VentureBeat

[Editor's note: So it turns out branded apps are a bust -- even if you're Nike or Coca-Cola. Below, Keith Rabois, vice president of strategy and business development at app maker Slide, explains why and gives big-name advertisers some much-needed advice.]

Procter & Gamble spent $2.4 billion on television advertising last year — but they didn’t spend it on the “I Love Pringles” show. When it comes to TV, brands understand that it’s smarter to integrate ads with existing, engaging content than to try to build their own from scratch. Why then, do these same companies sink so much money into branded applications on the web?

Many have opted to launch their own social media micro-sites and social applications with brand names featured front and center, or with functions somehow relevant to the products they’re pushing. But in doing so, they’re choosing to compete directly with far more popular sites and widgets that already have traction sans the marketing angle.

A prime example is Bud.tv, an Anheuser-Busch-built portal to original entertainment aimed at beer drinkers. The company spent $30 million with the expectation that the site would draw between 2 and 3 million unique visitors a month. Instead, it gets about 10 percent of that figure, according to Advertising Age (subscription required).

It’s not the only one feeling the hurt. There is now substantial data from big names showing that built-for-brand apps provide little return on major investments. Consider this: Verizon, Blockbuster, Nike and the New York Times (all marquee brands) have launched their own custom apps on Facebook. Their combined active userbase (see chart) is just shy of 10,000. So if you were to turn all four into a single application, it wouldn’t even rank in the top thousand apps on the site.

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Even though social networking companies serve tens of millions of users, there’s still bizarrely little advertising on the most popular sites. Many big agencies and brands have experimented, but they’re still looking for better ways to target the users they want.

The latest company hoping to serve these advertisers is Appssavvy, a startup that sells direct advertising space on social media applications like Flixster, MesmoTV, and Playfish — most of which have a presence on major sites like Facebook. The company announced today that it received $3.1 million in second round funding.

New York-based Appssavvy joins a field of peers hoping to score social media ad dollars. Companies like SocialMedia, Lookery and Social Cash have also been selling advertisers on new and innovative ways to add branding to social networking sites. But Appssavvy likes to distinguish itself as a consulting firm, working with its clients to devise a more custom, targeted end product.

Examples of Appssavvy campaigns include Sony’s sponsorship of Facebook’s Wedding Book application to promote its film “Made of Honor,” a custom Facebook application built for Kohl’s back-to-school season, and ads for the TBS show “My Boys” on the MesmoTV application… on Facebook. Okay yes, all of their examples are from Facebook, but Appssavvy says it can also hook brands up with apps for the iPhone, MySpace, Hi5, etc.

Despite the seemingly thin client base represented on the startup’s site, it did land a deal with NBC Universal at the start of the month that gave it exclusive ad-sale rights on NBC News’ iCue website. iCue is a social network targeted at students that lets members watch NBC archive footage, join related discussions, and play relevant learning games.

Even if Appssavvy can bag other big names, it still faces a tough market for social media campaigns, which have yet to gain major traction on Madison Avenue. In fact, one study suggests that half of these campaigns are already set up to fail.

Still, that didn’t dissuade Appssavvy’s recent investors. The round was led by True Ventures and also included About.com founder Scott Kumit.

Here’s the latest action:

Microsoft cut prices for its Xbox 360 videogame consoles in Japan by as much as 30 percent — The software giant is trying to increase momentum in its most challenging market as the holiday season approaches.

VP candidate Sarah Palin’s Wikipedia bio was cleaned up — The fact that a single user made 30 positive edits to Palin’s bio shortly before the announcement that she’s John McCain’s running mate led to a flurry of online speculation that the McCain campaign made the edits. The anonymous Wikipedia user acknowledged that they volunteer for the campaign, but denied any conflict of interest.

MySpace co-founder Tom Anderson has a rich hacker history — That history includes FBI confiscation of his computer equipment. TechCrunch revealed earlier that Anderson, who has more MySpace friends than anyone else in the world, is really 37, not 32 as his profile says.

Tesla to supply battery packs to Daimler — Tesla will provide the batteries for Daimler’s 150 electric Smart cars deployed in Berlin, according to AutoblogGreen. The site reported the rumor a few weeks ago and now says there’s confirmation in the German edition of the Financial Times.

Movie social network Flixster acquires iPhone app Movies.app — The application was purchased for an undisclosed price, then re-released last week. Movies.app is probably the first iPhone app to get acquired.

Only 25 percent of Internet traffic now routed through the United States — In the earliest days of the web, all traffic went through the U.S., and that number was still 70 percent a decade ago. The shift has implications for intelligence agencies and foreign policy.

GameStop Chief Operating Officer Daniel DeMatteo will succeed longtime CEO Richard Fontaine — Fontaine will stay on as videogame retailer’s chairman.

Linux developer Hans Reiser gets 15 years to life for killing his wife – A deal with prosecutors led to Reiser’s reduced sentence after he brought police to his wife’s body.

New software offers iPhone-like navigation on Windows Mobile devices – The application is called Kinoma Play and costs $30.

Game publisher Square Enix bids for Tecmo — If Tecmo’s board approves the deal, it would give Square Enix a stronger foothold in the United States.

Tech pioneer Judy Estrin warns of an innovation gap if the U.S. fails to invest – Estrin, formerly the chief technology officer at Cisco Systems, has written a book on “Closing the Innovation Gap.”

There has been speculation recently that investors are no longer putting money into social networking application companies. That is not the case.

Today at the f8 conference, Facebook chief executive Mark Zuckerberg said that more than $200 million in funding had already been invested in third-party applications to date. He announced that Flixster, a movie review application (and site), has just raised $6 million from investment bank Allen & Co. and other investors. Last night, game application builder Zynga said that it had raised a new $29 million round led by Kleiner Perkins.

Zynga and many other gaming application companies are starting to see hundreds of thousands if not millions of dollars in revenue from virtual goods, as I wrote yesterday. Zynga, for example, has a large Texas HoldEm Poker application with a vibrant virtual currency that helps it make real money. Zuckerberg noted today that Zynga has four times more people playing the poker application than there are hotel rooms in Vegas.

Facebook has also been doing its own investing through its fbFund, in the following companies announced today (pictured): Coursefeed, Hotberry, Zimride, J2Play, Challenge, Podclass, ConnectedWeddings, MyListo, LuckyCal and Trazzler.

Facebook is also announcing a new funding competition. It will select 25 finalists, that will get 25,000 in seed funding. Then, users will vote to fund the top five applications with $250,000.

[Photo via Techcrunch]

Flixster is a San Francisco Web site that lets you share movie ratings and reviews with friends.

It has reportedly raised a round of financing of $2 million or so from Silicon Valley’s Lightspeed Venture Partners, though we haven’t confirmed this. [Update: One authoritative, albeit off-record source tells VentureBeat the funding was more than $2M]

We haven’t mentioned this company before, but it is noteworthy for its scorching marketing tactics. By November, after just ten months of operation, it said it had signed up 5 million registered users, who had posted 190 million movie recommendations. It drove this with aggressive policies, such as automating a way to invite friends on your contact list with messages that reportedly weren’t necessarily always true. Upon signing up, Flixster engages you immediately, asking you to rate 50 films to determine your preferences, and offers you a profile with spiffy movie-star avatars and backgrounds — and thereby gathering quite a bit of data about you. It places your movie reviews to the “movies” section on your MySpace page.

Last but not least, there’s the gawk appeal that such a site has for young people: Page after page of good looking folks to look at.