DEAL COMMERCE (aka Daily Deals): The New AdSense

A recent survey by the American Institute for Certified Public Accountants indicated that over 23 million Americans (10% of the adult population) purchased a daily deal in 2010.   There is no doubt that the Deal Commerce space (aka Daily Deals) is huge, and poised for continue growth.  But how prevalent will Deal Commerce become?

We think Deal Commerce can become as ubiquitous as AdSense.

When Google introduced AdSense in 2003, the concept was simple:  take the search experience, and the unparalleled traffic monetization of Google.com, and present contextually relevant paid links all around the net.  Today, AdSense is part of the monetization toolset on millions of websites, in addition to over 50 million “parked” domain names around the world. (Aa “parked” domain is a website that exists simply to monetize the direct navigation traffic through Google AdSense.)  In 2010, Google earned roughly 30% of total revenue through Ad Sense.

AdSense in a Parked Domain:

AdSense spread rapidly because it is such a powerful tool for monetizing from Internet traffic. There has never been a true competitor to AdSense for monetizing traffic on many Internet sites.  Until now…

We believe that Deal Commerce, which is embryonic today, will evolve into an increasingly powerful and personalized commerce experience, with the potential to pose the first true alternative/complement to Google AdSense for monetizing large swaths of Internet traffic.

At the recent heavily attended Daily Deals Summit in New York, we were surprised by the substantial number of media companies including Rogers Media, The Boston Globe, CBS, Hearst, The Wall Street Journal, and others that were looking to develop partnerships to monetize their traffic with Deal Commerce.  We even met a domainer who is buying up Deal Commerce related domain names to monetize their traffic with affiliate deals.

The reason that so many people came to the Daily Deal Summit and the reason for the general frenzy going around Deal Commerce is because the economics work.  Local retailers can easily leverage the Internet to drive significant traffic to their store in a cost effective manner.

And it’s not just local merchants that are participating; big brands are also getting in the mix.  While the press gave a lot of attention to national deals run by The Gap (not happy with outcome) and Amazon (happy with the outcome), we are seeing more nuanced national deals like General Mills recent deal to offer deep discounts on “packages” of 12 General Mills products in Minneapolis.  In short order, 5,000 packages were sold out.  In addition to the one time lift, the General Mills deal also included a book of coupons that was delivered to the buyers’ homes.

While much has been written about the presumed lack of long-term value that customers sourced through the Deal Commerce ecosystem provide to companies, we believe that concern misses the larger picture.  We believe that a new commerce paradigm is emerging to which consumers are responding in massive numbers around the world.   The simple undeniable truth is that…….everyone wants a deal.

The ecosystem is evolving rapidly, and providing incremental value to users and merchants.  A great example is Village Vines (see Guest Post by CEO Dan Leahy later in this report).  The Village Vines value proposition to consumers is very simple, 30% off high end restaurants.  The twist for the restaurants is that they get to choose the days and times the discount can be used ─ so they don’t have to give the discount on a Saturday night when the restaurant would be filled with customers paying the full freight.  We highlight Village Vines as a simple example of how the Deal Commerce space will evolve.

Another example of the rapid evolution is the market share gains made in the U.S. by Living Social:

There are many factors driving the market share shifts noted above, including the Living Social offer by Amazon in which 1.4 million consumers participated, many for the first time ever in a Daily Deal.  However, we believe another factor is that Living Social is a Second Internet company at its core, having its roots in Facebook applications.

That’s why Living Social gets a significantly larger share of its traffic from Facebook than does Groupon:

Recognizing their users’ interest in Deal Commerce, both Google and Facebook are taking steps to retain some of the value they are sending elsewhere.  Months after having their $6 billion offer for Groupon rebuffed, last Thursday, Google unveiled Google Offers, rolling out the initial beta version in the Portland, Oregon market.  In March, Facebook announced its intention to test a daily deals service in San Francisco, San Diego, Atlanta, Dallas and Austin and on Monday, they unveiled their Social Deals product in these markets.

Not only will new entrants contribute to the burgeoning ecosystem, we believe that Deal Commerce is poised for major evolution as location is increasingly factored into the deals offered. The Groupon Now Mobile App is poised to rollout in Chicago.  The app will have two buttons “I’m Bored” and “I’m Hungry”.  When a consumer hits one of the buttons, they will see nearby deals, offered for brief periods of time, which will meet the need indicated.  LivingSocial’s Instant Deals is a similar platform being tested in Washington D.C. that enables merchants to create deals on the fly and get traffic in the doors for certain periods of time.

To sum up our view, we believe that Deal Commerce is not a passing fad, but rather, the category is emerging as a major new commerce experience driven by the ease with which local merchants can leverage the Internet for the first time.  It’s the early days and there will be rapid market share gains and losses as the ecosystem evolves to best serve the needs of merchants and consumers.  But given the ability to drive significant revenue, we believe Deal Commerce may become as ubiquitous as AdSense around the net.

Given how diverse and rapidly evolving the Deal Commerce ecosystem is, we are pleased to present the following guest posts by some of the companies that are driving the revolution.

 

Segmenting the Deal Commerce Market

Guest Post by Jim Moran, CEO Yipit

Though just two years old, the Daily Deal market is now worth billions and specialty layers are forming to slice that value.

Here’s how we view the Daily Deal market:

Daily Deal Sites

The largest players are pure play Daily Deal sites, such as Groupon, LivingSocial, BuyWithMe and others. These companies service both consumers and merchants and they control the majority of value created today.  According to our recent data and industry estimates, Groupon generates around $17K per deal, while LivingSocial generates $23K. Mean price point for both is approximately $45 per offer, however, Groupon runs significantly more offers per day, and thus has total daily revenue above its peers.

 

Vertical Deal Sites

Attempting to compete with the scale of the larger players, newer entrants often focus on a single vertical. Conceivably, they have an edge on user acquisition since everyone who signs up for a niche daily deal service is interested in that niche. Furthermore merchants working with such a specialty site would enjoy better access to enthusiastic, repeat customers for their vertical.

The largest vertical focused site that displays its purchase count is OpenTable, which averages 563 vouchers sold per deal at $25 per voucher, or $13K per deal.  Vertical sites’ pricing can vary widely across niches: LivingSocial Escapes, its travel offering, averages $288 per deal while Gilt City averages $110.  At the other end, Yellowbook’s Weforia, ValPak Deals and the Village VOICE each average $21.

 

Publishers

Major publishers like the DailyCandy, McClatchy, NYTimes, SF Chronicle, San Diego Union Tribune, and Thrillist have entered the space. Their specialty is mobilizing their audience, whom they’ve been telling how to spend their local dollars for years.

Publisher success has varied depending on style of implementation: For instance, San Diego Union-Tribune’s product, which is displayed prominently on its homepage, averages $19K per offer from fewer than 1 million monthly unique visitors, while the Washington Post’s product, which is absent from its homepage and has a separate brand, averages less than $5K per deal despite WashPo having nearly 10X the traffic.

 

White-Label Providers

White-Label providers focus on the publishers with access to consumers. Certain white-label providers such as Analog Analytics and Nimble Commerce are mostly technology plays, while others such as Powered By Tippr and Group Commerce have a large sales forces.

 

Exchanges

There are now at least four Daily Deal exchanges facilitating the transfer of merchant offer contracts between sales forces and publishers.  Presumably the market is made on commissions offered to the publisher and details of the offer. While this is a new segment for Daily Deals, we note that in the display ad world, exchanges represent an increasing portion of total display ad dollars.

 

Merchant Services

There’s no shortage of people trying to own the consumer mindshare in the daily deal space, and similarly, services are forming to maximize the value to merchants in the burgeoning space. Companies like Closely have methods for merchants to convert promotion visitors into repeat customers.  There are also agency models, like Stampede, that help merchants optimize best practices, demographics and commission rates for their clients.

 

Consumer Services

The purchasing and redemption of offers has created new pain points for consumers that startups have formed to address. Secondary markets like Lifesta, DealsGoRound and CityPockets allow users to exchange unwanted vouchers with each other.

 

Aggregators

As the number of daily deal sites has continued to proliferate daily deal aggregators like Yipit have formed to recommend deals to users based on where they are and what they like.

 

Taking a Closer Look at the Stand-Alone Deal Commerce Sites

Guest Post by Eric Yohay, Business Development BuyWithMe

The daily deal industry has seen an explosive number of competitors emerge in the last 18 months (350+ companies).

While surveying the competitive landscape, we have found single city daily deal players gravitate towards two separate buckets:

  • Peaks ~10K unique users, 2K registered buyers, gross monthly sales from 10-20K at a frequency of 1-3 deals per week.
  • Peaks ~30K unique users, 5k registered buyers, gross monthly sales from 30-75K at a frequency of 3-6 deals per week.

Through conversations with over 50+ daily deal sites, we found that 90% fall into the first bucket.  For these companies, growth typically flatlines due to low (or no) paid marketing efforts, narrow focus on single city growth, and lack of sufficient capital to staff for sustainable future growth.

At the top of the spectrum, the largest national stand-alone players are Groupon and LivingSocial.  These players are the few who are able to run true local deals (compared to national e-commerce deals) with local merchants through their shopping portal (no aggregation of deals from other sites) and have been able to sustain a new deal every day in every major US market.  This type of frequency and scale is only obtainable through heavy investment in a direct sales force, tech resources, and user acquisition.

While a majority of the market typically can only feature 20-30% new deals (merchants first time running on a daily deal site), Groupon and Living Social are able to fill over 80% of their deal calendar with first time deals.

The major differences in growth strategies between the single city daily deal players and the top national players can be explained by their ability to dedicate financial resources to different channels.  Single city players must rely on organic word of mouth growth, merchant participation (emailing the deal to their list), social media, and event type marketing.  Living Social and Groupon, conversely, can rely on the snowball effect of tying up high quality merchants who have never run before, with massive distribution channels stemming from affiliate type relationships and large member lists.  These large member lists are fueled by rapid investment in digital marketing efforts, the network effect of having quality deals worth sharing (refer a friend programs), and PR/offline outreach.

With a deep understanding of the economics to the deal space, BuyWithMe is working to secure its place as the number three player. There are so are many other players.  Most will fail.

 

Utilizing a Unique Model of Deal Commerce To Improve Restaurant Yield Management

Guest Post by Dan Leahy, CEO Village Vines

With their ability to drive thousands of new customers to a local business in a single day, daily deal sites have quashed the notion that small businesses cannot use the Internet as a marketing tool.

Yet the very simplicity that has enabled these websites to scale at breathtaking rates has also limited their ability to serve a wide segment of the local business landscape.  A popular restaurant typically filled to 80% capacity is hard pressed to slash its prices through a daily deal when doing so means its loyal customers won’t be able to get a reservation (at full price) for months while the venue is inundated with coupon-wielding patrons.  As such, the restaurants that opt to offer daily deals are typically those in dire need of huge influxes of new customers, certainly an adverse vendor selection from a consumer’s perspective.

VillageVines is the web’s premier yield-management solution for restaurants, incentivizing consumers to dine during times when its restaurant partners have empty tables.  Members pay $10 to make reservations with over 500 restaurants in New York, Washington DC, Chicago, Los Angeles and San Francisco, and in turn their parties receive 30% off their entire bills (food and drink). Restaurants populate the inventory on VillageVines.com with their tables that do not typically turn, driving substantial new business (many VillageVines restaurant partners report over $30,000 in incremental monthly sales from the service) while ensuring that they do not cannibalize their natural demand. And consumers can enjoy the finest restaurants their cities have to offer at unbeatable values.

Just as Priceline and Expedia revolutionized the way in which consumers book travel, VillageVines is changing the way consumers make their dining decisions by introducing pricing sophistication to the restaurant industry, and our marketplace is growing stronger every day. The daily deal space is not going anywhere, but as the market matures, solutions custom-built for targeted market segments will distance themselves from generic products trying to serve every type of business.

 

Iterating the Model to Improve Profitability

Guest Post by Chad Nell, CEO Stampede

Stampede aims to help businesses smartly use Deals and Social Marketing in new ways to maximize business growth.

As an example, Closely just launched “Social Select”, a program that turned the concept Daily Deals into a social tool for converting visitors into recurring customers, and for generating social referrals from the best customers. Offer Cards are printed with unique codes that take the user to a personal daily deal designed for return visits and for sharing with friends. Businesses have embraced the increased control of how and when they use these deals.

Another example is with the work Stampede is doing with OpenJar Concepts, Inc, an Integrated Marketing Firm.  OJC has a core competency of generating leads for clients in a variety of verticals ranging from Cost-Per-Lead to Cost-Per-Order offerings, using TV and Radio as the medium for awareness.   OJC brings a proprietary tracking and reporting system to their clients as well as enabling mobile offers and other key components to the marketing mix. OJC will be working with Stampede to bring national clients from products, services and brands to the Daily Deals market, with most deals supported by traditional marketing awareness.  In addition, OJC will assist Stampede in building out a Daily Deals network, similar to ad networks, that will include Tier 1 to Tier 3 sites, as well as sites with varying subscriber bases, and sites that are broad in focus or more narrowly niche-focused around topics or demographics.  The shared focus is to simply enhance the client experience.   By finding the tools that offer incremental value to merchants, the market will continue to expand as merchants that previously wouldn’t have considered Daily Deals, now find real value.

President Obama Visits Facebook, Gets Mark Zuckerberg To Wear Jacket & Tie for Second Time

Recalling memories of then-Governor Bill Clinton campaigning on MTV in 1992, on Wednesday President Obama engaged the Facebook Generation by leveraging Facebook Live capabilities to broadcast his town hall meeting at Facebook headquarters to the Facebook audience.   While the President didn’t break the record Facebook Live audience of 1.2 million who watched Katy Perry visit Facebook, the audience exceeded 100,000 people around the world.

Explaining his visit to Facebook, President Obama stated his belief in the importance of Facebook as a platform that is revolutionizing how we receive and process information.  By keeping citizens informed and engaged in the two-way conversation, Facebook is fostering a healthier democracy, stated President Obama.

This was the second time this year that President Obama has met with Mark Zuckerberg, with the previous meeting coming at a dinner with Silicon Valley’s top CEOs in February.

As we have previously mentioned, one of the risks to Facebook remains government regulations.  Facebook’s efforts to engage Washington are helping the company to navigate the regulatory landscape.  In 2010, Facebook spent $351,390 on lobbying (Google spent $5.2 million while Yahoo greased the wheels in Washington to the tune of $2.2 million).

Finally, it’s interesting to note the political debate that ensues when a President visits Facebook.  A post by the highly respected blogger/Professor (Harvard, Berkeley and Duke) Vivek Wadhwa noted that while it’s apparent that Facebook is playing a role in the drive to democracy in many countries and that the President is visiting Facebook for good reasons, Professor Wadhwa is worried that “…this attention could end up killing the golden goose? Think about it: if you are an evil dictator, looking for an excuse to block Facebook and Twitter, what better propaganda weapon than a picture of President Obama getting chummy with Mark Zuckerberg? Yes, I know that the U.S. government didn’t invent Facebook or even figure out how to use it until recently; and that it doesn’t control Facebook’s policies. But don’t those pictures and video clips tell a different story?”

 

Facebook Unveils Facebook-Studio, a Stand-Alone Community for Advertisers

Last week, Facebook launched a stand-alone community site for the advertising community that is increasingly looking to spend brand dollars on the Facebook platform.

Reflecting the essence of its social networking DNA, the site allows advertisers to share the work they’re producing on Facebook and browse other examples from their peers.

Unlike Myspace which spent significant resources building one-off customized advertising programs, Facebook has focused on creating the largest canvas and letting the advertisers bring the paint brushes and paint.  Facebook Studios is designed to provide inspiration by highlighting the best campaigns (based on the “likes”), as well as additional materials that advertisers can use to better leverage the Facebook platform.

Throughout the history of media, the advertising dollars have followed where the eyeballs are, and we continue to be encouraged by Facebook’s scalable approach to monetization which is appealing to advertisers (see Guest Posts below from Brand Affinity Technologies and Appssavvy) without negatively impacting the user experience.

 

 

Mutual Fund T. Rowe Price Discloses $190 MM in Investments Facebook

T. Rowe Price disclosed that as of the end of March, the mutual fund had invested a total of $190 million in Facebook at an average price of $25 per share, distributed across 20 funds.  These shares were purchased through a Facebook-sanctioned private offering of employee stock.

In addition to disclosing their investment in Facebook, T. Rowe also disclosed a $71.8 million stake in Zynga, a $35.4 million investment in Angie’s List, an $86.8 million stake in Groupon, a $66.6 million stake in Twitter, and $114.7 million position in YouKu.com.

It’s clear that by taking these positions, T. Rowe is looking to re-capture some of the public returns that have melted away as companies have waited longer to go public.  While these investments represent less than 0.04% of T. Rowe’s $485 billion investment portfolio, we believe these investments are a precursor to a trend of institutional investors seeking improved returns by increasingly taking positions in private companies.

In the current environment, companies are going public at a later stage and at a higher valuation, thereby diminishing much of the appreciation that investors have historically enjoyed by purchasing shares in an IPO.  Rather than going public at $85, if Google had been a private company in these times, it may not have gone public until it was worth $300 a share, thereby erasing significant gains that accrued to public shareholders.  Similarly, if Facebook were private in the ‘90s, it’s likely that the company would’ve IPO’d at a valuation of under $10 billion; whereas we believe a Facebook IPO now would exceed $100 billion.

The Like Button Celebrates Its 1-Year Birthday

Facebook’s ability to innovate at breakneck pace is unmatched as the company strives to achieve its goal of ubiquity.

On April 21st, 2010, Facebook released the “Like” button.  On April 21, 2011, the one-year anniversary of its introduction, Facebook revealed what an amazing year it’s been for the feature:

  • More than 2.5 million websites have integrated with Facebook (including over 80 of comScore’s U.S. Top 100 websites and over half of comScore’s Global Top 100 websites)
  • Growth continues to accelerate, with more than 10,000 new websites integrating with Facebook every day
  • Over half of the 25 fastest growing Comscore U.S. retail sites use Facebook
  • On average, media sites that adopt the Like button experience a 3X increase in referral traffic from Facebook

As other Facebook applications have evolved, we believe the “Like” Button will evolve over time to bring a wider variety of human emotions and perspectives to the increasingly ubiquitous social layer Facebook is creating.  

 

Walmart Buys Kosmix for $300 MM, Integrating the Social Graph into the Online Shopping Experience

In our Second Internet Report, published on March 24th, we described how Amazon, not Walmart, became the dominant Internet retailer because the core competencies needed to succeed online were ingrained in Amazon’s DNA whereas Walmart was an offline retailer at its core with a secondary focus online.

Recognizing the paradigm shift that is underway from the First Internet to the Second Internet, Walmart embraced social commerce with the $300 million acquisition of Kosmix, a technology provider that enables users to filter and organize content in social networks.  The Kosmix team will join the newly formed @WalmartLabs, which is focused on social and mobile commerce.

While we applaud Walmart’s focus on social commerce, it’s imperative that the company adopt a holistic approach to driving digital sales if it really wants to harness the power of the web and the Second Internet.  Realistically, we see little opportunity that Walmart will fully engage with Social Media.  What are the odds that CEO Mike Duke has ever been on Twitter?  About the same as the odds that Rupert Murdoch ever had a MySpace account.

Just as Walmart and most other leading offline retailers were unable to capture anything near the online share they had offline, we believe that the companies positioned to most benefit from the Second Internet are companies, like Shoe Dazzle, Yammer, and The Huffington Post, that have a singular focus on harnessing all that the Second Internet has to offer.


 

Celebrity Influence – and Economy – Grows Online

Guest Post by Ryan Steelberg, CEO Brand Affinity Technologies

Over the last two years, we’ve seen a seismic change in the relationship between celebrities and fans. Online media provides 24/7 access to news, gossip, and anything and everything consumers want to know about their favorite celebrities. Social media takes this dynamic further: people can easily follow commentary directly from stars on Facebook and Twitter.

 

Brand Affinity Technologies (BAT) has created mechanisms for brands, media companies, and celebrities themselves to monetize this evolving celeb/fan relationship. (We’ve also started to quantify this changing relationship: in a recent survey, we confirmed that 61% of Americans feel more connected to celebrities because of online media and tools.)

Proof point: endorsements ignite social media advertising

To get a sense of the power of celebrities – and a taste of the business opportunity tied to the celeb/fan relationship ─ consider how celebrities boost social media performance.

BAT recently conducted the largest analysis of endorsed and non-endorsed social media advertising to-date. We compared more than 200 Facebook and Twitter endorsements with similar Facebook ads that did not feature celebrities, and found that – for the same spend – messages from celebrities delivered monumental performance lifts.  Click-through rates jumped significantly, and the cost-per-action improved dramatically:

Where we’re headed: deep engagement, personal interaction, meaningful brand opportunities

As the data reveals, much of the hype over celebrity social media endorsements is well-deserved. However, the power of celebrity as a business driver goes far beyond endorsements.  BAT has recently launched a new platform that brings online celebrity engagement to consumers beyond the comparatively closed worlds of Facebook and Twitter.

More than 800,000 fans have downloaded Fantapper since it became available in December 2010, making it one of the fastest growing Web downloads released – outpacing Twitter in early adoption rate. In addition to the free download, leading websites – reaching more than 100 million unique users every month – run the Fantapper application.

Fantapper changes the way consumers experience celebrity and sports content – giving people more of what they want, at the moment they are interested. Fantapper populates celebrity and athlete images and stories – on any website – with relevant, interactive apps, giving people always-on access to YouTube videos, exclusive celebrity info, news, Twitter and Facebook feeds, and more.

  • Celebrities benefit as editorial content now opens doors to their Twitter and Facebook feeds, monetization channels (iTunes for musicians, etc.), and in some cases, custom content developed for Fantapper. For the first time, celebrities gain real estate within the content that features them ─ wherever it appears.
  • Consumers experience content in an entirely new way. Immediately, the celebrity and sports content they crave becomes engaging and interactive – giving people what they want at the moment it interests them.
  • Advertisers benefit by being able to insert their brands at the point of engagement and interactivity, as well as include custom apps of their own.  Advertisers such as PepsiCo, Versus & Intuit have created custom Fantapper apps that drive traffic to their sites and include interactive elements such as polls and contests.
  • Websites benefit by providing a better experience for their communities and thus users spend more time on their pages.

As an example, if you’re reading about Kirstie Alley as she competes on Dancing with the Stars, Fantapper appears and provides instant access to related tweets, news stories, video clips – all without leaving the page you’re on.

The takeaway

Consumer passion for celebrity and sports content is boundless – and drives a significant amount of online activity. Consider that 20 months after launch, Twitter had 100k followers; that number went to several million almost immediately once celebs got involved.

Nothing demonstrates the insatiable hunger for celebrity and sports content better than Fantapper. Based on what we’re seeing in terms of the time that people choose to spend interacting with Fantapper apps, there is no saturation point in sight in terms of the ability for celebrities to drive engagement.

Online and social media have changed the relationship between celebrities and fans – creating a closer relationship and amplifying celebrities’ ability to influence consumers.  There is a tremendous market opportunity for brands, media outlets and celebrities that capitalize on this new dynamic.

 

 

Social Media Advertising Rivals Paid Search and Dominates Display

Guest post by Chris Cunningham, co-founder & CEO appssavvy

The emergence of social media has dramatically changed consumer behavior. People now spend more time online performing social activities than they do on email, content portals and instant messaging combined. Despite this profound behavioral shift, online ad inventory and delivery has gone largely unchanged, while opportunities to engage key audiences at key moments remain untapped.

New research from appssavvy, Social Activity Index – Measuring the Effectiveness of Social Advertising,” reveals the power of delivering brand messages against social activity and underscores its evolution as one of the most effective forms of digital marketing to drive brand engagement.

SOCIAL ACTIVITY ADVERTISING DEFINED

Social activity advertising includes online advertising channels that serve ad impressions against events rather than content. This enables brands to deliver contextually relevant ads based on what people are doing rather than what they’re viewing. This new segment of display advertising delivers brand messages within activities or events in social games, apps or websites, which include sending a virtual gift, playing a branded level within a game, completing a poll or quiz, entering a photo contest, to name a few. Upon completion of a brand-enabled activity, a social ad is delivered. These ads combine brand messaging through video and interactive media with social calls to action such as sharing, following, or Like-ing.

KEY FINDINGS

Key Finding 1: Social activity advertising rivals the effectiveness of paid search, outperforms standard display ads by 11 times, and more than doubles the performance of rich media.


Drivers of Performance

Social activity ads perform at high levels for two reasons. First, social activity advertising places brands and ads within highly interactive, social content that typically enjoys a loyal and engaged audience, allowing marketers to leverage naturally occuring activity to drive significant engagement with their brands.

Second, social activity ads offer a wider variety of calls to action vs. other online ad formats, including clicks to URLs, video views, sharing to Facebook, tweeting, etc

 

Key Finding 2: Within social activity advertising, social games deliver the highest performance, outperforming all other ad formats (including paid search).

Drivers of Performance

The strong performance of gaming advertising is driven by its exceptionally high activity rate and uniquely engaged audience – games enjoy audiences that play for hours per week while completing several activities per minute. Additionally, ads incorporated into gift giving, virtual good use and the completion of in-game missions or quests enable brands to integrate and become associated with daily events that enrich the everyday life of the gaming audience.

BEST PRACTICES

The most successful social activity ad units immerse themselves within the flow of activities that occur naturally within a website, game or app.  Branded calls to action should mirror functionality and styling throughout the website, game or app, and can serve to enrich, rather than disrupt, the user experience.

 

Additionally, social activity ads are most effective when the activities inherently involve a high level of interaction. Apps and websites that drive the creation of shareable content or encourage self-expression through activites like interactive contest entries provide advertisers the best opportunity to foster brand engagement.

CONCLUSION

Social activity advertising gives brands access to previously untapped ad inventory and provides a new way to engage with consumers at a time when they are actively involved with relevant activities. These lean-forward events allow context and intent to be captured before ads are delivered, and have paved the way for a new segment of display advertising that significantly outperforms other display media, including rich media and video, and indexes alongside search. As the Internet continues to evolve and time spent online continues its shift towards social media and games, social activity advertising will become an increasingly powerful way to reach and impact online audiences.