Inside Facebook

In an effort to give brand owners more ways to engage with users via Facebook Pages, Facebook is preparing to launch a new Contest/Sweepstakes application that could be available to some clients as soon as late May.

The Contest app will only be available to marketers within Facebook Pages. In order to participate in a contest or sweepstakes, users would first have to become “Fans” of the page, and then opt-in to the promotion. In addition, in order for Facebook to avoid contest risk, any contests run on Facebook Pages will first need to be contracted and approved by Facebook’s legal team at least 3 weeks before the contest starts.

As Facebook seeks to increase revenue from Social Ads, expect to see more marketing features and functionality developed for Facebook Pages. Facebook wants to give brands as many reasons as possible to want to drive traffic to their Pages, and contests are a key step forward in expanding Pages functionality.

Two weeks ago, Facebook’s Dave Morin said to look out for big news on the data/identity portability front at Web 2.0 Expo SF.  Today, Facebook announced Facebook Connect, a comprehensive set of Platform services designed to let users take their Facebook identity, friends, and privacy anywhere on the web.

The idea behind Facebook Connect is a big one. As owners of a very large and relatively authentic part of the social graph, Facebook wants to allow users to share the identity, privacy settings, and friend lists that they have established on Facebook to application providers around the web. Historically, most social apps have attempted to build their own social graph (i.e. many failed social networks) or have punted on the idea of identity altogether (i.e. blog comments). With Facebook Connect, users can trust that their privacy will not be violated when they share their Facebook identity and friends with other sites.

Facebook Connect has 4 main features:

• Trusted Authentication. Facebook users will be in total control of permissions granted (though the identity crowd will note that it’s a proprietary authentication system).
• Real Identity. Users can bring their real identity with them wherever they go on the web, including basic profile information, profile picture, name, friends, photos, events, groups, and more.
• Friends Access. Users will be able to take their friends with them wherever they go on the web. This will allow developers to create an entirely new class of applications leveraging much deeper social context.
• Dynamic Privacy. Users’ Facebook privacy settings will follow them around the open web. For example, if you change a profile picture or change a setting, this will automatically be updated in Facebook Connect partner websites.

With Facebook Connect, Facebook hopes to take the Facebook Platform to a much deeper level. If Facebook is able to establish itself as the owner and steward of identity, privacy, and friends across the web, the company’s enterprise value will increase significantly.

During this week’s “Bringing Brands to the Facebook Platform” series, Inside Facebook has explored different ways brands are reaching users on the Facebook Platform. Today, we conclude our series with Federated Media. Traditionally known for representing blogs, Federated Media is expanding its reach into the social networking world and representing application developers that are enabling conversations inside Facebook.

We sat down with Chas Edwards, Publisher and Chief Revenue Officer at FM, to learn more about the company’s Facebook practice. (Disclosure: Federated Media represents Watercooler, where I work.)

Chas, how does FM view publishers creating Facebook applications?

We’re really in the early stages of this process, but some developers are doing some really interesting things. I see the world of social networking applications falling into 3 buckets:

1) The biggest bucket is “poke” apps. Most are very simple and fun - one comes across your radar and you think it’s hilarious. But what they don’t do is become a publication, a media brand - something a marketer wants to associate with. Poke apps are fun for consumers, but are not as interesting to marketers who want to tap into an engaged conversation.

2) A lot of companies will see the success that some developers are having and try to build apps themselves. However, usually only relatively edgy young male brands are able to gain much traction. Beyond those, most of the branded applications have failed.

3) The magic middle ground is developers that build an app to help users enhance their community experience over time - to connect more deeply with friends and share content together. When an app can do that, it no longer looks like a one trick pony to a marketer. It looks like a conversation, like a media brand like a Vanity Fair or an Oprah that marketers want to join into and speak the same language. Marketers want to join those conversations so that people in those conversations think better about them and want to tell their friends about them.

So what kind of deals are you putting together for app developers?

At FM, we’re trying to figure out monetization opportunities for social networking apps that are founded on something other than direct response marketing. I look at what we’ve done on Graffiti with Paramount Studios (Movie Poster Contest), BMW (What Drives You campaign), Dell (Regeneration eco-friendly campaign), or Haagen Dazs (Graffi-bee Contest), and these kinds of campaigns really resonate with the brand marketer. It’s not just about clicking through to my website and buying a pint of ice cream, it’s about getting hundreds of thousands of people to know more about this bee situation - and if they know more about it they might care more about it, want to learn more about it, and want to learn more about Haagen Dazs’s role in it. When you do that you’re likely to have a more emotional experience with the Haagen Dazs brand - creating brand equity that will lead you to make different purchasing decisions when you go to the grocery store. This is really hard to do on the internet, which is just awash in banner ads.

Applications on social networks like Facebook seem like a context where deep brand equity could be created.

Yes. If you take a look at the history of the media business and of companies building brands through PR and other tactics - for example, taking a look at radio (the internet of our grandparents’ day), people listened to news clips and radio plays. If you go back and listen to advertising during radio plays, the ad is a mini version of a radio play. You didn’t get a blinking light on your radio or something that created cognitive dissonance. And when things moved onto television, the ad didn’t contain two guys sitting around microphones doing radio plays - commercials changed as well. They got beautiful people, got a good soundtrack, and took advantage of all the visuals.

If you bring that forward to social network environments, it’s largely about the conversation.  As a Facebook user, I have a relationship with a couple hundred people, and my News Feed is where the conversations between my friends and me are happening.  Marketers can’t just come in there and insert a radio play and hope that you will pay attention. The format that we’re engaging in is an online conversation, and the advertiser that wants to be a part of that needs to mimic what users are doing: join the conversation, not throw in a banner ad that disrupts that experience.

So what does that look like?

It doesn’t really matter what the ad unit is, as long as it starts to mimic the environment that you’re already in. For example, word games - are there examples that advertisers can tap into and create a campaign around playing word games with friends?  Marketers like high engagement, but if you just broadcast a message people may ignore it. You want to be transparent and acknowledge what the community is there for.

Thanks a lot Chas. Any final thoughts?

In the end, advertising ALWAYS eventually follows audiences, though there is a lag. What can help ad dollars follow the audience more quickly is helping advertisers understand what’s unique about social networking products. That will help them shape their messages to work well within this environment.

There’s not a lot of money in throwing sheep right now - we’re probably still in the hype cycle with some of the valuations we’re seeing. Pets.com distracted us from seeing some of the important revolutions that were happening in 1999 - like Amazon and GoTo and Google. There are some real businesses being created right now that aren’t necessarily getting all the hype.

Continuing our “Bringing Brands to the Facebook Platform” series, Inside Facebook today takes a look at New York-based Buddy Media. Originally known for its AceBucks loyalty program, Buddy Media has built its business as a full service solutions provider for agencies and media companies, helping them extend their campaigns and offerings into social media. The company also recently closed its Series A round of funding and launched the Buddy Media Ad Network. (Disclosure: Buddy Media is also an advertiser on this blog.)

We sat down with Michael Lazerow, Buddy Media’s CEO, to learn more about the company and how it’s working with brands to bring them into the Facebook Platform world.

Mike, tell us about your vision for Buddy Media.

We believe that the opening of the social networks gives anyone who cares about audience unprecedented access to users.  From 1994 all the way until 2004, in order to get distribution you had to go to AOL and pay millions of dollars to become an anchor tenant - and even then some of it wouldn’t work. Two groups of folks who care most about audience and distribution are media companies and brands, and we’re here to help them.

We’re taking a very full service approach. We don’t really like doing app development, but someone has to do it for these companies. We have a whole group in house who does rapid application development for them, and once the apps are built, we promote them on our own apps and other apps, wherever it makes sense.

So how do you create engagement around the apps you build for your clients?

The business was founded on engagement and AceBucks, which is still an important part of what we do on the activation front. Our development platform, our ad network, and AceBucks are free programs that we also use to support our efforts to create distribution and engagement for brands. The loyalty program is an important long term part of that, even though it’s a small part of our revenues right now - brands are still spending more time on CPM/CPI now. We’re spending a lot of our time figuring out what engagement on social networks means. We think social media is different.

A big challenge developers face is communicating the value proposition to buyers. How do you do that?

We think that there’s a major shift going on from media centric buying to advertiser centric buying. In a media centric buy, you hear the inventory and you hear your rates and there are standards for media placement. The big shift in social media is the disintermediation of the media companies - how do brands take their communication plans and their marketing plans and make them live cost effectively in the social environment?

Our question is how can we help a brand succeed in the social media space, whether it’s tight integration of the values of the brand or a very tightly knit program that reinforces the benefits of the brand in a very highly engaging way. You’re not going to be able to create SuperPoke and get 2 million people a day using it, but with a very targeted approach you can create something that is going to engage your audience a lot more than a banner ad can.

It’s hard to know how to make sense of the inventory. We have 15 year olds, 50 year olds, massive churn, billions of impressions. Do you group it per user, group apps together, and how do you do it in a world where you can’t store the information from Facebook or MySpace for more than 24 hours? Tacoda was great because it paid publishers to build up a massive user database. It’s not easy in this space where there’s a lot of platform restrictions.

So how are you building out Buddy Media’s technology and sales efforts?

We’ve taken a very client centric approach and said it’s about what you should be doing to take advantage of the distribution. Frankly, it’s a very sales intensive business - right now we’re growing our team from 4 to 16 people worldwide.  I don’t think technology is the answer - you have to have a sales team and an account service team. There’ s a reason media companies have huge sales teams and get a lion’s share of the dollars - because it’s not easy.

At the same time, we’ve created a lot of great technology. We basically had to create a banking system for AceBucks. And we’ve created an ad network that lets you do things differently - you can buy installs, use different creative formats, and so A/S/L targeting.

You recently launched an ad network, but it’s not where you started. How does your ad network fit strategically?

Strategically, our ad network is a tool to use to fulfill campaigns that we sell.  Other folks take CPM deals and CPC deals and self serve deals where there’s a 10 cent CPM and the only people who make money is the ad network. We’re only bringing in more supply as demand warrants it.

I’d rather monetize 100 apps incredibly well than 2000 apps poorly. Being a remnant player in a world with infinite remnant inventory seems dangerous to me. If you can make a $.10 spread on 3 billion impressions, that’s $300k. But I know from my Golf.com days that there’s unlimited demand for premium inventory. And who knows what Facebook and MySpace are going to do. We want to be as open as possible to work together with folks.

In addition to working directly with agencies, you’ve also been working with media companies. Can you explain what you’ve been doing there?

The main way that we work with companies is through a solutions provider relationship. They have ad sales, they have content assets, andthey need someone to take those assets and socialize them.

One app we created (that’s no longer around) was the People.com Red Carpet Challenge, a fun game to get people to compete around the Oscars. People.com bundled it together and resold it to the Oscars, and we guaranteed a certain reach. We built it using a templated solution, so we’re now going to do the VMAs and Grammy’s as well.

We also made a Hollywood Hair Makeover app for InStyle that was part of an overall marketing campaign for InStyle.com. It achieved 250k installs and users did millions of “hairstyle makeovers.” Women would do it and ask their friends if they should get the makeover.

Media companies see 2,000 people a day engaging, that’s 60k a month, they see that as a “social campaign” that they can sell in addition to the inside back cover. They can get wholesale distribution from us and resell it at much higher prices. Our average deal is a little over $100k, which is not a lot of money when you’re spending $4 million on a worldwide marketing campaign. Why wouldn’t you add social?

Our vision is that social media will be bolted onto every marketing campaign. If that happens, we’ll be in good shape. If not, we’ll need to figure out how to evolve.

Thanks a lot Michael. Any parting thoughts?

It’s early, and as an industry we all need to work together. We’re not at a stage yet where we’re selling against others. If you look at the amount of time being spent in social networks, if we can get an appropriate amount of money flowing into this space, there will be some big companies created.

As most people in the Facebook developer community are aware, the upcoming Facebook profile redesign is the biggest and most far-reaching project at the company so far this year. Its impact on users and developers will be significant, and Facebook hopes it will create a better and more valuable experience for all.

Today, Facebook is announcing detailed specs on how Facebook applications will interact with the new profile page. On the whole, the upcoming updates to the profile page will have a big impact on how users interact with each other and express themselves with applications. In order to get a detailed look at all of these changes, their significance for developers, and Facebook’s hopes for their impact on user experience, I sat down with Ruchi Sanghvi and Josh Elman, Product Managers of the Facebook Platform and leads on the profile redesign effort. Here are all the details.

Developer Documentation & Sandbox

Starting today, developers will have access to documentation on the upcoming profile changes on the Developer Wiki (see links below). In order to create a level playing field, everyone will have the next couple of weeks to read and absorb the changes and think about how they will affect their applications. Starting in late May, Facebook will open a developers’ sandbox that will allow developers to test their apps. A few weeks after the developers’ sandbox opens, Facebook will push the new profile design live to all users. If developers do nothing, their apps will continue to work as is. However, in order to take advantage of new opportunities for integration with the redesigned profile page, developers will need to update their apps in several ways.

With the profile redesign, Facebook wants to give users more control over their profile and make the profile more communication focused. In order to integrate with the new profile design, developers are going to need to adapt to and take advantage of several new integration points on the Facebook profile:

Changes for App Profile Boxes

Application profile boxes will largely be moving to a new home in the updated profile design. The new Facebook profile is getting 5 default tabs: Feed, Info, Wall, Photo, and Boxes. All current profile boxes will be moved to the “Boxes” tab with the update (the title of the “Boxes” tab is still up in the air). The specific migration flow has not yet been determined, but the specifics of how Facebook implements it and helps users decide how to organize their new profile pages will have a big impact on developers. On the Boxes tab, users will be able to add, remove, and organize their profile boxes.

In addition, the Feed, Info, and Wall tabs will have a left-hand column that will hold “main profile” boxes that will be height limited (to about 250 pixels) but otherwise will be very similar to current profile boxes. Users will be able to move their profile boxes between the Boxes tab and the “main profile” area fairly easily. Finally, users will be able to have up to 5 boxes in their “main profile” area - more than that will be put into the “Extended Profile” that developers have come to know well since the initial profile cleanup tool.

The New Info Tab

One of the new integration points for developers in the profile redesign is the new Info tab. This will be a very structured tab, much like the Info sections on the current Facebook profile page, containing key-value pairs on which information will exist in comma separated text or thumbnail lists. Unlike the Info sections currently on the profile page, content added to the Info tab from apps will link directly to the application (not Facebook search results). There will be an in-line editing flow on the Info tab for users; Facebook will provide a suggested type-ahead editing interface.

Users will be able to add content to the Info tab from within application canvas pages (in FBML). After users see a popup confirmation, the content will be added automatically. Each application will get its own section on the Info tab that look much like the different Info sections currently in Facebook’s current profile.

New Application Tabs

Another major new integration point for developers is app tabs. These will be built like “semi-canvas” pages, meaning Facebook will be proxying the images but hitting the apps for the tab’s content. Like profile boxes, app tabs can’t be built with iframes or using auto-play Flash, but developers will be able to build fully interactive FBML pages.

The only place users will be able to add tabs is on the profile itself, using the “+” button to the right of their default tabs, and up to 6 tabs will appear (the rest will be accessible via a “More” dropdown). Facebook will provide a drop-down list of users’ applications, sorted by those they use most. Facebook’s intention for app tabs is that they’ll meet the personal expression needs of those users for whom profile boxes are not enough. However, the page is also a place visitors will be able to initiate interactions, like starting a game. Developers won’t be able to create different views for the profile owner vs. profile visitor - similar limitations to the current app box FBML rules to prevent profile page spam.

Mini Feed 2.0

The focal point of the profile redesign is the new Feed tab. For profile owners and friends, it will be the default tab you see. For profile visitors who aren’t friends, the Info tab will be shown by default (Facebook says this is because it’s more likely you’ll want to learn basic information about non-friends, like where they live or go to college, before you want to learn detailed info about their recent activity).

With the new Feed, there will now be 3 different feed sizes:

• One-Line Stories. This is very similar to what currently exists on the Facebook profile. In the profile redesign, app developers will still be able to use the API to publish feed stories to users’ profile pages.
• Short Stories. Short stories will be slightly larger feed stories, that will have limited FBML. Users can embed images and (soon) Flash.
• Full Stories. These will be up to 700 pixels of free form FBML.

Unlike one-line stories, app developers will not be able to automatically publish short and full stories via the Facebook API. Instead, users will have to approve them. Developers can use feed forms to create multiple versions of feed stories that the user can choose from for publication. When developers want to publish a short or full feed story, users will be given a popup preview of the story, the choice of size (one line, short, full), and the button to approve it. This is a major shift from the current framework of auto-publishing feed stories, but Facebook believes it must give users more control over their profile in this way in order to keep the Feed from becoming spammy.

After a story has been published, users can change which version (one line, short, full) of the feed story is published in their Feed via UI in the feed itself. This means that app developers can publish one line stories automatically, and users can “make them bigger” later on. Facebook will encourage developers to create feed stories in all sizes, so that users can choose which one they like best. Obviously, larger stories are likely to generate more application click traffic than smaller stories.

In addition to being able to publish stories for app users themselves, developers will also have the power to let users publish stories into their friends’ feeds (for example, giving a gift). Once the sender approves the feed story, it will automatically appear in their friends’ feed. However, recipients will be able to change or remove the story later on.

Since removing passive feed publishing earlier this year, developers have been unable to publish feed stories for users not using the app. Now, users will again be able to share app content with their friends not using the app (currently or at all).

The New Publisher

The new publisher flow (a significant upgrade from Wall attachments) will allow users to share content from apps both on their own and friends’ profiles. It’s the main place Facebook wants profile viewers and owners to interact, and this is the change that’s likely to have the most impact on users.

At the top of everyone’s feed will be a way for you to create content on their feed or yours. For example, you may want to add a photo or video, write a note, send a gift or song, draw graffiti, or share links. The interaction will be similar to the way wall attachments currently work. (Facebook thinks of its Wall as just another application that integrates into the Feed’s publisher flow.) When you create content, it will look like a feed story and go directly into the feed. The default feed size will be long for your own profile, short for your friends’.

When you want to attach content to a feed, you’ll be shown Facebook’s default apps (like photos and notes), as well as apps that users have recently used to create content on their feed or otherwise used pretty recently. (In addition, when visiting others’ profiles, users will be invited to use apps that others have recently used to create content on their profile.)

Developers will be able to design the publisher interface that users will use to share content from their apps. For example, users may want to be able to search for songs. And in addition to the “attach-post” flow, developers will have the opportunity to create a multi-step wizard interaction (though like profile boxes, they can’t be iframes, but can be FBML or on-click Flash). Finally, developers will have the option to display a text comment field (or the app can provide that themselves).

Finally, developers will have option to specify different publisher flows for your own vs others’ profile if they want. For example, adding a video would be pretty similar, but it would be weird to send a gift to yourself.

In Summary

The Facebook profile redesign will have a big impact on the developer community. Developers will need to think long and hard about how to make their apps more valuable to users, specifically in the integration points that Facebook is providing. While much of the first year of the Facebook Platform has been about virality, it will be harder for purely “viral” apps that don’t provide much value to users to grow - the second year of the Facebook Platform will be about engagement.

Kicking profile boxes off the default view of the profile page will definitely make it harder for users to discover and re-engage with applications. Facebook must embark on a major user education campaign to help users understand the new tools they have to organize application content on their profile page (specifically, moving boxes between tabs and adding new app tabs) and share application content with their friends (specifically, the new feed publisher).

Ultimately, Facebook really doesn’t want the profile redesign to screw developers. They’re trying to find the right balance between user and developer interests to allow everyone to have a healthy long term relationship. If you have thoughts on what these changes will mean for your applications, now would be a good time to send your thoughts to the Facebook Platform team at developer-feedback@facebook.com. The developers’ sandbox will be opening shortly.

Developer Wiki Resources

• New Design Integration Guide
• New Design Platform Changes
• Details on Publisher
• Details on Narrow Boxes
• Details on Application Info sections
• Details on Feed Wall
• Details on Profile Tabs

Developers can find the official Facebook announcement here.

Continuing our “Bringing Brands to the Facebook Platform” series this week, in which we’re exploring different ways brands can engage users on the Facebook Platform, Inside Facebook next takes a look at San Francisco-based Context Optional. Context Optional has already run campaigns for some of the biggest brands on Facebook and other social networks using what the company calls its “social application server.”

Kevin Barenblat, CEO of Context Optional, previously held product management and business development positions at Verizon Wireless, WideRay, and Adventureseek, after starting out at BCG. We spoke with him to learn more about the platform the company has built and the services they’re able to provide to brands.

Kevin, what’s Context Optional’s approach to bringing brands to the Facebook Platform?

We work with advertisers to build a presence on Facebook and other social networks. Brands can advertise through Facebook or with Platform ad networks like RockYou, sponsor existing applications, or build branded viral apps.  Most of our business is with our social application platform that makes it easy for advertisers to build apps, includes stats and reporting, and viral channel optimization.

When we sell applications, our customers get a license to the platform and we provide professional services to help them customize it.  If they have their own team they can do it, but many don’t want to do it themselves.

There are 5 main components to what we call our “Social Application Server”:

1. A dashboard for demographics and campaign effectiveness
2. Analytics tools to track growth, conversions, and how effective users from different ad networks are (for example, you might get more installs but less engagement from one or the other)
3. Optimization around viral marketing
4. Tools for creating other user channels
5. Features like photos, leaderboards, polls

OK, can you give us some examples of what customers have done with it?

We have an application for Microsoft called Office Poke. It’s been out for a couple months and has gained 250k users so far, with users sending between 60-100k branded pokes a day. For example, stealing chairs, or holding the elevator. It’s a branded viral app, and over half the users have come through viral channels (rather than ad campaigns). The pokes generate half a million page views a day. It’s all built on top of the platform, which allows Microsoft to tell which users are the most valuable, and optimize viral channels.

In some cases, we’re providing social marketing strategy, and in almost every case we’re doing the social app development and management/optimization. We’re also sometimes doing the ad buying because we have the ability to measure and monitor how effective it is/those users are. We’re experts in building viral applications and managing social marketing campaigns.

How much are you working directly vs. through agencies?

Most agencies can’t build their own apps, so they look to us. We sell half to brands and half to agencies. It’s still early, but it’s possible that more agencies will want to bring this in house over time. Usually, campaigns are bought and managed by the agency. And as of today, Ford, EA, Samsung, Microsoft have a license to our platform.

What’s most surprising to you about what brands are able to achieve on Facebook?

The most interesting thing to me is how non-linear advertising can be on Facebook. Most ad buyers view advertisers in a very linear fashion - “I have $100k to spend; I know how many people I can reach at a $5 CPM.”

When an app is designed well, things operate differently. For example, take the app we built for EA (Smarty Pants). It’s a simple trivia game, and they already had all these questions they built for the Wii version of Smarty Pants. It’s been played over 5 million times now in the last six months, but they spent no money on advertising. Some advertisers think that if they don’t pay for it, it’s hard to know what it’s worth. That’s a ton of impressions. Why pay for clicks when there’s so much you can do by building more viral social apps?

The Facebook Profile Preview team tonight unveiled another screenshot of the upcoming Facebook profile page redesign that shows the new “Boxes” tab for the first time. While the main Feed tab will only have room for 3 app boxes by default, the Boxes tab could potentially house dozens of application profile boxes.

According to Facebook, users will be able to choose which boxes appear on this page directly from the tab itself, and users can move boxes around just like they currently can on the profile. Notably, the two columns on this page leave room for wide-format profile boxes, previously thought to be getting the boot from the profile altogether.

Facebook says that, “Our intention is that the ‘Boxes’ tab can be a good place for your friends to go to learn more about you and your history on Facebook, in addition to learning what sort of applications you like.”

Clearly, Facebook faces tough design decisions here as it attempts to balance and align user and developer interests. Without the “Boxes” tab, many developers were concerned that their profile boxes would disappear altogether when Facebook migrates users to the new profile page design. Do you think that this approach is a good way to strike a balance?

Yesterday, we argued that one of the biggest reasons apps have the chance to monetize better than social networks themselves is the opportunity apps have to offer deeper and more aligned integration to brands. This week, Inside Facebook will be taking a look at the companies helping brands connect with users on the Facebook Platform.

To kick off our “Bringing Brands to the Facebook Platform” series, Inside Facebook first takes a look at New York-based Appssavvy. With a long background in digital ad sales, Appssavvy has built its business connecting Facebook application developers to brands by creating custom, integrated campaigns.

We sat down with Chris Cunningham, Founder of Appssavvy, to learn more about the company and how it’s connecting Facebook Platform developers with brands.

Chris, give us some background on Appssavvy and where you are today.

I come from a long career in digial ad sales, including MusicVision, Bolt, and Freewebs (which sput out SGN, which is now one of our partners). I was hired by Shervin Pishevar (currently CEO of SGN) at Freewebs to sell widgets in 2006.  I was first person to sell a widget program - I sold it to Paramount Networks. I spent the next year educating agencies and brands about the value of widgets, and launched over 30 campaigns.

After Facebook opened up their API, many of the brands that we were selling widgets to called us up about applications and started asking about them. Companies like P&G did $100k buys. It was then that I realized that someone needs to connect Palo Alto and Madison Ave - connect developers and brands.

Today, we 9 people and have closed angel investment. Our team is not made up of typical Silicon Alley/Valley guys, they’re media guys. The problem is not inventory, the problem is money.

Are you building any technology in house?

We don’t have in house developers. We’re not technology focused - we don’t do anything except applications.  We are a direct sales team for leading apps. So far, we’re working with 60 companies and 230 applications.

What approach are you taking when selling app inventory to brands?

Whenever I read that no one is monetizing applications, it makes me angry because we’re selling some very high CPM’s. We focus on contextual relevant advertising. Lookery and Social Media are traditional ad networks with lower CPMs, and the agencies don’t know where the ads are going to appear. We tell the brands what apps their ads will appear on and, and we’re doing $15 CPMs.

For example, we’re working with Sony on the new movie Maid of Honor.  So we found an app called Wedding Book, and called the developer, Kevin, in Toronto. We asked him if he would skin his app and give us all of his IAB ad units. Kevin will make more money than he could otherwise.

As another example, we’re working with Adidas. We found an app called Shoes, another called StyleFeeder, and 6 more - all for a $14 CPM.  Recently closed another deal for $200k at $19 CPM that will include 20 apps. And we’re about to close a $250k deal, our largest to date.

We’re able to do this because we’ve spent 10 years traveling the country and becoming good friends with the clients and agencies. Advertising is relationship based - I fundamentally disagree that advertising is about technology.

So are you building any apps directly for brands?

10% of our business is custom.  When I first started, I thought a much larger part of our business would be custom. However, we only want to build custom apps if clients are willing to devote the energy and resources to support it.  Rather than trying to reinvent the wheel, it makes more sense to partner/sponsor with an existing user base.  If you build an app and the viral idea doesn’t work, that brand manager will hate social media.

Who are some of the larger developers you’re working with?

Right now, we’re working with RockYou, Flixster, SGN, and several others. RockYou is the only company in our network that has some internal people selling and some external people selling.  Most people don’t have the bandwidth or time to do ad sales, and that makes sense, because it’s not their core competency.  I’ll be the first person to help introduce your VP sales if that’s what you want to do.

Thanks Chris. Any last thoughts for developers out there?

We want developers to realize that we’re not another network, and to reach out and challenge us.  We’re also trying to hire sales people.  The waters are murky, especially from the agency perspective.  Agencies are making sloppy buys, and we want to educate the agencies on who does what in the social media space.

While much attention has been paid to the vast volume of inventory that’s been created by social networks, remnant-style CPMs that most social networks earn is not sufficient to sustain a real business for most developers. When the dust settles, can apps hope to do any better?

Andrew Chen has noted 5 reasons why social networks are hard to monetize. While developers face many of the same monetization challenges, developers have two big advantages over the social networks that can actually enable them to achieve higher CPMs than the social networks themselves:

1. App usage is a better signal for intent than profile data.

While users who indicate an interest on their profile may not have significant purchase intent at any given time, users actively engaged in applications around that same interest are more likely to conduct a relevant transaction. Of course, your app needs to serve a need in high value verticals like travel, media, finance, or shopping.

For example, it’s hard to know with much precision when users who list “skiing” as an interest on their profile page are most likely to purchase a lift ticket just based on profile data.  While this is great for basic targeting, it’s nowhere near the level of intent signaled by a Google search. However, users actively engaged in an application used to research current ski conditions and find friends going skiing this weekend are much more likely to have monetizable intent. Whereas profile data is often write-once-live-forever, application usage is a better indication of activated interest in a given vertical.

2. Apps offer better opportunities for brand alignment and integration.

While Facebook offers Pages and Social Ads for brand owners interested in building a presence in Facebook’s social environment, applications can go much deeper and offer experiences much more directly aligned with the values of the brand. With Facebook Pages, brands can only achieve fairly generic levels of user interaction. On the Page itself, users can post messages, upload photos and videos, and sign up to receive future updates. When users become a “Fan” of your brand, their friends will see a message that says, “Justin became a fan of Colgate Toothpaste.”

All of these things are great, but they leave a lot of value to brands on the table. With apps, brands can create more directly aligned and integrated brand experiences - both within the application itself AND in the “viral” messages that users send to their friends.

For example, Federated Media recently did a BMW “What Drives You?” campaign with application developer Graffiti in which users created over 6,000 entries and shared their creations with their friends. Which is a more valuable brand experience to BMW - looking at a Page with a logo and messaging, or drawing the car of your dreams? Which is a better feed item to be seen by millions of friends - “Justin became a fan of BMW” or “Justin challenges you to show What Drives You in the Graffiti Car Contest”? You decide.

It’s not all hunky-dory

To be sure, app developers still face many of the same challenges that social networks do. There’s a lot of inventory, and not all of it can be valued eqaully. Brands are concerned about how they will appear in close proximity to user generated content. And - as always - apps have to play by the rules the social networks themselves set, which could change at any time.

At the end of the day, big opportunities still exist for app developers to monetize well on social networks. Developers need to pick verticals that capture high-value intent/interest and partner with brands to create deep, integrated experiences. Picking the right space? That’s up to you. How to partner with brands? We’ll have more on that soon.

Tonight, Facebook changed the viral channel limits for application developers, making it harder for spammy app developers to keep growing and rewarding developers with good user feedback ratings with more opportunity for growth.

The changes apply to requests (invitations) and notifications. Depending on user feedback ratings on your apps’ requests and notifications, applications sending high-quality messages through these viral channels will experience higher limits, while apps that receive bad ratings will get lower limits. As the Facebook Platform team writes,

Notifications now have more buckets for greater granularity and a broader distribution of thresholds, so applications in higher buckets should receive larger allocations that before and lower buckets should receive smaller allocations. Requests still has the same number of buckets, but the distribution has also been pushed wider, resulting in more requests for some applications and fewer requests for other applications.

Facebook’s continued optimization of its viral channel throttling system is a good thing for the overall health of the Platform - as long as it still allows new applications the chance to bubble up.