Facebook to end Beacon tracking tool in settlement

Facebook is shutting down its much-maligned Beacon marketing program, launched nearly two years ago amid fanfare only to generate a storm of privacy complaints over the tracking of user activities at partner Web sites.

Facebook agreed to end Beacon and create a foundation to promote online privacy, safety and security as part of a $9.5 million settlement in a lawsuit over the program. A federal judge in California still must approve the terms.

Meanwhile, Facebook is teaming up with the Nielsen Co. to help advertisers grab the attention of the hordes that are spending more of their time at the Internet hangout. Sheryl Sandberg, Facebook's chief operating officer, is expected to unveil the new marketing program, called "Nielsen BrandLift," at an advertising conference Tuesday in New York.

Facebook thought the Beacon marketing program would help users keep their friends better informed about their interests while also serving as "trusted referrals" that would help drive more sales to the participating sites. Sprinkled in with status updates and photos were alerts on what items their friends had bought or reviewed.

But users complained that friends could learn of holiday gifts they had bought at the online retailer Overstock.com or learn of the mindless movies for which they had purchased tickets through Fandango.

Users were able to decline tracking on a site-by-site basis, but not systemwide — at least not initially. Many users simply didn't notice a small warning that appeared on a corner of their Web browsers; the box disappeared after about 20 seconds, after which consent was assumed.

After an uproar, Palo Alto, California-based Facebook ultimately let users turn Beacon off, and CEO Mark Zuckerberg publicly apologized for it.

The service never really caught on, though, and Facebook said late Friday it agreed to end it as part of the proposed settlement.

The lawsuit was filed in August 2008 on behalf of 19 users against Facebook, as well as Blockbuster Inc., Fandango, Overstock.com Inc. and other companies that used Beacon. It claimed the defendants disclosed users' personal information for advertising purposes, without their consent.

"We learned a great deal from the Beacon experience," Facebook spokesman Barry Schnitt said in a statement. "For one, it was underscored how critical it is to provide extensive user control over how information is shared. We also learned how to effectively communicate changes that we make to the user experience."

While Beacon was unsuccessful, out of the experience grew Facebook Connect, which lets the online hangout's 300-million-plus users access other sites using their Facebook log-ins and share with Facebook information on activities elsewhere.

Unlike Beacon, however, Facebook Connect gives users, rather than Facebook and advertisers, control over the information they share.

The multiyear partnership with Nielsen marks Facebook's latest attempt to persuade advertisers to spend more money promoting their brands on the site. Among other things, Nielsen will develop opt-in polls that attempt to measure Facebook users' responses to the ads that show up on their pages.

Facebook's huge audience already has been luring more advertisers to the site. The company is expected to bring in more than $500 million in revenue this year, according to Facebook board member Marc Andreessen. The rising tide of money cascading into Facebook is now enough to cover the 5-year-old company's operating expenses, a major milestone for startups.

Asian social networking sites profit from virtual money

By selling an array of virtual products from avatar clothes to e-furniture, Asia's social networking sites appear to have solved the conundrum of how to leverage big profits from their extensive user bases.

It's simple, they say, the money might be virtual but the profits are all too real.

Chinese university student Tan Shengrong spends about 20 yuan ($2.90) per month purchasing outfits for her pet penguin avatar or playing games on QQ, an instant message portal on Qzone, China's most popular social networking site.

It might not seem like a hefty sum, but every fen, or cent, is money in the bank for Tencent Holdings, which owns Qzone and saw an 85 percent increase in its second quarter net profit this year compared to 2008 despite the economic downturn.

"They keep growing even though the economy's bad because they keep making millions from cents from millions and millions of people," said Benjamin Joffe, head of Internet consulting firm Plus Eight Star.

From virtual clothes to e-pets, Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star. That's about 80 percent of the global market for virtual products, it says.

"Social networking is just a way to get people together, but if you want revenue you have to sell them something. What they found was that people were happy to pay for content related to emotion, status and entertainment," said Joffe.

Of the virtual sales in Asia, about 80 percent comes from the sale of such items as equipment for online games such as rods for GREE's fishing game Tsuri Star 2. The rest comes from purchases for avatars on social networking sites.

Such is the success of virtual sales on Asia's most popular social networking sites that Myspace and Facebook are starting to look with a fresh eye at the potential of virtual money to generate cold hard cash.

Qzone's Tencent Holdings made over $1 billion last year with just 13 percent coming from advertising revenue. In contrast, Facebook and Myspace depend on advertising to fund most of their revenue.

The evolution of virtual money on social networking sites in Asia is partly due to a less developed online advertising market which drove Asian web businesses to seek new ways to profit.

Cultural issues are at play too. Gaming is popular among adults in Asia, whereas in the West it tends to be only for kids.

East Asian societies are also very status conscious. Players are loath to be the only avatar without the latest gear and Asians are perhaps more willing than counterparts in the West to buy virtual products to update their avatars or social space.

Asia's social networking sites tend to be country specific but they have very active user bases.

Qzone had 228 million active user accounts for the second quarter of 2009, although it won't give out monthly visitor figures. Meanwhile, Cyworld, which says that 90 percent of South Korea's 20-somethings are members, had 23 million unique visitors per month at the end of the first quarter of 2009.

Virtual rentals

Like their Western counterparts, Asian social networking sites allow their users to chat, play games and share photos.

There is also some advertising, but the sites earn most of their revenues from their users. Members are represented by avatars and acquire virtual currency from the sites to buy digital goods, game packages or upgrades.

The model has taken off abroad but there is still a long way to go until the West catches up with Asia.

Habbo, a social networking site for teenagers owned by Finland's Sulake Corporation, sells virtual clothes and furniture. Meanwhile, games such as Pet Society which is available on Facebook and allows users to raise virtual pets, sells goods such as virtual pet accessories and e-food.

Playfish, creator of Pet Society and other social games, says it has 47 million active users per month playing its games.

With seven million or so inhabitants, the virtual world Second Life offers a range of e-wares for sale for Linden dollars. Some are mundane and others are controversial such as guns and virtual phalluses with price tags based on the size.

Asia is also a playground for a range of virtual business models such as rentals. For example, Cyworld rents background skins of popular South Korean baseball players for limited periods. Such rentals drive repeat sales and tap into trends.

Lost in translation

The success of these East Asian sites contrast sharply to the frustrated social media landscape across the Pacific where despite immense popularity, Facebook and Myspace are yet to fully harness the profit potential of their massive user bases.

Facebook, the world's biggest social network with close to 300 million visitors per month, is on track to bring in more than $500 million in revenue this year, mostly from advertising, but its focus is on growing its user base rather than making money.

Still, a recent New York Times article suggested signs of an exodus from Facebook as disillusioned users leave due to privacy concerns or complaints of rampant commercialism.

Rupert Murdoch's MySpace has been unusual among the major social networks in turning profitable through advertising sales, although is now undergoing a major overhaul, including ousting its CEO and firing hundreds of staff, in the face of worrying user metrics.

Meanwhile, both Facebook and MySpace are eyeing the virtues of virtual money. Facebook, which sells virtual goods mainly in the form of 'Facebook gifts' through a credit system, said in March that it was looking at offering a common virtual currency to third-party application developers.

At the Web 2.0 Summit late last year, Myspace's recently-departed chief operating officer Amit Kapur mentioned that that the firm was also seeking to develop a payments and virtual goods system.

Meanwhile, Internet entrepreneurs are coming to Asia to pick up on innovative web business models.

In June, 32 venture capitalists and Internet entrepreneurs visited Japan and China under the banner "GeeksOnAPlane," to learn about local success stories such as DeNA, video hosting website Tudou, and gaming website PopCap.

"They were all blown away even though some of them already knew about what was going on here," said George Godula, founder of Shanghai-based consultancy Web2Asia. "They (Asian social networking sites) are quite nimble at finding out business models or ways of how to make money," he told Reuters.

Social networking sites grab big slice of Web ads

About one of every five Internet display ads in the United States is viewed on a social networking Web site like MySpace and Facebook, according to a new report.

The report by analytics firm comScore underscores the increasing prominence of social media sites in the Internet landscape and broadening acceptance of the sites by brand advertisers.

It also illustrates the increasing competition between social media sites and established Internet companies like Yahoo Inc and Time Warner Inc's AOL which have long billed themselves as the top online destinations for brand advertisers.

The study by comScore, released on Tuesday, said social media sites represented 21.1 percent of U.S. Internet display ads in July, with MySpace and Facebook accounting for more than 80 percent of those ads.

"Because the top social media sites can deliver high reach and frequency against target segments at a low cost, it appears that some advertisers are eager to use social networking sites as a new advertising delivery vehicle," said Jeff Hackett, senior vice president of comScore.

According to comScore, AT&T Inc, Experian Interactive and IAC/Interactive Corp's Ask Network were the top three advertisers on social networking sites in July.

While social media sites have enjoyed a surge in popularity in recent years -- Facebook is now the world's fourth-most visited Web site -- some observers have questioned whether the sites can be effectively monetized.

Because the content on social media sites is created by users, and could therefore prove racy or offensive, some have questioned the willingness of marketers to place their brands alongside that content.

"They are sensitive to some extent, but nowhere near to the extent you might think," Sanford Bernstein analyst Jeff Lindsay said of advertisers.

The price of placing ads on social networking sites is significantly less than on a Web portal like Yahoo or AOL, said Lindsay. The vast amount of Web pages available on social networks means that advertisers can purchase a massive volume of ad impressions at bargain prices.

The strategy may not be ideally suited to smaller marketers, or advertisers seeking a direct response from their ads, said Lindsay.

"For big, national brands it works just fine, just like TV," said Lindsay. "It's a huge, huge volume game."

A Google model for mobile advertising?

The week is not over yet but it seems I've already exceeded my quota of interviews with IT executives. Most of them are mobile officials who came over to the country to attend the recently concluded IMMAP (Internet and Mobile Marketing Association of the Philippines) conference.

I picked up a number brilliant ideas from these guys who all argued that the next battleground in digital marketing is in the mobile sector. While Google has undoubtedly made the most money out of the Internet, its competitors, including archrival Yahoo, are locked in a race to conquer the mobile space.

One of the most interesting comments I got from my interviews is from a Dutch guy named Boudewijn Pesch, who is the managing director for Asia-Pacific of Acision. I almost did not attend my session with Pesch because my interview schedule was mixed up with that of another reporter and the venue was the company's office in the opposite end of the metropolis. The late-afternoon gig became messier when strong rains made traveling doubly hard.

But, I'm glad I dragged myself to the Pesch interview since the guy was not the typical executive I usually encounter. He was quite stingy with his answers and responded with a single sentence for each of the questions I threw at him. Thus, I had to constantly ask questions to keep him talking.

At the start of the interview, Pesch proudly pointed out that Acision, a Netherlands-based tech company, is the inventor of SMS or text messaging. Since I had no idea who really invented this technology service, I didn't dispute his assertion and accepted it at face value.

Pesch also admitted that his company developed the Duo service offered by Globe Telecom. The innovative offering allows mobile phone users to make unlimited calls to landlines and other Duo-ready phones at a fixed subscription fee. Pesch stressed, however, Globe had first broached the idea and Acision only provided the technology.

One interesting comment he made was on the issue of mobile advertising. Acision, he said, has actually developed a technology that allows advertisers to insert their ads in the text messages sent by subscribers.

Pesch this is similar to the Google model in which ads that are related to the queries of users are placed alongside the search results. As we all know, Google has extended this model to its Gmail service wherein ads related to the e-mail sent by its subscribers also appear inside their inbox.

The exec said they already presented this service to local operators, which, I'm sure, will thoroughly study it first before deploying it commercially. Pesch didn't mention any pricing scheme, but the only reason I can think of that consumers would agree to have ads in their text messages is for operators to give free subscription service in return.

It would be interesting how this thing will pan out.

Rigodon Update

Internet firm Yahoo has just appointed a new guy to lead its Philippine operations. Jonathan "Jack" Madrid, former head of technology incubator iAyala and managing director of MTV Philippines, will replace tech pioneer Jojo Anonuevo, who will take up a regional post at Yahoo in Singapore.

Madrid also had a short but uninspiring stint as a manager at Dell Computer's call center before the facility was sold recently to Teleperformance. But, I guess the company had to put in a marketing man in charge after Anonuevo, a technology guy, was done setting up the local office.

Also, veteran IT exec Nilo Cruz has reportedly taken up a new post as head of the joint venture of Smartmatic and TIM, the consortium that won the 7 billion pesos (US$144.2 million) 2010 automated elections contract. Cruz's experience and network as former country manager of Compaq, Hewlett-Packard and BT will surely come in handy in his new job.

RP mobile marketers eye $60M ad pie

Local mobile marketers are targeting a larger piece of the local advertising pie as consumers continue to give more attention to digital media, the president of the Internet and Mobile Marketing Association of the Philippines (IMMAP) said Tuesday.

IMMAP president Arthur Policarpio said the trade group's vision is to capture 2%-3% of total ad spend in the Philippines, amounting to $60 million-$90 million, in the next three to five years. The IMMAP is currently composed of 86 member companies, including 37 mobile companies, as well as advertisers, agencies and publishers.

He said that while some companies have spent money on Internet and SMS advertising, a large portion of their budgets still goes to traditional print, TV, radio and outdoor media platforms.

One platform that remains largely untapped by local advertisers is mobile marketing. From less than a million subscribers in 1996, the Philippines now boasts of over 70 million mobile subscribers this year.

Policarpio said one challenge faced by marketers is lack of understanding of mobile's potential and potency as a marketing tool. "The mobile phone is the only device that you have on you almost 24/7. It's a marketing platform just waiting to be tapped," he said at a digital marketing summit at SM Mall of Asia.

He said that beyond SMS, marketers could also look at other mobile marketing initiatives such as bluetooth advertising, mobile Internet advertising and mobile applications.

He noted that Yahoo! Mobile's site receives 1.2 million unique users per month and 128 million page views as of August 2009. He said separate data supplied by Admob showed that local mobile sites logged in 380 million page views a month.

Admob statistics also show a rise in sales of smartphones in the Philippines such as the Nokia N70 and Nokia 3110c, which is fueling the increase in mobile Web browsing.

Policarpio acknowledged though that there are some barriers into increased adoption of mobile marketing including the abuse of consumer privacy and rights, lack of industry-specific research, lack of knowledge on the part of the advertisers and lack of industry-wide metrics and measurement.

"This is the vision of IMMAP - to become the recognized thought leader and center of mobile marketing innovation in the Asia-Pacific region and to leverage global best practices, standards and consumer guidelines," he said.

The IMMAP recently partnered with the Mobile Marketing Association and established the MMA Philippines Local Council. The objective of the partnership between MMA and IMMAP is to foster the mobile advertising and marketing industry in the Philippines.

A shift to digital media

MMA president and CEO Mike Wehrs said advertising companies in many parts of the world have exhibited a shift in brand thinking by seeing mobile as an essential and not just an experimental platform for marketers.

He said that with over 4.8 billion mobile subscribers worldwide, the platform has outpaced the growth of Internet and fixed-line users.

He said he expects spending on mobile messaging to rise to $2.9 billion in 2010. For this year alone, he said advertisers are reallocating $65 billion of their ad budgets from traditional media channels to digital channels including online, mobile, viral and search engine optimization (SEO).

He also noted trends in some countries such as mobile banking, alerts, mobile vouchers and coupons, as well as customer service application, which can be done via mobile phone.

"[Mobile marketing] delivers on the promise of one-to-one marketing. There's a higher level of engagement and interaction controlled by the consumer. Empowering the consumer makes the ad more effective," he said.