Offerpal is one of the primary targets of the recent complaints about aggressive offers on the social web. However following those criticisms, the company brought in a new CEO, and today is releasing a new set of advertising policies which holds the company “to the highest standard of ethics and corporate responsibility.” If you want the full details of the advertising policies, you can read them here. The advertising policies are relatively clear, however the “gray” areas which generate a large portion of revenue for many publishers, still exists.

It’s somewhat surprising to hear that the company will still enable publishers to accept “gray” area offers, rather than just exclude them completely, something which a number of companies including Zynga have decided to do. For the industry leaders to publicly denounce aggressive advertising policies would make a lot of sense, and while many of them have done so on their own, there is still a competitive advantage to those who provide “gray” area offers.

For example, included in Offerpal’s latest advertising policies is a section related to “free” offers. It’s well known that free offers frequently require cancellation in a specific period, otherwise the user will be charged a fee. As such, Offerpal’s policies state:

If a purchase will be required by the consumer to receive the reward item, then the disclosure within close proximity of the word “free” (or similar terms) must be in the same color, font, and size of the word “free” (or similar terms) and it should educate the consumer about the purchase requirement(s).

I wonder why they don’t just remove the gray area all together, however that may be a lot to ask for an industry which has always been straddling the line. This is no doubt a step in the right direction, and Offerpal is clearly looking to clean up their image after the controversy which erupted over the past few weeks. These updated advertising terms also adhere to all the other regulations set forth by industry commissions as well as the terms provided by social platforms including Facebook.

The industry as a whole is moving forward in the right direction and the faster that dirty offers are removed from the system, the quicker that the businesses can be considered sustainable. It’s great to see Offerpal (who’s also a sponsor of ours) moving forward in the right direction.

As a journalist, former programmer and senior editor at Fast Company, Lynne D. Johnson is a social media maven. She was also a general manager for Vibe and Spin magazines with an award-winning blog. She’s been fusing technology, community and journalism since back in the days of online bulletin boards. It’s no surprise that the Advertising Research Foundation (ARF) recently snagged her as their first senior vice president of social media to help guide the industry into the new age of community tools. I recently sat down with Johnson to get her take on how brands should be listening while navigating the social web.

Social Times (ST): How did you get involved in technology and, more recently, social media?

Technology came about for me as an undergraduate. I started out studying computer science and business and then switched to journalism because I’ve always been a writer at heart. Even when I had a journalism job, I infused it with technology, getting involved in online communities, like the New York online (a bulletin board service), Yahoo groups, and other types of groups. An opportunity to work with two ethnic sites came up at Community Connect, where I got to meld journalism, community, and technology. That’s where social media came into being
for me. I used to be a programmer and learned how to foster community with technology, as a journalist.

I worked for Vibe and Spin as a general manager of their digital operations. Then Fast Company (FC) hired me because I had been blogging since 2001—back when journalists thought blogging was crazy. But I embraced it early. FC then wanted to integrate their Company of Friends community with their web site and content. The wanted their community blogging alongside their editors and journalists. They brought me in to grow that social network. Then they also launched a video site with Robert Scoble.

ST: How was your experience with Robert Scoble?

They brought Scoble on because he was the hot-shot in social media and Technology at the time. They figured they could tie that to their community emphasis and monetize it with sponsorships. But it didn’t prove to be an effective model. It was around the time the recession was starting. I wouldn’t say it was Scoble’s. It wasn’t the right programming for the Fast Company brand, and video has been hard to monetize on the Web. It was “all Scoble all the time,” and there should have been more FC content on the site. It failed due to the mix of content and the timing.

ST: What’s your role at ARF?

I met Joel Rubinson, Chief Research Officer of the ARF, at a social media conference. He showed me this job description and I said I thought I could do this job. After the recession, I became more of a traditional editor for Fast Company, and I really wanted to work in social media again. I came here to ARF to work on the content and brand and to launch a social media council. We just had a successful event called the Industry Leader Forum with Chris Brogan, who is a top blogger and a good buddy. We’re planning to have the same event in San Francisco. I have been helping them get social media rock stars into conferences. But my goal is to help the industry at large understand social media.

ST: Is social media the flavor of the month and why is it important for brands?

Even more than social media, digital content gives consumers a platform to have a megaphone and talk about anything they want. But the truth is that they are talking about brands. I recently read that 20% of tweets are about brands. We see it now as people use tools like Brightkite and Foursquare to mention the restaurants they’re in on Twitter and other social networking sites. Are people going to be a friend with your brand? That’s the part that’s funny and fishy. But if brands make content that’s relevant to people’s interests and passions then it’s a win-win.

It’s not just about putting up a Twitter or Facebook page; it’s more about engaging in relationships. Brands have to be interested in the narrative. If you have no story about your brand, then people will make up the story for you. It’s not a fad at all; it’s an evolution. Now the consumer is being thought of as a collaborator. Traditional marketing used to have these closed surveys and got feedback from people in private rooms. Now it’s all open. It’s not a fad.

ST: What do big brands need to do and how do they handle criticism from the community?

It’s about listening. Listening to your customers is about making your brand trustworthy. Brands shouldn’t worry about whether they’re up on Facebook or Twitter; they should worry about whether they have a story and can build a community. That community can be built on their own website. They just have to be engaging enough.

In regard to criticism, transparency — that’s the key. If you’re in a relationship with a significant other, it’s the same thing. It’s about communication, and sometimes, there are things you ignore and let blow over. You don’t do this whole crisis management thing and try to spin the story. No more spinning. Be honest and truthful, that’s what people expect now.

I’m amazed at how many “social media experts” I meet. What makes someone an expert or consultant in this area? Some people are basing their expertise on how many followers they have.

There is no “expert” yet because we are still figuring it all out. It’s the quality of followers versus the quantity. I’ve seen people with hundreds of thousands of followers, and they tweet something that falls on deaf ears. Someone who has fewer followers but a selective and focused community who is interested in the same interests would be more influential.

A consultant also has to have business experience and understand traditional marketing because there should still be an overall marketing strategy. Social media is just one part of it and does not replace it completely. Stats say traditional television still works. Do banner ads still work? No. Does everyone need to develop a community? Not necessarily. An expert is not that kid who comes out of college. It could be a traditional marketer who is learning some of these new tricks. It can be people with anthropology, journalism, or even scientific backgrounds.

ST: Are you going to advise brands directly?

Yes, but not alone. We have a social media council with co-chairs from Nielson, Sapient, and General Mills. We have quarterly meetings and talk about case studies. We have a mission and goals, like coming up with metrics and best practices. I will be coming up with a document in 2010 that will be a social media manual.

ST: What’s next for social media?

Mobile is going to play a great role in what happens next in marketing, advertising and social media. The next generation is on their phones at all times. That is where they get their community and information. That’s the next place we have to play.

Every morning I wake up and click through my blackberry to see what messages I’ve received. For the most part, I don’t receive anything important between 2 AM and 8 AM but there are still large numbers of messages that I sift through. The most annoying of those messages are the night time spam comments on this blog. Disqus does an absolutely horrendous job at filtering out spam which means 10 to 15 minutes of my morning everyday are spent sifting through spam.

All of the spam comments follow the same format. Most often a user will say something to the extent of “Thanks for the post!” with a link to their site and some keyword that they’d like to have indexed by the search engines. There’s no doubt the spammers are using automated systems as they all tend to take place within seconds of each other. I’ve spoken to numerous people who say that this process is also part of their normal routine, which is why I know the system is broken.

Wordpress already does a great job at blocking spam so why would a use another system when it does a worse job? The only conclusion I can come up with is that I won’t continue to use it. If the only service that your company provides is commenting on blogs, you better do an amazing job at it. Honestly, no matter what service your company provides, you better do an amazing job at it.

What I’m trying to figure out is whether or not everybody else has the same problem. Why on earth should I have to have my inbox spammed with messages every morning, requiring me to manually reply to each message with the word “Spam” to delete them? Oh and if you were hoping for this post to provide insight, you’ll be seriously disappointed … you’ll have to wait for the next post for that one!

Do you have the same issue with Disqus and other external commenting systems?

There have been rumors circulating over the past month about Playfish, the second largest Facebook Platform developer, being acquired by Electronic Arts. This morning the news was confirmed via a press release stating that:

EA has acquired Playfish for approximately US$275 million in cash and approximately $US25 million in equity retention arrangements. In addition, the sellers are entitled to additional variable cash consideration, up to a maximum of US$100 million, contingent upon the achievement of certain performance milestones through December 31, 2011.

The company, which was funded by Accel Partners, has been a dominant force in the social gaming space, second only to Zynga, which has been the subject of substantial criticism recently. This is a relatively quick exit for the company which is only two and a half years old. The company currently has approximately 60 million monthly active users and growing steadily.

This acquisition is clearly a testament to how hot the social gaming space has become. With approximately three times the number of users, Zynga would be worth approximately $1.2 billion if we were to consider all other things equal aside from the company’s number of users.

What Bebo has done with its game platform is integrate it with several of its existing features, such as chat, messages and other forms of notifications. This means that users can do things like challenge other users to a game directly from their chat window. It also means that developers have more immediate access to users for the purpose of encouraging them to return to their games.

Ultimately it means more monetization opportunities for Bebo and developers. With Bebo enabling game integration on a more ubiquitous level, developers can better gauge their own expectations of their reach across Bebo’s platform. For users, the games are more seamless and tied in directly with their Bebo experience. Whether or not users will appreciate this level of interactivity is to be determined on an individual level. But a significant portion of social network users enjoy wasting time with casual gaming.

The social factor is meant to further increase user engagement on Bebo’s site, essentially turning it into a social gaming platform. With this type of implementation, Bebo is separating its capacity to appeal to a wider pool of application developers and appealing heavily to game publishers. So far this has been the more lucrative route to go, especially for those social networks seeking additional and more direct monetization opportunities with end users.

hi5 has taken a similar approach to its social network, building out its platform on an administrative level for games to plug into. The presence of its virtual currency provides a leveling factor for marketplace exchanges within its social gaming environment, giving hi5 more control over the platform in its entirety. Friendster too is looking for a more direct form of integrated game play as well, combining several aspects of casual gaming and social networking.

Considering the moves by Bebo, hi5 and others, the growing desire to improve on many aspects of Facebook’s own application platform involve the top-down approach. Facebook has been surrounded with expectations of a similar platform roll out, but the regulations regarding such an approach would conflict with some existing terms for app developers, among other things.

With Facebook’s own recent changes to its terms policy for its platform and rapid game platform integration from several of Facebook’s competitors, the question of how Facebook can improve its own platform for monetization and the establishment of social platform standards remains partially unanswered.

A new report published by eMarketer today suggests that one of the best ways brands can capture the attention of internet users is by “providing relevant news and analysis” as well as providing “new ideas and thinking”. In other words, brands need to educate the user. By providing educational content, the theory is that internet users will reciprocate by providing support to the brands that educate them.

The one flaw with this survey? When was the last time that a human could rationally explain why they purchased something? Robert Cialdini’s “Influence: The Psychology of Persuasion” discusses some of the methods that can be used to influence consumers. Never does Cialdini go and poll consumers as a method for proving how something can influence a user’s purchase decision.

This doesn’t mean that this data is horrible though. Educating users simply works. The most popular articles that we’ve written over the years are those that are educational. Since the cost of content production has dropped dramatically over the years, it almost makes sense for large brands to develop ongoing media channels that they use to educate users.

While there are clear issues surrounding biased data coming from brands, investing in educational content makes a ton of sense. Those companies who spend tens or hundreds of millions on advertising each year would be much better to create their own media entities since the costs of running media enterprises are so cheap.

I’ll end my rant about investing in media companies though as there are numerous other activities that are relevant to internet users, as surfaced through this eMarketer survey. Discounts, for example, trumped every other activity as consumers are looking to save money. Also of interest in the eMarketer survey was the finding that family members and close friends are the best sources for information on purchase decisions.

While numerous social media companies have been working on turning that information into cash, the most effective systems to date are those platforms which enable communication among our closest relationships. You can check out the eMarketer findings for more information.

In an interview with Xconomy, Mussie Shore, one of the developers behind Google Friend Connect, says that “8 million communities have formed with Friend Connect”. What do those communities consist of? The same widget which shows up in the sidebar of this site. The number is massive considering that Facebook Connect is now on “tens of thousands” of websites. I’ve written about the service extensively since it first launched and as of now, it’s being hailed as a great success.

Friend Connect Powers The Long Tail

It’s an amazing number: 8 million communities. However what does that mean and how does that compare to the thousands of communities powered by Facebook Connect? For the most part, it simply means that Friend Connect communities are much smaller than their Facebook counterparts. That also means that there’s a greater likelihood that the communities could simply shift to other platforms, such as Facebook.

Why would a community with 50 members have any real concern about shifting to a new platform that provides more functionality or simply looks better? My guess is that they wouldn’t which is why Facebook still has a long way to go on the social front. The greatest issue that the company has is developing an accurate image of the global social graph, something that Facebook has been extremely effective at accomplishing.

Can Google Take On Facebook?

The bigger issue at hand is Google’s attempt to develop social services that compete with Facebook. As Eric Schmidt recently noted at the Gartner Symposium/ITxpo Orlando, learning how to rank socially relevant data “is the great challenge of the age.” In order to make that information more relevant, Google will be forced to organize all the social information they have access to.

The only problem is that Google’s social data is split among multiple products, the primary two being: Google Profiles and Orkut (which I haven’t used since I was 20). None of the services have anything close to an accurate image of my social graph. The easiest way for Google to get access to that data would be to implement Facebook Connect, however that would be somewhat of an admission of defeat.

For now the company has a great start with over 8 million Friend Connect communities and a solid profiles product. Google has a long way to go if they’re going to get access to all of our social information though.

If you have a lot of traffic, you instantly get a large valuation in the internet industry but what if your service stops working as it’s supposed to? Digg had a novel solution to the social discovery issue: let users vote on the articles they like most. It’s an effective model however it is most effective at doing one thing: determining what content its community likes most. Want to know what the general web likes or what various segments of the internet likes? You won’t be able to find that out with Digg.

Community Moderation Is Crowd Sourced Editorial

What’s the difference between a digital media company which creates editorial content and a platform which lets the users determine what content to serve up? Well nothing actually if you consider Alley Insider’s latest valuations of Gawker Media and Digg accurate. They currently value both companies at $190 million. Digg has a much easier business model though as they let the community generate all the content.

The result is that numerous startups have been created around community moderated content, all attempting to go after various verticals. The aggregator model is excellent if you are a fan of the people aggregating the content. Unfortunately though Digg doesn’t really solve the greater relevance problem facing the social web, although they were previously hyped as though they would solve that problem.

We Still Want Smart Aggregation

It still takes way too much work to sift through all the user generated content on the web. While the social streams are becoming public, developers are still struggling to generate effective algorithms which cut out the noise. Often times we turn to editors to find the most effective content on the web. That’s what keeps blogs alive, right? Other times we turn to the community.

Perhaps these two models will serve as the most effective social discovery systems for the next few years. As Erick Schonfeld of Techcrunch regularly complains: there’s still nothing out there to cut down on the noise. All I see popping up is more service to help me visualize the noise and to those services providers I say: thanks but no thanks. Why do I need a more creative way for illustrating the fact that I can’t consume the most relevant information streaming around the web?

What’s The Solution?

I wish I could present the solution to the problem but alas I can’t, I’m a mere blogger. However there are now countless ways to find the most “interesting” content on the web but none of them work perfectly for me. Do you know of a solution to the problem? How long do you think it will be before we come up with a way to filter through all the social media content being generated on the web?

The Future of Social Media Monetization

While performance and brand marketing have been long-standing online business models, virtual currency has recently captured the most interest of both developers and users alike. But of the three revenue streams, virtual currency may be the hardest to successfully manage.

Virtual Currency

Virtual currency is the most public example of successful social media monetization, with social game developers selling virtual items directly to consumers. Companies like Zynga, Playdom, Playfish, The Broth, Serious Gaming and hundreds of others are completely re-writing the playbook for online gaming success. Freemium is the standard business model, whereby users play freely and only pay to upgrade their experience through virtual items focused on improving game performance or self-expression. Now many of the most recognized names in console and mobile gaming are entering the space as well.

Revenues across social games today are estimated well north of $500M to $800M*** (excluding Asia), making it the largest segment of social media monetization. Success here is “hit” driven and requires managing the balance between user engagement, monetization and viral/social growth. As a result, while there are many attempts at making a “hit” social game, without a lot of investment in engineering and design, getting to meaningful revenue is difficult. In order to generate $100K to $1M a month, a game needs to reach 100K-2M daily active users, which requires a true understanding of game mechanics, social/viral tuning and marketing arbitrage. This has resulted in a high concentration of virtual currency revenue among the top social game developers due to the financial and headcount investment required to succeed.

Complexity aside, the tools available to analyze and monetize the virtual currency space are well developed. There are three main drivers for virtual currency monetization: offers and surveys, mobile payments and direct payments via credit card or paypal. The players in this space include Offerpal, SuperRewards, Zong, Boku, Peanut Labs and many others. By facilitating non-credit card payments via offers and mobile, a much younger generation of users are now able to actively play social games and still upgrade their experience through non-traditional payments. This has been one of the major drivers of the success of the industry.

Another driver of success has been the continued growth of online casual gaming, which has now exploded across social media sites. It’s no surprise that many of the top social games have been in specific genres (farming, restaurants, community chat) that focus on nurturing and growing a product or business through social interaction with friends versus the typical console game which focuses on battling/competing with other gamers.

The entire social gaming industry is just a few years old and has already become a huge component of social media monetization. But is this truly the most attractive business segment of social media? Where should developers and publishers in social media focus their efforts and time? I break down the numbers and make a judgment call below.

Today, without question, the most heavily invested and fastest growing segment of social media monetization is virtual currency. The massive success of Zynga, Playfish, Playdom and others have charted a path for developers of social games and gifting. This market is expected to grow from $1B in the U.S. in 2010 to $1.5B in 2011 to $2.4B by 2013. Meanwhile, the social media ad market in the U.S. is expected to reach $1.3B in 2010 but only grow to $1.4B in 2011. That’s a difference of 50% year-over-year (YoY) growth for virtual currency versus 8% YoY for expected social media advertising.

With this growth, it’s hard to argue that virtual currency isn’t the future of social media revenue and that developers and publishers should focus all their efforts here. That said, over the long haul I absolutely believe brand advertising will lead social media monetization, and companies not investing in working with brand advertisers today will miss the biggest opportunity within social media for the future.

To believe it, you have to assume two things. First, that social media will comprise the vast majority of total online engagement over the next 5-7 years, and become the initial point of entry for a major portion of online activity. Already, services like Facebook, MySpace and Twitter are material sources of traffic for publishers, with Facebook the top traffic driver for sites such as PerezHilton, CafeMom and EVite. Facebook Connect and Friend Connect have been adopted by more than 15,000 sites, and frankly there’s no reason why every site looking to drive meaningful free traffic through social awareness wouldn’t adopt these services as well. Doing so enables social media across the entire web.

Second, that the vast volume of brand advertising spent on non-online media (TV, radio, print) will finally come online. The recession has dramatically accelerated the drop in spend on non-online media in comparison to online. With more than $300B in U.S. advertising spend alone (http://bit.ly/1NR4im), at $28B in the U.S., online marketing is only 9% of the total. At just 15% of the market, online spending could quickly increase to $45B over the course of the next five years, much of that driven by the transition of brand advertising from off to online.

So long as social media use continues its unabated growth, it’s not difficult to assume social media advertising will comprise a material portion of that $45B, much of it driven by brand marketing based on the aforementioned offline transition. It would only take 10% of online spend to be social media focused ($4.5B) to almost double the expected size of virtual currency ($2.4B) by 2013. Compare that to the nearly 40% of online spending focused on search marketing today, with the increasing use of social media as a top traffic driver for sites, and that 10% estimate seems conservative.

Simply put, brand marketing has a high probability of being a much bigger opportunity than virtual currency in the space and deserves real focus from developers and publishers given it’s true potential within social media.

Sources

*** Estimate based on Zynga $150M + Playdom $50M-$70M + Playfish $30-$50M + Others Social Game providers $75M-$100M + Facebook Gifts $50M + Other Social Networks virtual currency (Hi5, MyYearbook, Bebo, MySpace) $50M and Piper Jaffrey estimate (http://bit.ly/IKdvm)

Let’s be honest, listening to people talk about tweeting for 8 hours gets kind of annoying. Given that I had never previously attended a Twitter conference I thought I would at least give one a shot. Thankfully the people over at Modern Media brought a Twitter conference to D.C. and it wasn’t as hype-filled as one would expect. At the end of the day though what we’re always listening for is valuable anecdotes and Twitter is the perfect platform for sharing those.

This afternoon Rohit Bhargava wrote, “Tweeting can be like putting $$ in a tip jar when no one is looking. You won’t always get credit for your own brilliance.” It’s a true statement and hundreds of these anecdotes streamed through Twitter throughout the day. Unlike a large portion of the attendees who were glued to their favorite Twitter desktop client throughout the day, I opted out of the background chatter for the most part.

I also happened to miss the keynotes from Laura Fitton and Craig Newmark and all the morning panels. However spending at least a few hours in a Twitter conference is plenty of sampling time. So what was my biggest takeaway? It wasn’t about Twitter. It was that rather than printing out entire conference program guides which can cost you thousands of dollars, you can use bookmarks and save a bundle! The other lesson is related to how Twitter data is being archived.

There are countless products that are each storing all of the tweets coming through the public Twitter stream. How that information is accessed depends on each product’s implementation. The most obvious system for storing and accessing a large data set is Hadoop, which is how most of the companies are now storing their data. However one company I spoke to built their own proprietary system which essentially organizes data based on the expected queries from users. A third company which had an iPhone application decided to cache information locally on the iPhone.

While non-developers may not understand the challenge of storing extremely large data sets, this new ocean of data presents some exciting new issues. While large companies like Facebook, Twitter, and Google are attempting to tackle these issues the applications built on top of them are also facing similar challenges. Anyways, enough about the technical issues of building scalable Twitter applications.

The real question to ask is: has Twitter finally jumped the shark? In the last panel of the day, Steve Rubel asked “Where is Twitter going to get its next million users?” Clay Johnson said it was the exact opposite and that “Twitter could be the next email”. Yes, the traffic charts of Twitter may suggest that Twitter could have already jumped the shark but a product that has brought together a large number of people together at events around the world, couldn’t already have jumped the shark, could it?