Shahar Solomianik

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Posts Tagged ‘zemanta

Zemanta: Crowd Sourcing Contextual CPA Advertising

with 88 comments

Introduction

In my last post, I wrote that CPA needs to be the next revolution in online advertising. I stressed that because CPA is the most efficient pricing method for advertisers, a wide adoption of CPA by publishers will drive the entire online advertising industry forward simply by helping it to gain market share over offline advertising. This is especially true in the current economic downturn, when advertising performance is becoming more and more significant.

I suggested that due to the lack of a scalable system that deploys CPA ads on publishers’ sites in a way that will generate high returns, CPA is therefor not widely adopted by publishers. A lot of innovation is required in order to make it scale.

However, I didn’t suggest any real innovative solution. I still don’t have a suggestion for a solution. But, I think I just found a company that does.  Let’s take a look:

Effective CPA Implementation

CPA can be used very effectively as of today, but it doesn’t scale for most publishers. Filling pre-allocated ad spaces with graphical or textual CPA ads, contextual as they may be, simply doesn’t do the trick. Successful CPA publishers will tell you that the highest eCPM is gained when they manually embed a minimal number of text links and banners that link to the single most relevant product, in the right spot within the content.

Any solution for scaling CPA must answer these three questions with great accuracy, for every web page on which it is implemented:

  • What product is the most relevant to be sold on the page?
  • Where is the best location to link to the product within the content?
  • Which linking method is the best for the product?

What product is the most relevant to be sold on the page?

Things that are very obvious to the human mind are not always so obvious to a machine. While a machine may be able to suggest some products after extracting keywords from a given text, it has no way of determining which of those keywords is a relevant product to sell. A machine can’t understand tone, humor and cynicism from the text. It can hardly tell if a product is mentioned in a positive or negative manner. Furthermore, it’s even harder for the machine to name a single product with the best chance of being sold on the web page.

In order for a machine to do all these things, it will need to understand the context of the page. One can suggest that Google does this. After all, they run the best contextual advertising system out there. But even Google is limited. And the fact is, their system is not so contextual.

Google’s alleged contextual abilities are a derivative of its great search technology. Search technology is all about matching search queries to indexed pages and assigning a score to each match. When AdSense ads are embedded on a web page, the relevancy isn’t gained by understanding what the page is about, rather it is achieved through matching ads to pages as if the ads themselves were search queries. That’s about all that Google’s technology does.

In a sense, Google doesn’t try to find the most relevant ads for any web page. On the contrary – it finds the most relevant pages for any given ad.

If Google can’t deliver the most relevant product right away, then there is still work to do.  It seems like we need a whole new technology in order find the single most relevant product on a web page, something which is more contextual in its nature, and not based on search technology.

Where is the best location to link to the product within the content?

Let’s say we have a machine that understands what product to link to. Now, where should it embed the link? It’s a difficult decision for a machine, even harder than finding the relevant product itself.

It’s one thing to match ads to web pages (or web pages to ads) and fill pre-allocated ad spaces, but it’s another thing to actually allocate the ad space based on context. And we pretty much understand by now that even Google can’t do this.

This challenge doesn’t stop others from trying. In-text advertising is a somewhat new approach, implemented by companies like VibrantMedia, Kontera and even Amazon. All based on the assumption that a good link from within the content is worth more than a bunch of ads around it. Yet, those companies also don’t have the technology to determine the best spot for the link to be embedded.  All they do is turn extracted keywords into links. Those are not necessarily the right words to link, and not necessarily in the right spot. Again, we see that technology can not yet deliver what an advertiser needs, in this case placement.

Which linking method is the best for the product?

Is this a product that requires a visual instead of a text link? And if so, which of the available visuals will perform better? Surely, no machine can provide the answer, yet…

Crowd Sourcing

It seems to me like machine scalable CPA is a romantic idea that belongs to the future. The requirements are just to much for the current technology. Nevertheless, we need a solution now. So what can be done? Crowd sourcing.

If the technology doesn’t exist yet, there is no other way to achieve scalable CPA but to outsource the job to people. This has already been done in other areas of online activity, for example Digg, Delicious and uTest.

How can we use the crowd for contextual CPA? Using Mechanical Turk? Perhaps. However, I believe Zemanta offers a better and more organic way.

Zemanta Crowd Sources Contextual CPA Advertising

Since every page that contains content is generated by humans, what could be more natural than outsourcing the contextual CPA ad embedding to those humans – the authors themselves?

I can think of one problem; authors are not always commercial savvy. They are mostly concerned with writing and not with marketing.

What Zemanta does, however, is provide them with a tool to enrich their content with tags, images, links and more. Zemanta integrates smoothly into the author’s domain and provides them with a great value. What if  Zemanta offers some CPA links and banners in addition their other offerings of pictures, links and tags? And what if those links and banners would be seamlessly merged into Zemanta, thus providing a way for the author to integrate CPA in a truly organic fashion?

In an earlier post, I suggested that Zemanta would eventually look for revenue from the point of content consuming, despite that they recently announced a paid API model. Andraz Tori, a co-founder of Zemanta supports my assumption with his comment on CenterNetworks:

But we are definitely working on monetization.
For example when suggest link to Amazon and you specified your Affiliate ID, we insert it. If you haven’t specified it, we insert our own.

Presently, authors from around the world are using Zemanta and organically embedding CPA Amazon ads within their content. They embed ads to the right product, they embed them in the right spots within the content, and they decide whether or not to add a textual link or a product image. Best of all, the authors don’t do it with the intention of selling. They are doing it with the intention of increasing the value of their own content. As a result, ads are organically and naturally embedded within their content.

Of course this is just the tip of the iceberg. Those are just Amazon ads for now, and Zemanta’s method of revenue sharing is not yet solid. However, they have just recently started – and as far as I can see, Zemanta provides a great service, and it’s byproduct is crowd sourcing of contextual CPA advertising.

If that’s not CPA innovation, then what is?

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Written by Isaac Trond

March 5, 2009 at 1:42 pm

Can Zemanta Generate Revenue?

with 149 comments

Zemanta is getting a lot of attention lately. And why not? This fascinating blog/e-mail enrichment tool adds new and surprising features on an almost daily basis. But I’ll leave the discussion about their features and products to others right now. What interests me is the business model behind Zemanta.

Exit Strategy

I am not sure what the initial goal of Zemanta was when they were founded, but the moment they accepted VC funding, they had to adopt the idea of an exit on the horizon. Making an “exit” is not necessarily a function of the company’s ability to generate revenue or show a sustainable business model. Sometimes, the acquiring company simply sees a great value in the startup that is not expressed through its financial reports. Google, for example, acquired Youtube before it showed any significant income. Youtube brought something more relevant to them – a significant search volume.

Is Zemanta headed for such an exit? I don’t think so. I see the great value in Zemanta, but at this time I can’t see any synergy between Zemanta and a larger corporation that is already monetizing in the field where Zemanta is currently operating.

Moreover, Zemanta exposed a for-pay service when they introduced their public API. Make more than 10,000 daily API calls, and you are now a paying customer. A few days ago, they exposed a second for-pay product – a per-site installation for a subscription-based fee.

With all this in mind, we can assume that Zemanta does have plans to start generating revenue, and prove their concept with some green lines in their financial reports. But are their current offerings sufficient for providing those green lines? I am not so sure. Let me explain why:

Possible Revenue Streams

There are three type of actors in the Zemanta show:

  • the bloggers/writers
  • the service providers that operate the blogging/writing platforms
  • and the content consumers.

Each one is a candidate to become a revenue stream for Zemanta.

Bloggers/Writers

Zemanta hasn’t yet attempted to monetize their bloggers. But they did not completely close the door to this concept either. Download their browser extension and you are asked to agree to this:

“Our basic service is free, and we offer paid upgrades for advanced features such as customization and guaranteed service levels.”

However, even if they do try to monetize this front at some point in time, they need to have a huge user base for this monetization effort to show significant results. They wouldn’t charge bloggers for more than $5.00/month – would they? and for so little, they need 200,000 paying customers in order to make $1M/month. Assume a generous conversion rate of 1% from free user to a paying one, and Zemanta needs 20M registered users to be successful if they choose this path.

Feedburner jumps to my head now (same audience: bloggers; and same VC invloved): their efforts to monetize their user base by providing for-pay added-value services has failed. Google acquired them not for their paying clients – rather for their feed advertising network. Their “Pro” program’s revenue had probably been such negligible that when Google acquired Feedburner it opened up the “Pro” plan to anyone for free…

Service Providers

Most chances are that Zemanta will keep it’s service for bloggers/writers free for good, and maybe this is why they started their monetization efforts on the service providers front.

At first glance, their chances in this front seem much better. Service providers tend to be willing to pay for service if it is business wise: Let the service users use Zemanta, have them producing content of better quality, and have this translated into better revenue. I can understand that.

However, take any of the two payment scheme Zemanta offers, do some calculations and you still won’t understand how they are going to make some serious money.

Their SaaS offering values their API at a $0.66 – $4.00 per 1,000 calls. Even if they charge at the higher end of their scale, they need to be serving 250M API calls in order to make $1M. Where will they get those numbers from?

WordPress.com reports about 4M monthly posts. Add up all the posts from all other leading blogging platforms and you’ll get to how much? several tenths of millions per month maximum. Only if you add some 200M emails you may start be nearing the goal. But is this feasible? They need to be converting so many huge service providers for that to happen. This sounds far fetched.

Same goes for their second offering of $2,500/month per site installation. Where are they intending to find 400 paying service providers to pay this price, when their SaaS is so better priced?

The Consumer End

And that brings us to the last possible income stream – the content consumers. Zemanta is not showing any intention here yet, but I think this is where they are headed. Simply because charging their bloggers/writers or service providers can never work for them.

Now, I don’t claim that they will charge content consumers – not at all. That would be ridiculous. But they will need to use the content consuming point to make significant revenues only because this is where the numbers will be big enough. Think about it – each post that utilized a single Zemanta API call can be viewed by several to thousands of readers. An email that is written once with the help of a Zemanta feature can be sent to a lot of people and then be forwarded on, hence being read tenths, hundreds or thousands of times.

In the point of content consuming, numbers get a magnitude of order higher. Here Zemanta can start talking billions. And when you have billions of events, a small transaction fee can be multiplied to generate significant income. How? I don’t know. An advertising network based on Zemanta’s contextual abilities and huge network of publishers? Semi-organic paid link inclusions offered by Zemanta to the bloggers, maybe with a revenue share scheme? an innovative type of another commercial inclusions in blog posts and emails that no one else can yet think about other then Zemanta?

We can only guess the answer – or wait until time (or Zemanta) will tell.

Written by Isaac Trond

February 11, 2009 at 3:00 pm

Posted in Web

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