Six Pixels of Separation - The Blog
February 8, 2008 8:33 PM

Online Social Networks And Advertising Don't Mix

With all of the excitement surrounding online social networks like Facebook, MySpace and Bebo, a couple of chinks in the armour are already appearing. Most recently, Mark Zuckerberg appeared on 60 Minutes and said that advertising is the main revenue stream that he foresees for Facebook's success (you can watch the whole interview online here: Facebook: The Entire ‘60 Minutes’ Segment). Then, today I noted two news items. One from Business Week titled, Generation MySpace Is Getting Fed Up, and the second is an editorial piece from MediaPost - The Past Repeats Itself - Social Media Needs Advertising. Two very different ways of thinking.

In the middle of all of this, it looks like usage of online social networks is either stagnating or staying the same (i.e. no huge growth like the last quarter).

Here's what we know according to the Business Week article:

"The average time spent per user on social networks has fallen 14 percent in the last four months, according to ComScore. MySpace, the No. 1 social network, has seen its traffic fall from 72 million users in October to 68.9 million in December. 'What you have with social networks is the most over-hyped scenario in online advertising,' says Tim Vanderhook, CEO of Specific Media.

That said, advertising on social networks is growing fast: eMarketer, a research firm, expects advertising on social networks to surge 75 percent to $2.1 billion this year, up from $1.2 billion in 2007. But could it be that advertisers are late to a party that's ending? Perhaps. Business Week calls the projection 'unrealistic', because aside from slowing growth, advertisers and ad network operators say social networking users are becoming less responsive to ads. If that trend continues, social networking could end up just another niche market, 'smashing hopes and valuations across Silicon Valley.'"

There might be another correlation that has some Bloggers a little antsy to spike the wooden stake in those nasty Vampire bites forever: the more advertising and marketing that is done in online social networks, the more people will reject it, limit their use and/or leave the environment entirely.

I'm not buying that.

Media channels have always been ad-supported. I also don't think that overall Internet usage was affected by the onslaught of online advertising - from banners and email to search and affiliate marketing - we're being inundated from every angle, and yet online - as a media channel - continues to grow with more and more adoption with newer advertising technologies being introduced all the time.

Do I think Consumers love having ads in every corner of their media experience? No. Do I think that people accept the advertising as a cost for all of this free stuff? A little bit.

Let's all take a nice long breathe. Online social networks are new. This is not the end - it's not even the beginning. No one is certain where the revenue models are for online social networks, and no matter where we find them, there will still be many forms of advertising and marketing as part of the mix.

Well-targeted messages that inspire and inform are a good first step in rectifying the current hiccups.

By Mitch Joel