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How to Turn Social Media into Cash

12 Oct 2012

In the age of social media, companies like Twitter, LinkedIn and Tumblr are attracting not just users but ad dollars too. The companies got together to share their ad experiences.

Executives from a new generation of tech media companies, from Twitter to Tumblr, gathered in New York to discuss how to make money in an age of social, mobile media.

The Advertising Week event, titled Masters of Monetization 2.0, some useful insights into the business of ads and engagement. Here are 6 takeaways:

1. In-stream, native advertising works best

What do LinkedIn, Twitter, Buzzfeed and Tumblr all have in common? These companies all embed sponsors in their content stream rather than laying ads on top it. This provides a less disruptive user experience and better engagement for advertisers. In-stream ads also scale well to smaller screens which, for many publishers, can be a marketing black hole.

"If you can get into the feed where people are looking and not piss them off, that works," said BuzzFeed's CRO, Andy Wiedlin.

2. Mobile natives are best positioned to offer mobile ads

This may seem intuitive but consider a company like Foursquare, which uses location tools to help people find friends and places. As CRO Steven Rosenblatt pointed out, a lack of "desktop baggage" means Foursquare is not tempted to try and shoehorn older ad models into the mobile environment.

A company doesn't have to be born mobile, however, to succeed on smaller screens. Jonathan Lister, VP of Sales at LinkedIn, explained how the company had designed its mobile site for the "coffee and the couch" habits of its tablet readers. But the most striking example of a company adapting to mobile is Twitter: VP Joel Lunenfield disclosed that the company, whose embedded ads work well on a small screen, now makes more money from mobile than from the desktop.

3. Social communities aren't created equal

Social media lets advertisers reach a "community" but that's just the beginning of the story. Advertisers must also decide the relative value of a given company's network of users. LinkedIn, for instance, claims that leads based on its professional profiles are three times more likely to convert than the personal ones on Facebook. They must also figure out what to do with "transient communities."

"The interesting thing about communities is that there's established communities and communities that just establish around an event," said Twitter's Lunenfield. His point is that events can give rise to a massive and passionate target audience - but that advertisers must be nimble to reach them in time.

4. Advertisers will have to spend more if they want timely, pretty ads

As Twitter points out, a passionate audience may emerge out of nowhere but the window to reach them is short. This means that advertisers need to invest more in creative teams who can whip up cool ads on short notice for mobile and social platforms.

Derek Gottfrid, a VP at Tumblr, added that the current trend for visual sharing means ad makers should invest in making their ads pretty enough to stand out.

Such arguments may be self-serving but that doesn't mean they're wrong. In recent months, it's become a common refrain that platforms and publishers have adapted to new media consumptions habits but that advertisers are lagging behind.

5. Engagement is great but tell them how you're going to close the sale

"At the end of the day, a brand spends money to drive a sale ... if you can prove it, you'll win," said Jim Murphy, a SVP at Catalina Marketing.

Murphy's perspective is a welcome counter-point to the notion that a social media audience is an end in itself. He says that brands are skeptical of hype about engagement and would prefer to hear how a given platform will help them close a sale.

The new tech titans appear to be cluing into this fact too. Foursquare's Rosenblatt said that companies like his are realising that "you have to speak Madison Avenue."

6. Facebook's ad strategy is still a big, fat wildcard

The social network's conspicuous absence on the panel gave the other companies a chance to say whether Facebook's ad strategy would fizzle or flourish. Unfortunately, their predictions were just as mixed as investors and analysts; half the panel, hosted by CNBC's Julia Boorstin, said they would buy the company's stock and half said they would sell.


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