Developers Forum Launched

I just wanted to make a quick post to announce that AdParlor has launched a forum for facebook, myspace, and all social networking application developers to freely discuss advertising. We hope that this will be an open and unbiased forum where users will be able to freely exchange ideas and strategies for monetizing their apps. You can check it out at: http://www.devtok.com

Facebook Profile Redesign - How will it effect advertising?

There are two components to speak of when discussing how the new facebook profile will effect advertising. First, let's look at the ads put out by facebook themselves throughout the site. Secondly, we'll try and see if the facebook profile redesign will affect applications and the ads which may appear on these apps.

Let's talk about the facebook ads themselves first - These ads will now be appearing in the right hand column but beginning higher up on the page. In the current version, the ads appear in the left column but underneath the applications. This is a better placement for facebook ads as it seems to be more prominent. Have a look at the screenshot below. The blank white space on the right is where the ads will go. Although this is not confirmed, this is the feeling I got while speaking to Rebecca Sawyer of Facebook's Monetization Team at the Facebook developer garage in Toronto. Note also that the left hand column for ads is 150px wide in the current design and it seems that the right hand column in the new design has room for an extra 15px of width - this could give the standard 120x600 banner a little more white space to stand out.



Now on to custom facebook applications and ads that may appear on the new application canvas pages. Let me first mention that the canvas page will now be 760px instead of 646px - meaning that social networking ad networks should probably be offering a new ad size!

More importantly however than the width change, is how user engagement with applications will change as a result of the redesign. Applications can now have their own tab in the new tabbed profile design - as seen above. Unfortunately however, many apps will end up losing overall user engagement as they are automatically being moved from the main profile page to the new 'boxes' tab.

Really user engagement is what will effect advertising on these applications the most. It seems as if developers who take advantage of the tabs and who have an engaging application will benefit - while those apps that are not that exciting and are not updated will lose daily active users - a key metric in determining how many advertising dollars app developers can attract.

btw, the new facebook profile is still buggy and incomplete but you can try it out by going to http://www.new.facebook.com. It should be launched to the public next week!

US Social Network Ad Spending

I just came across an interesting graphic from the MIT Technology review and wanted to post it here. Users and Advertising revenues in the US. Full credit given as usual:

http://www.technologyreview.com/Biztech/20978/page2/



Looks like the data came from eMarketer - but it is definitely an interesting view of that same data.

facebook passes myspace in unique users, but what about advertising revenues?

Over the past couple of weeks, there has been a lot of talk about facebook passing myspace in terms of unique users. Comscore reported that facebook had 123.9 million unique visitors, while myspace had 114.6 million in the month of May. This was foreseeable for some time as facebook created a social networking site with superior functionality and ease-of-use. Throw in custom application development, an exciting friend news-feed, and international expansion, it was a recipe for success.

The important question for me would be, 'Does this now mean that more advertising dollars will flow into facebook?' The answer for now is a simple NO. Reason being - THE U.S.A.

The US has the highest penetration rate of any country in terms of Internet usage at 71%, and the US has by far the most mature Internet market (Consumers comfortable buying goods online, Advertisers confident in a positive ROI on their investment). This means that the majority of online ad spending is by US companies, targeting US consumers. myspace has a majority of it's audience in the US, hence the advertising dollars flow in their direction as opposed to facebook.

However, facebook should not be scared. Although I try my best not to stray off topic in this blog, some brief research into the world economy indicates that economic strength is shifting from the US to other countries, and facebook is well positioned to take advantage of International growth. In fact, facebook has recently expanded into China. China is expected to PASS THE US in terms of total internet users this year. (China is currently at ~210 Million while the US is at ~215 Million). Although it may take some time for the non US Internet market to mature , it seems that soon facebook will be passing myspace in terms of a more important statistic - Ad revenues!

In Response to 'Exec: Ad industry must think small to tap social sites'

In keeping with the trend in my previous blog posts, I have decided to comment on recent industry news - this time a post by CNET writer, Caroline McCarthy. She posted an article titled: Exec: Ad industry must think small to tap social sites

The purpose was to summarize the keynote speech by Seth Goldstein, co-founder and CEO of SocialMedia Networks. Seth made an interesting comment about click-through rates on social networking sites tanking. Now, there is no doubt that the CTR is dropping for standard ad placements on facebook (left-hand column) and myspace (top-right box), however, having dug deep into the numbers at adparlor.com I can tell you that the CTR remains high on custom applications for reasons I mentioned in my previous post.

I agree with most of the statements Seth made. For one, applications like super poke and food fight are "not important because the content is serious; they're not important because they're high-utility; they're important because people are spending an ungodly amount of time using them." Although an advertiser may question how effective their ad will be on a food fight application, the reality remains that this is where the users are - and as these users are highly engaged with the application and everything on the screen, ads displayed on these applications will get a high click-through rate and will see meaningful results.

The beauty of these application is the ability to grow phenomenally fast. When launching, for example, a new poker site, it would take a large marketing budget and a significant amount of time to grow your user base. However, on myspace 'Texas Holdem Poker' has acquired over 350,000 users in just a couple of months. Application developers can quickly own a valuable property on the internet, and if monetized correctly, they can be earning over a $1 CPM rate. That application then becomes a mutually beneficial property for both the developer and advertisers trying to tap into the social networking market.

In Response to 'eMarketer Lowers Social Networking Ad Spending Estimate'

After having read Debra Aho Williamson's article titled 'eMarketer Lowers Social Networking Ad Spending Estimate', there are a couple of quick points I would like to make.

1. In the online world, and especially in the social networking world, things are changing extremely fast - so to say that advertisers will spend 2.2 Billion instead of 2.4 Billion in 2011 doesn't change my perspective on the future of social network advertising.
   
   
2. One trend which was not mentioned in this article, is that advertisers are starting to move away from advertising directly with these social networking sites, and looking at ad networks that place advertisements into custom applications. Why is this relevant? Because it has been shown consistently that click through rates and advertising effectiveness is higher on custom applications than advertising directly with social networks. This is because the user is more engaged with an application whereas they have gotten used to 'blocking out' the ads that they know will always appear in the 'left column' or the 'top right'. Once advertisers discover the effectiveness of advertising within applications, I believe social network ad spending will go up.

       

Worldwide Internet users vs social networking users [Corresponding Advertising Markets]

There are some interesting numbers that I am always looking for - so I decided to bring them together and post them on my blog, as I am sure others will also find them useful. These numbers are taken from three sources: The Economist, USA Today, and eMarketer with some extrapolation of course.

Worldwide Internet users: 1.2 Billion
Worldwide social networking site users: 506 Million
% of Internet users registered on at least one social networking site: 42%

Worldwide online advertising spending: $40 Billion
Worldwide social networking advertising spending: $500 Million
% of online advertising dollars spent on social networking sites: 1.25%

Seems to be quite a discrepancy however, I expect advertising spending on social networking sites to increase steadily over the next few years as marketers become more comfortable with the concept and more aware of the benefits.