Are more ads on social networks inevitable?

One of the biggest questions on my mind with all of the hype surrounding Facebook (and the ramp up by marketers) is how they plan on making money. There are some ads on the site now (the lack of ads is one of its redeeming points) and Beacon seems to have loads of potential even though it was poorly launched.

Facebook seems to be leading the way among competitors in opening up the platform for developers and that's a key to growth and future revenue. But they're still not making any money outside of investments. Most of the other networks, however, are still more closed and are heavily advertising dependent. Just take a look at these examples of Facebook vs. MySpace. I've removed the portion of the page that I control and left in the ads and other default pieces.

Facebook without my content	MySpace without my content

Given that example and the obvious focus that MySpace places on ad space, take a look at this chart from eMarketer showing the share of traffic and ad impressions for MySpace and Facebook. Note that MySpace has twice the traffic and 6.5 times the ad revenue of Facebook.

Now, let's look at how eMarketer expects ad spending on social networks to progress. Though the anticipated growth is leveling out, it is gaining attention from marketers as a viable outlet.

Taking all of that into account, is throwing more ads on a page the answer? It seems to get more revenue in the door, but it's far from adding value to the users. Click through rates are also notoriously low, so the value isn't really there for the advertisers either. So what's the solution? Here are some options that we're already seeing, but are sure to see more of:

• Creating rich, branded applications
• Helping users centralize data into one place
• Connecting people from multiple networks around a passion
• Localization and hyper-targeting

What have you seen that gets you engaged with a brand?

Technorati Tags:
advertising, Facebook, marketing, Matt Dickman, MySpace, social media, social networks, Techno//Marketer

Comments

[phil gillman]

matt - i think that social networks could be a great location/medium for the next model in online branded content. The opportunity for a brand to sponsor appropriate discussion areas and consumer/prosumer content creation seems huge in networks such as facebook and linkedin.
What if instead of buying display advertising in linkedin as they do now, adobe was sponsoring discussions on how design and programming can solve business problems. Heck, they could potentially buy exclusive access to sponsor any topic on the subject.

[Matt Dickman]

Phil -- Branded content is right on the money. We need to step away from the banners, take a breath and come up with something cool that adds value. Your Adobe example hits on it. If you can build on relevant content and hit people when their mindset is right, it'll be much more effective.

Now it's up to the networks to wise up and start offering these opportunities. Marketers rely too much on media kit specs and don't think about content, context and community.

[Mario Vellandi]

Relevant and engaging RIAs are an answer; sponsorships like Phil gave would be awesome.
On a flash banner, we can expand the stage dimensions can't we? so as to load an mini application.

[Ryan Manchee]

Matt - I don't think stepping away from banner ads is the solution. I found your site by clicking on a banner ad I saw on Facebook, so they are obviously doing something right!

You can provide rich, interactive, rewarding experiences through rich media banners and widgets. With smart media planning to ensure relevancy, there is a great deal of value for the user. With smart interactive design, the banner can break through the clutter of other ads and engage them for an interactive experience.

It's not always all about the clickthrough, and with these types of ads and technologies you are able to measure engagement (interaction time vs total time spent on page, interaction rate, depth of interaction, etc).

Couple these rich banner ad experiences with sponsored content and/or more relevant information , and you have yourself a pretty solid campaign in my mind.

[Ryan Karpeles]

Phil nailed it. This space has, and always will be, about adding value.

For the most part, display ads add almost no value whatsoever. Impressions don't mean that much any more. I'm pretty sure marketers know this. They're just not willing to accept it and act accordingly. After all, creating a banner is a million times easier than providing rich, value-added content.

Maybe it just comes down to a lack of effort...

[Matt Dickman]

Ryan M -- First off, I see that you work for EyeWonder (who's business is based on rich media display ads). I want that out there so my readers know where you're coming from.

I agree with you that banners, when done right and with the right degree of thinking behind them, can be very effective. Engagement metrics also are great as helping to measure rich media. I think a lot of marketers, however, don't put that thinking into ads.

Your last point is a great one. When you do branded content and surround it with engaging, value-add advertising you have a winning equation. Thanks for commenting (glad to see my test campaign on Facebook is working out).

[Matt Dickman]

Ryan K -- Creating boring display ads and measuring impressions and click throughs is a staple of traditional digital (yes, I said it) marketing. It's easy and trusted from the marketer's point of view.

If the effort isn't there, the results will follow suit. I think, however, that for nominally more effort, you can produce good content that reaches people in context. Pair that with the community and you're on the right path.

[Matt Dickman]

Mario -- That's what Ryan M is getting at in his comment. Rich media allows you to load an entire web site into the physical space of a traditional ad. RIAs are also a good step that, when paired with targeted, relevant, contextual advertising can add value.

[jon burg]

When are we as an industry finally going to "get" that it isn't about interruptive advertising, but belonging within the user experience?

Is it really worth the cost differential to live in the white space around the experience (the lowest handing fruit) than to live within the experience itself?

[Matt Dickman]

Jon -- I love the way you summed that up, "belonging within the user experience". That should be our goal and should be in line with adding maximum value.

[David Mullings]

I found this blog via the Facebook ad as well.

I agree with all the points above - branded content, sponsored discussions, user experience instead of interruptive advertising.

I also do not think that adding more banners to a social network like what MySpace has done is the only way to increase revenue from advertising and even MySpace has recognized that by now focusing on behavioral targeting and charging higher cpm rates.

You always have two options to increase revenue as a business:

- sell more stuff
- raise prices

I personally have always preferred to raise prices than to sell more and I don't know anybody who would prefer to see more banner ads on websites.

p.s. The leaderboard banner ad in your MySpace screenshot is a perfect example of poorly targeted advertising - clutter is more like it.