It continues to amaze us how, 15 years after the web hit critical mass, online advertising has basically remained unchanged. Outside Google ad words, most of the web continues to suffer from the same banner ad carpet bombing we were subjected to in 2000.

Where’s the innovation? While sites like Facebook hearken the new age of targeted advertising and spend millions of dollars on their serving technologies, I continue to get served Proactive ads featuring Jessica Simpson on my Facebook page. How much technology is required to assess my age? Click through rates have fallen from 0.41% in 2002 to 0.20% in 2007, and the trend continues to decline. Facebook’s CPMs are now averaging an anemic $0.15 and few other Internet sites across the web are doing much better.

When we founded Fuego Nation a year ago, we were hell-bent on shattering the already archaic convention of online advertising modalities and create the next wave of innovation. We started with the requirement to revolutionize online advertising for lifestyle/luxury brands by creating a social context where passionate people could engage with and evangelize their products. It was only after this customized framework was established that we built a product experience to support that vision. Our intent was to provide an experiential approach that improved the user experience for both lifestyle/luxury brands and members alike.

We call our platform for lifestyle branding in social media FuegoFusion. The name comes from our desire to fuse our memberships’ most passionate interests with more experiential approaches to delivering brand engagement that result in powerful affinity and evangelization. Our focus on solving the needs of high-end brands from the outset has resulted in a comprehensive slate of sponsorship services, ranging from multi-tiered, in-product engagement to offline event sponsorships.

FuegoFusion is our implementation of Integrated Experiential Advertising, or IEA. There are two components to every IEA program. The first involves data filtering and targeting, and the second revolves around the engagement experience itself.

Data Filtering

Most Web 2.0 sites begin with amassing content, then figures out ways to make sense of the data, which theoretically enables ad targeting. Fuego Nation, in contrast, filters data at the outset and at every stage of the data lifecycle thereafter. As a result, our process of data filtering is organic and actually requires very little specific ad-filtering technology. A sampling of key filtering components is listed below:

• Data is filtered at the outset, preferably at the brand level. So, for example, Fuego Nation is unique in a social context because it is an exclusive membership club that stands for something very specific – human excellence and endeavor. Guests not attracted to that concept are repelled from the site before they even engage with it – that is strictly by design
• Relevant demographic information is collected at the outset, during the registration process, and its accuracy impacts that user’s ability to experience the product fully
• Users are then filtered by passions which motivate their actions and drive purchasing behavior (in contrast to interests)
• Users rate profile information within the community to further refine the members’ degrees of passion into levels that can be uniquely targeted (e.g. basic, VIP, Elite)

Experiential Advertising

IEA is particularly relevant to lifestyle/luxury branding companies who require tight control over the user experience and brand display. It involves hyper-targeting, but also an experiential, customized component where brands achieve the following benefits:

• The advertising is integrated into the experience itself. In Fuego Nation, users rotate through our passion card carousel (note: passion cards are similar in design to baseball trading cards) and read applicant and member commentary about the activities that inspire members the most. Members are looking at small data sets and photos for each person, and ads are tastefully interspersed throughout the experience and can be almost completely indistinguishable from member cards
• While I might be annoyed by a Proactive ad, few people are annoyed by an ad featuring a beautiful woman clad in Armani – the advertising positively impacts the overall experience and increases engagement with the brand
• We can build layers of engagement into each Flash-based brand trading card so that a user can determine how deeply they want to interact with the brand. Ultimately, they’ll be able to purchase products (Channel sunglasses, for example, directly from the ad window itself)
• Users get Fuego credits for interacting with brand experiences, which further increases their status in the community. In Fuego Nation, members will actually WANT to engage with great brands
• Brands can sponsor VIP users themselves, who will gain additional credits for wearing branded products in their passion card photo (similar to product placement in movies)
• All other brands featured in the product are of a similar quality. So, for example, Mercedes is featured along with Armani, which is featured with the Ritz-Carlton group of hotels – ALL advertising is lifestyle/luxury, so the experience is similar to flipping through a high-end magazine like Vogue, GQ or Vanity Fair
• We only accept advertising sponsors that share our focus on quality, brand experience and prime user demographics. We are exclusive not only about our membership base, but about the brands that we feature and support

The net result of the FuegoFusion experience is that high-end brands can substantiate their offerings in a highly controlled environment supported by brands of similar quality and ilk. This alleviates much of the risk associated with social media sites like MySpace, Digg, Hotmail, etc. Brands can then leverage the stature of users in the community to provide feedback on current and future product offerings, evangelize throughout their own micro networks, and target specific products (Prada vs. Prada Sport for example) to members at various levels (e.g. basic vs. VIP). In essence, FuegoFusion represents a more powerful extension of the way these brands have already achieved success in offline environments.

• Align with luxury brands – design, demos, intent
• Not social network but all web 2.0 – online, off, passion travels well
• Consumer friendly – benefits consumers AND advertisers, enabling real communities and conversations

Whether it’s a membership to Diamond Lounge, invitation only sign up on Gmail or getting into a popular club in New York City, we all want something not everyone else can access- something special. If access to goods or services is unfettered then the value generating power of those products is necessarily deflated. This represents the power of exclusivity and it drives lifestyle/luxury branding the world over.

Fuego Nation Online is a hybrid Open-Closed Network and it is the first of its kind on the Internet. It’s closed in that not anyone can sign up and access member benefits as is the case with sites like Facebook, MySpace, Bebo, LinkedIn, etc. It’s open in that anyone CAN request an invite and apply to get in on their own merit. We believe this provides the benefit of scale by reducing the friction created by ‘invite only’ business models while generating the brand power inherent in exclusivity.

Most online clubs generate exclusivity by legacy, offline means. They rely on symbols of material success like income level and celebrity. Fuego Nation Online breaks this antiquated mold by creating exclusivity around the energy that drives the world- individual passions. To us, passion is the great equalizer, capable of connecting individuals regardless as to income level, caste system or common prejudice.

At Fuego Nation Online, talent literally rises to the top. In our world what makes someone elite is the passion with which they engage and participate in the community coupled with the energy and devotion they engage with their passions. In a sense, we are creating a global meritocracy based on passion and believe the combination of all that energy and desire will be combustible– a true social change agent.

Though we see the value in exclusivity as a marketing concept, as articulated above, our application of the concept is more experiential and practical and we believe, more potentially powerful. We use exclusivity to separate the truly passionate from the posers and then we use that knowledge to distinguish between the truly elite and the novices (e.g. in our Mountain Climbing and Fashion Passion Spheres). If one is not truly passionate, after all, then they won’t have the energy and desire to fill out a simple passion card and apply for membership.

We apply exclusivity to leveling of content as well with the purpose of making it easier for adults to assess the relative merit and value of community contributions. This leveling structure enables someone to review only content of members ‘at their level or above.’ In doing so, we intend to help solve the problem of indecipherable user generated content and increase the discoverability of high quality content by levels of magnitude.

We extend exclusivity into the offline world as well via Fuego Nation Events. To attend Fuego Nation VIP events at clubs, restaurants and museums a member must have achieved VIP status online first. Once at an event, those in attendance have valuable data about one another which decreases overall anonymity and provides a psychic tethering mechanism to foster connections via commonality.

In the end, our market approach and strategy leverages exclusivity in the traditional marketing sense while deploying its functional application to create a more engaging and efficient user experience.

A major impetus for the founding of Fuego Nation was the feeling that in using social networking sites like MySpace, Facebook and Bebo that I was an outsider trying to use the tools and devices of youth on the Internet. Virtually all of the major social networking sites left me feeling like I was searching for a paperclip in my nephew’s messy dorm room.

There are a couple key reasons why these legacy social networking sites look and feel the way they do. The crux of the rationale is that sites, Facebook is a prime example, are designed by young engineers, themselves still kids, with designs largely defined by their own life experiences and needs. This, coupled with the nature of technology early adoption being a youthful endeavor, has led to a preponderance of these tools being geared toward youth and not toward the discerning tastes and unique needs of adults.

But the market for social networking has moved far beyond the confines of schoolyards and dorm rooms. The fastest growth area on Facebook is among 25-35 year old adults, a segment that has seen 181% growth in less than one year. Ultimately, it is interest from this segment that has exploded consumer awareness of social networking beyond the previous confines of the youth market and gained the interest of brand advertisers, large and small. Recent growth trends with MySpace follow similar demographic trending.

Having said that, we anticipate a flattening in both demand and usage among adults currently using utilities like Facebook as the novelty of social networking as a concept wears thin and the utility value on sites originally designed for youth proves vacuous. We also believe that the overwhelming number of, and juvenile nature of, Facebook’s application program will continue to chase away adults from the site. While recently added privacy controls do provide some salve to the psychic wounds suffered by adult users, they will prove out to be band-aids to an inherently flawed experience.

The reality is that the social needs of kids and adults are so widely disparate that no plausible, easily understood and intuited system can peaceably coexist. Adults have very specific needs that have not been addresses by the market. They have more disposable income, but less free time. They are more willing to pay for a better controlled experience that helps them gather the information they need quickly and efficiently. They want a well-lit place for interaction not a messy dorm room when visiting another user’s profile. And perhaps more than anything, they want an experience that offers a simple, intuitive interface as busy adults have little time or patience for learning new technologies. Adults have jobs to go do, kids to get ready for school and mortgages to pay. Time is of the essence and value must be derived from each minute expended.

Send an adult to MySpace for the first time and they will be instantly repelled. Why? Because the UI is so complex, confusing and non-intuitive that user friction becomes volcanic. If an adult first time user is actually able to create a simple profile (no small task indeed), they’ll probably have received a pornographic valentine before logging off. The product experience, itself, is just not acceptable to a discerning adult mentality.

In contrast to MySpace, Facebook and Bebo, Fuego Nation restricts its member base to those 21 years or older. From the outset we have remained steadfast that every feature, every design component and every value proposition should be targeted toward satisfying the digital socialization needs of busy, high-energy adults. We’ve done this because we believe the best market opportunity in social networking is that targeted at adults not kids and, secondly, an ‘adults only’ approach creates greater revenue monetization opportunities than do the frameworks of current, non-exclusive networks.

The power of the Internet to enhance both the quality and quantity of human interactivity is staggering.  The recent successes of MySpace and Facebook, among many others, are testaments to the innate human desire to connect with one another.  From the time the umbilical cord is cut, eliciting a powerful separation anxiety response, we strive to reconnect with those around us. It is this power of human bonding that is at the forefront of the Fuego Nation business.  So, while we speak to the power of status, second generation interactive interfaces, customized user experiences and the like, the value of creating an underlying functionality that provides the best opportunity to make invaluable connections is at the heart and soul of our mission at Fuego Nation.  Everything we do serves to shore up this singular purpose.  What is the value to you of a product that results in finding a lifetime partner?  

What is the value of finding a job that not only leverages an area in which you are most passionate but also provides an upside many times greater than the dead end job in which you currently find yourself mired?  The answer is, in many cases, priceless and that is why the Connection Business is such a great one to be in.  Couple that with the financial mechanics and low capital requirements of web-based businesses and you have one of the greatest business opportunities in the 21st century.

Every social networking site is basically an interface to a database. From a technical standpoint they are fundamentally the same. The core value of their product, the DNA if you will, is represented by the quality of the data created by users themselves. Data can be refined, repackaged and tarketed in myriad ways to brand stakeholders the world over. Direct marketers and ad agencies have always paid a premium for quality data about potential customers. Our first rule of success at Fuego Nation, ‘Data Rules’ is based on this market reality. 

There is a fundamental difference in the way we approach data collection and mining than legacy social networking products. The difference is like that of mining for gold by panning in Sierra streambeds or blowing mile-deep veins into gold-laden mountainside with millions of tons of TNT. So whereas our competitors collect billions of pieces of data and then write expensive programs in an effort to make sense of it all, we developed a strategy that couples sophisticated interface and user design to engender clean data from the outset then leverage the community and brand affiliation of our users to further refine the data to an even greater degree.

The data mining process at FNO begins only seconds after a visitor lands on the site while the end result is a database that opens up new revenue streams not available to other sites. (e.g. offline event promotions and management, direct marketing to high-income individuals, hyper-targeted advertising, luxury brand product testing with key market influencers, ‘in-game’ advertising, etc.).

Peering into our design helix and comprehending the depth with which we’re piecing together this perfect data storm is an efficient way to get to the heart of the FN opportunity. It may be interesting to note that the design elements for which we have received the most interest including exclusivity, interactive interface design and status-based leveling systems were not end goals in and of themselves but rather tactics used in the execution of our overall strategy of attaining the ‘highest quality set of data of any social networking product anywhere in the world.’ So instead of embracing the small-minded worry about whether exclusivity will restrict the size of the overall membership, one should worry more about how we use exclusivity as a simple tactic to generate better, cleaner data about our member base.

What follows below is a simple process flow that articulates, at a high level, our ‘Data Rules’ founding principal:

Goal: Maximize Market Valuation

Market Reality: Better Data Results in Higher Revenues

Strategy: Create a system that ensures the collection of high-value data from the outset then leverage membership to help scrub the data

Tactics:

1. The Brand Voice- In our marketing, the voice as communicated via copy is aspirational in nature and aggressive in tone. This is done intentionally to attract ambitious, talented people and repel those for whom this message would not be naturally appealing.

2. The Game of Life Carousel- From the outset, we use the visual metaphor of the carousel and the spinning trading card profiles to begin honing the database. By voting we begin the process of data cleansing.

3. Being Proud of Who You Are- Once a member, users display actual names not usernames. The point of the brand experience is to be proud of who you are so pretending you’re someone else doesn’t make sense and is not rewarded. This mitigates against the biggest hurdle in open networks which will always limit the value of their data, that is, a large percentage of their data is fictionalized by users.

4. Passion-based Data- We collect data only about those things that motivate action in user’s lives. When it comes to data we believe that ‘less is more’ especially when the data is related to one’s driving passions in life.

5. The Hidden Value of the VIP Level- Since you need to recruit friends in order to accumulate the points necessary to move up to a VIP level, the likelihood of members inviting friends to a place with a fake name and fake picture is reduced exponentially.

6. Status-based Leveling- Each level in FN requires more confirmation of the member’s talent, skill and relationships indicating to advertisers a pool of folks worth paying added premiums to gain access to them.

7. A Power Community - When users adopt a community in which they have helped to create, and around which they place high psychic value and ego attachment, they are typically more motivated to police against those who do not consistently represent core community values. In the end, by creating a system that ensures that Fuego Nation has the best data we are ensuring that we will create an environment most likely to result in a stronger market opportunity.