This guest post about the widget economy was written by Michael Jones, an angel investor, the CEO of Userplane and a Senior Vice President of AOL.
Userplane, which was acquired by AOL in August 2006, is a communications widget provider (add chat and other services to sites) and a large advertising network.
Mike Jones’ personal blog is here.
Companies facing a slowing economy are looking for more cost-effective ways to reach customers. Forrester’s recent post on the role of social media during economic recessions supports the idea that social media can help companies survive and thrive in tough economic times. And Josh Bernoff’s full report on the subject calls for an end to “toe-dipping” by interactive marketers and advises a more serious look at cost-effective and measurable social marketing programs. A key take away:
…since interactive marketing programs are now fueled by measurable results, not dot-com madness, we believe that they can thrive in a recession. Social applications in particular, such as communities and social networking sites, are cost-effective and have a measurable impact on prospects’ decisions in the consideration stage, which will be important to companies under recessionary pressures. Interactive marketers should stop toe-dipping and invest only in programs that can deliver on measurable metrics.
Additionally, Forrester analyst Jeremiah Owyang points out that social marketing costs far less than traditional marketing. So when purse strings are tightened, marketing execs will become more excited about social media’s potential of reaching exponentially more people with fewer dollars.
While the recession-proofness of social media is a case study in the making, the idea that social applications can thrive in tight economic times because they are a cost-effective, precise way for companies to interact with customers and prospective customers, is right on the money – quite literally.
Widgets: The Macro Promise of Micro-markets
The top widget providers are proving that widgets can be big business. Slide and Userplane, of which I’m CEO, are two successful providers of distributed applications. Slide’s recent $500M valuation gives credence to the huge potential of these small attention grabbers. The success of today’s widgets is largely a function of the hundreds of millions of ad views they garner each day.
In April 2007, comScore estimated that widgets reach 177M people every month, or 21% of the worldwide online audience. Currently, only a fraction of widget traffic – perhaps as little as 0.5% - is being monetized. And that 0.5% is being monetized most frequently through traditional CPM models. In order for widgets to pay off in the long term, however, new models are required that will drive revenue beyond the top few widget providers and generate significant returns for all customers investing ad dollars.
Brands are changing the way they view online advertising and are becoming more concerned about reaching audiences based on their interests and actions, through so-called behavioral targeting. Traditional brand affinity concerns are taking a back seat to a willingness to meet users on their own terms. And, it doesn’t stop there. Marketing will align with individual social graphs as well.
The idea of a brand’s squeaky-clean “image” appearing next to a porn star would have been cause for reprimand in the old school of media buying. Yet in online advertising, it seems to slide. The new model of advertising, which is focused on customer behavior, makes it not only okay but necessary to meet customers within their preferred areas of interest, or “micro-markets”.
Widget providers are gathering the kind of intelligence that allows for this sophisticated behavioral targeting. They can assure brands before investing ad dollars that particular users are interested in their product or service. If behavioral intelligence demonstrates that a particular consumer is effectively engaged by the brand in proximity to MySpace vampires with blood-coated fangs, the new breed of media buyers will be more willing to put their old placement fears aside.
The Changing Nature of the Media Buy
The convergence of behavioral intelligence, distributed advertising models, and micro-markets is helping to create a sweet spot for widgets. eMarketer predicts an increase in the behavioral targeting market to $3.8B by 2011 from $350M in 2006. This is the kind of market that is driving activity in companies like AOL with its acquisition of Tacoda, as well as companies like Revenue Science and Lotame.
The very definition of CPM is also changing as new models for media buying emerge. New ways to purchase and monetize connections between brand and consumers will emerge, including opportunities to move the point of purchase to these distributed applications. Not only will widgets incorporate ads based on individual behavior and areas of interest, but widgets will likely become e-commerce services as well. There is no reason why a social marketing program for a specific product can’t incorporate distributed shopping carts across sites where likely buyers congregate. The revenue opportunity for a widget-based checkout function distributed across social mega sites is already there.
New Media, New Optimism
Even with the less than positive economic news of the day, there is room for continued optimism about social media. What better way to navigate wavy financial waters than with low-cost, high-reach, targeted platforms that bring companies and consumers closer? Widgets are the conduits to our markets, and ultimately, people that matter to our business. Leveraging them humanizes not only the brand but interactions with the customer as well.
Great article. I think the landscape is indeed changing. Swoot is one of the new hot players around to help change the desktop/web widget landscape. By bringing the complete widget idea as full webcontent to the desktop. Every bit of the object is streamed. A lot of advantages their for brands and advertisers. Every combination of branding and targeting becomes possible, and the best , every object, skin, buttons, functionality and more…. can be changed on the backend and the user gets his (re)new(ed) brand experience just by clicking from the desktop again!
Widgets in all its appearances, webwidgets and desktopwidgets are the new black for advertisers to target closer to the enduser and achieve effective advertising and/or branding.
Great example, Madonna Cube by Warner Music as a Swoot object. Download madonna to your desktop, and experience Madonna in a completely new, rich media way. Warner can change the complete envrionment at any time and the users will just be surprised in a positive way by experiencing the changes on the fly… check it at http://www.madonnahardcandy.nl
One of the most requested features for crowdstatus has been widgets. I am working on them but there is another aspect that is not really shared here but that I have picked up from experience from justaddme.com my social widget app and that is traffic for widgets can be huge.
I serve about 500k in widgets a month for justaddme.com and that is taking up a fair old amount of bandwidth. I have a huge update to come to it and I suspect when it comes I will need to look for new hosting.
rule of thumb, number of users x users site vistors = a hell of a lot of traffic.
Social Media can really help if getting boost in your website traffic and more then that it get your site aware to your targeted audience.
Forget the widgets! It’s RickRoll, Flame, Bait, and Bag!
Very few people are being creative in social media! Most are a Wild West Bunch!
I agree, but times will eventually get better, until then some good advice
Looking to raise some capitol for my new venture, where to get started? Anyone knows how please email me: Johnson360@gmail.com
“[T]he idea that social applications can thrive in tight economic times because they are a cost-effective, precise way for companies to interact with customers and prospective customers, is right on the money – quite literally.”
How so? Prove it.
Amazing that people who make money (or would like to) on widgets, people that build social media sites and analysts getting some exposure on this hot topic by covering the space are such strong proponents of leveraging social media for advertising, but how about somebody calling out specific ROI companies have actually realized. Vapor ROI until objectively proven otherwise.
Please, will someone please stop the widget madness? Most people play with a widget for five minutes before going on to the next thing.
I tried to use userplane at least 4 times over the past 4 years to provide chat to http://sitespaces.net. We have tens of thousands of members and millions of visits. Each time userplane de-activated the free account. Why? Who knows but it makes me think that the free ad supported service is a game.
I would use userplane to provide ad supported chat on our social networking and other websites, but it has to be stable. If you care, please see what happened. I will reregister, but not if the same thing happens again. We didn’t violate the TOS or anything.
I had an IRC server going but people were abusing it so I shut it down.
Folks, online marketing is in the midst of a major transformation - one that is quickly changing the way businesses connect with target demographics and build brand loyalty. There is now so much evidence of the growing ineffectiveness of traditional online marketing, especially on sites that attract youth and young adults, like social networks. Marketers not embracing newer strategies will be left behind.
http://blog.splashcastmedia.co.....fade-away/
this article is just awful. the ceo of a company that makes widgets thinks they’re the answer to the recession? imagine that!
let’s back up the truck and look at what a recession actually means - reduced consumer spending. so you know those things you were trying to sell online before? well, you’re going to sell even fewer of them now. if every company could “survive and thrive” by just jumping to social media, then it wouldn’t be a recession, would it?
also, using slide’s valuation(??) to justify the success of widget advertising is completely disconnected and erroneous. why not cite some company that is selling boatloads of product through widgets? is there one?
lastly, people can avoid being “behaviorally targeted” by clearing your cookies AND your flash cookies - most people don’t know how to clear the flash cookies, and as a result they’re basically permanent.
Widgets will need to evolve from sheep throwing and vampire bites before they really go mainstream. There are several keys to widgets becoming a major force on the internet.
1. Metrics
Advertisers will need measurable ROI and better standardization before they begin to dedicate major dollars en masse. Not to say many companies aren’t experimenting and some are taking real initiatives, but alot more common knowledge and best practices will be needed before marketers allocate significant ad campaign dollars.
2. Utility
Widgets that provide utility for the end user are going to be the ultimate winners in the battle for eyeball retention. Funwalls for friends are great for kids in their early teens but does nothing for the mainstram global online population. Brand advertisers that find that perfect synergy will garner huge successes for their clients’ products. Trip Advisor’s “where have you been” map has become the poster child for widget success. However, not every brand has that perfect, sexy match of travel + brand =great widget.
What if you’re Liquid Plumber? The key then is to provide some type of widget that is useful in relation to the benefits of the product. Perhaps an “instruction widget” that shows videos about fixing your sink or the best way to snake a drain pipe. This may sound odd, but the utility value of the content within a contextually related widget that can help me solve a problem is going to retain my attention and gain my brand loyalty as a consumer.
Or consider someone who is trying to get their arms around the benefits of a reverse mortgage for her parents. What if she could simply go to “calculatorwidgets.com”, search under personal finance widgets and find a widget that specifically calculated reverse mortgage payment schedules? What if this widget also offered videos on the pros and cons of taking on such a mortgage? How valuable is that widget to that consumer? She may keep that widget on her start page for several weeks. How powerful is that widget in relation to the brand that is associated with that widget? How much better are the odds that she will contact the mortgage company branded on that widget? This is a true brand relationship. The success lies in the perceived value of that widget by each individual end-user.
3. Distribution
As widgets become more utility oriented, they are less likely to be spread virally. Why would somebody spread a “reverse mortgage widget” or “Liquid Plumber” widget? The answer is, they wouldn’t. The key point is that as widgets begin to offer specific utility values that are contextually related to their products or services, they will need to aggregate in locations that are very easy for consumers to quickly search for and locate based on the “utility value” of the widget…NOT the specific website of the brand that may (or may not be) associated with the widget. A company that can provide a place or network of websites that contain very specific types of widgets where consumers can simply “go and grab” the type of application they need will be in a very dominant position in the war for control of the widgetsphere.
The sheer volume of widgets coming online is already creating a need for a more structured method of distribution. WidgetBox and ClearSpring appear to be in good positions for this inevitable shift in widget search and acquisition method by consumers. Also, as we enter into the “platform” era of the internet, compatibility between websites and networks will also become critical. The “Open-Social” initiative by Google, MySpace, Bebo and others will be critical. Consumers will not tolerate widget incompatibility, particularly when their widgets become mission critical to their daily task schedules and relationships with their friends and families.
Disclosure: I own calculatorwidgets.com and many others and have developed my business model around the topics of this post discussion. I will be attending the WidgetWebExpo in Brooklyn, NY on June 16-17 this summer.
MagNet is coming…
@Joe,
Is spot on, there is no historical ROI to justify this widget argument. This is simply baloney, and one of the worst arguments that i’ve seen to justify widgets.
With all due respect to Michael Jones, if he and the rest of the senior team at AOL understood ROI, perhaps they would be in a stronger market position.
Simply put, there is no factual evidence to support the financial success of widgets. Slide’s bloated valuation is only evidence of more poor decision making by most members of the venture community. The National Association of Venture Capital (sic) has recently shown data supporting the fact that the top 5 or 6 venture firms account for nearly all the industry’s returns. My bet is that Slide’s investors are NOT part of those 5 or 6 firms.
Michael Jones has made clear, concise, and reasonable arguments. He’s clearly very intelligent. But his argument’s fatal flaw is lack of an actual positive ROI, which simply makes his arguments nothing more than reasons to gamble money on widgets. In a recession, companies are always wise to cut back on spending and make sure the spending is likely to yield a measurable ROI. This is a fact that will never change no matter how many silly “gee whiz” and “new economics” products come out of the valley.
The economics never change. They never have, they never will.
the UrTurn Rewards widget launches Monday for all Facebook Users. A frequent flyer program if you will for Online Social Networking Activity. Users earn points for typical activity and can buy/sell and redeem points for prizes and cash at http://www.urturn.com, Private Beta Only!
I’m sorry, but I have to say it….
Mike Jones.. WHO?.. Mike Jones… WHO?
Widgets are great, not a doubt..
Over-the-top and all-over-the-map cheerleader articles like this continue to miss the main point: widgets are simply portable pieces of interactive content.
Pieces of a site experience that, hopefully, have some utility or value - entertainment or otherwise - which makes people want to use them, save them and pass them along.
The days are over when we can hope to drive every prospect or customer to our web-sites… but we can build little satellite pieces of our digital assets and send them off into the wild where our prospects and customers are spending their online lives.
It’s about portable, distributed digital customer engagements that can be measured & updated back at the mothership where all the clicks in the wild will lead.
Who?
from the picture i thought it was dave mcclure
One of the better acquisitions of AOL. They got a steal acquiring Userplane for $50M.
Now compare Userplane versus Google acquisition of GrandCentral for the the same price. Goes to show even Google makes mistakes.
Hi,
According to studies and quite logically, advertising on the internet is still a child when compared with the other media.
However its power to interact - this difference will be shortenned by the interactive TV - is quite superior to the other media.
With an impressive amount of internet users, but also a not less impressive amount of advertisers, one really must be creative to reach the community and especially to get visitors back and buyers.
The future is there for those who can reach for it.
Have a nice weekend,
José
This is a sharp article, but it reads too much like a sales pitch, and it detracts from this blog.
Great Article, as long as there is a need for a widget and demand is relevant the widget will stay for long.
Nat
http://www.workersinc.com
This post touches on several key points. There is the effectiveness issue. The costs savings (both time & money) to achieve a similar or, more likely, an exponentially greater reach, is compelling. But, the thinking has to change, and in large organizations and many small ones, changing the thinking takes time. There is just something that is quite different in the “feel” of using social marketing as a serious part of your go to market strategy. Many in “staid” industries (e.g. the legal industry) are going to be SLOW in making the move. Bad for them, good for the risk takers that are willing to challenge the status quo. Many of these will be boutiques that have very little baggage and not much too lose. It should make for an interesting ride.
i agree
This reads to me like one of the conversational marketing messages being put out by Federated Media.
Mike Jones, Jones
Mike Jones, Jones
[Hook - 2x Big Moe]
I stay flossing in that candy paint
Blowin dank
Sippin drank on 84 swangers
Tearin up the lane, tearin up the laaaaaaaane
[Verse 1: Mike Jones]
Lil daddy you can tell I’m ballin
From the way I’m flossin 84s I am crawlin
Screens fallin as I slide up and down your block
With a chain full of rocks and princess cuts in my watch
Mike Jones
I’m hot now a lot of people callin
But back then they left Mike Jones crawlin
I’m rising they fallin
Cuz I stayed up on my grind
Didn’t have time to whine
Had to put it dine (down)
I’m Mike Jones
Who…Mike Jones
Who…Mike Jones, Jones
And I’m a stay putting it down until the end
Pimpin pens
Tryin to put a brand new benz in the wind
Cuz
[Hook - 2x]
[Verse 2: Mike Jones]
I pull up in a drop top holding grain
Parking lot pimpin mayne
I ain’t even trippin mayne
Screens rain as I slide up and down the block
Ride daily holding glock
Cuz I know haters plot
You might see me SUV on 24s
Or I might be flippin tippin on four vogues
Mike Jones
A lot people now mad cuz I’m hot
But they gone be even madder when that jag leave the lot
I stay grindin so I can stay ballin
Cuz Lord knows I can’t picture me fallin
I’m crawlin
Candy paint on fours
Doggin all these hos
You handlin the road in my wide body load
I’m a baller shot caller 20 inch crawler
Catch me on the highway or about to tear the mall up
My album Who is Mike Jones comin soon
My album Who is Mike Jones comin soon
Cuz
[Hook - 2x]
[Verse 3: Big Moe + Mike Jones]
I’m pimpin flippin that candy paint
Lane switchin sippin that purple drank
Screen fallin dubs crawlin
I guess that’s why the girls keep callin
My phone
I roam and hop in my maybach
[Mike Jones]
Haters knock cuz we on the grind and they not
Big Moe and Mike Jones
Who..Mike Jones
Who..Mike Jones
Who..Mike Jones Jones
[Big Moe]
Swisha House and the Wreckshop
Big Moe and Mike Jones finna wreck shop
Why do you need to print this shameless self-promotion by Userplane, Mike? And why does he care? Is his AOL stock not fully vested yet?
userplane got revenue sharing. but first you pay the $500 fee.
then
$1,000/mo./500GB* $2,000/mo./500GB*
500 Simul. Connections
100,000 - 250,000 Est. Daily Visitors
there goes your share.
@Gilltots, Holy crap! I had no idea about flash cookies. Anyone else interested in seeing theirs and /or removing them should go here:
http://www.macromedia.com/supp.....ger07.html
Widgets aren’t a cure-all for recession but what widgets and distributed ad systems are trying to accomplish… well… that’s worthy of attention.
less than half a percent of widget traffic is monetized is because nobody knows how to monetize widgets. and that half percent is money being spent by other startups trying to climb into facebook.
slide’s obscene valuation is testimony to levchin’s savvy, and to the investors lack thereof, not because the widget market is huge.
you can have a lot of traffic and no money being made. examples: Digg, Delicious, slide, YouTube….
While folks are yet to figure out how to monetize widgets (widget advertising is certainly still vaporware), there might be good possibilities. Remember, in the early days of search, no one made money from search which was why the major league web guys gave up on search and even licensed technology from a particular company we all know so well - and the rest was Goostory.
If the next phase of the web is going to be dominated by interaction (the interactive web), who knows there might be another Goog in waiting…
Fine over view for monetizing widget like features. But it is inevitable that biased nature of the subject and the writer. In any case there is something to learn here. Perhaps market yourself any which way you can. thx
I agree that the ROI has yet to be proven. The upside is the cost, but how much of your effort is really converted into customers? The effectiveness of widgets is still a work in progress. I think there will be potential for great value some day, but that day has not arrived yet.
“Slide’s recent $500M valuation gives credence to the huge potential of these small attention grabbers.”
Surely it just shows how out of touch with reality most of these valuations are? How much actual money has Slide made?
Thanks everyone for the comments - I will try to address some of them here:
@Chris - I will ask my team about your account - I don’t believe we have ever disabled a free account if they were adhering to our tos.
@SutroStyle - Only contributing to the discussion.
@Hector - Thank you.
@snyggast - Userplane has no setup fee for ad-based accounts, only ad free accounts.
@Ciaran - I agree that the Slide valuation is high - but considering the reach they have it is not outrageous. I think you can speculate that for Slide to become truly a market leader they will have to expand beyond “widgets”. I think of them more as a software company that has a small portfolio of socialware. I imagine their growth in the future will bring them beyond that. And frankly - everyone is betting on Max with that deal.
Given that Mike used Slide’s valuation as a justification for widget-based advertising, I wonder how he would respond to the fact that Slide’s founder is now saying that they’re moving away from advertising due to the recession: http://valleywag.com/384742/sl.....dvertising
Doh!
Okay…the truth is, widgets are a good form of marketing BUT only if the widget is created by the company itself — Soon new ad models WILL add to the value of advertising on other widgets but the ads must be seen as a social aspect of the widget, not as traditional banner ads.
Behavioral targeting DOES work but really there has to be a form of targeting of some sort where the ad becomes a part of each individual widget… I have no idea?
There are currently two main challenges for advertising and widgets:
1. Distribution. I don’t think most marketers recognize this as a significant need yet, thought it’s enormous. There is also much confusion around the term distribution - sometimes used to describe a platform that allows a widget to be shared - and less often as the inventory/eyeballs of users so that a widget can reach a critical mass of installs in the timeframe of the typical ad campaign. If you build it, will they come?
2. Proof of impact. Many things can be measured, but what do they mean? What’s the impact on brand awareness, sales? How do they metrics compare in an apples to apples way to other established forms of interactive advertising like rich media? We have a long way to go here.
Given that Gigya (www.gigya.com) is missing from this article and this discussion, I have to throw in a comment here that it is one of the most successful solutions out there for #1, and is working diligently to answer #2.