After reading Justin Smith's Post on Inside Facebook about CPM rates - it got me thinking. I would think that getting advertising dollars would be one of the primary reasons for developing a popular social networking application, so a high eCPM would be the key to monetization. Looking at the huge differences in the values he reported, I wonder why such a disparity exists? Are high CPM rates really achievable by advertising networks resulting in real profits for social networking application developers?
I think high CPM rates are possible - but there are certain things ad networks need to keep in mind.
1) The advertising must be relevant. A teen myspace user looking for some entertainment will not be interested in an ad to purchase furniture. What is relevant usually are ads for other cool applications similar to the app that he/she is currently using.
2) The advertising must be targeted by demographics. The beauty of social networks is the information you have available to you - Use it!
3) The advertising must be targeted by topic. Someone playing a poker game application will probably be interested in a BlackJack game application - and not a celebrity gossip news application. Advertising networks should keep this in mind, and be sure to show that blackjack advertisement more often on that poker application than other ads.
I believe that these social ad networks are evolving slowly - soon they will have figured out the optimal way to serve ads, and I expect average CPM rates to climbs steadily.
Sunday, April 27, 2008
Friday, April 25, 2008
3 Classifications of Social Network Advertising
I classify social network advertising to come in three major forms:
1) Direct Advertising that is based on your network of friends
2) Direct Advertising placed on your social networking site - usually uses demographic information from your profile.
3) Indirect Advertising - usually building a brand - by creating 'groups' or 'pages'
Let me dig deeper into each one of these.
The first format can be the most effective but also causes the most controversy. Heard of the facebook beacon project? That would fall into this category. Based on an action your friend has taken, you might see a message in your news feed saying 'Hussein has just bought a 'RadioHead CD from MusicWorld'. I definitely consider this a form of advertising and it is using your friends to influence you. This can be the most effective means as often people make decisions to purchase something or do something based on their close group of friends. However, there is also a lot of controversy surrounding this as it can be considered exploiting the personal relationships you have with your friends and also raises privacy concerns.
The second format is what you would consider 'normal' advertising. Just like you see google AdSense or banner ads on many many sites, this is the same thing except on a social network site. You can see these - for example - as a brick in the top right of myspace pages, or as a banner on the left of facebook profiles and so on. There are two differences however. One is that these social networks can take advantage of demographic data on your profile and hence target the ad directly to you. Secondly, these types of ads can also be placed by individual developers on their application pages. They have access to the same data and can generate income for application developers giving them further motivation to create apps.
The third format I called indirect advertising but perhaps that is not the correct word. Many times a company will use this method specifically as a marketing technique - the difference is that it is not 'in your face' without you asking for it. It is usually a 'page' or 'group' that they have created that you can choose to join. These can quickly grow in numbers of subscribers and fans and become a very effective marketing tool.
No matter which format or combination of formats your company chooses - realize that it will most likely be far more effective than traditional methods. The very nature of social networking creates a more personal feel and - although this is open for debate - creates a more comfortable setting for marketing your product or service.
1) Direct Advertising that is based on your network of friends
2) Direct Advertising placed on your social networking site - usually uses demographic information from your profile.
3) Indirect Advertising - usually building a brand - by creating 'groups' or 'pages'
Let me dig deeper into each one of these.
The first format can be the most effective but also causes the most controversy. Heard of the facebook beacon project? That would fall into this category. Based on an action your friend has taken, you might see a message in your news feed saying 'Hussein has just bought a 'RadioHead CD from MusicWorld'. I definitely consider this a form of advertising and it is using your friends to influence you. This can be the most effective means as often people make decisions to purchase something or do something based on their close group of friends. However, there is also a lot of controversy surrounding this as it can be considered exploiting the personal relationships you have with your friends and also raises privacy concerns.
The second format is what you would consider 'normal' advertising. Just like you see google AdSense or banner ads on many many sites, this is the same thing except on a social network site. You can see these - for example - as a brick in the top right of myspace pages, or as a banner on the left of facebook profiles and so on. There are two differences however. One is that these social networks can take advantage of demographic data on your profile and hence target the ad directly to you. Secondly, these types of ads can also be placed by individual developers on their application pages. They have access to the same data and can generate income for application developers giving them further motivation to create apps.
The third format I called indirect advertising but perhaps that is not the correct word. Many times a company will use this method specifically as a marketing technique - the difference is that it is not 'in your face' without you asking for it. It is usually a 'page' or 'group' that they have created that you can choose to join. These can quickly grow in numbers of subscribers and fans and become a very effective marketing tool.
No matter which format or combination of formats your company chooses - realize that it will most likely be far more effective than traditional methods. The very nature of social networking creates a more personal feel and - although this is open for debate - creates a more comfortable setting for marketing your product or service.
Thursday, April 24, 2008
Purpose of this blog
We all know the size of the Internet advertising market is huge... and growing. Estimates by the Kelsey Group put the Global advertising market at $45 Billion for 2007 (7.4% of the total global advertising market) but expect it to grow to $147 Billion by 2012!
We all know the number of people on social networks is huge... and growing. Estimates puts the worldwide Global active memberships around 250 million people - primarily dominated by the top 6 sites (in order of size) - myspace, facebook, Hi5, Friendster, Orkut, and Bebo. As for the number of total page views on these sites, it is difficult to say.
Do these mesh together?
That is the question this blog is here to answer - along with the many other questions related to social network advertising. Can advertisers use this phenomenal social networking platform to promote their products? Can the unique and personal relationships between members of social networking sites be 'exploited'?
I will do what I can to stay on top of news in the industry - whether it be comscore reports, facebook beacon experiments, or myspace launching an ad network. I welcome your feedback at all times as I tackle this complex and interesting topic.
We all know the number of people on social networks is huge... and growing. Estimates puts the worldwide Global active memberships around 250 million people - primarily dominated by the top 6 sites (in order of size) - myspace, facebook, Hi5, Friendster, Orkut, and Bebo. As for the number of total page views on these sites, it is difficult to say.
Do these mesh together?
That is the question this blog is here to answer - along with the many other questions related to social network advertising. Can advertisers use this phenomenal social networking platform to promote their products? Can the unique and personal relationships between members of social networking sites be 'exploited'?
I will do what I can to stay on top of news in the industry - whether it be comscore reports, facebook beacon experiments, or myspace launching an ad network. I welcome your feedback at all times as I tackle this complex and interesting topic.
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