I recently posted our success, or lack thereof, advertising over on Facebook. In the post I pointed out that it could very well be the lack of knowledge on my part, but I posted our numbers and usually numbers don’t lie.
Today I was forwarded a great article from one of my good friends, Simon, with the title of “Google’s Loss is Murdock’s Gain“. In this article, it speaks of Google’s lack luster earnings and recent stock drop, along with what Google says is one of the main causes.
“We have found that social networking inventory is not monetizing as well as we would like,” said George Reyes, Google’s chief financial officer, implying that the sites on which the minimum payments are due were social networks. By far, the largest social network on which Google sells ads is MySpace, which is owned by Mr. Murdoch’s News Corporation. In 2006, Google agreed to a three-year deal to sell ads on MySpace, committing to pay a minimum of $900 million.
This falls back to my gut feeling about social networks, the user demographics and their spending abilities. Here’s an example:
Let’s say you put a shopping strip across the street from a University. In this shopping center, you have Mercedes Benz, FAO Shwartz and Saks. While there will definitely be some sales from students, most will walk right past on their way to Fraternity or Sorority houses, local bars or music hot spots.
I know some people have said they do well with social advertising, but when a company like Google openly states they are losing money through advertising in social networks, then you can bet your ass that your chances aren’t all that great. Straight from the horses mouth:
“We have a huge amount of social networking inventory, including the MySpace relationship,” Mr. Brin said. “I don’t think we have the killer best way to monetize social networks yet. We are running a lot of experiments and we have had some significant improvements. But some of the things we were counting on in Q4 didn’t pan out. There were some disappointments there.”
Reading this makes me think even more that Izea’s SocialSpark has a huge chance to be the flop of the year.