Google’s New Ad Star: You; Search Giant Soon Will Have Names, Photos Pitching Products Across Its Sites

Google’s New Ad Star: You

Search Giant Soon Will Have Names, Photos Pitching Products Across Its Sites

ROLFE WINKLER, GEOFFREY A. FOWLER and EVELYN M. RUSLI

Oct. 11, 2013 7:25 p.m. ET

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Google Inc. GOOG +0.43% plans to make its users the stars of advertisements—without first asking for permission. The move encourages word-of-mouth marketing but is bound to raise privacy alarms. The search giant on Friday alerted users in a bright blue warning across its home page that, beginning Nov. 11, it may display their names, profile photos, ratings and reviews in ads as part of what it is calling “shared endorsements.”Users age 18 or over could now see themselves pitching their favorite smartphone, say, or recommending an Italian restaurant across Google’s stable of sites including in its search results. The company didn’t specify whether user information would be included in ads Google places on third-party sites.

Many of Silicon Valley’s most popular sites say that such social-context ads are more useful—and maybe even less annoying—than traditional types of online advertising. But they have raised the hackles of privacy advocates, and advertisers have yet to fully buy into their effectiveness.

Even before Google’s latest privacy change, when users clicked the “+1” button—Google’s equivalent of Facebook Inc. FB +0.12% s “like” button—their endorsement might have appeared in an ad.

Now it is expanding the type of content that may appear in ads—for example, ratings of songs in the Google Play store, or restaurant reviews posted to its Google+ social network.

Moreover, users who sign into third-party applications using their Google account may also see their activity used in Google ads. The company hasn’t specified which apps, what actions or where such ads might appear.

“We think it’s a problem,” says Marc Rotenberg , executive director of the Electronic Privacy Information Center. “It’s a commercial endorsement without consent and that is not permissible in most states in the U.S.”

In response, Google said in a statement: “The privacy and security of our users is one of our top priorities. We believe our Terms of Service updates are a positive step forward in clarifying important privacy and security details for our users, and are in full compliance with the law.”

Google, which had $14.1 billion in revenue last quarter, still gets most of its revenue from search ads, though it has expanded into display ads and hardware, like Motorola smartphones.

The potential of social ads is to replicate online what marketers have long known is effective in the real world: a word-of-mouth endorsement from a friend. In a blog post, Google gave the example of how a user of its maps service may respond more positively to a restaurant listing endorsed by a friend.

Most of the biggest players in social media have tried integrating information about friends and followers into ads, with different degrees of success.

Twitter Inc. integrates member account names (which can be pseudonyms) into ads shown to their followers; the ads say that the promoted accounts were also followed by those other users.

Facebook helped pioneer the idea in 2007 when it debuted ads that were tied to friends’ actions, such as a visit to a restaurant or an endorsement of a business. Facebook added additional layers over the years, as it introduced new features such as the “Like” button.

Today, for example, when a member likes a company’s Facebook page, his or her name could be used in an ad for that company seen by the member’s friends.

Facebook has struggled to strike the right balance between the need to appease advertisers and the need to protect its users’ privacy. In 2009, for instance, the company was pressured to shut down Beacon—a system that automatically broadcast actions, like purchases on other websites, back to Facebook—as part of a settlement for a class-action lawsuit.

Facebook also recently agreed to pay $20 million to settle a separate class action lawsuit, in which users complained that Facebook shared their activity for ads without compensation or the ability to opt out. (Members can now opt out of having their actions used with ads.)

Behind the privacy debate is another question: Do online ads with social cues work?

Today, social ads are at the center of Facebook’s business, but it is starting to rely as well on other, more traditional types of online ads. Some marketers continue to question the value of social signals, such as “likes,” and are still studying the correlation between social ads and purchasing behavior.

A Facebook spokesman declined to comment. Facebook hasn’t said whether its Instagram service will use social cues in ads, which it plans to roll out in the coming months.

“In a world where we are besieged by marketing and advertising messages, one of the ways to cut through clutter is to have someone that you know and trust’s opinion,” says David Cohen , the chief media officer of agency UM.

The same applies online, he says, though advertisers can overdo it. “Imagine every ad we were to see had some kind of endorsement associated with it,” Mr. Cohen said. “It would lose its effectiveness and start to get overbearing.”

Google may have a challenge making such ads work until it gets more consumers used to the idea that they give endorsements on its services, says Bryan Wiener , the CEO of digital agency 360i. “The question in the long term is the consumer backlash,” he says.

Despite Google’s efforts to grow its own social network, Mr. Wiener says clicking +1s isn’t yet an ingrained consumer behavior in the vein of clicking on a Facebook “like.” “It is a bigger leap when you see this from the consumers’ perspective,” he said. “When you see it in the form of an ad, you will be more surprised.”

Social ads could also go awry if sites try to make things seem like endorsements that weren’t really intended that way, says Ed Keller , the CEO of market research firm Keller Fay Group.

“If it crosses the line and people start to feel like it is inauthentic, it has a chance of backfiring,” he says. “There is a line that can’t be crossed there.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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