Will StumbleUpon Redefine Internet Advertising?

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StumbleUpon’s ability to propagate viral material online is normally enjoyed by Internet junkies who just want to find out what’s out there on the web. But, founder and CEO Garrett Camp is banking that the site can be much more than that. With new options to be launched early next year, they believe they may have the next evolution in online advertising, steering companies away from your traditional banner.

“With StumbleUpon, [your item] is not an ad,” Camp explains about sponsored stumbles. “It becomes a socially endorsed product.”

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The way StumbleUpon works is that users submit web sites that they think are noteworthy, kind of like Digg. People to click through these suggestions and give a thumbs up or thumbs down rating whether or not the content is worth his or her time. Advertisers, however, can also get their website to appear more often in the cycle by purchasing a sponsored stumble. Noted by a toolbar button featuring a green-shirted person icon (versus a typical blue-shirted person icon for the average user), sponsored stumbles show up about every twentieth website that users click through. Although a sponsored stumble guarantees a certain number of page views, the higher rated your ad is, the more likely it is to be stumbled upon. Camp says that 75 percent of sponsored stumbles receive a positive rating, which is just a few percentage points away from the normal user submitted pages, which receive a 85 percent positive rating.

Online advertising definitely a lucrative business. In the third quarter of 2010, internet advertising revenues increased 17 percent from the same period in 2009 to $6.4 billion according to the Interactive Advertising Bureau. Purchases made through the Internet is expected to reach $32.4 billion by the end of this year according to comScore. With online ads directly targeting traffic to etailers and other consumer websites, if you can prove to be the most efficient at getting to customers you can win big.

Camp believes that because people see the actual website in the stumble, guaranteeing that your potential customer will see your product, it’s perfect for advertisers. Traditional banner advertisements only link to a certain product so businesses have to hope someone clicks on the ad to get to their website. Plus, they need to pay someone to design the ad and typically pay more for the space on the website where the banner is hosted, making StumbleUpon a cheaper option and more efficient option in Camp’s mind. The option to link to a traditional advertisement like a video or a specially designed and targeted website for a by product is there as well, he pointed out, and can be used as a cheaper way of testing out an ad on a certain audience before launching the campaign fully. “Most of the time I find a good piece of content, and I didn’t even know it was sponsored,” added Stumble Upon director of communications Mike Mayzel.

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The current Stumble Upon sponsored system, where advertisers pay what amounts to five cents per user per stumble, has proven highly successful according to Camp. He says that 42 percent of all links shared through social media comes from Facebook – with Stumble Upon in second place at 36 percent. It’s not bad when you consider that Stumble Upon only as 12.5 million users to the 500 million active users that Facebook boasts, but with still more people guaranteed to see your ad on more popular social networking sites, you can see why some companies are tentative when taking the full leap into Stumble Upon and forgo traditional banner advertising even though the website can guarantee direct traffic.  Their updated advertising system, which will tentatively be out in February 2011, will introduce a variable pricing system which advertisers can pay more or less for their ad to appear a certain number of times and will include additional more detailed analytics and advanced targeting, two things that companies are increasingly asking data for. With the new system, if a business is in San Francisco they can choose to have their stumble shown to people only in that area plus see the type of people who are clicking thumbs up on their ad.

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There is the question of whether or not sponsoring a stumble defeats the integrity of the site because it forces into rotation certain websites that users might not have suggested in the first place. Camp and Mayzel both disagree, pointing out that although sponsored stumbles are guaranteed to appear a certain amount of times, it doesn’t mean that users have to like the content. StumbleUpon will never sell positive thumbs up ratings, and if a site is just not clicking with users, then it will show on the rating. Users can just chose to stumble to the next item without spending much time on the page. Whether or not this means that companies will have to rely on the integrity of their product rather than a brilliant marketing campaign – or if businesses are even willing to put all their money into non-traditional advertising  – has yet to be seen. “We let the community rate and choose the content, whether it’s paid for or not,” Camp said.

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