Connect the Thoughts

The online social networking universe presents a tempting pool of data for advertisers to use in order to improve their targeting techniques. The rise of Facebook and other social destinations means that users are revealing their connections, their influences and tastes like never before. Information like this is obviously a potential gold mine for marketers.

One particular social networking technology has already changed the way we communicate, how businesses operate and how connections are made. Its adoption has been massive and global. It is, of course, the telephone. Amidst the promises of Facebook and Twitter to fundamentally change the way people connect, it can be instructive to remember that the phone is arguably the oldest social networking tool around, not to mention the most successful.

That’s why clues to how online social networking will change the face of advertising lie in observations of telephone use. In 2004, Chris Volinsky from AT&T Labs Research and Shawndra Hill, a New York University grad student, plowed through reams of the data AT&T collects on phone use. Calling patterns revealed to them that there was a direct correlation between the connectedness of consumers and their purchasing habits. More specifically, consumers shop quite a bit like their friends and are more likely to respond to marketing messages from a brand a friend uses. How likely? Five times more likely.

These findings are among the factors encouraging some marketers and ad executives to believe that the next wave of Web ad targeting lies not in tracking user movements across Web sites but, instead, in mining social networks for the social tissue that connects consumers with their friends and family. With this data as the starting point, the bet is that ad messages can become significantly more relevant and therefore effective. It also could contain the answer as to how social-networking companies like Facebook can turn their huge, active audiences into thriving, ad-supported businesses. In short, the value of social networking platforms might not be on the ad placements running there, but in the data they can collect about consumers’ connections that can then be used to fine-tune ad messages on their sites and beyond.

Social targeting is part of a larger trend in online advertising that is seeing the focus shift away from content to audiences. Put simply, advertisers and agencies are less interested in using content as a signal to attract and identify their target audience. The Internet makes it possible to collect information on habits, demographics and friend networks to find specific audiences irrespective of the content they happen to be consuming right now. Advertisers are seeing the power of combining their own data on customers with that collected by others online to find their desired targets. Some call this a “people, not pages” approach.

Whatever the name, the method threatens an upheaval in the online world, which until now has in large part mirrored the traditional publishing approach of attracting an audience with content and services, then selling access to it. The problem with this model is that the online world contains a stupefying amount of content. As a result, generic ad impressions have literally become a dime a dozen, and prices for display ads have plummeted accordingly. But while the abundance of cheap ad inventory is a predicament for publishers, it’s an opportunity for advertisers — especially those armed with consumer insight.

An illustrative case is that of Media6°, which launched a new marketing analytics platform late last year. The concept was promising enough to lure former top Microsoft ad executive Joe Doran to sign on as CEO. Nearly $20 million in venture funding soon followed.