Social apps as ads? We look at Buddy Media

Technorati CEO Richard Jalichandra is our guest host evaluating social applications as ads

In this segment, we brought in Richard Jalichandra, CEO of Technorati,  an advertising network for mid-tail sites.

This week, we looked at Buddy Media, a provider of advertising and marketing applications across social networks. Manhattan-based Buddy Media raised $8.3 million from high-profile investors, such as Greycroft, Softbank, Bay Partners and European Founders Fund. The startup provides a new economic model for advertising, as well as strategy, development, promotion and tracking for its clients, which include big brands, such as InStyle, Anheuser-Busch and Fox News.

Ezra Roizen, Vator Box regular and digital investment banker, joined us as well.

Here are our observations and highlights of the discussion about Buddy Media CEO Michael Lazerow’s video pitch (see his Vator profile for that), the novelty of his idea, the competitive landscape and the advertising industry. 

- Lazerow does a nice job explaining the company’s scalability. Advertising and marketing solutions often require significant manpower that goes into creation of an advertisement/campaign, and the promotion of it. In his video pitch, Lazerow talked about how Buddy Media's technologies are deployed once across all the social networks that display its social apps. The promotion is done via an optimization engine (in other words, not by people). And, its analytics system, called Buddy Brain, is used to show clients the effectiveness of an ad.

- Being one of the emerging startups addressing demands to target people active across social networks is novel in and of itself.

- While there is a market for new ways to advertise to consumers where they are active, a novel way to advertise to a consumer isn’t enough. For instance, Reactrix had a very unique advertising solution. It made interactive projected ads that were used in malls and movie theaters. It raised $75 million because it was a cool idea. But eventually, it went under because marketers, constrained with diminishing ad budgets, weren't able to spend ad dollars on experimental ads. Suffice it to say, any form of advertising across a social network is experimental.

- Buddy Media has done a great job with its 50 customers, 40 of which are repeat customers, suggesting the company is gaining traction despite the ad downturn.

- Buddy Media has a unique model, which is the company charges $1 per subscriber to its application. Paying per subscriber vs paying per impression is an attractive ad buy today, given the challenging economic environment.

- Buddy Media’s model – so far – is to charge a customer (typically a big brand) one flat fee for a set number of subscribers. This is great for the customer, but Buddy Media should consider incorporating an economic model in which it could also participate in the upside.

- Display advertising will always be a key way to carpet bomb, meaning it’s a great vehicle for brand awareness. But Buddy Media’s approach may be a good use of funds when launching a new product and at a time the marketer’s intent is to find evangelists and core users.

- In order for Buddy Media to be a several-hundred million company, much like previous ad startups which were sold for over $300 million (Quigo was sold to AOL for $360 million in November 2007, and Blue Lithium was sold to Yahoo for about $300 million), it should consider a self-service platform whereby agencies could do the creative themselves. Buddy Media should make sure it stays away from being a one-to-one professional-services model.

(Note: We're not experts. I'm sure a number of people have objections or criticisms about our outlook and advice for Buddy Media. We just want to start the dialogue. For anyone interested in being a highlighted company in Vator Box, let us know by posting a comment here or just emailing newsroom@vator.tv)