Saturday, June 10, 2006

Social Networking Revenue

I found this news item on Yahoo! dropping MySpace publishers interesting. Looks like social networking ads are generating 1/10th the clickthrough rates vs normal contextual ads (1-2% clickthrough) and only $0.10 per CPM for MySpace due to massive oversupply of pages vs demand.

While the articles state that MySpace should focus on brands and businesses creating profiles, I don't think there's a ton of viability to that concept. It's fairly apparent that social networking users aren't appreciative of ads being part of the context of what they read (hence the ridiculously low clickthrough). If I were MySpace, I'd flip this on its head. While readers of blogs/profiles may have no interest in contextual ads, associating and tagging users based on what they write in their profiles and presenting them contextual content (including ads) could be more effective. The reason ads work on search engines is that they're viewed as a value-add for a specific keyword search a user performs. Many times, the ad itself is a more valuable link from a research perspective than the natural search results alone for a specific keyword.

In the case of social networking, the ads have little to no relevance to what's being searched (i.e. a user reads a personal profile or a friend's blog with no specific keyword or search in mind) As a result, contextual ad content which relates to written social-networking content has little to no value-add for the reader of said content. It would however relate to the writer.

Social-networking sites should move more aggressively in evolving the content editing pages of their sites (for profile and blog creators) into a personalized webpage experience (ala Goowy, Pageflakes and Netvibes). In this way, the MySpace's of the world could capture and monetize the interests of said user (tagging that user via their own written content) by presenting personalized, dynamic content related to the content creator. Adding ads at this point once again are a value-add since the ad is presented alongside content the user is actually interested in... (Take a hint here Rupert. Buy Netvibes, Pageflakes or create this capability on your own)


Anonymous Greg Isaacs said...

I found this post on Om Malik's pretting interesting:

12:51 PM  

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