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Monetization: Social Network Advertising

ByLaurel Papworth

Online ads are dropping in price and blaming online communities. Yet social advertising rarely work because we are chatting with mates, and not to be interrupted by situationally irrelevant ads.

Social Media Monetization is becoming THE hot issue in online community chatter. Probably because companies are getting past the “why should we care?” and into “how do we get some dosh?” questions.

Social Ads are driving down the price of regular online ads:

A recent analysis by ComScore shows social networks, primarily Facebook and MySpace, have over the last year drawn an average CPM of only 56 cents, compared to the $2.43 average for the internet at large. Looking more closely, the ComScore data show that the average pricing for online ads exclusive of social-networking sites, namely Facebook and MySpace, would be much higher, about $2.99 for every 1,000 views; social sites dragged down the average online CPM by as much as 18% over the last year.

comscore

Some industry executives are concerned that Facebook and its ilk may in fact be reducing the overall pricing of CPMs, or the cost-per-thousand impressions, that are the basis for online ad pricing. (read the rest on AdAge)

The challenge is not that Facebook and other social networking sites are underpricing advertising, it’s that the context is different in online communities. And don’t think normal context – matching ads with subject keywords. Think emotional context.

If you wanted to advertise a new baby pram, you wouldn’t necessarily choose a TV show about cars or a magazine about trucks to do it, would you? And so it is online, we are used to matching ads with audience demographics. Even psychographics, thinking laterally. But what about mood? Focus and attention? At least with TV and magazines you know that at least nominally, they are there with some focus.

How do you advertise to an audience that is busy doing something contextually irrelevant to your keywords?

Situational advertising during social discussions by clintjcl on Flickr
Situational advertising during social discussions by clintjcl on Flickr

You know what I mean: have you ever been running – nay, flying – from one meeting to another and had one of those guys on the street hold out a hand and stop you with “Do you have a few  minutes to save the planet”? No mate, I don’t – can’t you see I’m sprinting here, running late?

They make you feel so guilty. But there’s a time and place for those sorts of things and about to get the sack for running late yet again is not one of those times.

I think we accepted interruptive advertising on TV – nicely snuggled down to watch Sound of Music (or in my case, Chuck) and the ads come in. We get up, get a drink and do other things. Then back when the ads are finished. We’ve been trained to be passive, mildly receptive and basically quiet and doing as we’re told.

I talk through movies and TV shows a lot and am always in trouble in our house. Are you surprised?

In online communities, we are busy, like we are rushing from one meeting to another. And it’s personal – unlike watching a movie, which only occasionally engages our heart and soul. We are chatting with friends. We don’t want to get up mid conversation and click on an ad. We’re in the middle of our own soap opera.

If you ever wonder why advertising is the lowest revenue when monetizating for social networking it’s this: we are in active mode, not passive. We are in creative mode, not receiving. Chances are we won’t even notice the ads, while we fight with our boyfriend, gossip with our mum and dig around for jobs.

Unless it’s relevant to the discussion. Or we can get a kiss.

19 Comments

  9. interesting topic. contextual for me as i am sitting on a panel discussing social media in online travel industry soon.

    i agree that context is king in this case. in online travel i think the best context for companies wanting to advertise via social media, is the context of provider referrals and location recommendation.

    tripadvisor.com is obviously exploiting this context, so it would be interested to see what the cpm is on their site.

  11. It’ll certainly be interesting to see how Promoted Tweets in (real-time) Twitter search work out for the advertiser, and how search advertising works out in other real-time search engines such as http://www.oneriot.com (my current fav for the emerging real-time search engines).

  12. Really interesting aricle, tho I disagree somewhat … if ads are contextual, I’m happy to receive them when in my social networks (eg if I’m talking to my pregnant sister & am served an ad about baby goods/presents etc I’m more than happy to explore).
    Cant argue w/ your revenue stats tho, so obviously worth greater investigation & watching how it develops over the next few months.

  13. Pingback: Social media: engage me! « Kat Online

  14. Really interesting post Laurel,

    I suspected that the social media websites, especially the larger ones like face book would have some impact on the advertising prices but not this much.

    We will have to wait and see what other implications there are over the coming months. The decline in the potential income through Adsense is going to hurt some online businesses too.

    Thanks for drawing this research to our attention.

  15. Pingback: Social Networks have lower than average Ad Rates « Social Networks Guide
  16. Pingback: Social media – engage me! | Kat Online

  19. Unfortunately ads on facebook and other social media sites it’s not that cheap any more and many believe that it’s not that effective. The good thing about social media marketing is that you don’t have to pay to run successful social marketing campaign since by making an attractive fan page and offering something unique could make your page go viral, with all the benefits…

    -Kostas

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