LOST Opportunity?

The otherwise unremarkable Steven Spielberg Film A.I. will long be remembered for spawning the first tremendously popular Alternative Reality Game. Typing an odd credit from the film’s poster into Google lead users to a Web site which served as the gateway to a far flung virtual murder mystery that refused to ever admit it was actually just a game. Players banded together to trade information gleaned from a vast network of real and fictional Web sites, emails from characters and even chilling phone messages warning players off of the case. With absolutely no advertising, tens of thousands of people immersed themselves in the game, building tremendous buzz and interest for the film in the weeks leading up to its release.

Fans of the hit ABC show Lost seemed poised to embark on a similar quest. Web sites for two prominent entities in the drama’s intricate mystery, Oceanic Airlines and The Hanso Foundation, reveal lightly hidden secrets to fans who take the time to explore them. But excitement began to mushroom in early October when discussion board postings noted that by accessing the secure URL of the potentially nefarious Hanso Foundation (adding an ‘s’ to the beginning of the URL to form https://) you would find the simple yet enticing message, “bigspaceship1.com.”

The bigspaceship1 Web site was a fan’s delight, with an array of Morse coded messages, bizarre imagery from the show’s mythology that would reveal hidden messages with some Photoshop wizardry, and even a unique version of the Giligan’s Island them song, set to the tune of “Stairway to Heaven.” Clues lead to a burgeoning list of other Web sites, each with their own secrets to discover, including ones for key plot drivers such as the Dharma Initiative and Mr. Clucks’ Chicken Shack.

Blogs, discussion boards and water-cooler chats exploded with enthusiastic tales of each new clue and expanding theories on the show’s complex and closely guarded mythology.

Then all of the sudden it stopped.

New content ceased without any explanation, and many of the sites now redirect elsewhere. A few WHOIS detectives noticed that none of the new domain names were registered by Disney or ABC. Though the Mouse has not issued any statements, it is likely that the aspiring game producers found Disney’s legal department to be far scarier than the murderous Others who also inhabit our favorite uncharted island.

Fan buzz has quickly turned to despair that the game they were so excited to embark on is so quickly over, while more than a few feel duped by the whole experience. Still, many are making an open plea to the show’s talented creators to take over the reigns and keep the game afoot.

Will ABC capitalize on fans’ strong appetite for an officially sanctioned alternative reality game? Stay tuned!

100 Pixel Adventure

So, an interesting and tremendously ephemeral business model that's emerged is the million pixel ad site. Basically, you (and anyone can) put up a Web site with 10,000 100-squre pixel blocks, which are each about the same size as a pencil eraser. You then try to sell the squares for anywhere from a penny to a dollar per pixel, or up to $100 per little square. With no skill, capital or infrastructure required, one guy's neat idea quickly spawned about a thousand copycats (as tracked here).

The most successful imitator is Million Quarter Web Page which somehow managed to temporarily leap high on Alexa's rankings by serving up 30 million pages per day.

Taking a $25.00 risk, I dove in and bought a square for BasicLingo, my little advertising science project. (It's the tiny blue and pink arrow in the bottom-left quadrant.) Tale of the tape: 29 click throughs and somewhere between zero and $7.18 in revenue after 8 days.

I'll soon get a better cost-per-click rate than I do with search, but will wind up in the red with this untargeted traffic. I'm a little surprised that the click rate is so low, but the bigger ads are definitely a lot more prominent. Don't think I'm willing to risk real money, like a hunert or two, to test that hypothesis, though.

The Online Advertising Multiplier Effect

Here's my really big thought: What if online ad spending STILL hasn't passed the 2000 high watermark of $8.0 billion?

That's crazy, you idiot! We already did $9.6 billion in '04, and are zooming past it this year (all IAB numbers). True enough, but my contention is that spending by actual end-use advertisers still isn't where it was way back when. The reason is what I'll term the Online Advertising Multiplier Effect.

Back in the good ol' days of the last century, most publishers did some form of direct ad sales, nearly all of it on a CPM (or similar) basis. Hit up some newly funded (or IPO'd) company for a good chunk of capital and then try to find a way to actually live up to the promises that you made. Yes, there were some networks (DoubleClick ruled the roost) but they were fewer and smaller, and some actually only booked their commission on the topline. It's a very different world in 2005. Performance-based is the majority of the market now, and because of that, it is cheap, easy and necessary to have partners try to move as much inventory for you as they can. As a result, many parties touch most ads, and that same dollar of actualy spending winds up being recorded twice, thrice or even more often. Proof points:

• In Q3, Google had $530 million in Traffic Acquisition Costs, which it defines as "the portion of revenues shared with Google’s partners." That's $530 million that OTHER companies are reporting as top line revenue. Google reported its own sales -- which do not net out traffic costs -- were just shy of $1.6 billion during the same period. Add these together, and you've got a market impact of $2.1 billion.
• Shopping.com shows that the multiplier is often a lot bigger. In its Q2 10Q (final independent filing), the company revelas that $12 million of its $28 million in revenue (43%) came from Google ads placed on its site. At the sametime, Shopping.com spent nearly $13 million on search advertising to bring in its own traffic! (Questionably categorized as Marketing Expense, rather than COGS where it really belongs.) You could certainly make the argumement that these sums represent in $25 million in spending (bartering) that pretty much nets out to zero.
• The coregistration churners like Adteractive and Azoogle add even more hands to the pot. Each company claims to be doing about $100 million in revenue this year, and needs to spend about half that amount on search and other partners to drive the traffic they need. But wait, there's more! To manage these massive search campaigns they need to turn to big SEOs like Efficient Frontier, who take their own 10% cut. All of a sudden, each dollar in 'true' ad spending is now delivering a buck-fifty-five to all of these players, and that's before factoring in the cut taken by the agencies on the front end.

Net net, is the industry really growing? Yeah, absolutely. Many thousands of real companies pushing real products are putting more and more of their ad spend online. But this revenue merry-go-round is making everyone a lot more euphoric than they ought to be. Plus, as the game gets bigger and goes faster, it's only a matter of time before the fine folks on FASB take a hard look at everything, asking questions that are going to open the trap door under the industry once again.

Look at me, I'm a blogger!

Been meaning to write down some rants and raves for quite a while, but today's the day I finally got to it. Blogger said it would only take five minutes to get started, but I clocked it at eleven, by the way.