Sunday, May 18, 2008

Social Network Ads: Not Much Targeting, Not Much Revenue?

Social networking sites could be, undoubtedly, very successful marketing tools. Unfortunately, the problem is that most of the companies do not yet realize that marketing online requires special marketing mix. They are using Internet as a part of broader marketing campaigns, without realizing the differences of the medium itself. Today we see targeted ads when we use search engines, but advertising on social networks, in which a lot of companies invest heavily, is mostly not targeted.

A research by Prospectiv shows that 56% of the respondents (on the whole 800 social network sites users were surveyed) think that their social networking experience would be better if marketers would use more targeted ads. 62% said they would be interested in offers from their preferred brands, and the majority of 82% said that right now they see very few or no ads relevant to their interests.

I find it very surprising that few companies using social networks realize the potential of targeting to increase their performance. On Facebook, for example, one wedding photography agency increased its business significantly by searching for the profiles of engaged women and placing its ads there. On MySpace two companies which reached consumers according to their preferences in clothes and music increased their performance by up to 300% while they were only on early stages of optimization.

Meanwhile, most of the companies are disappointed by their ad revenue from social networking sites. This week eMarketer reduced its forecast for U.S. and global online social network advertising spending, estimating that U.S. advertisers will spend $1.4 billion to place ads on social networking sites this year, instead of the previous projection of $1.6 billion, as social networks are still trying to come up with successful advertising models. Advertisers worldwide will spend $2 billion on these ads in 2008, and the spending will grow to $3.8 in 2011.

Social network advertising is still considered to be experimental by most brands. Even Google says that it’s not monetizing as expected. As Sergey Brin said recently, ‘I don’t think we have the killer best way to monetize social networks yet. We have had a lot of experiments (and some disappointments).’

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