenagers, and those approaching their mid-life crisis, in the same data set? How many 40 year olds do you know that play video games? (go ahead “out” them in the comments section). ;-)