Andrew Chen Archives

If you want to grab these in real time, you can follow me on Twitter at @andrew_chen.

As always, I can’t promise they are all work-related ;-)

• omniture blog actually has some good stuff on it – uncommon for corporate blogs: http://blogs.omniture.com/
• good whitepaper from quantcast describing challenges of user measurement using panels, pixels, vs cookies: http://snurl.com/3kuhm
• introing fortune cookies to china: “they would put the cookies in their mouth, and then be surprised” http://snurl.com/3kbku
• list of problems solved by macgyver: http://tinyurl.com/9k8v7
• why parents in china save so much money, via kedrosky http://tinyurl.com/57nulo
• “Every myth on this planet tells us the purpose of life is death… I think the purpose of life is life.” http://is.gd/1Wnq
• an oldie but a goodie – single men/women by geography: http://img91.imageshack.us/img91/4701/ngsinglesze4.jpg
• new trailer for world of warcraft expansion: http://www.worldofwarcraft.com/wrath/intro.xml
• article from habbo designer on MMOG monetization in the US: http://tinyurl.com/6m389u
• article on latency and how it impacts your business: http://tinyurl.com/5g8mp2
• warren buffet CNBC interview transcript: http://tinyurl.com/6dppmj
• current state of the art for computer animation of faces: http://tinyurl.com/6745dj
• what are the most important avatar customization features? hair style and color, it turns out: http://snurl.com/3jcqn
• new flash game by the makers of bloons out! http://is.gd/1Sqp
• slate article on an econ experiment to increase the productivity of field workers and fruit picking: http://www.slate.com/id/2197735
• hilarious new FF extension hides youtube comments with bad grammar: http://www.flickr.com/photos/waxpancake/2790444683/

The $12MM/year Facebook app
There has recently been a lot of news about a single Facebook app generating $12MM in revenue per year, called Mob Wars. Here are some articles from Eric Eldon of VentureBeat, here and here.

Here’s some predicted numbers for some of the other apps as well:

Virtual currency tips inside of Facebook
Justin Smith from Inside Facebook did some more digging on this. They recently had a great interview with the founders of Super Rewards, the company that’s powering much of the virtual currency-based games on Facebook along with Offerpal and others.

There are some great comments related to Facebook-specifc strategies, and also on performance metrics like below:

The core metric we use is dollars per click. We hope our developers can get 25% of their daily active users through a Super Rewards page at some point. Of those, if the economy is balanced correctly, you should see a 40-50% click through rate, and ultimately a net 8-10% conversion rate. Developers get about $1.00-$1.50/conversion for US users, but less for international users. We’re lucky to get $0.06/conversion in China, but we have games operating in Europe and other parts of Asia at $0.25 and up.

So assuming all of a developer’s traffic is US traffic, the developer could see up to $83 per day per thousand DAUs. However, on an average basis across all geographies, we are about half that number. It goes without saying that there is a wide distribution around the average based on quality of app and balance of virtual currency economy.

There are some other comments about how users stop monetizing as well once they are leveled up and aren’t buying as much. All worth reading.

The history of incentivized leads
Note the flow of how money flows into the Facebook ecosystem:

• People install a social gaming app
• They play the game, then want more money
• To get more money, they fill out lead forms for auto insurance, etc.
• The users get the virtual currency
• The social game publisher gets their payout from the lead itself

Now if the leads end up being poor quality – like if the Facebook audience is putting in garbage data, or signing up for things they are going to cancel, ultimately that will affect the value of the lead. The reason is that if the Facebook user has a lower LTV, then the acquisition price that is willing to be paid for that user will be less.

A cycle repeated itself online over the last few years where leadgen companie liked Gratis used a lot of incentivized offers, using offers like below. You can read more about Gratis on their Wikipedia entry here or a Wired article here.

Ultimately, these leads weren’t of terribly high quality, tricked the user, and a bunch of other bad things. So that industry has slowly transitioned itself out as a result.

The question is, are incentivized leads from Facebook any different? How will the quality compare to the now low-value leads generated from companies like Gratis? I suppose it will not take long to find out.

Facebook is winning on traffic
Several articles have recently come out that speak to Facebook’s tremendous growth overall, and particularly, overseas:

• As Facebook hits 100 million user mark, twenty percent have already opted in to the redesign
• Facebook v. MySpace In The U.S. Market: The Music Factor

As TechCrunch points out, among the key factors that have led to the growth relate to the Facebook’s strategy of letting users translate the site, allowing it to roll it out quicker to new countries:

Most of Facebook’s growth is international, where they’ve executed on a brilliant strategy for quickly rolling out localized versions of sites by getting their users to do the translation work for them (MySpace, by contrast, expands via a command-and-control infrastructure that puts people on the ground in each new international market).

This will have a big impact on the global outlook for social networks. The international market has traditionally been much more fragmented, more viral, and as a result more startups have targeted it as a niche to get some traction. But as MySpace and Facebook strengthen their grip in more countries, perhaps even that will be harder

International users suck at monetization
As I’ve discussed many times on this blog, international users are extremely hard to monetize, unless you’re Japan/UK/western Europe.

Mostly the reason for that is 3-fold:

• For direct response advertisers, payment processing for credit card transactions is a pain – either they don’t have credit cards, or there are potential fraud problems or high transaction costs
• There are natural inefficiencies like language, culture, and geography which may cause advertisers to convert more poorly and otherwise not be able to deliver their goods and services
• Brand advertisers mostly care about influencing US spending, or spend their dollars with US-based agencies and multi-nationals, unless your social network has reached scale

An interesting follow-on to the last point is that for some companies – and Hi5 and Friendster come to mind – they may have achieved enough scale that they have an interesting flow of brand advertising dollars from local international brands. When you’re a top 5 site in a country, dollars might follow you, and that’s a good thing. Certainly Facebook has reached this point in countries like Turkey or Canada.

My argument here would be that Facebook knows that international users suck at monetization, and if the primary source of traction is overseas, other than acting defensively, the company will start focusing on the next stage of monetization for the site.

The next steps for Facebook monetization
Given the fact that the team around Facebook hasn’t stumbled much in the past, it’s likely that they will continue trying some Hail Mary products around advertising that, if they work, would generate a huge amount of revenues. Among other ideas, this would include variations on Beacon (both inside and outside of Facebook), trying to monetize their user data via sharing or syndicating newsfeeds, integrating ads into Facebook Connect, etc.

If they decide to get boring and try to monetize in normal ways (and in particular following MySpace’s lead), then it would make sense for them to:

• Build out contextual sections like Games/Music/TV
• Add advertiser-friendly ad units like leaderboards rather than tiny proprietary spots
• Allow for homepage takeovers by brands

OK, let’s just admit that none of these things are likely to happen :-) And if they do, it’d be a big deal because of Facebook’s very user-leaning stance on interfaces, clutter, etc.

And yet these things were there from Day 1 on MySpace.

MySpace’s secret weapon: FOX ad sales
This brings me to my final point – Techcrunch says that Music is MySpace’s secret weapon. I disagree.

It’s a possible reason why users like MySpace, but ultimately I think that the key issue around monetization will be that MySpace has access to the FOX ad sales team where Facebook does not. This leads to a huge increase in brand dollars flowing MySpace’s way that would otherwise be difficult for Facebook to access. Think about it this way – here’s the revenue information for News Corp/FOX:

Revenue for the year ended June 30, 2007 was US$28.655 billion with an operating income of US$4.452 billion. Almost 70% of the company’s sales come from its US businesses.

And of that $28B/yr in revenue, obviously a very large portion of it comes from advertising. Now it’s not like MySpace has access to everyone who’s selling ads across News Corp, but certainly the conglomerate knows its way around the ad inventory. And very importantly, some percentage of the entertainment-related properties across FOX/News Corp will likely bundle MySpace inventory as part of every deal. This makes it so that a big record studio can go and launch a new artist, reach millions of people, and only talk to the folks at FOX to make that happen.

Ultimately, my guess is that the monetization futures of both Facebook and MySpace will diverge strongly as they establish themselves to be very different companies with different goals and strengths. It’s fun to pit two folks in a sorta-related category together, but I think that Facebook and MySpace are after very different goals and that will play itself out soon enough.

(this is a cross-post of the guest blog I wrote over at the Startonomics blog yesterday)

So you want to make some money, eh?

Every startup gets to the point where they decide to bring in some ad revenue, and it's worthwhile to consider exactly how much money will be generated through advertising. So in the parlance of the ad industry, your "ad inventory" is the set of impressions that you have to sell to people. Let's talk about modeling that goes beyond the simple reports into thinking about what drivers influence your CPMs and impression counts.

This blog post will go over some of the key milestones that any ad-supported startup will have to face. In particular, we'll discuss 5 stages:

• Stage 1: Just getting started
• Stage 2: Layering in new sections
• Stage 3: Thinking about growth
• Stage 4: Adding in multiple ad networks
• Stage 5: Building up brand sales (rep, vertical, direct, or otherwise)

Let's get started with some basic metrics around CPMs and pageviews…

Stage 1: Just getting started
When you first get started, it makes sense to sign up to a self-serve, automated CPC ad network like Google AdSense. At the end of the month, you'll get a report for how much money you've made and what your CPM is, which will look something like this:

For many folks, just looking at this kind of number is enough, although it doesn't provide much detail beyond the core revenue numbers.

As I mentioned in my previous blog on 5 factors that determine your CPM rates, there are some rules of thumb for what kinds of CPMs you should expect on your site. Here are some very rough numbers:

• Social sites (forums/chat/etc) without direct ad sales teams: <$0.25 CPM
• Largely international sites: <$0.50 CPM
• Medium-sized sites that use banner ad networks: <$1 CPM
• Reference sites in a specific category: >$5 CPM or sometimes
  much higher, depending on category – we ran into home improvement
  reference sites that did $20 CPMs

Much of that is determined by the frequency of the pageviews, how specific it is, how much international advertising there is, etc.

Stage 2: Layering in new sections
For the sites out there that grow beyond AdSense, you need to have more granularity for thinking about and optimizing your ad inventory. You have to break down your site into the pieces that influence the performance the most. In general, that tends to be factors like:

• site section (or function), like Homepage, Profile, Media, Inbox, etc
• ad unit size, like 300×250 or 468×60 (full IAB ad units listed here)
• type
• targeting
• etc.

The point is, you should have a good sense of where your ad units and impressions are coming from, and how revenues overlay that. And the more impressions you get, the more granular you'll want to track your advertising.

Let's take a social networking site like MySpace as the example here. They might break down their inventory, at an early stage, into something like below:

(disclaimer: note that these numbers are for purely illustrative purposes only – your mileage may vary)

Once you have an inventory breakdown like above, you can start rolling up your aggregate revenues, impressions, and CPMs.

Stage 3: Thinking about growth
The next phase is scaling up your site and thinking about where you're likely to add to your ad inventory. In general, static areas like the homepage aren't necessarily going to grow very much. But other portions, like forums or profile or other social areas are likely to experience network effects that drive non-linear growth.

As a result, you'll end up adding traffic disproportionately to the social areas of the site, and your aggregate CPMs are likely to be brought lower by the higher-traffic, lower-value communication parts of your site. In the cases where the higher pageviews are also brought on by higher engagement, you might also expect the CPMs to decrease as you hit frequency caps imposed by the various ad networks upon your userbase.

(again, disclaimer: note that these numbers are for purely illustrative purposes only – your mileage may vary)

The point is that even though the traffic grew over 4x, the revenue only grew 3x. That's to be expected based on the reasons discussed above, primarily driven by lower-value inventory tending to grow like weeds.

Stage 4: Adding in multiple ad networks
It's also often the case that having many different ad networks can dramatically affect your CPM rates as well. Because of frequency capping issues and the availability of high-value campaigns for each ad network, a lot of times high-CPM opportunties are spread lightly across many sites and you don't get much of a benefit for having deep engagement. One way to solve that is by serving the ads of many different networks and optimizing between them to get the best prices at each point.

There's a great post by Mike Nolet of MikeOnAds on this subject, where he talks about how his previous company, RightMedia, handles the ad-network-to-ad-network optimization of revenue.

The key image from Mike's post is below:

What you're seeing here is that as user frequency increases, the monetization between the 3 networks (small/medium/large) is different. Ideally you'd start out on the small network, then go to the medium one, and then go to the large one in order to monetize for that CPM.

My personal experience (while at Revenue Science) working with the MySpace ad ops team led by the fantastically smart David Dipilato was that they juggled more than a dozen very large networks in order to maximize their revenues. This level of expertise in ad ops is a very hard skill to train and hire for, by the way.

Stage 5: Building up brand sales (rep, vertical, direct, or otherwise)
Once your site hits a certain level of ad inventory – and that number's certainly over 50M/month and maybe even several multiples of that – it's likely that you'd want to go after brand dollars. The reason is simple: remnant ad networks bring in CPMs in the dollars, whereas brand can take you into the tens of dollars. The problem is that the process of doing brand ad sales is very foreign and specialized, especially to folks who have thus far focused on technology, automation, and scalability. Brand sales is like enterprise sales – it's slow, custom, and not technology-intensive at all. To win you focus on excellence in sales and marketing operations.

Here are some of the common options for getting brand dollars:

Old school ad networks
Generally most folks get started through their existing ad networks, which start to rep their inventory as part of a brand category. This can happen if you're a tech blog and they sell you as part of their "Technology channel." You'll end up seeing these dollars mixed into your overall ad network CPMs, and hopefully they boost your aggregate numbers into something good!

Vertical ad networks
Another way that's getting much more common now is to get into some sort of vertical ad network like Glam.com or Jumpstart or whatever is appropriate for your site. (Glam = women and Jumpstart = cars, btw). These guys are far more sophisticated and specialized, and commonly move a ton of ad inventory as part of their business models.

Direct sales teams
Similarly, many companies go out and hire their own sales teams, or engage ad reps who already have those relationships. This is a hugely expensive process, but that's how the big money comes in.

Once you get your brand sales going, the site you're running will need a dedicated team to manage the active campaigns. The different ads coming through the system need to be carefully and constantly checked to make sure they are delivering in a timely manner, that they are running in the right sections, and that whatever performance metrics the advertiser is using goes well.

On the revenue side, you can no longer make little tables of inventory and use that to predict revenue. It's common that a very small % of ad impressions generates a sizeable % of the revenue. I've heard that some sites sell 5-10% of their impressions as brand ads which account for 30-40% of the revenue, for example. The right way to think of this is that your ad inventory ends up being a pyramid with the best stuff on the top and the worst stuff forming the base. 

So ultimately, you track the ad campaigns that the ad sales team is selling and your ad ops team is running exactly like an enterprise system. You have a sales pipeline with different campaigns going through based on RFPs your team is getting, and eventually once those flight, the revenue comes into your company.

In summary
There are many complexities in squeezing out the most dollars from your ad inventory – it's something that even big media companies struggle to master as they grow. Much of the process of doing this smoothly involves making sure you don't try to solve hard problems until they really become core to your business – for example, don't hire a big ad sales team before you have enough pageviews. Similarly, it's important to understand the implications of how your product ultimately impacts the monetization – social products, for various reasons, tend to monetize poorly and that needs to be built into your business model from Day One.

For more essays on advertising, social network monetization, and more, check out my directory of essays here.

Moving the blog…
If you’re reading this, it means the blog migration went well! Woohoo!

Having problems?
Otherwise, if you are having any problems, shoot me an e-mail at voodoo [at] gmail.

Organizing a blog
I've slowly been working on the blog infrastructure I have set up, including at some point moving to WordPress. Recently I've just focused on organizing the essays and information I've written so far, including making a big directory of all my essays in one place.

Anyway, I wanted to work on making it easier for new users to figure out what this blog was about, so I added a "Are you new?" section with a couple links to my best essays, quotes about this blog, and an about me / contact info section.

I e-mailed a couple folks to throw together the quotes page and got a great response. I wanted to include a snapshot of the list below – thanks to everyone to contributed a quote!

Quotes
The sad truth about blogging is that 99% of blogs are not worth
reading.  Andrew Chen's blog on online marketing is one of the few
exceptions to this rule.  I often find myself referring people to posts
from Andrew's blog because it actually contains useful research and
insight, instead of the usual noise.
— Jonathan Abrams, ceo of Socializr and founder of Friendster

Marc read Andrew
good blog
— a half haiku by Marc Andreessen

Andrew Chen's blog is one of the few I make sure I read every day — both thoughtful and thought provoking.
— Lauren Bigelow, svp marketing and gm of Weeworld

Andrew’s incredibly analytical mind, understanding of web
development, and expansive network of entrepreneurs, venture
capitalists and veterans, affords him the unique opportunity to jump
into the trenches on case studies for an intimate micro-level
understanding and to learn from experts a wealth of research and wisdom
of the macro forces at play.
— Jason Feffer, ceo of Sodahead, previously vp operations at MySpace

I'd call Andrew's blog 'unmissable.'
— Jared Kopf, ceo of Adroll and Paypal alum

Andrew's blog is an inexhaustible source of numbers and ideas on concepts that matter.
— Max Levchin, ceo of Slide and cto/co-founder of PayPal

Andrew is one of the smartest geeks in Silicon Valley, and a
brilliant and comprehensive virtuoso on a broad array of tech and
non-tech topics including internet advertising, viral marketing, web
analytics, social networks, online games, and all kinds of web
glitter.  He is a veritable Glenn Gould of startup blogging, and every
chance i get i rip off his ideas and try to pass them off as my own.
Respect.
— Dave McClure, angel investor and Paypal alum

I subscribe to Andrew Chen’s Futuristic Play blog because I value his insights into virtual worlds and gaming.
— Cary Rosenzweig, ceo of IMVU

My brother and I built JibJab by instinctually understanding and
leveraging viral marketing.  When I want to think about it in a
quantitative way, there is no better source of information (and
inspiration) than Andrew Chen’s Futuristic Play.
— Gregg Spiridellis, ceo of JibJab

Andrew is writing the textbook on web marketing.
— Jim Young, ex-cto/co-founder of HotOrNot

I will be giving a talk in October at Startonomics, run by Dave McClure, which is a conference described below:

Startonomics is a one-day workshop designed by entrepreneurs
for entrepreneurs on how to create simple, actionable metrics for
internet startups, and use them to make better product and marketing
decisions for long-term growth and success.

I’ll be doing a session on making money:

Revenue: The Internet Wants to Be Free, but You Need to Get Paid
Learn how to generate revenue using a variety of business models &
strategies including advertising, digital goods, subscriptions, lead
generation, & e-commerce.

Dave asked me to make a contribution to the Startonomics blog, which I’ve cross-posted a preview for.

Enjoy!

Counting your big pile of Benjamins:
5 startup tips for maximizing ad revenue

So you want to make some money, eh?

Every
startup gets to the point where they decide to bring in some ad
revenue, and it’s worthwhile to consider exactly how much money will be
generated through advertising. So in the parlance of the ad industry,
your “ad inventory” is the set of impressions that you have to sell to
people. Let’s talk about modeling that goes beyond the simple reports
into thinking about what drivers influence your CPMs and impression
counts.

This blog post will go over some of the key milestones
that any ad-supported startup will have to face. In particular, we’ll
discuss 5 stages:

• Stage 1: Just getting started
• Stage 2: Layering in new sections
• Stage 3: Thinking about growth
• Stage 4: Adding in multiple ad networks
• Stage 5: Building up brand sales (rep, vertical, direct, or otherwise)

Let’s get started with some basic metrics around CPMs and pageviews…

Read the rest over at the Startonomics blog »

Just an update to the random links I've been posting to my Twitter account over the last
week or two – no guarantee that they have anything to do with work!
Mostly a grab bag of nerdy/biz/news stuff.

If you want to get these in real time, you can follow me here.

Here they are:

• my blog traffic still slooowly growing: http://img402.imageshack.us/img402/8126/42564167cc2.png
• wow, undubbed vocals from britney are horrible: http://tinyurl.com/6g27wf
• omg cat with 4 ears: http://tinyurl.com/4bqdae
• art sculptures based on data/graphs: http://www.joshuacallaghan.com/Graphs.htm
• weight watchers = MMORPG. http://tinyurl.com/669b8u
• WSJ article on how old inventors are when they make their biggest impact: http://snurl.com/3hhim

Have a good weekend!

I'm giving a talk this Thursday at CommunityNext::Monetize to cover an overview of the ad targeting landscape. Tickets are currently free for publishers with 10 open spots, use the code ANDREW.

You can register here

The outline of my talk will be…

People not pages:
An introduction to ad targeting

• Targeting = $
  How publishers can generate higher CPMs using targeting techniques from demographics, behavioral, geo, etc.
• Does it work?
  Comparing the performance metrics for brand versus direct response advertisers using studies from Revenue Science and Yahoo campaigns
• Social networks suck at monetization
  Discussing why social networks traditionally have had low CPMs and driving into issues like 1) low CTRs and what forces generate them, 2) interest versus intent, and 3) ad sales team dynamics

The talk will be about 30 min and should start at 3:30pm.

See you guys there!

I have been posting random links to my Twitter account over the last week or two – no guarantee that they have anything to do with work! Mostly a grab bag of nerdy/biz/news stuff.

If you want to get these in real time, you can follow me here.

• SIGGRAPH paper on a computer vision technique to make people hotter. awesome: http://www.cs.tau.ac.il/~tommer/beautification2008/
• very impressive video/photo magic: http://tinyurl.com/5q7neb
• blogger vs biz people on the olympics. russell beattie rant: http://snurl.com/3gfqv (expand) vs Silicon alley insider article: http://snurl.com/3gfqz
• growth of women-focused websites in NYT: http://www.nytimes.com/2008/08/14/technology/14women.html
• neat mailing list search engine: http://markmail.org/
• programming languages by geography: http://tinyurl.com/54s22d
• funny comic about behavioral targeting: http://tinyurl.com/69aemp
• Article on chinese kids under huge academic pressure: "Plight of the Little Emperors" http://snurl.com/3g6kr
• How to catch a mouse without a mousetrap: http://tinyurl.com/b6zwr
• hi5 stacks up on execs: http://tinyurl.com/6rr6mu
• email marketing numbers (open rate/ctr/etc) by industry vertical: http://tinyurl.com/yqtnpq
• article on the origins of chinese athletes: http://online.wsj.com/article/SB121824136943426125.html
• lol tila tequila dating terry semel's daughter?? http://tinyurl.com/686xzx
• china's little girl bait-and-switch, girl was "not cute enough" and had to be switched "for the national interest" http://tinyurl.com/5nzfnz
• interesting inside look at the hillary clinton campaign as it was crumbling: http://tinyurl.com/5efmom
• omg delicious: http://tinyurl.com/6jpwvl

For folks who are working in the online advertising space, see below for a great summary on the dynamics between ad networks and publishers. There's a full document from the IAB and Bain.

Here's the the Executive Summary: Overall, 2007 was a strong year for the seven participating publishers

• Average revenue growth of 32%, with CPM increases for several participants
• Growth in ad impressions served and in sell-out (after secondary channels)
• High demand for premium video inventory trading at 2-3X display CPMs

At the same time, use of ad networks increased dramatically, from 5% of sold inventory in 2006 to 30% in 2007

• Ad networks were used to monetize significant unsold display inventory
• Publishers under considerable pressure to realize all revenue opportunity

Average realized CPMs on ad networks ranged from $0.60-$1.10, versus $10-$20 in direct-sold display inventory, or only 6-11% of direct pricing

Importantly, the study revealed significant publisher challenges in managing pricing and yield

• Lack of longitudinal sales data to measure trends – overall, by account and by channel
• Limited staff resources and tools in place to optimize CPMs and inventory yield
• Several participants lacked data on ad network volumes and pricing

It is still too early in the game to measure the full impact of ad networks on online pricing and revenue share

• Large marketers still rapidly shifting budgets to online – “all boats rising”
• Publisher use of ad networks still too recent to see “cause and effect”

However, growth in marketer use of ad networks will likely lead to erosion of premium CPMs if publishers maintain current behavior

For publishers, two key implications:

• Need to better support the value of premium inventory – through more innovative offerings and/or reducing units available
• Need to actively manage secondary channels, both to maximize yield and to safeguard strategic position

The ability of ad networks to increase CPMs and share gains with publishers also appears critical to creating win-win relationships

• Enhanced ad network targeting and inventory management resulting in higher price realization on premium inventory from publishers
• Further scale-up and (potentially) consolidation of networks should enable higher margins

Time slicing Google Insight queries
Yesterday I wrote about the use of Google Insight to see how widely products had reached in the US. Inspired by a recent post by Erik from Seattle
on the growth of Twitter from month-to-month, I explored the fact that
the Insight product actually has data from as far back as 2004! This
means you can try out timeslices of data on different websites, before
they were successful, to see if there were common growth patterns as they grew in userbase.
For example, you can look for the search term "youtube"
and see what states were active in that search in Nov 2005, Dec 2005,
and so on, until the entire US is saturated.

Interestingly enough, the data actually shows there are many different patterns of growth – I show two below, based on YouTube and Webkinz. Everyone knows what YouTube is, but if you need a refresher on Webkinz, here's the Wikipedia entry.

Before diving into this though, I have to repeat the caveat from my
previous post. First off, this is not traffic from different states,
it's searches. You have to make the assumption that more searches
correlates to more traffic, which sounds reasonable to me but might be
completely wrong. Also, obviously these searches skew toward Google,
which has its own bias as a search engine. And finally, I don't know
how the search index really gets computed, but I'm assuming higher
search index means more searches.

Now that we have that lawyerly disclaimer out of the way, here's the data…

YouTube

Nov 2005: As expected, YouTube starts out in
California and New York, which are two of the more digitally inclined
states, and also the most populous. The site was launched to the public
in late 2005, and as you can see from these next couple pictures, it
grew very very quickly.

Dec 2005: Next, it spreads to other populous states, including
Florida and Texas. One observation would be that because YouTube was
generating lots of traffic from MySpace and search, it'd be logical to
think that they'd have fairly "general" audience growth and follow
whichever states had the most people.

Jan 2006

Feb 2006

Mar 2006: Starting to fill in more to the central states. Note that
it's light in the south even though there's a TON of people there –
perhaps those were the YouTube late adopters?

Apr 2006

Sep 2006: The final month I'm showing is about 2 years ago, where it
was able to achieve widespread adoption throughtout the US. Note that
Hawaii is very dense, along with California. If you look at the Insight
data now, it basically has not changed much since Sep 2006.

WebKinz

Mar 2006: Webkinz, unlike YouTube, started out in Massachusetts. Did
you know that the kid-centric MMOG shared the same birthplace as
Facebook? The Wikipedia entry for Webkinz
lists the starting date for the company as Apr 2005, so it took them a
year to register enough searches to show up on Google's tool. Note that
since the MMOG is tied with a plush doll, much of the expansion is
probably related to actual product distribution and how they rolled the
product out. Similarly, it's been noted that "viral channels" don't
really exist for kids – they primarily learn from each other via word
of mouth, since few are reading blogs or twittering ;-)

Apr 2006: Unlike the YouTube example, Webkinz doesn't immediately
take off in Texas or California. Instead, it makes a slow expansion
into New York and Florida. (In this set of pics I'm skipping more
months since the growth is so much slower than YouTube, btw)

May 2006

Sep 2006: The growth continues westward, with Illinois, Michigan,
Ohio, and a couple East coast states. Note that California finally
shows up with some searches.

Dec 2006

Jun 2007: Much later, you see that the Webkinz phenomenon is still
mostly East Coast focused, and doesn't involve California much even
though it's a very populous state. Strange!

Conclusions
I think there are a couple interesting observations to be taken out of the two, in concert with each other:

• Different products get adopted differently, and follow different patterns
• Horizonal product like YouTube and grow quickly across the US, and hit the most populous states first
• Products like Webkinz, on the other hand, have very distinct signatures and might have to do with the fact that it's
  tied to a offline product and/or the fact that the customer base of
  kids doesn't have many consolidated online marketing channels
• Similarly, the actual underlying growth of some products can be
  very fast, with state-by-state growth happening over weeks or single
  months, or sometimes the distribution doesn't change much over many
  months
• Webkinz is also an interesting example of a non-California
  centric product that is successful elsewhere. Perhaps MySpace is
  non-Silicon Valley, as another observation.

As always, suggestions and comments welcome!

If you end up
doing this analysis for other sites and find other patterns, please
comment and I'll link you to the bottom of this post via UPDATEs.

I was looking for a site where it'd be popular in Montana, Alaska, Dakotas, but not California. I hit the jackpot. I will post the answer as an update to this post…

Discuss ;-)

UPDATE: Too easy! Randal correctly guessed that it was Adultfriendfinder. I imagine the reason is that unlike California, there's fewer people in Alaska and Montana, and they use more dating/adult sites. That's the theory at least ;-)

Intro to Google Insights
I have recently been playing around with the insanely useful Google Insights for Search product. You should definitely try it out if you haven't. It's basically Google Trends on steroids, and shows you a ton of data on any search you try. An SEO wizard's dream, basically. It's described as:

With Google Insights for Search, you can compare search volume patterns across specific regions, categories, and time frames.

Basically you put in keywords and it give you pretty charts.

Navigation searches and geo-location
One useful query to try is to search for your favorite website – like "gaiaonline.com" and specifically target it towards the US. It shows you a neat state-by-state breakdown of who is doing those searches.

Although unscientific, it tells you a bit about the location of the people who use the website, since logically the folks in states where the product is popular would tend to search for it quite a bit. Interestingly enough, Nevada, Hawaii, Oregon, and Washington are some of the top searchers for Gaia Online. Fascinating.

Now, another use for this is to figure out what websites are being used mostly by early adopters versus products that have broken into the mainstream. One could just go and search a whole bunch of domains and see what kinds of graphs are produced.

This is exactly what I've done below…

The graphs for Digg, Facebook, MySpace, Netvibes, Skype, Techcrunch, Twitter, and YouTube

Here they are…

Digg is pretty evenly used throughout the US, although there's a big hole in Montana, North and South Dakota, and Wyoming. Weird.
 

MySpace is mainstream and used throughout the US, although popular in California, Florida, and Vegas. Those are all places known for awesome club scenes, is there any connection? ;-) (er, SoCal)
 

Netvibes is California only – perhaps this is a good candidate for an early-adopter-only crowd?
 

Skype is interestingly close to Digg's geographic profile, actually. I'm sure the worldwide chart looks very different, but at least within the US there doesn't seem to be a crazy amount of penetration. Would be interesting to see this graphed against % of population that are immigrant populations, who are talking to their relatives overseas.
 

Techcrunch:
 

Twitter has a surprising profile – it's very strong within the states where it has any presence, but is basically dead outside of it. If you would conclude anything, you'd say that Twitter is in a transitionary period where it's certainly grown to be a larger-than Silicon Valley phenomenon, but is still mostly dominated by early adopters in specific states.
 

Facebook is mainstream, and unsurprisingly focused towards the east coast rather than the west.
 

YouTube is also quite mainstream, and looks like the MySpace profile.
 

Next steps
Basically this tool is a very interesting part of any internet analyst's arsenal, alongside Quantcast, Alexa, and the like. It gives a unique view of what's going on. You could do a lot with this also – I'm too lazy to do the full analysis, but you could run the entire Crunchbase database through this and see what sites have broken into the mainstream and which ones have not. You could also run the entire Quantcast top 100k site list though this.

Another interesting thing would be to translate the color shades into index numbers, and then calculate the sites with the highest variance of scores (Twitter would probably rank highly in this), which would indicate polarizing products. Similarly, products that were successful outside the Silicon Valley area might be interesting investment candidates for venture capitalists to look at.

If anyone does further work on this, please shoot me an e-mail and I will link you!

BTW, if you enjoyed this article, check out the list of 50+ essays on this site, related to viral marketing, metrics, go-to-market strategies, online ads, etc.

UPDATE #3: I did some additional work timeslicing the data for YouTube and Webkinz to show how they grew over time. You can read the new post here.

UPDATE #2: Some more interesting analysis, which shows the spread of Twitter over time, month-by-month, using the same tools. General trend seems like it hit the coasts and then filled in the central areas.

UPDATE: Techcrunch does some great analysis here – they basically point out that instead of querying for "twitter.com" and "techcrunch.com" I should have searched for "twitter" and "techcrunch." Good points and worth reading more.

Web 2.0 + games
As I've previously written about, I'm hugely fascinated in the use of virtual goods to monetize social web properties. In particular, there's an increasing intersection of games and social websites as well as the people who make them. Obviously there's a lot of cross-pollination going on, particularly in the heated Facebook social gaming space. Another space where a lot of innovation is happening is the casual MMOG market, where more than a dozen venture-backed companies are coming to market in the next 12 months.

Virtual goods infrastructure
One of the opportunities that is emerging, as these companies release their product and consumers start to have a standardized set of expectations, is the virtual goods infrastructure. The interface for virtual item sales is starting to standardize. In many cases, you see common elements like:

• Your avatar
• A collection of items which can be navigated through
• "Buy" buttons and other interaction with each item
• Regardless of whether you can buy it, you can dress up your avatar with aspirational items

Yet while the interface standardizes, the rest of the process does not. In particular, how about issues like:

• Payment policies what countries, what currencies, and how many methods?
• Alternative payment cards (like Nexon cards in Target stores)
• User-to-user sales
• Number of currencies (dual? single? more?)
• etc.

In fact, one realization is that all of this backend stuff is really just the same type of infrastructure that e-commerce sites have built for ages. And looking at the resulting analogy, one might ask: "Who's going to be the Amazon of virtual item sales?"

Let's examine what this quesiton means…

Amazon.com and where their techniques apply
Ultimately, much of Amazon's success is due to their quantitative views on personalizing the user shopping experience. This includes issues like:

• Product recommendations
• Price testing
• Product bundling
• Search, browse, and navigational hierarchy
• Reviews, ratings, lists, and metadata
• Affiliate programs
• Ad targeting
• etc.

Right now, the virtual item stores I've seen are in their infancy – there's very little sophistication relative to what's possible as shown by Amazon, at least in e-commerce.

My question: Will one particular game (or game platform) do this all right? Or will it be a third-party vendor that provides this rich set of functionality to partner games?

I'd enjoy any suggestions for companies that are looking into this space – comments and suggestions appreciated!

Starting from scratch

I started my professional blog in late 2006 as I was packing my bags and moving from Seattle to San Francisco. In the first month, I was pleasantly surprised to see a couple ex-coworkers subscribe via e-mail, and didn’t think it would ever lead to more readership than that. Two years later, I have a nice community of a couple thousand subscribers, and I occasionally get the question of “how would you start a blog, if you were to do it over again?” I thought I’d share my thoughts on that.

Here’s the quick summary, for those who want a quick skim:

1. Carpet bomb a key area and stake out mindshare
2. Take time to find your voice
3. Stay consistent on your blog format and topic
4. Just show up
5. Go deep on your topic of expertise
6. Meatspace and the blogosphere are tightly connected
7. Embrace the universal reader acquisition strategies for blogs
8. Come up with new topics with brainstorms, news headlines, and notes-to-self
9. Look at your analytics every day
10. Don’t overdo it

Extended discussion below…

Carpet bomb a key area and stake out mindshare
Like all products and markets, the blogosphere has its own set of existing products and channels. For example, if someone asks me about a “VC blog” I might refer them to Fred Wilson, Mike Speiser, Venture Hacks, and others. If someone asks me for a “games blog,” I typically recommend folks like Raph Koster, Nabeel Hyatt, Daniel Cook at Lost Garden, and others. The point is, just like companies, blogs tend to achieve 30-second elevator pitch status, and it makes sense to figure out a theme for whatever you’re going to be writing. IMHO, as long as the space you’re writing about is growing, you can never be “too vertical” since you’ll easily attract a couple thousand supersmart people who care passionately about your particular sub-vertical.

In general, I find people describing this particular blog as “the viral marketing blog” more than anything else. I write about a bunch of other stuff other than that, but people seem very interested in the topic so I’ll take what I can get ;-)

Take time to find your voice
As I said before, it’s good to find a key area. That said, it takes some time to get there, and I spent the first couple months switching between a couple topics – be it personal stories, product design, and advertising. It wasn’t until almost a year in that I started writing about viral marketing, which this blog is probably most widely read for.

I found that as I wrote more consistently, and learned from other bloggers, I began to change the tone and voice of my articles. While some of the key elements were always there – essays rather than links, certain topical themes, etc. – I added much better formatting within the blog posts, photos, linking to other blogs, etc.

Stay consistent on your blog format and topic

Related to finding your voice, it turns out that blog format really matters. To completely oversimplify, there seem to be two very different kinds of blogs that are successful. Either you’re a “curator” of news, or you’re a primary content source.

The curator is someone who blogs often and throughout the day with links and snippets, and I would consider someone like Robert Scoble (or iJustine!) to be the Michael Jordan of this approach. The style is often more conversational and casual, and includes lots of little updates on what they are doing or reading or trying out. These guys can really “cover news” and are widely read because they can provide the first opinion on new stuff coming out.

The bad news is that the curator model requires you to stay on top of things ;-) For a guy like me, with a full-time job and blogging as a dirty habit, being a pure content creator is much more appealing. I will never get the traffic of the news curators, but I can go deep on a specific topic and get a laser-focused audience that just cares about the topics I write about.

It’s obviously good to experiment and leave the door open for any and
all topics that interest you, but obviously once you begin to settle
and find your voice, it’s good to focus since then your readers will
know what to expect from you. There’s nothing worse than that guy that
writes one really good essay about the industry and then spends the
rest of the time writing about his dog!

Just show up
Hands down, the hardest thing about writing a blog is doing it regularly. I often just don’t have the energy to write, and have to consider it as a core part of my job in order to get it done. It’s especially true once you get past the first couple months and you’ve hit the top 90% of topics you wanted to get off your chest. Then coming up with new ideas is much harder.

In general, it seems like you have to maintain a tempo of at least 1 essay a week to be relevant. Any less than that, and people stop reading (or at least you’ll have all subscriber traffic and no one will just check your site). This blog is averaging about 1.5 posts a week, which I should probably work on, but it seems enough for at least some group of people to follow it. If I weren’t so lazy, I’d try to get at least 3-4 posts up per week, and possibly make them a little shorter. (Or one long one, and 2-3 news-related items)

Go deep on your topic of expertise
In general, I’ve found that you can never go “too deep” when covering a vertical. Some of the things I would have thought were the most esoteric – like viral loops and sharkfin graphs – have become the most widely read and widely linked posts. I originally hesitated to even post those since I thought they would be too obscure, but instead I found that people either appreciated it more. My guess is that it has to do with the fact that either they’re learning something completely brand new that they think is interesting, or at the very least you’re build “street cred” by not being the typical super-high-level analyst.

Meatspace and the blogosphere are tightly connected
Surprisingly (or unsurprisingly?) the world of San Francisco conferences, events, hanging-out, etc. are very much correlated with the blogosphere. A lot of readers of my blog either know me personally or know of me through a mutual friend – I get this sense since many of the inbound emails I get start with, “hi I read your blog and am friends with X” or I have lots of friends introducing me to FOAFs who want to talk about a topic from my blog. I think the point of this is just to say that you can grow your readership by being part of the conference circuit – either organizing or speaking or otherwise – and also your blog readership will lead to opportunities to get more visibility in meatspace. It’s all useful, so embrace it. And move to SF if you haven’t already ;-)

Embrace the universal reader acquisition strategies for blogs

When it comes to blogs, the user acquisition is pretty boring. You basically have the following sources of traffic, by importance:

1. SEO, specifically Google
2. Blog aggregators (like delicious, digg, etc.)
3. Social platforms (like twitter, friendfeed, etc.)
4. Individual blog links

Given that a lot of your blog traffic will come from SEO, it’s a good idea to try to own some keywords for a topic if you can. I get a ton of searches on viral loops and other viral marketing terms. It’s a good idea to add whatever your main keywords are to your blog title, blog topics, etc. I sometimes use blog titles like: “Facebook marketing: X” to get people to link back to me using those terms.

Similarly, whatever your expertise is, you might find vertical aggregators that drive a lot of traffic. For me, it’s Hacker News, Techmeme, and others. Identifying those key aggregators and submitting your articles is key.

Come up with new topics with brainstorms, news headlines, and notes-to-self
As mentioned above, it’s very very easy to run out of new topics to write about. Writer’s block seems to afflict me almost every week ;-) This is especially true once you hit the 2-3 month mark, since many of the topics that you might want to write about have already been covered in one angle or another.

My usual remedy to this is to employ a set of tactics that generate a healthy list of blog topics in my inbox, to be written one day or another. The first tactic is that when I’m in a good creative mood, I’ll often do a quick brainstorm of many potential topics and ideas. Some can be simple and explanatory, like “how to do X” or specific companies, or recollections of specific conversations that are worth blogging about. Similarly, I’ll also peruse sites like Techmeme and look for headlines that catch my attention. In particular, I often look for things that I think are either wrong, need clarification, or otherwise would compel me to rambling if someone told me about it in person. All of these ideas I will write up in very short outlines and e-mail to myself. Having a short outlin or starting a paragraph or two of the post helps me sketch out the idea in enough form to easily execute it at a later date. Otherwise, if you just have a fun headline but no body, going from 0 to 60 can be quite rough.

Look at your analytics every day
I look at the small amount of analytics on my blog on a frequent basis to understand what’s going on. It’s really nothing fancy, and certainly pales to the kind of instrumentation I’d do on an actual web project, but it’s good enough. More importantly, it helps you get some interaction with your passive users that aren’t leaving comments, and helps you figure out how to serve them better.

In general, I start by looking at my referrers every day, along with daily visitors/pageviews. I have sitemeter bookmarked on my phone so that I can glance at this all the time. I’ll look at what searches people are making via Lijit, and what searches are drawing people to this site. Another thing is to look at my Feedburner numbers and subscribers to see who is subscribing and how things are trending. I also get my top referrers and top content e-mailed to me on a weekly basis by Google Analytics, so I have an understanding of what people are looking at.

In general, in looking at this information I’m trying to assess a couple things:

• Are there specific topic areas people are coming to the site for, that I should write more about?
• Are there certain traffic sources that I should try to “develop” more? (Twitter is one good example of this)
• What are the e-mail domains and companies that are visiting this blog, and how would I better serve those readers?
• What are the searches people are making on the site, and are there any that aren’t returning any results?

The point of all of this is looking at your blog not as a “diary” as many people do it – instead of being fuly focused on yourself and what you want to write, you can think of your readers as your customer-base, and you’re trying to collect whatever knowledge you can to cater to their needs. Obviously, for part-time bloggers like myself, it’s important to balance your interests with the interests of your audience, but in general I think the philosophy holds.

Don’t overdo it
Finally, have fun ;-) After all, you can always quit! I often find myself not blogging for a week or two just because I don’t feel like it. I think that’s OK, since this isn’t my full-time job and I’m just doing it for fun. I think if I felt a lot more pressure to do this consistently, regardless of my enjoyment, I’d probably stop since it wouldn’t be fun anymore.

Recent poll
I recently had a poll on user acquisition and where people are putting their efforts. To summarize, most everyone put their focus on word-of-mouth and blogs, whereas less folks were looking at SEO/SEM/email/etc to drive their traffic.

Similarly, Facebook/OpenSocial was in a 3-way tie for 2nd place along with the other methods as well.

In general, I’m quite surprised! Here’s why:

Scalability of user acquisition methods
One my main considerations, when thinking about user acquisition, has to do with how well that method will scale over time. Ideally it’s a “set it and forget it” process (to quote informercial god Ron Popeil), where you can scale to millions of users after solving it once.

In a previous post called Why bloggers and press don’t matter for user acquisition, I point out how hard it is to scale the blogs/WOM gravy train, and I’ve also discussed why tech early adopters are often the wrong folks to target. I think in general I’m pretty surprised people are still going after blogs/WOM when it’s pretty obvious to me, at least, that it’s not a particularly great way to go.

I could be misinterpreting my own poll option, so let me know if I’m getting that wrong.

Given my previous Debbie Downer post on the advertising industry in a recession, I wanted to outline a couple major opportunities in the ad industry where huge companies could be built. This is a summary of many discussions that already out there, so it should be obvious to most folks in the ad industry but maybe new for everyone outside.

Here it is, not in any particular order:

1. Online video
2. User-generated content (blogs, social networks, etc.)
3. Monetizing international traffic
4. Vertical ad networks
5. Cross-channel/cross-property targeting
6. Continued securitization and efficient brokering of ad inventory
7. New platforms and categories

Most of these may be obvious, but I’ll summarize all of them with a line or two of description. If I’m missing anything, please shoot me a note at voodoo [at] gmail and if I agree I’ll add it ;-)

Online video

Obviously video is a huge category since it’s the clearest metaphor to TV advertising, and no one really has cracked it. What’s the opportunity for folks outside of the big branded publishers? What are the key metrics? What’s the right ad unit? (hopefully not pre-roll)

User-generated content (blogs, social networks, etc.)
The buzz and incredible word-of-mouth for blogs and social networks is undeniable, but in order for this opportunity to scale, a saleable ad unit needs to be determined. This ad unit needs to be priced, measured, and otherwise standardized. What will it be? Is a standard of profile + news item + widget + etc emerging? Will blogs be treated similarly to social networks, or are they considered too different?

Monetizing international traffic

Many social networks and ad networks attract a tremendous amount of international traffic, much of which monetizes poorly because of a lack of direct relationships with advertisers in the source countries (and also ad spend internationally). Sometimes it’s akin to throwing away 30% of your pageviews because the 30% isn’t monetizable to a comparable degree. Who will solve this? Who will own the infrastructure to broker these transactions?

Vertical ad networks

As content becomes increasingly separated from distribution online using widgets, syndication, and aggregation, more and more of branded content exists outside the destination sites of branded publishers. Many of these guys are now organizing vertical networks to take advantage of larger, trusted networks. Is this model here to stay? How expansive will the influence of branded publishers be relative to the hustle and bustle of long tail publishers?

Cross-channel/cross-property targeting
As the amount of content and products increase online, user attention is getting fragmented – the same person that browses WSJ at a $60 CPM goes to their email service and is served an ad at $1 CPM. Similarly, the same person who is shopping for a car on Google is priced at $10 a click, but the same search elsewhere yields terrible monetization. Bridging the small areas of “high-context” online versus the larger swaths of high-engagement/low-context activities online will become an increasingly large opportunity. How will companies price, organize, and otherwise securitize this data? What will consumers think of their data getting aggregated? Will one company win, or will it be an open exchange? Or a co-op of similar sites?

Continued securitization and efficient brokering of ad inventory
As ad networks become more technologically advanced, allowing APIs, automated campaign management, a multitude of targeting options, the ad inventory of the world is becoming more efficient over time. (Though never efficient enough!) As exchanges, arbitrageurs, networks, and ad infrastructure become more mature, how much of the finance world can be directly applied? Will there be an organized futures, options, and derivatives market? Who will be the Bloomberg, the LTCM, the Instinet? What infrastructure hasn’t been built for ad industry that does already exists in the finance world?

New platforms and categories
And of course, the big wild card is that the available inventory online is constantly shifting as new consumer products are being created. If a new category of websites is created, like social networks or widgets in recent years, some of these opportunities have new and different advertising characteristics than others. Some may have extremely high CTRs, or capture the imagination of brand marketers.

For example, the ad market within games is still very much in flux, and who knows what standards will emerge there. Similarly, mobile continues to be a large opportunity that may open up as Android, Symbian, and the iPhone evolve.

Have a billion dollar ad play that’s not in here?
Email me cuz I’d be interested in hearing about it ;-)

This recent article on the NYT discusses the site CriminalSearches.com called
If You Run a Red Light, Will Everyone Know?

After playing around with CriminalSearches for a couple minutes, I’m honestly wow’ed by how much data is in there. Basically it provides a free, searchable list of peoples’ names and all the stuff that’s on their rap sheet. I’d encourage you to try a couple searches to the comprehensiveness of this data.

This also reminds me of the power of Crime Maps to show you what’s going on in your neighborhood. In my neighborhood which is close to Bernal Heights / Mission, there are an incredibly large number of sex offenders, violent crimes committed, and other things that look horrific when plotted in Google maps next to my apartment!

Anyway, here’s a scary idea: If you cross-referenced your Facebook friends list with the CriminalSearches site, what would you get out??

I’d call that site FacebookCriminalSearches.com ;-)