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Web 2.0 is a bust – Advertising doesn’t work


NewsFlash! From 24/7 Wall Street

Social Networks Don’t Work For Advertisers: Web 2.0 Is A Bust (GOOG)(TWX)(NWS)

Perhaps someone could have figured this out a year ago, Social networks like MySpace, owned by News Corp (NWS) and Facebook are poor targets for marketers.

No wonder. A social network is a patch work of millions of largely unrelated people posting private and uninteresting things about themselves. Shut-ins who put up their own web presences on the networks are probably the only ones who look at those listings.

Unlike web portals ala AOL, owned by Time Warner (TWX), where content is organized into neat groups, there is no way to find discrete demographic or content sections at social networks. Search advertising, led by Google (GOOG) is even more targeted, matching advertisers with search results.

According to The New York Post “Advertisers in the US will spend $1.4 billion to place ads on social-networking sites this year, down from an earlier estimate of $1.6 billion, eMarketer said.” The research firm also revised down its revenue estimates for MySpace and Facebook.

The news is another indication that the largest sites in the Web 2.0 world are a failure. The other huge category in this part of the online industry is video, with YouTube, owned by Google (GOOG) as the leader in visitors. Even management at the search company says it is still working on a way to make money on the website. Given that most of the content is low resolution and posted by amateurs, that is not going to happen.

Web 2.0 is a bust.

Douglas A. McIntyre

Maybe someone should explain to Douglas et al that it’s not the only Revenue Model in town? Here’s a blog post of mine on business models in social networks, but there’ s others on here and elsewhere… And social networks are a poor target for marketers? What ever happened to other ROI such as brand recall and engagement? Where do they find these guys?

Some background on 24/7 Wall Street:

24/7 Wall St., LLC is a Delaware corporation set up to run a financial news and opinion operation with content delivered over the Internet. The company currently has its content picked up at websites including TheStreet.com, AOL Finance and BloggingStocks, The Wall Street Journal online, MarketWatch, and StockHouse.

The company publishes about 35 pieces of content a day and has readers thoughout North America, Asia, the Middle East, and Africa.

The editors of 24/7 Wall St. do not own securities in companies that they write about. Other writers may have positions in companies and these are disclosed in their articles.

24/7 Wall St. is not an investment advisor, and the content of the site is not an endorsement to buy or sell any securities. Articles are simply the opinions of the writers.

*giggles naughtily* Ok I admit, I’m linkbaiting. Heh.

Laurel Papworth

Named by Forbes™ Magazine in the Top 50 Social Media Influencers globally, named Head of Industry, Social Media (Marketing Magazine™) and in the Power150 Media bloggers (AdAge™). CERT IV Training and Assessment certified trainer (Diplomas and Certificates etc) Adult Education. Laurel has manager Facebook Pages for Junior Masterchef, Idol, Big Brother etc. and have consulted on private online communities for banks Westpac, not for profits UNHCR & governments in SE Asia. Lecturer, social media, University of Sydney for 10 years and Laurel has 11,000 online students. Laurel Papworth personally connects to 6 million followers online and has taught around 100,000 people in the last 10 years how to be social media managers.

9 thoughts on “Web 2.0 is a bust – Advertising doesn’t work

  1. Advertising not working in social networks sounds like a recommendation to me.

    I remember downloading Mosaic right at the beginning and not seeing any ads! Seemed pretty cool!

    Ads didn’t make it cooler. But they helped ensure VC’s would put money into tech.

    So QED – the reason we need a business model is so that people will want to invest. Most of the geeks that I know are like most of the songwriters that I know… they would do what they do regardless.

    (Full disclosure, though: I am an investor in Vquence, a company that is developing metrics capabilities for socialized video. Why? Because brand managers need solid information to justify investing in campaigns within social networks. And the information that is out there at present is not very helpful)

  2. aye its just that advertising is the worst revenue model. there are better ones that have VCs jumping for joy.
    MySpace makes 2.17 per year per member and only have advertising for revenue. CyWorld (SKTElecom) with nearly as many members, make 3x that (Habbo, 17x that, less members) and both have zero advertising. Makes one think no?

    Only NineMSN thinks the future is in video ads 🙂

  3. From the link to an old blog post that I gave above:

    “Advertising tends to be outperformed by other revenue streams. CNN Money found that MySpace makes $2.17 per member per year from advertising, whereas South Korea Telecom’s Cyworld (90% of South
    Korean’s in their teens have signed up) makes $7 per user per year ($300,000 per day). However in SKTelecom’s Cyworld case, there is NO advertising, the revenue is from virtual goods.”

  4. What ever happened to other ROI such as brand recall and engagement?

    That’s exactly where online advertising went wrong. The main ROI is measured in clicks, not recall/brand awareness, not positive view of company, etc. So essentially online advertising shot itself in the foot – no other medium has to make people buy on the spot.

    You don’t get junk mail in your letterbox and immediately run out to buy a TV. But that’s what online advertising expects.

  5. Social media is not designed for advertising but rather it is designed for marketing, and you need a long term marketing plan. You are correct that is you send advertising message to the people within a social media site it will not work. You need to develop a relationship with the people within your network of people and begin a long term marketing plan that will span; 6 months to a couple of years depending upon your market. Social media is not a quick sales medium!

    Direct advertising within a social media setting will not work. You will get the general 0.01 to 0.05% response, but my clients are finding that if you build a relationship with the people within the social media network by providing useful content to them, they begin to trust you. Social media is all about providing useful content to people to build that relationship. Let me ask you; is a long term relationship more valuable than someone who clicks on an ad? We think so!

  6. Guys should check out this new social network www.Formvote.com , it’s pretty awesome.

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