Social Networking Meets Madison Ave.
Thursday, June 5, 2008
Feeling feisty? Throw an orange Tic Tac at a friend through Facebook, sponsored by Fox Searchlight studios to promote DVD sales of the movie "Juno." Feeling thirsty? Give a friend a virtual bottle of Vitamin Water, courtesy of Coca-Cola.
These are a few of the ways big-name brands are advertising to the millions who use the social networking tools made by Slide, the largest maker of mini-software programs known as "widgets" that let people express themselves on sites such as Facebook and MySpace. Slide has received so many inquiries from advertisers that the San Francisco start-up is opening a New York office today to be closer to Madison Avenue.
Other top widget makers such as RockYou and Social Gaming Network are following suit, putting together ad-sales teams and expanding their widget inventory to appeal to a range of companies starting to advertise on social networks.
"The number of advertising inquiries we receive on our site has seen tenfold growth in the past year," said Sonya Chawla, general manager of advertising at Slide. "We went to where the brand advertising dollars are, and that's New York."
Programs that let people spray-paint graffiti on a friend's profile, read daily horoscopes and play poker with one another started as simple diversions on Facebook and MySpace. By downloading a small piece of software, or an application, social networkers could spruce up their profiles and find quirky excuses to connect with friends. The tools, created by companies with names such as Zynga and iLike, have proliferated since Facebook and MySpace began allowing outside developers to build applications.
Advertisers now see these online applications as a prime way to reach the growing number of consumers who regularly visit social networking sites. But the ads are taking a different form than the traditional banner ads or sponsored links typically stripped across a Web page.
Vitamin Water, owned by Coca-Cola, in April launched a campaign with Slide to promote the beverage. In Slide's "Top Friends" application, Facebook users can send one another virtual bottles of Vitamin Water. The brand's advertising agency hoped that 100,000 bottles would be swapped during the week-long campaign. More than a million bottles were exchanged in the first day alone, said Ian Schafer, chief executive of Deep Focus, the ad agency behind the campaign.
"There's no data we can point to that says how it impacted store sales, but it certainly feels good knowing people engaged with the brand in ways they normally wouldn't," Schafer said.
RockYou, a San Mateo, Calif., widget company that makes the Super Wall application on Facebook, plans to sell advertising to go with its widgets in particular categories, such as automobiles.
Some brands choose to align with features that appeal to their target markets. Vampires, a RockYou game that lets members virtually bite one another to receive points, was rebranded by Sony Pictures to promote its vampire horror film "30 Days of Night." Players of the game could register to win an all-terrain vehicle and a cash prize.
"The advertisers are actually turning over the campaign to users and integrating the brand with the widget itself," said Jeremiah Owyang, an analyst with Forrester Research.
But he added that this type of advertising doesn't lend itself to every company's message. "Nobody's chattered that they've made a tremendous amount of money with this," he said.
Still, investors see promise in the growing popularity of the applications shared on Facebook, MySpace, Bebo and Hi5. In January, Slide raised its fourth round of funding of $50 million, pushing its valuation to more than $500 million. Clearspring, a widget company in McLean, last month secured $18 million in its third round of financing. Webs.com, the Silver Spring company formerly known as Freewebs, spun off Social Gaming Network, which last month received $15 million in its first round of venture capital funding. The company, with offices in Palo Alto, Calif., has become the third-most-popular application maker, with nearly 900,000 active users for features that let them send free virtual gifts or give friends funny nicknames, according to Adonomics.com, which tracks Facebook applications.
Advertising isn't the only way for social applications to make money, said David Sze, a partner with Greylock Partners who invested in Facebook, LinkedIn and SGN. Some game designers allow players to buy virtual goods to dress up their characters, for example. Slide offers fancier "pokes" or virtual gifts to those who pay $5 a month to use its SuperPoke application.
"The leading players are making in the millions of dollars in revenue already, up from zero just a year ago," Sze said. "That's not enough to make a world-leading company today, but it shows that the market is evolving."
Jeremy Liew, a partner with Lightspeed Venture Partners who invested in RockYou, said it's a good sign that consumers are willing to affiliate themselves with a brand on their personal profiles.
"It's not hard to imagine that advertisers will take advantage of the fact that users want say, 'I like Nike or Scion or Burger King or W Hotels,' " he said. "Are we there yet? No, but a lot of people are experimenting."