The current, at least our current, interest in the flog space has meant coverage on one of our other favorite sectors. Interestingly and perhaps not surprisingly, the future of the flogs will probably mirror that of the ringtone space. It begins wide open, makes many people more money than expected, catches the attention of various regulators – from companies that display the ads to end advertisers and even government agencies – ultimately to find it a shadow of its former self. And, whether a lost cause or not, we will also have those looking to reclaim the profits of old, people and companies torn between the effort needed to succeeded while questioning whether such times could exist again. In the case of ringtones, if it were a baseball game, we’re probably in the 7th inning stretch. The majority of action has happened, and while lead changes can always take place late in the game, the one calling the shots in this game is definitely the regulators. We’ve covered in the past the challenges the industry has faced, perhaps chief among them constantly changing rules that don’t always agree with each other.
Of all the regulators, the Florida Attorney General and Google have taken the lead in shaping the advertising of ringtone subscription services. The former’s cyber fraud unity has generated millions of dollars in fees paid for by the marketers of firms, and the unit’s efforts have produced several guidelines on future compliance. The latter, Google, has generated hundreds of millions of dollars (if not more) from the advertisement of ringtone subscription services. The search engine has, over time, instituted its own requirements for those wishing to promote these services. The latest change involved the two entities – the Florida Attorney General’s cyber fraud unit and Google – coordinating on a rather unique requirement for any marketing program. Those wishing to promote ringtone subscription services on Google must now disclose the costs in the ad copy. Price has always been a sensitive issue. Ringtone subscription marketing became famous, if not infamous for offering users free ringtones, which in reality were not free but came with a subscription plan to one of several “off-deck” providers. Over time, the various marketing materials have required greater and greater price disclosures with mention in the ad copy being the ultimate step. According Will Haselden, head of the cyberfraud division of the Florida Attorney General’s economic fraud unit and as reported in a MediaPost article, they “figured you could represent $9.99 a month in seven or eight characters," and they " convinced Google that advertising wouldn’t be markedly affected by putting that in there."
The reality of course is that putting price in the ad copy absolutely impacts the performance of the ad. Since putting the copy in there, marketers have seen a dramatic decrease in the CTR of their ads. And they have not seen a corresponding conversion rate increase as result of users having a potentially greater commitment to the process. All of which leads us to two questions – why would Google agree (given that they did not have a legal obligation to) and what is next for marketers of ringtone subscription services. The answer to the first is relatively easy. The ringtone market no longer comprises a meaningful amount of Google’s revenue. They can afford to decrease it further if it means some future political capital. The second question is harder to answer but we’ve started to see a few things.
Return of Click Arbitrage – Google, famous for its outward concern for the user with relevance being the proxy, has long dinged advertising methods they didn’t like in the name of relevance. One of the earliest scuffles featured those advertising pages filled with primarily or only paid search results. They bought cheap clicks and made money sending them to pages with higher paying ones. Google’s method of dinging meant they wouldn’t show on certain keywords as a result of their irrelevance. Post pricing though, a scan of some of the recent paid search results shows a handful of arbitragers back in. Their ads don’t have to feature pricing as they aren’t directly marketing the service, and it’s a lot simpler of a site to run
What about Display – Search became the preferred channel for many because of its scale and low cost to enter. That cost meant not having to design display ads or going through the steep learning curve of placement to profitability. For a select few though, display became an invaluable and multimillion dollar channel monthly. While we haven’t seen ringtone ads resurface yet, we suspect that some will once again explore it especially given the weakness in overall display advertising. And, frankly, ringtones now look like the lesser of two evils compared with what is running today.
Improvement in Relevance – The whole goal of any change from Google is greater relevance in the ads users see. It’s hard to say if they achieved that goal when pricing became mandatory. In addition to several click arbitragers, others ads have started to litter the result set that arguably have less to do with the keywords than those trying to sign users up for the subscription service.
More “Black Hat” – Funny how the ad copy which Mediapost took a screen shot off, where it shows the price in the copy, we found running recently with no price. Our unofficial searching found more ads than not without the price. Not surprisingly, the off-deck brands themselves were the most consistent in adopting the new policy with affiliates who have a vested interest in seeing their revenues continue, willing to take risks to ensure it.
Innovation – a bright spot in all of the challenges to the status quo and something we touch upon again in another article this week is what wins. The changes and what we see above mean one thing – lots of untapped volume. Users want free, even ad supported free, and the companies that can figure out a model that offers the same end result without requiring a paid subscription can gobble up marketshare. There are a handful that started trying to figure this out prior to the standard model coming under attack. Their work is paying off now and will pay off many-fold as the old way seems lost for good.
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