Inside Social Apps 2010: Offer Companies Look Forward to Industry Growth

Advertising offers on Facebook have gotten a lot of scrutiny in the last year. And, today at our Inside Social Apps conferences, leaders from offer companies talked about how they’ve been improving — both in terms of ad quality and in terms of making developers more money.

Notably on the panel was Netflix’s Jim Bobowski, who helps lead the company’s widespread online performance advertising campaigns. Netflix is one of the largest offer advertisers on Facebook and other social networks.

Here are the panelists:

George Garrick, CEO, Offerpal Media
Adam Caplan, VP Virtual Currency, Adknowledge
Lisa Marino, CRO, RockYou
Jim Bobowski, Director Online Partner Marketing, Netflix
Alex Rampell, CEO, TrialPay
Jay Weintraub, Founder, LeadsCon (Moderator)

Note: You can check out tweets from this and other conference sessions via the #isa2010 hashtag on Twitter.

And here are our highlights from the panel.

Weintraub: I’ll start out with one word: “Scamville.” How have things changed?

Marino: The industry has been going through a concerted effort to police itself. Plus, Facebook has been taking a serious look and it has been implementing more quality and enforcement measure.

Caplan: We’re seeing the productization of the offer wall. It’s not just ad offers, there are other ways for users to earn money. Surveys, tasks, other ways that enable consumers to earn points in games. We’re seeing a shift in mix of advertising from what was once dominated by ads. Now, large brands are  realizing that this medium is one of only ways to reach certain category of individuals. These are people who don’t click on ads or read newspapers. If you’re larger advertiser you have to engage; we’re beginning to see a lot of brand advertisers move in.

Rampell: Nobody was trying to be unethical, but the  ads that brought in the highest eCPMs were low quality and they crowded out legitimate advertisers. Conceptually, you should be able to do all sorts of things through offers, like “place an order from Staples in the next 20 minutes and get 1000 points for free.” The same scam problems, meanwhile, are happening on Google and pretty much everywhere else. Facebook is cleanest ad platform on the web, far better than google and the others. Nobody wanted to run scammy offers, but they were getting the highest revenues. Developers thought “not our problem.” Now you do have room for Staples, or things like video ads. From the user perspective, this improves the longevity of the space.

Garrick: Most developers  were concerned about eCPMs, demanding that they go higher and higher. If your optimization service pushes it to the top, this is what happens. The reason some of the offers were bad is that they were coming in huge feeds from other networks on the web. You can see the same thing around the web. On the day of Scamville, the notorious Video Professor ads were running on the front page of Techcrunch. If you take a large feed, this stuff will get in there. I agree with Alex, social media has probably become the cleanest place. You don’t see stuff that you get in your postal mailbox, email, or the open web. The other thing is that the concept of alternative payments has branched out from offers: You can watch videos, surveys, but you can buy iTunes, movie rentals, turn in old  iPods — everything can be converted into points.

Bobowski: We’ve been steady. If there’s a risk and if Facebook requires offers to come down, that would hurt my numbers. But we’ve also been thinking: how can we use this medium better, how can we make sure we treat customers efficiently. How can we take our customer and make sure they’re being treated appropriately by all the players in the market.

Weintraub: Jim, what advice do you have for other advertisers?

Bobowski: Provide value to customer, make sure they’re treated well, make sure way we treat offers as complementary to brand. I want to invest where i can get a return. Most importantly, if you take a step back and look at the size of this base and the demographics behind it — the stereotype is that its 13 to 18 year-old boys in a basement. That’s wrong. This is a wide demographic, and high quality. Ads shouldn’t just present offers, but present them and make sure they fit. You’re seeing the beginning; there will be more brands coming in.

Weintraub: How has monetization been impacted?

Caplan: We haven’t just been in compliance with the written rules, but the spirit of the rules as well.

Marino: There’s been a shift in analysis on provider and dev level about where the user funnel is — how they’re going to provide the overall experience. There’s been a pretty reasonable expectation that we go around upper and lower funnel of user. A fantastic game will monetize 3% to 5% of its user base. Most will do 1% to 3%. When you put an offer wall on top, maybe you double that number. When you move up the funnel, you are reaching people who aren’t willing to pay. There’s huge pent up demand in gaming where people want to level but don’t want to pay. If you start putting this into the game experience — video views, downloading a coupon — doing it in a clear, opt-in way, a very clean user experiences, it can make a big difference.

Caplan: Most of the larger game companies haven’t done a lot of banner advertising. The reason is the success of payments in the offer wall. I think we’re going to see more brand ads in application. When integrated, they can drive revenues 20% to 30% higher.

Weintraub: So, everyone, more brand ads?

Marino: The integration can change numbers dramatically. We’re sending 200,000 to 300,000 video views per day via integrated videos, versus 5,000, 6,000 or 7,000 offers in a day.

Rampell: It’s not just about  brand versus direct response, it’s where you appear in the funnel. In real life, think about how someone would respond if you took them to Starbucks for their first time, then gave them the option to earn a frappuccino. If they want to earn it for free, then you tell them have to choose from 100 different things. Most people will think this is too complex, but maybe some do. The next time they come to Starbucks, they’ll probably just opt to pay. There’s nothing wrong with the offer wall, but there is fatigue. If you show things that are timely, if you can get for free, that’s something that hasn’t been tapped very well.

Garrick: There’s a lot that’s not understood about how to integrate brands and offers into games. Developers  haven’t yet figure out how to use offers and brands as effectively as possible. But both types of advertising can coexist.

Weintraub: Should there be some body that can provide best practices for the industry?

Bobowski: There are places we can collaborate, like agreeing on customer service protocols. These are areas where the industry would be better off. There are natural places where people should test stuff out, seeing what adds real customer value not maximizing the eCPM.