Thoughts on Open Source, Open Standards, and Online Advertising : Data Sportability Pt 2

In 2005 I started FindMeOn after noticing some serious flaws in the use of OpenID. The base of the system grew out of the identity & publisher syndication components of a music website I had been working on with friends for a few years. When the music project went on hiatus, I decided to flesh out the identity system into its own entity. I wanted FindMeOn to be a full-fledged standalone / open source project to allow for secure online identity management/syndication because I truly cared about that, and no one else did at the time. On the flip side, years in marketing taught me the marketing value of information identity could deliver — so the system was designed to create a revenue model that gives brands & ad agencies better insight to their consumer distribution across networks.

From late 2005 to mid 2006 I met with dozens of agency execs, online experts and VC investors to vett my concept, and I learned my monetization scheme wasn’t enough — everyone required a higher monetization potential from it. By April 2006 the answer was clear: FindMeOn was not just going to offer cross-site information for dispersion intel, but for social demographics and online advertising… selling targeted advertising or media planning services.

I spent the next few months learning how the entrepreneur in me could reconcile open source beliefs with unadulterated american capitalism.

Maybe I’m wrong, won’t you tell me if I’m coming on too strong

With this in mind, I offer the following industry commentary. Keep in mind that this is pure conjecture from research and analysis; I can offer this only as insight not fact — but I am certain that it is accurate.

As I mentioned in my followup to DataPortability Podcast #5, The Facebook management team was absolutely brilliant in concepting their API strategy. I will easily credit them with getting the whole portability thing rolling by releasing their API – which set the precedent of a platform API that users and developers would adopt en-masse. It was working so well, that Facebook was gaining tons of user activity within-site, and gaining new developers to build applications FOR them. Facebook was also becoming a much bigger threat to their competitors than previously thought…

MySpace and the other major social networks suddenly had an entirely new level to compete on. While these other networks were constantly shifting between friend & foe with third party developers ( blocking their widgets, announcing partnership deals, repeat ), Facebook – who previously kept all widgets off their network – suddenly had a dedicated & robust *platform* dedicated to widget/app developers that was the darling of the internet community. Facebook was suddenly making developers happy, users happy, and — most threatening of all — showing a giant head start in this new ‘economy’ by seting the bar.

Lurking in the background was a stealthy figure who was realizing they would soon need to compete against Facebook: google. Why? Well, the search/advertising giant wasn’t worried so much about Facebook as a Social Media competitor, but what intelligence gleaned from Social Media could power — online advertising.

Here are some neat facts about the social media advertising market in the US in the Summer of 2007.

– Social Media advertising is the largest growing segment of internet advertising — as its the largest growing segment of the internet ).

– The 2008 projections for social media ad spends are around 800MM; the 2009 projections are 1300MM; and 1900MM in 2010.

– Social Media is probably the worst performing sector of online advertising. As an illustrative figure: its responsible for 90% of impressions, but only 10% of revenue.

A well optimized online publisher, like the New York Times, commands hefty eCPMs ( effective costs per 1000 ad impressions ) – upwards of $20; with a rumored $85 eCPM page monetization. MySpace is somewhere between .10¢ eCPM for a generic buy to $2.00 for an ultra optimized query — not very impressive.

Facebook has long been one of the best monetized social networks, consistently demanding eCPMs in the $1.50 to $8 range. A rumor was circulating in the Summer of 2007 that the Palo Alto firm was developing an off-site advertising network to display ads across the internet based on cookied data off their users. This is what Google was scared of.

As more population demographics adopt the Facebook platform, this rumored ad system increasingly jeopardized Google’s position as the internets premier ad network. Even more troubling, Google knew that Facebook had the talent and power to develop this competition — they weren’t just a large firm, but recruiting the new employees Google wanted first, and even hiring key staff members away from Mountain View.

There Ain’t No Second Chance Against The Thing With Forty Eyes

Google and MySpace had to respond – and act fast. So they come up with a daring little plan: they teamed up together to sketch out a competing platform, roped in a couple of other networks who were threatened by the burgeoning Facebook, and wanted to beat them with sheer numbers. Since Facebook had a ‘closed’ platform, Google decided to ‘open’ things up to foster more adoption with tons of “open standards” and “open source” — even calling their system ‘OpenSocial’. Through the use of the word “Open” everywhere, and multi-network capabilities, the new alliance of ‘once-enemies , now friends’ gathered against the mighty Facebook would hopefully woo more developers to the ‘OpenSocial’ market — stagnating Facebook’s platform growth.

As a quick side note, Google’s OpenSocial project kind of sounds like a whole lot like FindMeOn’s “Open SN (Open Social Network)” in both function and name. One would think their army of patent and trademark lawyers would have ‘googled’ their own product ideas for clearance…

Since everyone was trading punches over being more open and more awesome than the other guy, Facebook quickly had an equally brilliant reply — they subsidized free hosting through a partnership program with Sun and Joyent, started giving out cash grants to spur development, and their backing investors started a new VC fund focused solely on Facebook applications. Take that! said Facebook as a sea of developers eagerly built products for their platform.

You’ve got to roll with the punches to get to whats real

Over the next four months, a plethora of large scale announcements would come from Google and Facebook as new players jumped into the fray.

Google decided to make OpenSocial a non-profit venture to bolster PR, even pulling in Yahoo to the relaunched initiative; the announcement was met by the praise of many tech-pundits, who talked about how wonderful the concept of a non-profit was. Predictably, everyone likened the initiative to civic minded non-profits – and none suggested the more relevant correlation: non-profit registered industry lobby fronts like the ‘National Smokers Alliance’ or ‘Global Climate Council’ that pipe tobacco and oil dollars into misleading consumer campaigns. Who can forget 2007’s hit webformercial “Carbon Dioxide: Some call it pollution, we call it Life”.

Nothing short of a ‘pissing match’ started between the large tech giants. In an almost round-robin fashion, each company would announce a new product that somehow ‘outdoes’ the last announcement from a competitor. Facebook expanded privacy controls, Google announced a ‘Social Graph API’, Microsoft jumped in with their ‘Windows Live API’, MySpace teamed with Yahoo and eBay to do ‘Data Availability’. Every other week, a new batch of PR announcements and partnerships are released — all accompanied by a hastily created set of documents, big-name backers, and incorporating one or more open standards while creating a few of their own.

These initiatives have been so hasilty and half-assed designed, that I wouldn’t be surprised if we soon learn that half of these products came solely out of the marketing departments, and the technology teams never saw anything until after a press announcement.

Today, *everyone* has an Open Standard and an Open Platform — myself included — which begs the obvious question: what good are open standards and platforms, if everyone has a different one? And are things really open when their main purpose is to further a proprietary system?

Perhaps more importantly – how many of the tech giants have collaborated with third-party developers to define these new Open platforms?

The industry’s modus operandi seems to be

1. BigTech decides what to open up and how
2. BigTech invites top widget makers / networks to be launch partners
3. Third party developers are then told “So this is how you’ll use it. Welcome to the new status quo. Happier?”.

Now I could be wrong — I’m three thousand miles removed from the SF bubble where all the ‘Open’ decisions are made — but I’ve yet to hear of any interactive agencies, dev shops, or brands who build/finance most of the ‘widget’ development being included in these conversations. I’ve been meeting with them non-stop to try and rectify that — and as of yet, no one I’ve met has even been polled by a large ‘platform’ for their input.

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