Will Social Networks Remain Low-Ad Districts? - eMarketer
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Will Social Networks Remain Low-Ad Districts?

David Hallerman, Senior Analyst

June 2, 2008 | Social Media

The question of whether social network sites will become major centers for online marketing is one that my colleague Debra Aho Williamson and I have debated for the past couple of years—she on the yea side, and me more on the nay side.

In the spirit of that debate, I set out to write a counterpoint to her recent piece, "Will MySpace Revenues Add Up?"—but, after some digging, my point of view has changed.

That change spins on two factors: money and people. That is, do a site's ad revenues match its traffic? The relationship of traffic to revenues is not an exact one, since it fails to factor in elements such as the amount of time people spend on a site. However, matching eyeballs to dollars builds a rough estimate of how well any Website monetizes its audience.

To research this, I gathered eMarketer's projections for 2008 US ad revenues at five sites—MySpace, Facebook, Google, Yahoo! and MSN. Then, using Nielsen Online's April 2008 data for US unique visitors to those sites and extrapolating that data across the whole year, I created a rough placeholder for unique annual visitors.

Simple math yielded the following estimates for US average online advertising revenues per unique visitor in 2008:

  • Google: $65.55
  • Yahoo!: $31.25
  • Microsoft (MSN): $17.74
  • MySpace: $12.85
  • Facebook: $11.79

It is not surprising that Google makes far more from each visitor than both its portal competitors and the social networking sites. What is notable, however, is that revenues per visitor for the two largest social networks are starting to edge up on MSN's takings.

When you consider those results in conjunction with a Collective Media study, in which only 26.8% of US agencies and advertisers said they will not run ads on social media sites—implying that 73.2% will run those ads—these revenue gains, rivaling those of a portal, come into clearer focus.

Types of Online Content on Which US Advertisers and the Clients of US Agencies Will Not Run Ads, January-February 2008 (% of respondents)

Perhaps one challenge for social networking advertising is a limit of perspective. When marketers look at what ad placements most influence consumers to make an online purchase, for example, only 1% of respondents in a DoubleClick Performics study cited ads within social network sites.

However, while social networks such as MySpace and Facebook may get the lion's share of media attention, they can also be seen as prime examples of what might better be termed the "social Internet." Customer reviews on company Websites, which influenced 10% to 18% of Performics' respondents (depending on age), are another example of the social Internet.

Type of Advertising that Most Influences US Adult Online Buyers When Making an Online Purchase, by Age and Region, February 2008 (% of respondents)

Social elements are now standard for nearly all types of sites—from audience comments on a newspaper or TV network site to blogs, video sites and online retailers.

Yet even as the social Internet becomes commonplace, substantially larger gains for social-related ad spending continue to lag behind the audience. Again, perhaps the spending brake is due to perspective, as with the 70% of ad agency executives who told iMedia that social network marketing is a likely tactic for "cutting-edge clients."

Attitude of US Advertising Agency Executives Toward Advertisers Investing in Social Network Marketing and User-Generated Content in 2008 (% of respondents)

One concern among advertisers is risking their brand's image against uncontrolled content. But more so, perhaps the effective use of these social elements for advertising will depend on a parallel growth of online ad methods that take advantage of the communications and sharing that shape the social Internet. The types of advertising that work best in social contexts will, in many cases, not be the plain vanilla banner or text link that is standard on content sites.

What elements might be part of social advertising and marketing?

  • Word-of-mouth, which certainly takes advantage of two factors: the communications side of the social Internet and the high marketing strength of peer recommendations. That is likely why 62% of marketing professionals told TNS Media Intelligence and Cymfony that creating word-of-mouth or viral campaigns has great potential to impact their business.

  • Social Media with the Greatest Potential to Impact Their Business According to Marketing Professionals in Select Countries Worldwide*, 2007 (% of respondents)

  • Product placement within entertainment, such as video, or product sponsorship for online entertainment, including games. This might include professional-quality video where the audience contributes to the progress of the story, such as plotline and characters, by suggesting elements and then voting on them.

  • Behaviorally targeted advertising with fully informed consent can be a prime method for social networks. The consent will mean not only opt-in but a clear trade-off where the site's visitors know what benefits they get in return for being tracked and targeted. For marketers, the detailed profiles available on social networks, combined with audience behavior, will make for highly relevant, and therefore extremely effective, ad placements.

Those are just some early examples. But the growth now seen in social networking ad revenues will expand not when marketers cede control to the audience, but share control—an increasingly essential element on the social Internet.

To learn how UK marketers are using social networks, get your copy of the new eMarketer report, UK Social Network Marketing: Ad Spending and Usage, today.



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