In the News
Making Good with Virtual Goods
AN INTERVIEW WITH: Nir Eyal, CEO/Co-founder, AdNectar
Ever get a virtual teddy bear from a friend on Facebook? AdNectar, founded in April 2008, is an advertising platform specializing in the integration of branded virtual items across social networks. The company works with brands, including Godiva chocolate and method home cleaning supplies, to create branded virtual goods for sharing and gifting on social networks. AdNectar grew out of one of CEO and co-founder Nir Eyal’s class projects at Stanford School of Business. Mr. Eyal spoke with eMarketer about how virtual goods give online marketers more bang for their buck.
Q. Let’s talk about virtual goods
A.The majority of virtual-goods activity online was originally through virtual worlds and game playing, but with the launch and adoption of social networks, people use virtual goods as a communication medium. People like to send them to one another as a quick message, a kind of rich media instant message or a rich media e- mail. That’s where marketers can come into the picture.
Facebook famously has its own virtual-gift catalog, where occasionally brands will insert themselves. It’s done a great job of validating virtual goods as an ad medium. Our specialty is applications, where 90% of virtual goods are exchanged, as opposed to the Facebook gift catalog itself. We work with over 40 applications, including Friends for Sale and Pass a Drink. One of the nice things about having so many applications is that we can choose the ones that are the best fit contextually and demographically for our clients.
Q. Why should marketers consider virtual-goods campaigns?
A. First, the analytics show that these campaigns work. For the campaigns we’ve run so far, there was very high purchasing intent lift over a control group that wasn’t exposed to the item. From a cost-efficiency standpoint, virtual goods live on. The gifts are still generating buzz even after the campaign ends. Marketers pay one price to launch the campaign, and then the more popular the gifts are after the campaign runs, the more the CPM rate goes down with time. That’s something brand new to the industry—an ad unit that gets cheaper over time.
Q. How do your virtual-goods campaigns work?
A.AdNectar works with applications and publishers that have some kind of generic virtual-gifting component already in place. We basically make those virtual gifts brands. So instead of allowing someone to give a friend a virtual beer to celebrate a night out together, they can send a virtual Dos Equis.. We work with a publisher base currently reaching 50 million monthly uniques, and we’ve built out pipes, so to speak, that can deploy the virtual goods dynamically. An advertiser can market through virtual goods with not only the items, but with hyperlinks below the virtual good that take users to the advertiser’s site—a homepage, a microsite or a video. Everywhere the gift goes, the brand message goes along with it.
Q. Are certain industries better suited for virtual-goods campaigns?
A. Anything food- or beverage-related works really well, as do items that are social by nature, like movies [and] the entertainment industry. A lot of consumer packaged goods work really well, too. We did a campaign for method home cleaning products. Cleaning products on their own aren’t that giftable, but it turns out if you enable your advocates to do user-generated targeting, they do a really great job of doing that for you. Users know a lot more than marketers do, so if we give them the ability to target other advocates and people whom they know affiliate with the brand or product, that’s very valuable. In the case of method, if I know you like environmentally sensitive products or you’re a particular fan of method, I’ll send it to you. You’re the person who marketers want to reach. The purchasing intent study we did with Vizu that we released in a recent white paper proved that getting user-generated targeting into the hands of our audience increased purchase intent over 65% for method.
Q. What analytics are on a virtual-goods campaign?
A. We can track viral spread, click-throughs and demographics.. We can track all kinds of details that were previously impossible to track, and are still impossible to track, with banner ads.
Q. What are some best practices for virtual-good campaigns?
A. First and foremost, no matter how good your virtual good is, it has to be optimized. You have to constantly maintain virtual goods, because they get old. Every three days or so, you need to bring in a new item for people to send around.
If an agency or brand comes to us and wants to do a virtual-good campaign, we’ll actually give them several choices and do the optimization constantly. If a product isn’t working, we replace it with a different item. Users are constantly changing their tastes, and sometimes little things like changing the call to action or the color can increase the gifting rate. We do all that in-house through our API in real time.
You also have to make a virtual good giftable. With method, our job was to figure out how to make the method brand something people would want to gift. A method bottle on its own is not that giftable, but if you figure out what’s great about the brand and what people love about it, that’s what’s giftable. For method, that means the environmental sustainability of their product.
Q. Will branded virtual goods within Facebook applications eventually be monetized?
A.We’ve never charged for virtual goods—they’ve always been sponsored by the brands. People on Facebook are used to seeing free items. I don’t think there’s an appetite to pay real money for branded items yet, although there might be as premium brands come online.
Generally, I think the future for us is when advertisers realize that they have to bring something of value to the user. We call it “brands bearing gifts.” If they do it right, they’re rewarded by being spread around in a much more efficient way than by a traditional banner ad.
Q. What role does the recession play in expanding virtual-goods campaigns?
A. I think social networking and online entertainment are going to grow in this recession, because they’re free, fun and connective. Virtual goods give people the quick fun of shopping and buying something without any money. You can acquire a branded item in the virtual environment that you might not be able to buy in real life.
Source
eMarketer (PDF)
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