Breakdown: Digg Allows Community To Choose Advertisements

Left: This screenshot, provided by Digg shows how an EA Sims ad is embedded in main body editorial as sponsored, as well as in upper right bug.

Digg Launches Community Voted Advertising: “Digg Ads”
Digg, who was formerly partnered with Microsoft for advertising, announced that they will be launching a new type of advertising unit that allows Digg members to vote up (digg) or down (bury) ads that appear in the editorial stream. As a result, the ads that are voted up will cost less to the advertiser.  Nodding to the power of the community isn’t new for Digg, in the past the Digg community actually has more control than the management team, so turning over the advertising power to them strategically makes sense.   After engaging in a discussion on Twitter last night about this, I gave it a good night’s think, here’s my take:

Social Ads Not New:

• Interactive Ads aren’t new, Facebook launched ‘Engagement Ads’ (analysis) nearly a year ago, and community vendor Pluck and agency Razorfish followed suit, in similiar vein community platform Kickapps launched WidgeADs. 
• Pricing based on ad performance isn’t anything new, we’ve seen this with demand and supply of ads for years with cost per action.

Requirements for Success:

• Homogeneous : Community ranked ads will likely work better in homogeneous communities where there’s a common interest or demographic, rather than a large broad community where consensus won’t be found.  In the case of Digg, I’d make a guess from watching the community that it’s a lot of Gen X and Y males that are technology optimistic, and liberal.  Having spent time at the live Diggnation event (the super fanboys, photo by Brian Solis) it could be a representative sample.
• Engaged: Community ranked ads make sense for the Digg community as they are already highly engaged in voting for stories, as well as the very active comment (over 100 comments is norm per article on front page).  
• Transparency: Dislcosing in the editorial stream that the ad is sponsored.

Risks:

• Gaming: Expect gaming of the site, not from marketers, but from fan boys, perhaps those that love Apple products will bury Microsoft ads.  Since you must have a registered ID to vote on items in Digg, the chances of the advertiser influencing the ad price will be limited.
• Unusual engagement: Expect that most users are more likely to bury ads, not engage with them and promote them.  However, if a user buries an ad they don’t like, this cost per action is still an engagement, which is higher than not paying attention to them at all.

Forward Thinking:

• If this works, Digg or it’s partners could replicate this product and extend to other sites.   Interactive advertisers like Federated Media would do well to open discussions with Pluck and Kickapps, who have a strong media focus.
• For brands and advertisers this is a great way to find out why an ad may not work for a particular community, rather than make guesses based on CTR performance.  Advertisers that analyze or even engage in the dialog may benefit their next generation effort.
• In the most ideal sense, community preferred ads become information and content –not invasive content.

Takeaway: If Anyone Can Pull This Off, It Will Be The Digg Community 
Digg is a very unique case study, and if these ads work here, it will be hard to replicate on other communities, a unique mix of a very engaged community that is somewhat homogeneous will be required to make this work.  Let’s see how it unfold.