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.