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In Sunday's NY Times Business Section, there was a huge article on MySpace.com called Making Friends Was Easy. Big Profit Is Tougher and I found it eye-opening....
If you don't know what MySpace is, let me give you a quick synopsis: MySpace is owned by News Corp., who bought it last year for $649 million. It has over 70 million profiles. These profiles are personalized web pages created by mostly under-30 types whLogodotcomere people can link to friends, post likes and dislikes, video, interests, pretty much anything that could describe you. For the corporate types that read this blog...think of it as LinkedIn for kids.
Now let's ignore some of the issues with MySpace (see Business Week article) which includes sexually explicit posts, trolling for minors, and so on...because MySpace is a social network place for over 14-year-olds. According to the NY Times article, MySpace taps into three passions of young people: expressing themselves, interacting with friends, and consuming popular culture.
I'll revisit the social impact a little later on because that's the only place MySpace can make money. Right now, MySpace is displaying more web pages than everyone except for Yahoo and theoretically can be targeted to users based on interest. However, who is buying these ads?
Quoting the article, "the company will have $200 million in revenue this year." Later on, it points out that it is charging around 10 cent CPMs for such ads. That rate is pathetic...and when you spend time on MySpace you get a ton of ads from E*Trade, University of Phoenix, Verizon, Napster, etc. -- the usual cast of characters you see on Pay for Puglsey performance network buys that are probably charging back to these MySpace advertisers on a CPA (cost per action) basis or a CPC basis.
Ross Levinsohn, president of Fox Interactive Media says, "If we can raise that by 10 cents, think of the upside." Yes, and if my cat had a college degree, he'd be a professor.
MySpace has plans to expand the advertising opportunities -- letting advertisers create MySpace pages so that kids can link to them. Say, have an advertisers put a page up for cute deodorants and then let kids link to them saying, "This is what I use to cure bad odor!" Another idea that Fox has, according to Mark Jung, COO of Fox Interactive, is to let a car dealership create a page and then sell enhancements to attract business.
Both these ideas -- plus selling plain old banner ads at a pathetically tiny CPM -- misses the point of a social network. To throw more cold water on these grandiose revenue ideas, MySpace ran testing with Google and Yahoo for search ads and then tried to get into a long term deal with them. You know what the search companies told them? You guessed it: No thanks, and according to the article, MySpace users are not the best prospects for most marketing since these kids use MySpace for socializing not buying.
Now what? First of all, if you are one of these marketers and you need credit worthy customers, you should probably stay away from running typical banner ads on MySpace. Personally, I'm a little surprised that any financial services companies are directly advertising in MySpace; I know that when I ran the 17th largest US internet advertising program, I NEVER WOULD HAVE DIPPED A TOE into MySpace.
It is the wrong demo target, even if it was a CPA deal. I wouldn't even run on a CPC basis because there was nothing I disliked more than a clicker deal that didn't convert. However, there is something to social network or conversational marketing if you are in the broadcast, movie, music, clothing, video game, and so on, business.
If I was marketing a musician or a TV show, targeted at the youth market, this is where I would advertise. Sure, I'd even run banner ads at 10 cent CPMs, but I would create pages to link to MySpace users. I'd also want to know how many people are linking and what they are saying. MySpace would not only provide great advertising opportunities, but a wealth of information and market research for their advertisers.
Creating MySpace pages for a toothpaste advertisers, seems like a bad idea that the youth of America won't get fooled into playing along with. I think they can figure out a commercial from a mile away. Using MySpace for pushing out TV shows, movies, music, new music downloads, etc., is really where social network advertising could work especially by providing critical market intelligence.
Mr. Levinsohn should forget about doubling his pathetic CPM with traditional advertisers and embrace what News Corp. bought -- a social network opportunity for the youth market the best the internet has seen since AOL from the '90s.
PardonMyFrench,
Eric
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Comments
I wonder how much disposable income the average MySpace user has?
You can do all the advertising in the world, but people must have the ability to purchase your product or service.
Posted by: Scanning Services | 04.25.06
re "monetizing" these social network sites, it seems that MySpace just inspired other people to create sites for other large and small niche markets (I counted nine in the past month)... just yesterday multiply.com announced its beta.
I'll bet these sites will find some Salon.com-style ways of offering "premium" service for a fee or in exchange for viewing an ad, with most people opting for the later
Posted by: Kare Anderson | 04.25.06
I also wonder how much it is costing MySpace to serve the ads. If they are getting 10 cents CPMs it is costing them, what 5 cents to serve them? Not much margins in the business here for selling banner ads to people that may not have much disposable income.
PardonMyFrench,
Eric
Posted by: Eric Frenchman | 04.25.06
Have you ever used MySpace?
Posted by: Natasha Robinson | 04.25.06
Of course I tested it out but I wouldn't consider myself sold on it or a user of it.
Posted by: Eric Frenchman | 04.25.06
Eric,
Thanks for the response. Often when I read articles like yours and ask that question, the answer is usually "no" or "I gave it a once over." And I think to myself "This sounds awfully familiar." Familiar to similiar articles about blogs not being worth the time of day for advertisers a few years ago and similiar to advertisers saying the same about search engine marketing even earlier. And these articles are usually from an "outsider looking in" perspective...But I'm getting off topic.
Often when I introduce people to MySpace, I tell them "As with any new medium, use it." And by use it, I don't mean sign up, click around and never return. I mean actually take part in it. When most do, they come away with the same feeling I had after using it for a few months: WOW, the potential for advertisers (within the community... not those who simply buy ads), WOM marketers and link builders is enormous. But you only see this potential if you actually use it.
Posted by: Natasha Robinson | 04.25.06
Natasha,
I agree with your post and I would have considered it in poor taste if I didn't give it a fair shot. That's why I wrote on how marketers could use it and that means not running plain old banner ads. I also have similar feelings about LinkedIn for plain old banners ads. It is about conversational marketing in social networks like MySpace and LinkedIn.
See you around,
Eric
Posted by: Eric Frenchman | 04.25.06
The section of the article talking about setting up a specific section of the site for advertising is interesting. The problem with community sites that don't have stringent moderation is that advertisers will not want to be associated with controversial views/discussions. This is where a lot of community websites have to decide on how best to moderate - too much and the punters will feel limited and the site will become uninteresting. Conversely, too little moderation leads to less advertisement possiblities or advertisement of the spamish type. Any views on how to get this balance right?
Allannon
Posted by: Allannon | 04.26.06
Eric,
Glad to here that. You'd be really shocked at the number of MySpace Pundits who have never used it.
Allanon,
In a comment on the blog post Wikis on Shopping Sites? - http://www.threadwatch.org/node/6371 - I wrote "You ask 'Or will the time to manage them outweigh the potential upside?' No, especially for large scale sites where the "bodies" are in place to manage such content - which would be similar (I imagine) to having forum moderators. Similar to how large brands are now (finally) incorporating "Blog Editors" into the ranks... I think smart brands will incorporate "Viral Managers", "Viral Scouts" or "Viral Editors" (ie: Reputation Managers) into the ranks.... Or at least hire a good company to do do this for them...." There are plenty of tools out there to track online conversations about your brand and great ways to manage what appears in search engine result pages about your brand via proactive search engine optimization.
Re: "The problem with community sites that don't have stringent moderation is that advertisers will not want to be associated with controversial views/discussions."
I agree, but staying out of fear is an even worse. Well as I alluded to above, in today's online world, you can't control the public response to a brand (advertiser shudder at the thought - lol), but you can do your best to moderate and take part in the conversation. I think that brands should be a little more open to conversations about their brand... the negative and the positive. As I say, "your worst critic is your best customer."
And if you don't take part in proactively managing your brand online by taking part in the conversation, you'll end up with critics creating your brand presence for you that you may not like... like the Rupert Murdock sites (that existed) on MySpace like this one: http://profile.myspace.com/index.cfm?fuseaction=user.viewprofile&friendID=22195968 & this one: http://profile.myspace.com/index.cfm?fuseaction=user.viewprofile&friendID=22333006.
And in Myspace the moderation is already in place because (like comment moderation) you can delete comments you don't like.
Posted by: Natasha Robinson | 04.26.06
Re- monetizing myspace, they should be looking at Cyworld in Korea, which has developed a sound business model and has attracted bigger brands such as HP.
Check my post on the topic:
http://h20325.www2.hp.com/blogs/kintz/archive/2006/04/08/883.html
Eric
Posted by: Eric Kintz | 04.27.06
Leading Silicon Valley entrepreneur and strategy consultant Sramana Mitra, outlines a strategy on how companies like News Corp. owned MySpace should charge Photobucket and all the other services that have sprouted around the MySpace eco-system.
Link: http://sramanamitra.com/blog/885
Posted by: Sumitra Menon | 05.24.07