In the future, we will all become micro-affiliates.

We are beginning to openly allow our activities to be tracked and monitored. For now, I am not referring to “big brother” style government monitoring, but activities we allow to be public, such as our interests, where we get our information, where we spend our money, and who we know. This information is obviously very valuable to marketing companies. Currently, advertisers are able to target our activities through contextual advertising, but it should seem obvious that contextual only begins to scratch the surface of effective marketing.

In the future, we will demand that the marketing we see is targeted to us.

If you are working online, you know your time is becoming very valuable. We are already using RSS feeds and subscriptions to filter out the information we need each day, and using social networks to keep up with our friends activities and interests. We use product reviews and comparisons to decide what we should be buying, and read specialized blogs to find out about new products on the market. Current contextual advertisements work like magazine ads, anticipating our interests based on what we are reading, however there is potential for advertisements to be much more cerebral.

Facebook attempted this with Social Ads (even applications took Facebook data into ads outside of Facebook), however they received a massive amount of backlash for showing personal product recommendations from friends without their consent. Most people were upset about this because of their privacy, however I think they should reconsider. Social ads are a great concept, as long as the people they use are being compensated with affiliate commissions.

In the future, we will help companies recommend products

When you connect our personal interests, with what we purchase and how we rate those purchases, you get information that is not only valuable to marketing companies, but valuable to other people. We are all accustomed to looking up product reviews before we purchase a product, but even those are often hard to find and hard to trust. When I purchase a product, it would be invaluable to be able to see reviews from people with similar shopping habits and interests to myself. In addition, it would be even more valuable to be able to connect with that person, and to chat with them about that product before I bought it.

In the future, we will want to help others purchase the products we recommend

The only way that we would want to give this valuable information about ourselves away, is if we are paid to, as affiliates would be. Companies should be more than happy to share revenue in order to market more efficiently. We should be able to earn micro-affiliate commissions through our shopping habits. We should be able to increase those commissions by offering product reviews. We should be able to increase our commissions further by actually making ourselves available to answer questions about products we buy.

The future is soon, so who’s doing this?

The next generation of cell phones will allow us to use GPS, the internet, and RFID to combine real-world activities with online research and tracking. The infrastructure will be there to allow online marketing techniques to follow us out into the real world – when we want it to. A company like Google, who is already a specialist in contextual marketing, could be the company to turn us all into micro-affiliates. Google’s mission is to organize the world’s information and make it universally accessible and useful. It makes good business sense that one day, they should organize our consumer habit information, and make it accessible to others – for a commission, please.

The popularity of APIs was a tremendous catalyst for the creation of web apps. For each popular web service that is released, a race begins to create every variation of widget, API extention and web tool that a smart developer can think of – it’s an amazing symbiotic relationship for both the company that releases the API, and the developers who can build companies from it.

This raises a question for the developers of web apps though – is your tool a monetizeable asset that you can build into a business, or simply a gift to the internet for which you will incur the costs? Is this tool going to become your startup, or just one in a number of tools you are launching? The best way to find out is to write a quick business plan that includes estimations of your costs, and revenues.

• Operating Expenses – hosting fees, API usage fees, marketing costs
• Revenues – advertising revenue, affiliate revenue, user fees, referral revenue

Most of these tools fall into one of several categories, see which one you should fall in, so that you can get the most out of your contribution.

100% Free

Most applications will (or should) fall into this category, because the market for most web apps tends to be small. Creators should be realistic about the size of their market. How large is the user base of the parent community? What percentage of those users will need to use your application? What percentage of that percentage will find your application through your marketing efforts? Creators of free apps can often benefit from their association with the application. A successful and useful web app is a good opportunity to promote yourself or your company for offering the service, and to use the referrals to your other core businesses to gain monetization. The notoriety that comes from running the application can make you an authority in the community, and can lead to profitable referrals or consulting work driven to your parent company or blog. A web app can be the thing that gains you credibility and name recognition, especially at conferences.

If the negative cost outweighs the benefits for you, then you should consider that you aren’t the right person to build this web application, and give your idea to the community where somebody else will pick it up. It is unfortunate when a good application is created, but eventually becomes slow and unusable when the developer cannot afford to support the traffic. Plan for this! While you may be excited to build your idea, is it worth it to become successful and then have to shut down?

Advertising Supported

Creators should put some consideration into whether to add advertising to their applications. While it is very easy to add Adsense to your application, consider whether your application lends itself to contextual advertising. Often a good application can be left unused because their developers have tried to place advertising on them in a way that doesn’t make sense, ruins the user experience, or makes the user feel like they are being taken advantage of. If you are going to build an application and you require advertising revenue to monetize it, make sure you plan for well placed advertisements which will benefit from high CTRs.

Advertising As A Business Model

Some of the most successful apps are mashups which combine a useful functionality with a CPA or revenue share point of sale. If you are developing this type of application, be sure that your idea is equally as useful to your users, as it is to you for making sales. A widget that sells books on Amazon will only be successful if it gives an added benefit to the people who use it. Just as a useful application should measure the amount of advertising it places, a good sales tool should measure the amount of benefit it adds to the user.

Case Study: TwitterCard

I recently became enamored with Twitter, and wanted to create a 125×125 graphic which would fit well into my blog design, and let others know about what I tweet about so that they can follow me. I couldn’t find any other widgets that did the job I wanted, so I registered TwitterCard.com.

At this point I quickly wrote out my estimated costs, and considered what monetization opportunities existed. I was sure that I did not want to include advertising on TwitterCard, as it will have a small market at best. I determined that hosting the app would be cheap enough that I could absorb the costs into my existing hosting fees. TwitterCard includes a link to my blog at the bottom, and a link to my Twitter profile as the example card, so the benefit I get from it is to make more contacts, and bring people into my blog.

More Reading: How Are We Going To Make Money? [howtosplitanatom.com]

It was good timing to see John Chow’s new contest for an Elite Retreat pass, because he’s challenged us to come up with a marketing strategy using campaigns from RocketProfit – something I was already doing. Elite Retreat sounds like a dream come true event for everyone involved – like a Dragon’s Den for online entrepreneurs to bring their business plans together, learn from some really talented and experienced mentors, and to benefit from their expertise to strengthen your business plan.

There are so many possibilities with the RocketProfit campaigns right now, I really don’t know where to start. While there are a lot of campaigns that can simply be pushed through CPC on search and Facebook, I’d like to come up with something where I’m not at risk of competition driving my keyword prices up too much. I’d also like a campaign where I simultaneously build a list of my own, so I can re-use it in the future.

What I came up with is simple, and effective. The one flaw is that there is already competition in the market, but I’ve come up with a contest that would hopefully help me to promote the application.

Grower Flowers Campaign

My campaign involves creating a Facebook (and Bebo) application to send virtual flowers for Valentines Day. Once the application is installed, it allows you to send virtual flowers to any person on your contact list, along with a message.

The application will advertise Grower Flowers in the application window, as well as recommending to the sender that they can follow up with real flowers after they send the virtual ones, with another link to Growers Flowers. As with any Facebook application, the transaction will be featured in both the sender and recipient’s news feeds, and on the recipient’s profile page. A text ad will appear beneath the gift, allowing the recipient to send back a virtual flower, or send real flowers using Grower Flowers.

In order to encourage people to install the application, I would give away 1 real flower gift through Grower Flowers per day randomly to 1 person who sent virtual flowers, and list those winners in the application. The free flowers will be valued at $39.95 USD

To advertise, I would place ad variations with Facebook Social Ads. I would promote that you can send virtual flowers for free, with a chance to win a free real bouquet from Grower Flowers. I would also promote the app through Facebook App advertising platforms like SocialMedia and Cubics.

As a bonus, I would collect information about the people who install my Facebook application. I can use the birthday information to promote sending flowers on birthdays, and I can market the application seasonally.  There is also the opportunity to sell the application as it grows larger.

I think that done right it could be a successful, long term campaign that could cycle many different online flower retailer affiliate programs.

Rough projections here..

Growers pays $14 per sale. I would expect to pay an average of $0.35-$0.60 CPC on Social Ads and $0.10-$0.20 on apps. I would expect to get more installs through app advertising, but higher quality leads through the Social Ads. With a $500 advertising budget per day, I’d hope to see 1500+ clicks and 500+ installs (rough numbers) daily, escalating as the app grows virally. That means I’d have to sell 40 flowers per day to break even, but I may be able to cut back on my ad spend as the app grows as long as I keep meeting my 500 daily installs. That is 3500 people by Valentines day, sending a minimum of 3500 virtual flowers. At minimum, I’d have to convert 250 of those to a sale to break even on a $500 daily ad spend (or 7%). The success would really depend on how viral the app went, and how many installs I could get over 3500 to decrease my required conversion ratio.

I hope that this idea shows some of my thought process – my approach to marketing is to try and create an application of value rather than to just dump campaigns into search and hope my margins work. I’m currently working on some big ideas that I’d love to bring to Elite Retreat – especially since I’m quitting my day job to pursue them next month.

Since my last posting was about WidgetBucks, I thought I’d continue on that topic by updating on my November, December and January earnings.  WidgetBucks has gone through some big changes in that time – by their description, in order to keep their traffic value up in order to offer high CPC revenues.  In essence what happened was that they cut back on CPC revenue and referral commissions, and by January my CTR had been cut in half.

So, as before I ran WB in a typically low CTR game screen, and saw revenues of $61.62 in November, $88.13 in December and $47.70 in January, despite seeing a 10% increase in traffic per month.   As of today I’ve taken down WB in favor of running some CPA offers through NeverBlueAds.  I’ll update at the end of the month on the differences between CPC and CPA marketing in this ad space.

Initially, I was pretty happy to see this.  I figured that I would be able to click on it and see a list of other people who had bought tickets to see Battles, like I would view a Facebook Group.  This would let me see if anybody in my friends circles were going, or meet new people who’d be there.  The ad was actually a link to install the iLike application, which I installed thinking it might lead me to a list of concert go-ers.

I haven’t found the list yet.  Instead I was profiled by iLike on my music listening habits so that they can let me put links to songs on my profile in exchange for likely selling me concert tickets, cds and movies in the future – and probably targeting my friends list as well.

So, here’s my take on this.  Up to now, Facebook has had the strength of linking us in ways that were not possible before to our friends and our community.  We can view what our friends are doing, who their friends are, pictures of them.  We can join groups and meet other people, increasing our circle of influence and helping us keep track of it all.  This has been so useful and successful that it’s our instinct to think any ad associated with Facebook (especially in Facebook’s familiar style) will similarly link us to useful information.  As advertisers fail to deliver on these expectations, it’s going to have an effect on Facebook’s overall trust and appeal.  Soon, like your inbox, it will become harder to tell what is safe to click on, what is useful, and what is just junk.

On a related note, I also signed up as an advertiser in Facebook Ads to promote Poker Underworld.   I’ve chosen a $0.05CPC campaign so it will be interesting to see if this price can deliver me any new players and how popular it will be.  Once I’ve had time to complete the Poker Underworld Facebook application, I’ll link the ad to that instead.  I’m hoping to see nice growth in November after a very strong October.