Monday, February 11, 2008

Social Advertising - not surprising that it's been overvalued

Google still waiting for social ad payoff | Tech news blog - CNET

It's not surprising to me to see that social networking has not developed into a gold mine of revenue for advertising. As I said before, I think that Facebook and MySpace are fun and interesting tools for personal communication and interest-linked networking. They've changed a bit about how we look at using the internet as a part of our daily lives; and, as a facet of defining "Web 2.0" have redefined how we consider information being broadcast whether synchronously, asynchronously, or semi-synchronously.

The problem is that it hasn't really defined itself well in the realm of making business sense. Ads don't pay off as well in the space because when people are in the social network realm, they're often not that close to thinking about shopping or buying. Neither are they thinking about becoming "Yacht charter captains" "finding other dating networks" or "Joining the real estate revolution!" They're thinking about their friends, what their friends are doing, and who their friends' friends are. Sure, there's the occasional curiosity that I'll want to follow an ad link about a travel destination, but for the most part, ads on social networks are overvalued and not as effective.

The genius behind AdWords/AdSense is that often times, the ads are placed in spaces very closely linked to, if not already, shopping sites where the internet consumer is already looking. Looking through an on-line advice blog for tips on improving your Labradoodle's behavior? Oh look, there's an Adsense ad for a site that sells restraining devices and books on dog training. Duh. Looking up sports scores on Oh, look there's an ad for my team's paraphanalia or a link to - gee I really like their TV ads.

But advertising in the social networking realm will find it's place and value, it's just that the high level of activity and membership on these sites is not translating into the number of dollars some have anticipated. The controversy over Facebook's Beacon and subsequent advertising tie-ins on the social networking site certainly dealt a setback on the image of social networks as a place where advertisers could expect positive results. I think that there was a lot put into the idea of "peer value" that when you saw in your newsfeed that your (trusted) friend bought that cool new sweater at - you might feel compelled to visit bluefly and buy their stuff too. The (legitimate) privacy concerns blew that idea clearly out of the water along with the value that it potentially provided.

There are perhaps a few missing links in the chain, and probably ones that will get constructed over time. Some of these links are cultural - surrounding users' internet shopping and browsing habits, expectations of social networking sites - and some of these are technological. The technology itself has to make simply (literally) good business sense. I've often maintained that I'm surprised that in the wake of Facebook's inability to prove that open apps have delivered any type of application that provides a business benefit, that LinkedIN should be the platform that makes that possibility a reality. But so far, I'm mystified that little has been heard on that front.

Google also changed the way we look at internet advertising by (first) building a great search engine and (second) shaping ads to conform to a certain level of understated uniformity and play along with some "level playing field" type rules that made everyone happy. It's been a tremendous boon that has made many people - advertisers, consumers, and ad space providers - tremendously happy. Whoever figures out this happy point in the venn diagram of all stakeholders on social networks will be another tremendously rich person.

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