Have audience, seeking ad dollars

Posted on February 1, 2008 by Martin Zagorsek

Beneath the surface of Facebook’s $15 billion valuation and the slew of niche social networks cropping up in its shadow like mushrooms, is a big assumption - wherever audiences congregate, advertisers will follow. After all, the hardest part of marketing is finding the people you’re trying to reach and getting them engaged with your brand. If social networks are where they’re hanging out, why wouldn’t marketers pay to be there with them?

This was the thinking during the Internet bubble, when every business plan said “ad-supported” and it was a given that you’d monetize whatever users you attracted. Early adopters among advertisers were paying $50 CPMs for banner ads, and the future looked rosy. But users were ignoring static banners, the recession hit, and CPMs plunged. It wasn’t until several years later that ad spending finally took off, thanks to a combination of PPC text ads, rich media banners, targeting technologies and reporting analytics.

facebook-ads Have audience, seeking ad dollars
 
Lonely ads, looking for clicks
 
Social networks are in the same place content-driven web sites were in 2000. People are starting to question their revenue potential now that there are indications that the ads being placed in them aren’t performing as well as expected. Click-throughs are abysmally low, and members are rebelling against efforts to monetize their activity.The big question is whether this is just a temporary dip just like the web in 2001. Will someone figure out the right way to link advertisers to social networks, and allow the dollars to come gushing in? Some media just aren’t suited for ads, the movie and music industries still rely mainly on consumers and not advertisers for their revenues.Monetization of audiences is far from a given - a lot of work needs to go into developing the right techniques, and the solutions are usually unique to the medium. What worked for TV didn’t work for the Web, and what worked on Web sites won’t work in social networks. Will anyone figure it out? And if so, will it be Google or someone we’ve never heard of?

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