Friday, December 5, 2008

Social Networkers Aren’t There for Ads

DECEMBER 5, 2008

Users want to communicate with each other, not necessarily with brands.

Monetizing social networks was challenging enough before the economic news got so gloomy—it will get even harder now. That’s because the huge traffic numbers at MySpace, Facebook, Bebo and the rest do not necessarily translate into ad dollars.

More than one-half of the US population surveyed uses social networking sites, according to IDC, but the ad dollars have not followed. The research company found more than 75% of social network site users logged in at least once a week and 57% did so daily. IDC also said more than 61% of those users spent more than 30 minutes per session on social network sites, and 38% remained parked for 1 hour or more.

Good news for marketers, right? Not necessarily. Only 57% of social network site users said they clicked on an ad in the past year, compared with 79% of all Internet consumers.

Barak Rabinowitz, co-founder of Amuso, a site that invites users to create and participate in entertainment contests and game shows, described the challenge of monetizing social networks as the “elephant in the room” of online advertising. Writing in VentureBeat, Mr. Rabinowitz said: “[It’s] 400 million social networkers creating and consuming content, clustering around shared interests and activities—all who have yet to be tapped in any major way by Web marketers.

“Search continues to be the most lucrative advertising strategy. Users are specifically seeking information in that arena. On social networks, people are primarily concerned with communicating with their friends, not looking to buy items or services.”

Despite phenomenal growth, social networks have yet to reach online advertising nirvana—that heady place where behavioral targeting tools aim for specific groups with offers specially tailored to members’ interests. It’s a place where marketers are able to serve ads, promotions and offers to friends of friends based on a pal’s recommendation, and where word-of-mouth marketing spreads like a flu virus in January to create waves of self-selecting consumers eager to interact with marketers.

However, IDC found just 3% of users polled said it was appropriate for publishers to use their data (contact information and the like) for advertising. The report referred to ad targeting on social networks as a “stillborn” idea.

Given the tepid situation for advertising on social networks, coupled with the deepening recession, what is the prognosis?

In May 2008, eMarketer projected advertisers would spend $1.4 billion to place ads on online social networks this year. eMarketer also forecast ad spending on social networks would reach $2.4 billion in 2011.

With the country in recession and online ad spending growth slowing, social network ad spending will be affected even more heavily. eMarketer will issue a new US social network ad spending forecast later this month.

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