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Adware's Next Generation

Roy Shkedi
Adware's Next Generation Roy Shkedi

Despite claims to the contrary, executives at adware companies know their industry faces big challenges -- including lawsuits alleging the violation of third party sites’ copyrights, proposed legislation banning or curbing adware and questionable transparency to the end user.

An even larger challenge for adware companies is how to cultivate a consistent consumer base that is attractive to advertisers. This challenge is reflected in two key issues:

Consumer Exhaustion: A basic principle of interactive advertising applies to adware companies -- success depends upon consumers viewing their ads. If consumers don’t, adware companies make less money and advertisers reach fewer customers. All adware providers face the same dilemma -- how to deliver ads on behalf of advertisers without exhausting consumers. Frequent pop-ups and pop-unders frustrate consumers, leading to frustration with the adware.

Churn: Frustration with the frequency of adware advertisements inevitably leads to consumers uninstalling or disabling the adware software. Most adware companies face enormous churn rates -- above 50 percent. With millions of customers uninstalling their software, adware companies must constantly chase new consumers to download their wares.

Facing legislation and the problems of customer frustration and churn, many adware companies are trying to formulate new ways to adapt to the current climate. We’ve begun referring to this adaptation and change as the next generation of adware.

Tapping behavioral targeting's mines

What will that next generation adware look like and how will it work?

Adware companies have an advantage in the interactive advertising space. Consumers have downloaded their software and have agreed to allow these companies to track their online behavior and activities. As a consequence, the adware companies are sitting on a gold mine of information. They have an extensive database of consumers’ specific online behavior that includes sites visited and the frequency of those visits.

However, adware providers have not figured out how to serve relevant ads based on that online behavior without alienating customers by serving ads too frequently or too intrusively

However, not all adware companies are tracking users’ behavior. Those companies that don’t track user behavior grapple with additional challenges such as figuring out how to charge maximum CPM rates for their ad space when they have little information about users.

Many adware providers have started looking at the recent interest in behavioral targeting of interactive advertising, and are considering how they can partner with a behavioral targeting company as a means to achieve their goals of serving more relevant ads to users without frustrating them.

Here’s an example showing how this next generation of adware would work. When a consumer visits a mortgage site, the adware company would let a behavioral targeting technology company tag the consumer anonymously as a user interested in mortgages. Two days later, when the consumer goes to a sports news site to check the score of a Yankees game, the behavioral targeting company -- working in cooperation with the news site -- would recognize the user and deliver a high CPM advertisement for a low mortgage rate within the ad space of the news site.

Who benefits?

Most importantly, consumers benefit. If an ad has no value to consumers, nothing else matters. They benefit by receiving ads relevant to them within the ad space of the sites they visit while enjoying peace of mind because the ads are based on anonymous profiles -- no personal identifiable information is correlated with those profiles. Moreover, consumers are not presented with additional intrusive pop-up or pop-under ads -- just with ads they would have seen anyhow when visiting a site and that are now relevant to their interests.

Publishers benefit from a higher return on their ad space. Their low-value ROS ad space is converted into lucrative property through the presentation of targeted ads to their sites’ visitors.

Adware companies benefit from a new revenue stream through the presentation of unlimited numbers of ads to their users within the ad space of the sites they visit.

The partnership between adware companies and behavioral targeting companies mends the adversarial relationship between adware companies and publishers. Publishers, frustrated with competition from adware companies -- which don’t share the publishing cost -- will now get higher returns on their advertising space and reduced competition for the attention of their readers.

As adware companies are forced to adapt to legislation and consumer preferences, this is an example of how we think the next generation of adware will work. What do you think?

Roy Shkedi is the founder and CEO of AlmondNet, Inc. Shkedi has 14 years of experience in inventing, developing and implementing interdisciplinary solutions and analyzing and investing in civilian and the defense companies. Prior to founding AlmondNet, Shkedi was the high tech analyst for Ofek Securities, Israel's largest portfolio manager.

Stability. Stability is the point at which there is no major mismatch of status between the parties. In a social media campaign, the relationship is stable, and the firm has provided a reasonable value proposition for filling latent customer needs. You have stability when the consumer is willing to sort through the criteria for making a decision and the vendor is willing to transparently make available the information needed to satisfy the consumer's criteria. In online media, a good example is Amazon.com. In addition to providing the manufacturers' information about products, they allow product reviews to ensure that consumers have a voice.

It is often difficult for brands to relax their corporate and brand guidelines to allow for reviews and comments, but know this: If you don't allow it on your site or in your campaigns, it will happen elsewhere. You can't get people to stop talking about your brand, but you can learn something by listening and being part of the conversation.

Commitment. Commitment comes when there is a shared outcome. Forms of commitment include downloading a trial, placing an item in an online shopping cart, or purchasing an item. However, in a social media campaign, terms are different, and commitment can mean posting a personalized brand message to your wall, sharing something with friends, or clicking a link to purchase.

For example, in Toyota's recent Rock the Space campaign, bands were asked to submit their best song within a personalized demo tape in an attempt to win a MySpace recording deal. Bands were then able to post a widget that included their demo tape to their page to share the experience with their fans.

Co-creation. Co-creation is about co-creating value and co-ownership of vision. When Skittles relaunched its website and displayed tweets on its home page, it was effectively telling customers that they could shape the brand -- a powerful co-creation example.

Embracing the LOVE model embarks an organization on a journey of discovery. Like a good marriage, the better you know your customers or the targets of your campaigns, the more you'll learn about them and about how to improve your business, from products to processes to messaging. The best customers will move out of the role of transacting and into the role of advocate. The benefits, however, do not come for free. You'll have to actually listen and align your interests with theirs. 

Carnet Williams is co-founder and CEO of Sprout.

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