THE DREAM IN ACTION

Most people know that Google’s precious search algorithm is a secret, sacred, thing that they’ve worked very hard to protect. In fact their behavior around that algorithm has been similar to Golum’s behavior towards his “precious” ring. You know, the one that will ‘rule them all’. This algorithm and others allow Google to provide very focused advertising based on your search terms.

In computing, an algorithm is an effective method for solving a problem using a finite sequence of instructions.

However, the way I see it, their dominance in providing web advertising using the “precious”, all machine, set of instruction won’t last forever. There are human powered systems that can adjust quickly for variables, change over time, and become increasingly “sharp” as they learn. Simply, they can learn better than just a computer. A great example of this type of human powered system is a NYC based startup Hunch. Effectively, they’ve created a system where they can collect an infinite number of decision trees, all generated by humans, and then predict future decisions based on passed decision sequences.

So, what am I getting at? Well, as you know I’ve been working closely in the local advertising space through my work with Foursquare and I can’t stop thinking about how large of an opportunity this is. If a bar or restaurant can advertise directly to the folks driving by as they’re deciding where to eat, that’s better than any billboard, radio spot, newspaper clip, full page magazine add, event sponsorship, Adsense ad in my Gmail or Google search, and I could go on… It’s simply the best possible advert you could get, as an advertiser or a consumer, unless I’m missing something. Here’s an example, when companies spend money on other ‘focused’ internet advertising they pay for say 100 impressions. This means that 100 people saw that ad, and the common click-through rate is about 1/100, even on the ‘focused’ ads. Now, what if you were able to directly reach potential customers who frequent your ‘type’ of establishment, fall within a very specific demographic, and only if they’re walking distance from your location!!! Right now you’re saying, “WTF are you serious…”, and I am.

With the blowing up of location based services like Foursquare, Loopt, Brightkite and a few others, this sort of data is readily available. People are using these services to share their location, their purchase preferences, their unfiltered thoughts about almost everything they do and businesses can learn A LOT from that. Now you see why all these nerds (me) get excited about data; because you can change the world with it. With this data you can turn industries upside down, and the ability to reach consumers in this intimate way is one of those opportunities.

It’s all a matter of who can reach the masses, who can create a product intuitive enough for “Joe the Plumber” to use. Google’s Adsense technology is fairly simple, but still local businesses don’t use it. The potential for human powered mobile, local, advertising is in the words of Austin Powers, “dead sexy”. My mouth is literally watering. I can’t wait to be a part of this movement.

Update: This post is going to be syndicated, and I made some additions/updates for that reason. 1/5/10

This weekend @Mollstar and I had a long (relative to the amount of time I can usually get her to talk about the web) conversation about how we don’t really understand who plays all these Facebook games. Other than Poker from Zynga, which I play a decent amount of, I don’t understand who grows virtual farms, zaps their friends with black magic, and others. Then, on Halloween, Michael Arrington of Tech Crunch posted a follow up post to his question to Anu Shirkla of OfferPal at the Virtual Good Summit about the ethics of many adverting trends within the virtual currency markets. His post covered examples of these ad schemes and a very entertaining video of classic Arrington antics at the event. You may like him or hate him but you can’t deny he’s kind of a bad ass.

http://www.techcrunch.com/2009/10/31/scamville-the-social-gaming-ecosystem-of-hell/

Then the next day on Nov 1, Tech Crunch followed up with quotes from two respected entrepreneurs who admittedly said they’d executed these types of ad strategies in the past and weren’t proud of it. One even said, “I’m surprised it took this many years to be reported by the “media”. These kind of scams have been going on for years…”

http://www.techcrunch.com/2009/11/01/scamville-hotornot-plentyoffish-facebook-myspace/

Then Dennis Yu the CEO of BlitzLocal wrote a very honest post about scamming Facebook and the 3 most common ways to do it: 1) Downloading a spyware tool bar, 2) Tricking users to give up their email using ‘you’ve won a “free” camera, just tell us you email address’, or 3) Getting a users phone number by using ‘thanks for taking that IQ test, give us your phone number so we know where to send it’, which charges a user $20/month.

http://www.techcrunch.com/2009/11/01/how-to-spam-facebook-like-a-pro-an-insiders-confession/

The next follow up was from Zynga’s VP of Biz Dev Andrew Trader who stated that about 1/3 of Zynga’s revenue comes from advertising. This is the same advertising that Arrington calls ’scammy’.

http://www.techcrunch.com/2009/11/02/scamville-zynga-says-13-of-revenue-comes-from-lead-gen-and-other-offers/

Next Mark Pincus, who I wrote about last week, responded to Arrington’s claims with a very thoughtful post about the industry and openly admitting that yes, some players on these social media platforms are ‘scammy’ advertisers and they’re creating bad user experiences. He also raised a point I hadn’t thought of; there are many users who don’t have access to online payment methods (broke kids) who are still interested in making in game purchases. So they’re able to take survey’s and perform tasks to earn in-game-currency. Pincus says this about the worst offender:

In fact, the worst offender, tatto media, referenced in the techcrunch article, had already been taken down and permanently banned prior to the post.

There is no doubt that social gaming is entering the mainstream culture and there is a business to be created around fun….

As we evolve to a world where people connections are the basis for the largest consumer services, we will face more challenges. I’m confident that with so many smart people (and critics) we will overcome these.

http://markpincus.typepad.com/markpincus/2009/11/my-take-on-zynga-and-cpa-offers.html

Then yesterday Arrington respectfully responded to the Pincus post:

Hats off to Zynga. Flat out admitting that the problem exists and taking early steps to fix it is just something you don’t see from most companies.

http://www.techcrunch.com/2009/11/02/zynga-takes-steps-to-remove-scams-from-games/

I hope that I could catch you up to what’s going on here and make it easier for you to follow than reading every post (although you can of course). As I stated last week in my application economy post I really think that Pincus is a sharp entrepreneur. He understand that you can’t just F’ the user and still build a great business so I’m excited to see how he responds to this in the longer term. I wouldn’t doubt it at all if Pincus were to push Facebook to adopt the standards that Arrington et al. are calling for.

Related articles by Zemanta

• How Facebook could clean-up the offers industry (andrewchenblog.com)

There is no way in hell that I’ll believe this tweet wasn’t paid for. I’m not sure if it was paid directly from Babooshbaby.com, or some 3rd party advertising company, but it was paid for, I’m convinced.

There has been many a theory that the introduction of celebs on Twitter will mess it all up. The mainstream will bring the polluted stream of spam, inauthentic tweets, and Babooshbaby.com’s. Brooke Burke, (yes I follow her, for obvious reasons) is busy. She hosts events, she was down at Sundance last week, and she’s interesting so people will follow her. She’s a perfect opportunity for an advertisement. Even if I’m wrong here and this tweet is authentic, this will happen. Shaq will talk about shoes, Dave Mathews may talk about a guitar, Britney may talk about an abortion clinic…who knows.

I don’t know if this is bad though. It may become extremely useful to see what people are using or what products are good for what. As long as the celebs are actually tweeting it themselves and don’t just have teams of advertisers tweeting for them it may still add value. This will also rank peoples influence. You’ll be able to measure how many clickthroughs Britney got vs. how many Paris got. US Weekly is going to love these stats. Yet another situation where my tech world and my fiances pop world intersect.

Related articles by Zemanta

• Twitter users angry over ad service
• Google Reader Share: Twitter Decides To Hire Somebody Whose Job It Is to Make Money
• Twitter authority & customer service
• Tweets from the Womb…seriously.