Niche marketing is not a new concept and is based on traditional economic models using supply and demand to plot the long-demand curve. Due to geographical reasons and consequently transportation costs, reaching a critical size market that can be defined as a niche can be a challenge. Thanks to e-commerce and ever more efficient logistics within our economy the challenge is much dispelled. Niches can now be served across the globe and when quantified globally are quite sizeable and attractive.

Imagine an obscure, strange product that most people would never even think about paying a single dollar for. Now imagine that a very small percentage of world population adores the product and is willing to pay quite a bit for it. Offering that product online in a reasonably priced way can be quite lucrative. Thanks to e-commerce we can now sell these products to these individuals and still make a profit at low quantities assuming margins are high enough.

Everyone always wonders what is an appropriate price to pay for a click. This differs greatly for many firms as the cost of customer acquisition also differs from firm to firm. The cost of acquisition ultimately depends on the margin derived from a conversion as well as the overall effectiveness of conversion after the click is made.

Some advertisers pay as much as $80 per click according to Optimum 7. This seems quite high but its important to look at this number in relation to the type of business the advertiser does. If a single sale derives a margin of $200, a cost of $80 per conversion is reasonable, BUT, what about the conversion rate? if conversion rate is 100% then this is justifiable but what if it is a more realistic 1-3%? then $80 per click is guaranteed to end up in a negative ROI.

The average CPC is actually $3.5 according to Optimum 7. This is understandable and more applicable to most businesses with reasonable conversion rates. The important thing is to be able to rationalize the expenses when conducting AdWords campaigns.

Klout.com is a service that allows social media users to see how much pull they have with their social media contacts. It takes into account how many users “like” or share your posts as well as whether your posts are looked at. This is useful from firms’ perspective as they can identify which users to connect with in their social media marketing campaigns.

Typically, users with high Klout scores will get free merchandise from brands and will participate in discussions with brand representatives. This ensures that their posts are read.

This is another aspect of this tool that can be a great asset to advertisers: They can look at their own Klout score and see how effective they are at engaging with followers on Facebook and Twitter. Although it stops just short of showing ROI, the tool is a great measure of how effetively brands are engaging with consumers online.

Facebook ads have been around for a number of years. The revenue generated by this function has been steadily growing at the same time. The reason is that its unequivocal in terms of how well it allows advertisers to target consumers based on geographical, demographical, behavioural, and psychograpical factors. This benefit allows greater efficiency and effectiveness in how marketing dollars are spent.

So what is it that companies are using Facebook ads for? The chart below answers that question:

Mostly awarnesss it seems. This is kind of off as strange as the main goal in digital marketing is consumer engagement but its weird that only 35% of firms are actually using this for that purpose.

In recent years, there have been lawsuits flying around from Facebook to Motorola, (not to mention RIM, Microsoft, Google, Yahoo, and the list goes on). This is an interesting phenomenon and I think its a new arena for these firms to compete and hinder each other in the relatively unregulated, open online realm.

This is a diagram showing who is currently involved in lawsuits:

You know something is pretty complicated when a diagram explains it better than words. As the saying goes, a picture tells a thousand words.

My personal opinion is that this is ridiculous and unnecessary. I fully value the reasons behind patents but I think these giants have taken it too far.

There is a shift in how firms are allocating their marketing budgets. Marketers have to always be aware of how they can best reach their target market. This task requires research and knowledge of your market. The younger segment is spending more and more time online, whether its on YouTube, Google, Facebook, or one of the hundreds of other online sources of information. At the same time, they are watching less TV and paying less attention to print media.

This shift requires marketers hoping to target these segments to reallocate their marketing dollars to make sure their message is getting across and getting through using the right channel.

According to Equimedia, digital marketing budgets in the U.K increased by 14.4% in 2011. This is a significant increase to 4.7B pounds.

This is a shift that we will be seeing more and more as firms adopt to consumers’ media consumption channel shifts.

Long gone are the days when gamers can pick up a box of a game for a fixed price and play to their hearts desire.

Let me start with a brief history of revenue generation in the gaming industry, I will stick to PC gaming as to not make it too long.

First, there was identical software packaged in a box and you only had to pay for it once.

Next, online peer-to-peer sharing took hold and games could be copied so developers included unique “cd-keys” along with each box and only one could be used at a time. Gamers found a way around this by creating their own servers that did not care what a users cd-key was.

Developers fought back by introducing monthly subscriptions and much more complicated server settings in order to prevent (delay is a better way of looking at it) users from creating their own servers. Eventually, users got around that as well by creating their own enhanced servers on which users could play with a pirated version of the game. World of Warcraft fell victim to this phenomenon.

Fast forward to today, developers have finally found a way to charge for games on PC as well as mobile devices in a way that has yet to be thwarted by the gaming community.

Welcome to the world of virtual goods and buying advancement in-game. Developers offer games for free and engineer the games in a way that you can advance just far enough to get addicted to the game without having to worry about paying a single dollar. But once you reach the “point of no return,” you will find that advancing in the game is extremely time consuming and that you are out-gunned, out-classed, and are an underachiever should you stick with playing for free. Zynga’s Farmville is a very popular game that users can play through Facebook as well as by downloading the app on their mobile devices. In Farmville, you can buy all sorts of virtual goods for real money. You can also advance faster through the game by purchasing credits and using them in game.

To put this in perspective, Facebook generates 12% of its revenue through commission on sales of virtual goods in Farmville. This translates into millions of dollars in sales for a simple application that runs on the Facebook platform.

Could this be check-mate for the gaming community or do they have another move?

I have been a Gmail user for a while now and I have always wondered how Google decides which ads to display to me when I am reading or writing emails.

After some research, I found out that Google scans email subject and contents for keywords. For example, I have been emailing my group members about a project we’re doing for a firm in the pet nutrition industry back and forth for a while. Now I keep on getting ads about dog care and nutrition. I do not have any pets and and not very interested in owning one, yet I get all kinds of ads that pertain to pet care and pets in general.

I think it is definitely a neat feature (excluding the privacy issues), but Google needs to do a better job in my opinion as I have not found a single useful ad so far.

Not that there is anything wrong with these pets…

I’m sure every one who has an iPhone or an Android phone has encountered ads while using free apps. For those who haven’t, this is what it looks like.

These ads are usually placed in a way that does not interfere with app navigation and are usually static pictures with text. From a consumers standpoint, we can’t complain; we downloaded an app for free and we use it as much as we want. The developers are probably making some money from either impressions or number of times someone taps the ad. I am personally okay with this sort of advertising.

Now, on the other flip side, I’ve encountered two tactics used by advertisers on apps that did not impressive me at all.

1. Ads are designed in a way to encourage impulsive clicks such as a Facebook message or notification alert. Once you click on it, you lose what you were doing with the app and the phone either takes you to the AppStore/Marketplace or opens a browser page with the advertisers content.

2. Ads are positioned very close to frequently tapped buttons in the app so it becomes a matter of probability of when you will eventually tap the ad.

These tactics puzzle me and I consider them to be very poorly designed and not well thought out. If someone is paying for each tap on their ad, chances are they are wasting their money on users who are not interested in what they are offering. Taking that into account, it seems as if someone is profiting from an ineffective advertising scheme.