By some estimates, these companies may earn 1/3 of their revenues from something called “offers”. What is an offer you say? An offer, for the purposes of this article, is an exchange of information and/or actions to earn credit spendable on a web site, virtual world, or online game. The concept is simple and particularly lucrative.

Web site visitors or game players can get in game points or currency that they can spend on upgrades, weapons, tools, or other power ups that give them an advantage. The points, often called cash, coins, or gold, can be purchased directly using several payment instruments; but for the cash strapped, unbanked, cheap, or income challenged, a more attractive mechanism is to use offers to gain these credits. Offers, up until a month ago when negative media attention from sites like Techcrunch and backlash caused Facebook to clean house, included surveys, quizzes, trials for magazines, game rentals, DVD rentals, credit cards, and more, many of which touted free trial or no cash or credit card required.

The partial list of offers (left) entices the user to enter trials, sign-up for services, or take quizzes and surveys.

What makes offers so attractive? How does “Fill out a survey and earn 19 points” sound to you? Especially when 19 points gets you a 10% boost in game income, increased character speed or other abilities? So for just a few minutes of time, you can earn the points that other gamers may spend their hard earned cash on.

For example in the popular game Mobsters, by Playdom, it would cost you $4.99 to purchase 21 points; thus taking these surveys sounds attractive since the math would suggest that if I completed a survey every 10 minutes, in an hour I would have done 6 surveys, earned 126 points, and saved nearly $50. But think about what just happened – the discussion turned from 1 survey and 19 points to a subtle assignment of a working wage for the game player, where he/she could earn the equivalent of $50/hour. Other offers include Blockbuster video trials, Netflix trials, Credit Cards sign-ups, mobile phone content trials, and more. Great deal for the end user, on the surface.

Before going forward, I need to add that many of the scammy offers have already been removed from by many of the providers due to the media attention, however, even the remaining offers by reputable companies still have issues. The risks of these offers fall on the user signing up for the offer and the merchant sponsoring the offer.

• Does the users know what he or she is signing up for?
• What quality of lead is the merchant receiving?

Problems arrise due to confusion over how to complete the offer. The Entertainment book offer button takes the user to a page with no actual mention of the offer. Are users supposed to sign-up? If so, how do they get credit?

The same problem appears for the Direct TV offer. How does the user know what to do? How does he/she earn credit?

By now you may be wondering where the deal really is. If users have to pay for subscriptions, why don’t they buy points directly? Do users always have to spend money to get their points? You’ve now hit the tip of the iceberg and are wondering if this amounts to a system for scams.

As a starter for the next post, consider the two images below.

The offer is not from Wal-Mart, but from a rewards program company, and it looks pretty good, right? Well, if you read the fine print you’ll see that to get your ‘free’ $1,000 gift card you must complete 13 offers. But click through and look at the second image: you’ll see it says you have to complete two offers to get your ‘free’ gift. How does this make sense? The user was lead to believe they had to complete one offer to get their free 21 points. This is starting to smell like the BlueHippo investigation by the FTC, where offers were supposed to get you a free PC. Yet they only shipped one. Yes one.

In my next post I’ll discuss my experience trying a few of these offers, some additional math around the business, and discussion on the even larger problem that this is revealing.

This all may be coming to a head in 2010. According to a study just released by the American Press Institute and reported on by eMarketer, close to sixty percent of member publishers are considering charging for content that is currently free. Twenty-five percent of them said they’ll have a paid strategy in place within six months.

Whatever plans publishers are concocting to charge for content may be worth little more than the paper their newspapers and magazines are printed on. According to a new report from research firm Forrester,  eighty percent of consumers say they are not interested in newspaper and magazine online content if it is not free. Only three percent say they would pay individually for each article read. This is a major blow to all those publishers (and there are a lot of them) who are toying with a “micropayment” strategy.

Forrester also asked the question: “If the publications you read were no longer available in print, how would you prefer to access that content?” Thirty-seven percent of consumers picked online access via a website. Fourteen percent preferred access via portable devices like mobile phones. Remarkably, ten percent wanted a relatively old-tech solution: to receive PDFs by email. Only three percent wanted to use eReaders such as the Amazon Kindle. Hmmm, that kind of puts a damper on the hoopla around eReaders, doesn’t it?

Forrester analyst Sarah Rotman Epps makes this point in reporting the results: “…one size won’t fit all – consumers want choice. There’s no one delivery platform, and no one pricing model, that will satisfy all consumers.”

The biggest problem for publishers of online content, then, is finding a magic bullet (not yet identified) to get consumers to pay for that content.

But there may not be one; in fact, advertising-supported content may continue to be the safest route for publishers. Let’s face it, Pandora’s box is already open. Consumers now get unlimited, free access, just by paying an Internet Service Provider, to virtually all the information they need. They’ve lived and breathed in an online world where a free Google search reveals just about everything worth knowing.

That’s why Rupert Murdoch, publisher of The Wall Street Journal and other newspapers, just weeks ago threatened to remove his publications from Google’s search index. Despite the fact that The Wall Street Journal has successfully implemented a paid online subscription service, a specific story can be accessed for free by non-subscribers via a link posted on Google.

While I’m not a big fan of Murdoch, I like The Wall Street Journal model for paid content. The subscriber has three different choices (per Rotman Epps’ point above): the daily newspaper in hard copy, the paid online version of the newspaper, or a combination paper/online subscription. The price difference is only about $15 between the newspaper and online version, which keeps the value of the online version high. The online version does offers some free content to a non-subscriber, but a subscription is required to continue reading most stories in full and get exclusive online extras.

One of the reasons it works is because the Journal’s audience is business people who are willing to pay for valuable information – but the paid content strategy is working, since the subscriber base for both the online version and the newspaper is growing. In fact, The Wall Street Journal is one of only two hard copy newspapers with positive circulation growth (the other is USA TODAY). Other publishers need to figure out how to offer information that is so highly valued that people want to pay for it.

It’s crunch time for publishers. As they wrestle with getting themselves out of the print world and into the digital world, they will face this challenge of finding a way to convince consumers to pay for online content. As the Forrester report suggests, however, there will be no single easy solution. If they want to survive, content publishers will need to do a better job of listening to what the consumer wants.

I wondered if it could be from that person with an obsession for tuxedoed birds, and sure enough: “The affiliate who referred this transaction: Jennifer Goode”.

Jen is a respected peer, friend, as well as owner of a little plushie traveling penguin that has become semi-famous. SAS emails give you the option to “Click to Send Affiliate a Bonus for this Transaction”, but I opted to log into Yahoo Chat to bust her chops… er… congratulate her… instead!

As we were chatting, another penguin sale came in – accompanied with another SAS email. Yep! It was Jen again! Amazingly, a third penguin sale and a third SAS email came as we were chatting. And defying all odds, it was another Jen referral!

In the course of an hour, I made money. Jen, who is the owner of Jen Goode Designs and My Penguin Travels (above me and the penguin in question), made money. My outsourced program manager (OPM), TeamLoxly made money. ShareASale made money. My merchant bank and three customer credit cards made money.

I thought about the events that led up to these sales, and if it weren’t for networking, none of them would have occurred. While this article is not a discussion on “the art of networking”, it is a discussion on the importance of networking.

From Networking to Friendships

Four years ago I was posting on ABestWeb (ABW), which is technically networking. At that time I knew Deborah Carney, Owner of TeamLoxly, as a regular poster, but nothing more.

That fall I attended an online convention called eComExpo, for the purpose of, you guessed it, networking. I joined a private chat in a merchant’s booth that happened to include Debbie and a few others. When the merchant left the virtual booth at 5pm, we “trashed the booth” through the middle of the night! Debbie and I became fast friends that day, exchanging IMs, and networking on a daily basis.

The following year Debbie took over the CafePress affiliate program. She brought up a particular CafePress shopkeeper, Jen Goode, frequently. I became familiar with Jen’s work – very talented – but I considered CP shopkeepers artists, not fellow marketers. In an effort to be helpful, an important part of networking, I occasionally gave her marketing advice, and we too became friends.

When Jen first developed her now iconic penguin character, it blew me away! We brainstormed all kinds of different ideas which ranged from the typical to the outright crazy.

The winter of 2006, I finally got to meet Jen in person at Affiliate Summit, which we both attended in order to network (I bet you’re seeing a trend here). I was impressed not only by her artistic talents, but by her passion and intelligence.

My niche is personalized gifts. While the penguins were only “quasi-personalized”, since users could request penguins for all occasions but not necessarily for specific occasions, I told Jen I would add them to my sites where applicable. For example, I have listed her Fishing Penguin in my personalized fishing gifts category.

(Pictured to the left Deborah Carney and Jen Goode at Affiliate Summit West 2009.)

Collaborating with Friends

In the meantime, I had been networking with Loxly, and she had got to know my personalized gift site intimately. As the CafePress affiliate manager, she  knew a lot of shopkeepers whose sites could offer my products. One day she called and asked if I would be willing to develop a merchant site in order to launch an affiliate program. She felt there were affiliates that were a perfect fit for the kind of niche products I had become an expert  at. And we could leverage our mutual contacts from our networking efforts to make it the kind of program we had been  talking about on the forums.

The goal was not to create a Top 10 merchant but rather to create a safe, parasite free, no problem program that could remain on good terms with affiliates in a niche we knew well. I agreed, and we launched the Engraved Crystal Shoppe program.

I hired a second OPM and we all met at Jen’s house in Colorado last June. As happens with creative types, occasionally drama does ensue. What happened with the other OPM has been embarrassingly well documented elsewhere. What I learned is that the ability to meet in person and hash out ideas is an important facet of networking and relationship building often forgot by many online professionals. Why? Well, because they are too busy being online.

Fast forward to last month’s Think Tank in Newport Beach, which was an intimate and intense networking opportunity hosted by ShareASale.

At the event I happened to mention to Jen that I actually carry two personalized penguin items on my merchant site. What I didn’t know is that she had started a site Nothing But Penguins which featured non-Goode original penguin products. But apparently, communicating with Jen paid off and she added my two penguin products to her site, and as I stated above, a lot of people got rich as a direct result (Ok I maybe overexagerating on the rich part – but sales did indeed happen – and without proof to the contrary, I’ll take full credit for their success!).

Moral of the story? Get out there! Network! Mingle! Talk! Good things happen from interacting with your peers.

There can be little doubt that social media has “crossed the chasm.” Social media surely meets Gladwell’s tipping point criteria as well: “Ideas and products and messages and behaviors spread just like viruses do.”

So with mass adoption under its belt, where is social media headed next year? The end-of-year predictions are already starting. Rather than depend on casual prognosticators, however, I like to follow the thinking of people who analyze trends and offer perceptive observations grounded in reality.

That’s why I think David Armano’s blog for Harvard Business Publishing is worthy of mention. Armano is a founder of Dachis Group, a consultancy based in Austin, TX specializing in social business. Its clients include AXA, BP, Philips, and Coca-Cola, so I have a feeling Armano knows what he’s talking about.

Armano identifies six social media trends for 2010, but I want to focus on the implications of his commentary rather than the specifics. One underlying theme of Armano’s blog seems to be that social media’s mass adoption comes with consequences, both to individuals and businesses. Individuals overwhelmed with multiple messages from multiple sources may bring a new meaning to the term “anti-social,” because, as Armano says, they need to “filter out the clutter.” But at the same time, Armano believes businesses will be impacted by social media’s popularity: “…employees will seek to feed their social media addictions on their mobile devices.” What used to be a coffee break may turn into a “social media break.”

“There are relatively few big companies that have scaled social initiatives,” says Armano, so in 2010, there could be more companies looking “to uncover cost savings or serve customers more effectively through leveraging social technology.” At the same time, companies will probably need to extend their email and Internet policies to include social media. “From how to conduct yourself as an employee to what’s considered competition, it’s likely that you’ll see something formalized about how the company views social media and your participation in it,” says Armano.

Notice the beginnings of a complex situation emerging when it comes to social media — not unlike what has occurred with email and cell phones. People can’t get enough of social media, but it may come to a point where there’s a backlash and it needs to be controlled. Businesses want to do more with social media and do it better, but they are likely to put rules into place to prevent its abuse.

Maybe in 2010, people will begin to think about social media in a new way: Can’t live with it, can’t live without it.

That was before smartphones came along. Blackberry brought in the era of hand-held email, particularly for business users. But Apple’s iPhone has created a new and robust mobile advertising marketplace. (Never mind the kazillion apps, which is a burgeoning marketing opportunity in and of itself.)

Now, with the introduction of more new smartphones like the Palm Pre and the recently launched Android, built around Google’s operating system, mobile advertising promises to become strategically important.

A recent Gartner Group report put worldwide mobile ad spending for 2009 at a little over $910 million – not huge in the greater scheme of things, but a whopping 74 percent increase over the previous year. Gartner said worldwide mobile ad spending would exceed $13 billion by 2013, led by the Asia-Pacific region and followed by North America and Europe, according to Online Media Daily.

The Interactive Advertising Bureau’s A Mobile Advertising Overview, while somewhat dated (July 2008), is a document worth reviewing. According to this overview, even two years ago, the active audience for text messaging was over 100 million, and for mobile web it was over 34 million. (As a matter of context, the iPhone was introduced in June 2007; the data reported was as of November 2007.)

The overview quotes the 2008 Pew Internet Life study, indicating the following percentages for individuals with a mobile phone using one or more mobile data services: 96 percent of 18-29 year olds; 85 percent of 30-49 year olds, 63 percent of 50-64 year olds, and 36 percent of Americans older than age 65. I was surprised at the relatively high percentages for individuals 50 and over. It bodes well for mobile marketers.

The IAB defines mobile advertising as having two major forms: “display ads delivered on the device itself (within a mobile Web browser or some other phone-based application), or display ads in other media that feature a mobile call-to-action (typically sending a message via text messaging shortcode).” On-device ads include text ads, banner ads, and video. Common off-device usage of mobile advertising includes mobile coupons to drive purchase at a retail outlet, mobile PINs to drive traffic to a web page, and mobile ticketing for events. Not surprisingly, major advertisers routinely include mobile advertising as a component of integrated campaigns.

The IAB Overview includes this sub-head at the end of the document, “The iPhone: Smarter phones drive even greater usage.” In July 2008, IAB refers to the iPhone as “the future.” Things have moved quickly: The future is here. Online advertisers need to embrace it, and start making the move to mobile advertising.

The “Pay-What-You-Want” sale marked the 1 year release of the game, so admittedly the game was not at the peak of the sales cycle and was likely in the hands of the users who really wanted the software. Also important is that the publisher reports piracy of the game close to 90%. Even so, the experiment provides some insight into pricing models for games and possibly content sold online.

What did people pay when they had the chance? 57,000 people paid an average of $2.03 for the game during the promotion. That’s a quick $110,000+ sales for a one week experiment, but that doesn’t tell the whole story.

Due to transaction fees, all sales less than $0.30 meant that the publisher received nothing from the sale. Since nearly 17,000 people paid $0.01, with another 6500 paying from $0.02 to $0.99, it’s likely at least one-third or more of sales were unprofitable.

The publisher also took a survey to determine why people were paying what they paid. The largest responses fell into two categories: paying what buyers could afford and supporting the model. More specifically, nearly 23% of respondents said that they chose the “price” they paid based on what they could afford, and just over 22% paid just to support the pay-what-you-want model. More importantly, only a touch over 5% responded that they paid what they thought the game was worth. Twice as many or 11% reported that they were “cheap bastards”, at least they were honest.

The sales figures, piracy rate, and survey lead me to a few obvious and non-obvious take aways:

1. Buyers appreciated the option to choose what to pay, so much so that any mental transaction costs of paying $0.01 were overcome.

2. The price users are willing to pay to has much less to do with perceived value than affordability.

3. Sales experiments, even a year after a game release, can lead to a healthy bump in revenue when done right.

This suggests to me (feel free to argue with me on this) that the $0.99 and $1.99 micropayment sized price points for apps on the Apple App Store and others may be driving huge sales simply because of affordability. If I’m right, where is your $0.99 app?

Amazon recently declared that it’s Kindle e-book reader was its overall bestseller by number of units shipped and total revenue generated. According to a MarketWatch article, Amazon CEO Jeff Bezos recently mentioned during the company’s Q3 financial results (ended Sept 30, 2009) call that the Kindle is now the most popular product on its site by unit sales and dollar value across all product categories. Analysts expect that the e-book reader and ebooks will fuel the online retailer’s next stage of growth.

Google announced details of its upcoming Editions service, to be launched next year, which will allow ubiquitous access to books on web browsers and other devices. In a recent announcement,   Google Book Search’s publisher partnership program head Tom Turvey said the new Editions service would kick off with between 400,000 and 600,000 books in the first half of 2010.

Consumer electronics giant Sony has judged the e-book reader segment important enough to take some focus off its television and Playstation projects to develop it’s Reader product. According to the Wall Street Journal’s WSJ.com, Sony had sold about 300,000 units of the product from its October 2006 launch till end 2008. (The WSJ.com post is currently unavailable online)

With e-book readers experiencing a boom, writers might be looking forward to a boom for their wallets.

Whether you’ve already had a few published books under your belt, or you’re working on your first book, you will be wondering: What’s not to like especially with Google Editions’ payout model?

With Google Editions, the revenue split of 55% to Google and its distribution partners and the balance 45% going to your pocket is more than just making about half the revenue from your sales, it breaks the historical monotony long held by publishing houses. Most published authors receive a fraction of the value of books sold. It’s not uncommon for an author to receive a $0.50 to $1 royalty fee for each copy of a book sold. If you’re a superstar author such as JK Rowling, author of the Harry Potter series of wizardry books, or king of horror, Stephen King, you’ll have more room to maneuver.

In fact, the 45% royalty that Google Editions looks set to payout looks like the perfect out for many budding authors to quit their day job and do the “writing thing”.

Before you fire your boss, take note of a couple of big holes in the new business model.

#1 Quality, quality and quality

Someone investing a couple of hours reading a book would prefer a good book, over a poorly-written book in most circumstances (a fetish for spending reading kitschy/trashy romance/potboiler novels notwithstanding).

Yes, the possibility of self-publishing will break the hegemony/monopoly of the publishing houses, especially since manuscript acceptance rates of 1 in 10,000 are not uncommon. But just because you get to publish what’s in your mind, i.e. the “great American novel”, doesn’t mean that anyone else is going to like, or buy it. If your book meet Joe Public’s quality standards, you’ll have the consumer telling you “No”, rather than the publishing house.

The refund policies aren’t out for Google Editions yet, but judging by Sony’s ebookstore policy on refunds: “Please confirm all purchases before you complete them as all sales are final. There are no refunds for digital content.” It sounds like you can’t give a refund for a poorly-written book, but if everyone and his brother is blogging and tweeting about how badly your book sucks, you can expect sales to suffer.

#2 But I only like to write…

Assuming you’re going the self-publishing route and making the decision to avoid giving the publishing houses your fat writer’s paycheck, means having to ensure quality on your own.

There’s a myriad of service providers online to find proofreaders, book editors, designers and other specialists to make sure your novel looks like more than just a Microsoft Word document converted to Adobe PDF. Hint: the lack of a cover and extensive use of Times New Roman size 12 font throughout the book are dead giveaways…

Being able to post an accurate job description, screen service providers, screen competitive bids, and manage the team you’ve hired, will require more project management skills, than just being a dang good writer.

#3 Traffic Generation and The Lesson from Satellite TV

With the launch of satellite TV a couple of years ago, the complaint shifted from “There’s nothing to watch on network TV”, to “I’ve got 500 channels on satellite now, but there’s nothing to watch”. The lesson? Having lots of choice is always a good thing, but being able to stand out from the pack will play a direct impact on your sales.

Remember back in the early 1990s when there were just 20 websites in your niche? And you would make bank even if you had a garish bright yellow website and a couple of typos liberally sprinkled across your site? Google Editions may be that way too…for the first week or two.

Being able to market your book successfully means being able to put together the elements of a cohesive and integrated marketing plan. Almost every blogger or twitter user will be able to publish some content and generate a few random sales, but if you’re planning to make writing a full time gig, you’ll need a whole lot more marketing mojo in your corner.

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E-Books: The Bottomline
Here’s what e-book have going for them:
* More money in your pocket: The technology has eliminated the brokers and middlemen from the traditional book publishing ecosystem.
* Write what you like: You’re not constrained and restricted like you would have been if you had signed on with a major imprint.

But like Peter Parker’s Uncle Ben would say “With great power there must also come – - great responsibility!”

The balance of power and more importantly, profit, comes with the writer’s responsibility for viral/guerilla marketing skills. If you decide to DIY everything, you’d need to have decent editing, project management and marketing skills (the majority of which most writers lack). If you’re not represented by a publishing house, which invests heavily in a publicity campaign, you’ll have to find alternatives since most bookstores will probably not arrange “e-book signings” (especially if it’s a product which they don’t sell), unlike an author with a published paperback or hardcover novel.

In my opinion, unless self-published writers have the whole package, including management and social marketing skills up their sleeves, they might end up being the biggest losers in the new e-book paradigm.

If any of those things ring a bell, then you might look back fondly on October 27, 1994. That’s when the first banner ad was created. Adman Frank D’Angelo was in on that historic moment, and he shares his perspective in a fascinating piece in Ad Age.

As with many advances in marketing, the birth of the banner ad really started because of an industry leader’s vision – in this case, Ed Atzt, then chairman of mega-brander Procter & Gamble. At a May 1994 industry speech, Atzt implored his colleagues to jump on the new media bandwagon. Frank D’Angelo’s boss, an ad agency head, was in the audience. He brought Ed Atzt’s challenge back to his agency, which happened to have MCI, then a rising telecommunications company, as a client. (MCI would later become WorldCom – but we won’t go there.)

MCI, says D’Angelo, was a perfect fit for this “new” online advertising. After all, one of the company’s employees was Vinton Cerf, the acknowledged “father of the Internet.” But D’Angelo makes it clear what a bold move it was for an advertiser to agree to a banner ad on Hotwired.com, a spin-off of WIRED and the first commercial digital magazine.

“Keep in mind,” says D’Angelo, “this was 1994; the first graphical web browser, Mosaic, was less than a year old (soon to be replaced by Netscape Explorer), and Web access? Purely dial-up, 24.4kps if you were lucky, meaning these ads took a while to load. The online U.S. population? Two million, if that.”

Still, MCI and five other advertisers took a crack at admittedly clunky banner ads. Read the rest of D’Angelo’s story to discover what happened.

Fifteen years later, banner ads may be under siege, but they are still very much a part of the web advertising landscape. D’Angelo says “no other development since has advanced advertising measurement, effectiveness and accountability than the display banner.”

The larger issue today, however, is the continuing quest for optimal measurement. In that context, D’Angelo references a recent report from eMarketer, “Online Brand Management: Connecting the Dots,” that is worthy of consideration.

The report discusses a huge challenge: Are advertisers getting their money’s worth from display ads and other branding-oriented ads? The report asks: “Do [advertisers] have the right metrics, and are they able to connect the dots, both within online platforms and between online and offline media?”

Needless to say, there are no easy answers, but the report offers valuable insight into where we are and where we need to go in terms of measuring advertising effectiveness. One of the quotes from Carrie Frolich, managing director, digital, for Mediaedge:cia, sets the tone for the report’s findings:

Remember why you’re advertising. You are not advertising for clicks or [gross rating points]. What you’re advertising for is to sell me stuff or change perception, and that’s what we need to be measuring against.

As we look back on the past fifteen years, and look forward to the next fifteen, we should always keep that in mind. No matter what technological advances come along, no matter how wonderful the creative might be, no matter where the ads are placed – the objective of advertising, both online and offline, should always be to have a measurable impact. Let’s not forget it.

About a week ago, ReveNews contributor Andrew M. Baer, Esq, wrote “FTC Regulates Blogger, Viral Marketing Relationships: Analysis and compliance tips” stating why he’s not concerned about the FTC intentions.

The guides which come into force on 1st December, are aimed at addressing endorsements by consumers, experts, organizations, and celebrities, with the intention of holding bloggers or other “word of mouth” marketers accountable, with the enforcement mechanism of a possible $11,000 fine.

As short-sighted and ambiguous as some bloggers have painted the guides to be, many bloggers’  objections have been equal in the fear, uncertainty, and doubt camp as they accuse their detractors. Many blogs painting worst-case scenarios and posting what-if scenarios with $11,000 fines for receiving cheap paperbacks as a freebie in the mail, writing a positive review and linking it to an Amazon affiliate link.

The Interactive Advertising Bureau (IAB), which comprises more than 375 leading media and technology companies is responsible for selling 86% of online advertising in the United States and includes organizations like:
* AOL Advertising
* AT&T Internet Services
* BBC Worldwide
* Google Inc
* Microsoft Advertising
* Yahoo! Inc
* Sony Computer Entertainment America, Inc
* Harvard Business Review
* CNN.com
* FOX Interactive Media
* Nokia Inc

and other technology/internet/news heavyweights in its membership roster. IAB has come out swinging off the ropes with IAB CEO Randall Rothenberg firing off an open letter to FTC chairman, Jon Leibowitz, published on the IAB website and the Huffington Post, expressing his disagreement with the guides on the basis that they are unconstitutional and should be retracted.

In case you’re wondering if the IAB is shooting from the hip, take note that the organization has attempted to start a dialogue with the FTC since March this year, with correspondence detailing(pdf) feedback on the proposed guides. The attempt to have the industry self-regulate appears to have failed, given that the FTC has expressed its intention to keep an eye and active hand in the industry.

In a FTC arranged media call on 14th October to address reporter’s inquiries on the guides, FTC’s Bureau Consumer Protection’s Associate Director for Advertising Practices, Mary Engle, stated:

Although the [Interactive Advertising Bureau (IAB)] contends the FTC’s Endorsement Guides are unconstitutional, the Guides apply only to marketing and they attempt to illustrate some of the factors relevant to distinguishing advertising from editorial content,” says Mary Engle, the FTC’s director of the division of advertising practices, in an email statement released today. “If particular communications do not in fact constitute advertising, as the IAB appears to be suggesting, then the Guides do not apply. Where the message is advertising, however, disseminators have an obligation to ensure it is not misleading. This includes, when it is not otherwise clear from the context, identifying when the endorser has been paid for the endorsement. Although IAB may disagree with the policy, nothing in this approach is unconstitutional,” .

From FTC’s Engle terse reply, it’s unlikely to halt the IAB’s attempt to rescind the FTC’s guides.

Even with the FTC contention that the primary targets are advertisers, rather than bloggers, have failed to assuage Rothenberg.

IAB’s Rothenberg contends that even with the FTC’s intention to go after advertisers, rather than bloggers, doesn’t mean that bloggers are off the hook. By it’s “social” nature, bloggers and their blogs are the advertising medium, hence they could still be looking at $11,000 fines.

How will this play out as the December 1st enforcement date draws near?

It’s unlikely that the FTC or IAB are going to back down at the moment, but the IAB’s Washington DC Public Policy office will be keeping very busy till then.

What raised my hackles? I read this eWeek article and choked when I saw this line:

“Twitter boasted astronomical growth, up 1,170 percent from its negligible .15 percent market share from September 2008″.

I decided to check out the source, Experian Hitwise’s press release on social network traffic, and examine their report using my own calculations:

Twitter September 2009 social network market share of a whopping 1.84% is 12.26 times (or 1,226%) of it’s 0.15% September 2008 figure. This is derived by taking 1.84 divided by 0.15 (1.84/0.15).

Taking a leaf out of a grade school math book, the increase in traffic can be calculated by the following formula:

Percentage Increase = [(new figure - old figure) / old figure] * 100% which should be [(1.84-0.15)/0.15]*100% = 1,127% or an increase of 11.27 times over the previous figure.

So where did the 1,170% figure mentioned in Hitwise’s release come from? Beats me. Maybe someone was a little lax in checking their own stats.

Should we be concerned when a web measurement firm whose bread and butter comes from reporting data, reports it inaccurately? If the reported data is incorrect, how about the validity of the web data contained the report? What happens when a respected media outlet like eWeek publishes data verbatim, without running their own checks to verify accuracy provided by a newsmaker?

Quality control of data is obviously an issue.

Even more interesting is the 1,127% or 1,170% year-on-year growth figure attributed to Twitter’s growth. Everyone loves to see impressive numbers, especially if it’s in multiples of 100%.

Mark Twain popularized the phrase “There are three kinds of lies: lies, damned lies, and statistics.”

Statistics are powerful because they are viewed as logic based.  In school math was the only subject you could get a perfect score in, and that thinking has carried over into adult life. People like seeing statistics, no matter how skewed, because it makes them feel secure in the information they have been given. When delivered by a smart PR firm, marketing team, or in the media the data is often accepted without question. 

This is because most individuals (internet marketers included) are inherently bad at math and numbers in general. Whether by choice or circumstances, they just aren’t equipped to deal with data critically or intelligently.

I’ve seen more than a few isolated instances where writers cite 500% growth or 1,270% increase in profit, but does this mean anything?

Context is key if you want to make sense of data. A sales increase from $1 to $5 is an increase of 400%, and publishing an article announcing a 400% increase will get you more than your fair share of eyeballs. However, if you consider that $5 would barely pay for lunch, it’s a case where statistics, without appropriate context, can be manipulated to distort reality. What’s important when dealing with data is to look at information against the appropriate backdrop.

If your company is growing at 90%, while comparable peers in the same industry are growing at 300%, you’re lagging behind the industry. By “comparable peers” I’m referring to partners or competitors that are equivalent in size or can be mathematically adjusted to provide a meaningful basis of comparison.

Context and relevance and looking at data in a meaningful way means seeing a $1 billion revenue figure and a net profit margin of 0.5%. Or a 500% monthly sales growth figure from a baseline of $27 in sales. Do these figures mean anything? Only when they’re seen from the perspective of the big picture.

If you want to see the forest and not just the trees, don’t simply swallow the “lies, damned lies, and statistics” they are trying to spoonfeed you.