Great article, Josh! I’m going to have some of my students read it in class, as we are about to talk about my favorite topic: activity.

I gave them my well-practiced spiel on FAQs and why they are a successful web genre…all about activity. The aim is to get them asking this question: What does the genre do that suits users so well?

Your take on ads in social-networking site is a great follow-up to that!

Josh, what you are saying seems quite reasonble and I tend to agree.

Question: how do the revenue from ads at myspace differ then say an average blog’s ads? Hypothetically, if the return is low (click-thru) shouldn’t we see a much lower success from ads on blogs?

@Sarven:

It’s about SERPs. The reason blog ads monetize better than myspace is that blogs show up in search engine result pages. User searches, user clicks through to blog, user clicks ad.

The only hope social/app-oriented sites have with ad monetization is branding/influence ads, whose effectiveness can’t be measured by clickthroughs, or with truly *social* ad concepts (ala facebook fan pages) that become part of the app’s experience and don’t draw users offsite.

Great coverage of the current situation for the web ads.
I’m pretty sure that its very much the same situation for news portals. Their clicks per view are incredibly low.

Very interesting Article. I think the focus for social media advertising should be brand building, panel research, writing paid reviews etc etc. Applications like Facebook offer great insight in specific sections of your target groups. This could and should be very interesting information. The question is just how to convert this knowledge to commercial benefits.

We’ve both written about the better chances of survival for specialized social networks. Seems like monetization through ads and sponsorship is just yet another way.

There are opportunities for better-targeted ads. Take a site like Dogster. This is a dream marketing opportunity for a company like… Pup-peroni. You know that the site’s entire user base has a dog. That’s some segmentation you just can’t get elsewhere.

There are better opportunities for sponsorship. Sure, let the people stay on the site and do their thang. But when they leave the site, they remember that you, the sponsor, were there to help make that experience possible. It is more of a brand relationship at that point. I realize it isn’t magic – it doesn’t always work out that way. It can take a lot of time and strategy.

But the holy grail would be achieving that NASCAR mentality: The “I’m gonna sit here and watch these cars go around in a circle 500 times… but when I’m done, you better believe I’m gonna go buy some Tide” approach.

I’ve often thought of the idea of Tag’sona’s or profiles of people solely by the tags they use in a tool like delicious. There I could see advertising as a potential viable thing because the site would see into my tags, see what moves me and thus tap into that sweet spot and maybe give me something that I’m interested in as well.

But the thought of ads in my bookmark or social network spaces just dont compute because i’m not looking for ads.

Now if you can rewire, re-represent those ads and make the appear to be of more value, more than just an ad, then that connected potential goodness they offer could have some merit.

Hanging out on social network like sites seems to vary as well I figure. My 17 year old niece spends 5hrs a day checking status of her space, her phone, her connected presence throughout the network. In glancing status, I doubt ads would connect unless they offered some rapid serving need, like insta-buy snickers bar at the checkout.

For me, I work hard to assemble all my networks, and all my feeds into as few streams as possible making my one to five glances a day to bring me the information i need unhindered by any ad presence.

The mobile plan makes sense but I dislike the idea of trapping and cashing in on users when they are most likely in need. If its presented as too much cashmoney pal come play with me vs real useful el powerful el you made a difference in my existence, it will not succeed.

Joshua,
Thank you for initiating a very useful discussion.

Nice article. Kind of ties in with a post on Fortuito.us about how ads really work for communities.

This got my brain humming. I think I’m already seeing this effect at work for our school. Our Google and Yahoo search ads are doing all right, but our mySpace ads (which are even full color with graphics compared to the other two) have dismal click-through rates.

Your article may be added to my ammo to get my boss to re-think our spending here.

Josh,

I think that del.icio.us typifies your argument. The only advertisements to be found on the entire site are on search result pages (when they finally load). Why bother people with ads before we know that they’re open to being advertised to?

Ads on social sites are better for brand building, but not as attractive from an ROI standpoint.

Note to self – implement Google ads in search results on my site when I get around to programming the search feature.

Josh-

Thanks for covering this topic. I’ve read bits here and there on the Web about this subject now that social ads have been around long enough for some real data to emerge.

What you brought up about the ‘passive’ nature of being on Facebook compared to Google reminds me a lot of television. I watch my wife use the Internet, going from Facebook to MySpace, from LiveJournal to Yelp, from Perez to the Consumerist, etc. and it reminds me much of how I flick through TV stations, staying just long enough at one to see what’s interesting.

I think Facebook’s problem is that they haven’t yet created that environment where you do all of that in their space. They are still a TV channel though they’d like you to believe they are “Cable”. They are only a website but they’d like you to believe they are the Internet.

I think Internet users are much more savvy nowadays compared to users of old who thought that AOL *was* the Internet. They know that Facebook isn’t the only social network. They know that if there’s nothing going on in Facebook they’ll change the channel to MySpace and see what’s happening.

To add advertising in to this analogy, I have never purposely tuned in to a TV channel because of the ads. If I’ve been interested in purchasing something off of the TV it’s because I found a channel that was selling something that looked interesting (Magic Bullet rocks!). I do the same on the Web by going to Amazon of searching Google Products when I feel like I want to buy something.

Would it impress me if I was flipping through the TV channels and started seeing friends of mine endorsing products on every channel? After I locked all my doors and checked my phones for taps, I think I would really start to question my friends. And turn my TV off.

At the end of the day I’m happy that Facebook rolled the dice. Advertisers spent a lot of money trying to get this off the ground. The beast has been fed for now.

as usual, i agree.

another reason i believe the ads to less successful is a lot simpler. many (most?) facebook/myspace users have spent countless hours on these sites and their interfaces are burnt into the users’ memories. there are specific things users do on the site and they know exactly where to find them. its almost as if they could move their mice and click with their eyes closed.

users have an amazing ability to filter out ambient noise in places they frequent and i believe this also plays a part in the lackluster results of ads.

At the Rochester Institute of Technology we have been doing research on Advertising and social networks for the past year. We have data that supports these ideas.

I agree wholeheartedly with the idea that it’s hard to hear ads from our friends. It just doesn’t work well. Sometimes, it’s not *as* creepy, like when your friend uses a movie’s icons as avatars for their IM client or whatever (we get that, at least). Other times, like when a friend is attempting to build affiliate links on my back, that’s a different matter.

So what will be the middle ground? For a while, people were thinking that advertising on video TVs in Second Life was going to be cool. I dunno. Can’t I do that in Real Life?

Thanks for this post. It’s given me lots to chew on, and I want to know as much as the next guy.

Josh–I think that smart advertisers need to (and will) adjust the format of their messaging to better fit with social media environments. Just like TV ads don’t work well on radio, direct-response promotions (Google-style ads designed to get visitors to click on them) may not be the best format for social-networking sites. Federated Media (my employer) recently worked with Dell on a Graffiti contest within Facebook that sparked high interaction levels among a large subset of the Facebook population. Here’s more on the campaign’s performance, http://chasnote.com/2008/02/01/dell-goes-green-1000000-votes-for-dell/

This is the first time I’ve seen anyone write what I’ve thought for a long time; the profit to be made in social networking sites is over-hyped as the ads just aren’t targeting people at the right time.

Thanks Joshua for covering this topic! For me, I work hard to assemble all my networks, and all my feeds into as few streams as possible making my one to five glances a day to bring me the information i need unhindered by any ad presence.

regards

You’ve hit the nail on the head with this one. Ads on social networking sites are more of an intrusion than traditional search based ads, especially those appearing on sites which we consider personal in nature (Facebook, MySpace). Despite what advertisers think, my Facebook account is MY personal space… please don’t bug me on it.

Rather than focus on ads, brands need to carefully consider the overall context of use within these social spaces and design useful or entertaining social applications that people want to share with their friends or post on their personal pages as an act of self-expression. No one wants to be advertised to, but they do want to take part in and share in an online experience with their friends.

Great post and one that neatly elucidates the difficulties associated with serving relevant advertising to users on social networking sites.

I think Facebook and MySpace are going to have to invest an incredible amount of money on targeting ads based on user interest *and* user activity because this is where they have an advantage over search engines.

If they know my interests *and* know what I’ve just done online, they can serve me highly relevant ads.

The question is, how creepy will this feel?

Interesting topic. Doesn’t this really mean that advertisers will just have to raise their game to get attention in a social context?

I mean, advertising does occur in offline social environments. I can be sitting down the pub with a bunch of mates and we are bombarded with adverts from the beer makers and we usually don’t have a problem with that – mostly because in this context, the beer makers put their ads on very short dresses on very beautiful women.

I wonder if the first ads that appeared on TV also had this problem, in that they were too similar to their preceding radio ads and also didn’t work so well until they tested new formats.

Plus, I think that for every Google ad that doesn’t work on a social network site, there must be corresponding viral or referral advertising that is boosted by the same social network site.

Well-stated argument Joshua and I agree with you. When Facebook introduced their Social Ads, the first thing that people pointed out was the fact that it would not compete with Google Ads precisely because Google and Facebook are targetting people with different users doing completely different things.

It’s a gradual learning curve but marketers should have realized that marketing to people on Facebook would be very different because it is a different environment. Keyword: environment.

I hope no one interprets this to mean that advertising on social sites does not work. I can assure you that there are a lot of advertising formats that *do* work extremely well, Google text ads just aren’t one of them.

I think that advertising on social networking sites must work, or else the plug would have been pulled on them, after all, that is how they are paid for. In the end it is just a numbers game, and if enough people click on ads on your site then you are happy to keep running it.

I quit agree with Richard , because if ads on social networks haven’t been working defiantly marketing on social networking has gone down. But in fact over the past year more and more social networking sites are doing good , and people are investing on them . The difference is Google , Yahoo or any other search engines are suitable for SMS to large corporate , where as social networking sites still into large organisations. Also Google must be using a reverse psychology to market their products and services .
Anyway what I feel is it’s not what people are looking for always, Yes Google is a target oriented media. But remember lot of uses are who are in the social networking sites are trying to kill time…so in my opinion there are certain amount of people who clicks on the adverts. Google are using the similer technique on their content networks (i.e via ad scene )

I think the social web will actually help commerce and advertising. Here is a quote from Greg Sterling that I posted on my blog:

“Search is highly utilitarian and indispensable as a tool but it doesn’t help people make decisions among a growing range of competing options (on the broader Internet or even individual sites).

Community can by showing the most trusted or popular or best or highest rated options among a list. It can also expose information that we might not have otherwise known about or discovered on our own.”

The concept behind social ads in my opinion is pretty solid: people are more likely to trust the opinions of friends and people they know when it comes to picking vendors or buying things. Facebook Social Ads is a first attempt at this and I think we’ll see more innovations in the near future to leverage the social web for advertising.

Notice Facebook Social Ads is unlike the Google Adsense text ads you see on MySpace. In fact, in Facebook you can only see those text ads on the third-party apps made by RockYou, Slide and the like. So comparing the two directly for their monetization effectiveness will be a bit tricky.

I thought they work. Just look at facebook. Its worth billions.

I think “ads” is the wrong state of mind, recommendations or actions or gestures make more sense.

If what you say is true, why Facebook value has reached $15bn. Is it the hype or are they making money somewhere else.

Sure advertising on social networking sites works somehow, but i have to admit – i never clicked on any ads on myspace but on some myspace layouts adds. I think the social sites and the search industry have to find new ways like Facebook Social Ads to monetize their traffic – Facebook Social Ads is a add campaign which is much more personal and customer orientated. Google adwords isnt precise enough to show you some interesting adds to leave your “sacred space” or your “virtual privacy” because myspace is something personal and private. And who wants the advertising industry in his own livingroom? If these ads would relate to friends or just visited profiles or interest groups things would look more different. Because the now provided information would be more interresting and may offer a (personalized) benefit.
The search industry (google) will find new working methods to monetize these sites. I´m looking forward to that.

Sure most of the classical google-ads dont work on these sites maybe some few and higly relevant ads work but they have to be relevant for these users. And on these social sites they dont search for information…they search for entertainment. So it would be inteligent to give the user what he wants. There should be creative ways to give the user what he wants (entertainment) while placing some companys logo somewhere. It just takes new ideas.

Interesting..
I think that del.icio.us typifies your argument. The only advertisements to be found on the entire site are on search result pages.

Those people on the social network are there to chat, not to look at ads.

users have an amazing ability to filter out ambient noise in places they frequent and i believe this also plays a part in the lackluster results of ads.

These were weak ties, they didn’t necessarily relate to each other, except through me, the common point. It always felt like I was working harder than necessary to make connections between the insights. More seemed possible, but no obvious way (at least to me) was readily available. I’ve always thought I could do more if I could figure out a way to make the connections easier to grasp.

Interesting. I can assure you that there are a lot of advertising formats that do work extremely well, Google text ads just aren’t one of them.
Regards.

And which formats you mean?

i have to admit – i never clicked on any ads on myspace but on some myspace layouts adds. I think the social sites and the search industry have to find new ways like Facebook Social Ads to monetize their traffic – Facebook Social Ads is a add campaign which is much more personal and customer orientated. Google adwords isnt precise enough to show you some interesting adds to leave your “sacred space” or your “virtual privacy”