The question persists as to how social media can be transformed from idle and pedantic chatter to hard quantifiable profits. Marketing executive like the alchemists of old search for this answer; it is the philosopher’s stone of today’s advertising and marketing industry. A new emarketer survey shows that marketing execs do find value in social media platforms, particularly in engaging customers and communicating with customers, which is no surprise. I believe the very idea of being social is communicating and engaging with others around you is it not? Actually, according to the dictionary social is:

So how do we make the social profitable? And in a way is that act potentially threatening to social intercourse if taken too far?  Can you imagine sitting around with friends at dinner and having an ad pop up every minute? This is the wrong way for marketing and advertising in social media to go. Thankfully the internet (or at least Google) has been moving away from those kinds of bombardments towards interest based advertising, which more keenly anticipates customer wants and needs as specified directly or indirectly by customers.

But how to make money as a social media service yourself is something that even the mightiest of social media platforms, Facebook, struggled with since its inception. Only recently did Facebook post profits after years of being in the red or just breaking even, but some other social media services are getting wise.  LendingClub launched via a Facebook application earlier in May this year and some believe it might be the closest thing to a social media profit model yet.  The service links up Facebook users in a person to person lending network with lower interest rates and less red tape than institutional lenders.  The person to person or peer to peer lending service has been successful and growing, with nearly 350,000 users lending and borrowing more than $66,000,000 in volume. $6,000,000 in loans were facilitated just this past October according to Senior Product Strategist Rob Garcia who I spoke with recently. According to Garcia the company is currently growing at 15-20% peer month, making them the definitive world leader in P2P lending.  After dozens of bank failures over the past year peer to peer (P2P) lending may just be the most attractive alternative to major institutions. Lending Club has even been noted by  the Harvard Business Review for its innovative approach. So here’s an example of a social media business model, but it relies on having an intrinsically valuable commodity in its social exchange, money. Perhaps the old adage “talk is cheap” sums up why social media, like the philosopher’s stone of old, has been so hard to translate into profits. By relying solely on social media to try and make your company successful you’re making a cake solely from icing. It’s one tool, and an increasingly important tool, but don’t expect it to be the driving engine of your marketing plan. This is why CEOs and executives have consistently viewed it with bewilderment, and have rarely claimed it to be be a driving force for profits and market share. The driving force for profits ultimately rests on your product or your service, your image, your message, your identity, quality and your value.  Marketing is about implanting that identity and value in the public mind and attracting their use of your company.  Don’t expect social media to make these things up for you if you don’t have them, and before you sink money into marketing in social media make sure that you can back your hype. Companies can often fail fast if they don’t. All that being said,  across the board from transnational corporations to small businesses in Vancouver everyone has been clamoring to get savvy with this social media thing.  In our guts we’ve all recognized that it’s big and it’s changed things.

As for Lending Club, they might be a social media profit model but once again it’s not the social part that drives the profits. I still believe it’s the demand for what they offer beyond the social aspect that makes them their profit.  So maybe we are still left searching for the stone, but perhaps we’ve gotten a little closer. As Business Week has pointed out, regardless of what the accountants might think social media has drastically changed the nature of business and if they’re not on-board now businesses will be running to catch an increasingly fast train. When I spoke to Rob Garcia of Lending Club he agreed with that sentiment:

“Social Media is a core component of Lending Club’s product marketing and customer engagement strategies.  Person-to-person lending works best in an open environment where our members can engage freely and directly with our brand, where they want, when they want.”

Lending Club represents a new trend in social media that other companies may be wise to observe. The social media value isn’t in talk alone, as was stated earlier “talk is cheap”.  Imagine how much business would get done on the NYSE if everyone was just talking about whatever they felt like. In Lending Club’s case the talk is more focused and common, like those traders on the floor.The company supplants a chaotic social media model with one that has a more disciplined, directed and shared interest at its core. Maybe this is the philosopher’s stone of social media profit models we’ve been looking for.  Instead of wading into the jungle of social media and searching for revenue in the din of chatter, why not give them (us) something to talk about? Something they (we) want, and then give them (us) a place to do it. The city in the Jungle.

Social media profits don’t stop with Facebook. If anyone has proved that Lending Club has.

American Rep. Rick Boucher, chairman of the House Energy and Commerce Subcommittee on Communications, is hoping to introduce an internet marketing and privacy bill that will include laws and regulations to clarify what information web sites collect, how long they keep it for, and what they do with it.  In the bill will also be “opt-out” clauses for users that would prefer not to have marketing companies combing through their every online activity. Web sites that share user information with outside advertising networks, which place ads on sites all over the Internet, would be required to obtain user approval before collecting that data and web sites that deal with sensitive personal information, such as medical and financial data, sexual orientation, Social Security numbers and other ID numbers, would be expected to follow the same trend of permissive marketing.

It will likely be difficult to enforce what this bill is asking for, but I commend him for the effort. Invasive internet marketing takes all the fun out of the art. Boucher claims that this bill will not threaten the underlying economic foundations of the internet which is largely from ad based revenue and that it will in fact be good for consumers.  Invasive marketing has been an issue among Sociologists, legal experts and consumer advocate groups who have warned for years that it can create numerous negative externalities. Some people can become enraged, or at the very least preturbed that their dinner was inturrupted by a telemarketer, or their e-mail is suddenly filled with spam, or that a canvasser on the street is trying to hand them something. And then they take it out on innocent bystanders, kids, parents, bartenders and servers etc. These traditional forms presents a far more innocent side of invasive marketing- though nontheless intrusive and annoying. Boucher’s bill is aimed at something far more subversive and worrisome to many, even though it doesn’t foul your mood leading to a negative pay it forward sort of effect. How much information about any of us at any given time, being bought and sold, gathered and stored would shock most people. And unlike when we recieve a phone call or have a coke zero shoved in our faces on the street, marketing online largely goes on out of site and mind.  we don’t know when a company has bought or sold our information, Boucher’s bill also wants us to be able to track that. An easy way to circumnavigate this legal and ethical swamp is for consumers and companies alike to take advantage of developments in interest-based advertising. Introduced earlier this year by Google, AdSense is a way to link producers and consumers effectively by only advertising things relative to consumer’s web habits. The difference is that it is up-front and users are made known that only those companies offering goods or services that are directly related to their surfing habits will be given access to their browser.

I believe Interest-based marketing and advertising will grow and eventually become increasingly effective- hopefully eliminating intrusive marketing altogether. If TV survives, I’ve maintained for years that I believe it should allow users (viewers) to pre-select what advertising they would like for any given amount of time- to maximize marketing and advertising hitting the mark and for benefit of the consumer; regardless of what shows they watch.

Advertising doesn’t need to be shooting in the dark (which despite the best efforts to pair ads with shows it still is when compared to direct interests-based marketing)  because demographics across the spectrum watch all the same shows and many shows you wouldn’t expect. For example, here’s my big secret- I really like the show Anna and Kristina’s Grocery Bags (I loved their previous show The Shopping Bags even more) it’s a show on the Women’s Network and I enjoy it for several reasons (coming from a marketing background and being someone who likes honest reviews of products) I’m also completely stoked for my beloved Seattle Seahawks season to start, but I hate crappy american beer and I don’t eat steak. So any time I watch either a game or Anna and Kristina I have to patiently wait for dozens of commercials that miss my particular demographic to end- everyone does. I want the option of choosing what kinds of products and ads are between my programs- I LOVE the idea of interest-based advertising. For now it’s web only, I hope TV will start to seriously rethink marketing and advertising, it has to in order to compete with all established and emerging forms of online content.

 The breakdown on the google site is like this:

Meet Mary

Mary’s favorite hobby is gardening. With Google’s interest-based advertising technology, Mary will see more relevant gardening ads because she visits many gardening websites. Here’s how that works:

 When Mary visits websites that display ads provided by Google’s AdSense program, Google stores a number in her browser (using a “cookie“) to remember her visits. That number could look like this: 114411.

Because many of the websites that Mary visits are related to gardening, Google puts her number (114411) in the “gardening enthusiast” interest category

As a result, Google will show more gardening ads to Mary (based on her browser) as she browses websites that use AdSense.

No personal information

Throughout this process, Google does not know Mary’s name or any other personal information about her. Google simply recognizes the number stored in Mary’s browser, sees that it falls into the gardening enthusiast interest category and shows more gardening ads. Google will also not use sensitive interest categories, such as those based on race, religion, sexual orientation, health, or sensitive financial categories

Bring it.

Marketing has traditionally been viewed by the masses as either something invasive and annoying (Sunday! Sunday! Sunday!) or something subversively cunning; subliminal messages in ads, or capitalizing on primal sexual or aggressive urges for example. But that’s only if what’s being marketed to you isn’t what you want. Because when it’s something you want, something you value, advertising and marketing are welcomed and appreciated.

Marketing is of course not just advertisements. It’s customer relations management, it’s creating alliances with producers and firms whom you can share a strategic partnership with; leveraging each other with your brand compatibility, it’s the way your service is presented and even conducted. The way your employees answer the phone, and the little logo and slogan at the tail of your e-mail messages. But let’s get back to the first issue we had with marketing, invasiveness. Relentless proliferation of your message will no doubt land on many deaf ears, but with proper placement of your materials, and proper venues and mediums for your message, you can hope to increase those odds. But what if we lived in a world where we chose exactly what we wanted advertised and marketed to us? That world is increasingly becoming our reality.  This year Google introduced “interest-based” advertising on their partner sites and on Youtube. This takes into account your web browsing preferences as cached in your browser history and cookies and then selects advertisements only relative to what you most commonly view or look for. In addition to this the user can narrow down further what kinds of advertisements they want to see using this Google service. The product is still in beta mode but has been well received, especially by me.

RSS feeds are another similar example of interest-based advertising. Companies are increasingly adding RSS feeds to their sites to keep customers updated of any new promotions or products as leading marketing firms like Forrester continue to stress the value of RSS feeds as a marketing tool. The cost effectiveness of these new marketing techniques, by reaching receptive markets for a fraction of traditional and outdated methods, makes them very attractive for those concerned about the bottom line. If only the cable providers would offer a similar interest-based advertising service. HINT. I’m not going to buy a shamwow CBC! OK?

About a week ago, Google launched a new, um…service they call “interest-based advertising”. The idea is to make the ads that pop up on your search return page more relevant. Before they launched this new initiative, Google would serve up ads based on the keywords you entered on that particular search, and that was pretty much all the logic there was to it. But now they’re going to store all your searches, and use them to hit you with increasingly relevant ads. Or that’s the idea anyway.

As they say on the Google blog, with interest-based advertising “users get more useful ads, and these more relevant ads generate higher returns for advertisers and publishers.” Win/win, right? Well, not if you have a thing about privacy…or even hate the idea of having past searches come back to haunt you (personally I’d be afraid of seeing a lot of ads for Everybody Loves Raymond DVD boxsets…don’t ask…).

What is raising some eyebrows is that the whole thing comes one short year after Google spent a few billion dollars in pocket change to buy DoubleClick. That company has pretty much had privacy advocates panties in a bunch since day one, mainly due to accusations that their click-tracking cookies are spyware.

So if you’re like me, and would rather not enjoy the benefits of interest-based advertising, at least you can pretty easily opt out of the whole thing. I did, and so I look forward to a future of using Google to search, without ever seeing an ad for anything Everybody Loves Raymond related.