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.
4 comments ↓
Your argument is that because Google can’t, nobody will be able to…? Google has innovated over the years in a number of ways: social networking isn’t one of their strong suits, really. They’ve mostly bought companies to make up for their lack of innovative ideas on that front; in fact, many of the technologies that we are seeing these days from Google are from acquisitions… So I doubt that Google is the final word on this issue…
Also, myspace is a terrible place to advertise: the people on it aren’t there for buying or selling, they’re often minors or students, they rarely have a lot of disposable income, and the products they buy rarely have a wider interest group outside their own niche. PLEASE…
Social Networking on its own isn’t going to make many people rich; but when combined with good quality content from good bloggers, the two are likely to be a very good combination…
Just my 2c.
Kenneth
I would never say Google is innovative with other technologies by any means, but they do have some very smart people in their corner and their single point of survival is through their advertising platform. So if Google can’t suck “ad money” out of social markets, then I would say it isn’t a very good advertising medium. Plus I have had my own hunch about social networks and I’d like to think of myself as somewhat smart.
Social networks are definitely good for “branding”, but for the average online advertiser, it’s just a waste of time. It seems like anything tagged with “social” has a lack luster performance with regard to making sales (stumbleupon, digg, myspace, facebook…). Social networks are generally comprised of the younger crowd that isn’t online to spend money. You mentioned Myspace users are minors or students, yet, facebook started as a network of college students. But I do agree that myspace is probably the worst.
I’d say it will probably work well for a few markets, but I’d rather lost my ass to click fraud through google or yahoo than spending anything with social networks. Either they’ll figure out a way to make it work or eventually we’ll see a swing of less focus in the social markets. Popularity doesn’t pay the bills!
Thanks for the 2 cents Kenneth!
What’s interesting to me is Sergey’s quote, “I don’t think we have the killer best way to monetize social networks yet….”
Specifically the “yet” part.
Here you have these sites with loads and loads of visitors and people are scrambling everywhere to monetize these mediums. It’ll be interesting to see how it all plays out.
I do agree with Ron, though. Beyond hoping for some type of click-through traffic (which obviously hasn’t been working even for Google), I really don’t see the value (other than branding) in advertising on the huge social platforms.
Does anyone have a success story about this?
I have an article on my blog about the horror stories of starting an account with facebook. Seems it is the ‘Hotel California’ of social networking :/
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