Hundreds of millions of U.S. consumers have adopted social networking services as a tool to manage their social connections and express themselves.
Spreading like wildfire, social networks have a stickiness among consumers that potentially make them prime real estate for advertising. However, a new report from IDC argues that sites like MySpace, Facebook and YouTube have not yet realized their full potential as advertising media.
According to IDC's assessment, social network operators are only beginning to learn how to monetize their services. Few offerings currently generate income in proportion to the media attention they receive.
However, the popularity of social networks will eventually translate into revenues. IDC estimates that social networks only made about $400 million in revenues in 2006, but could make as much as $1 billion this year.
To generate new revenues in the future, IDC expects that most social network services will employ a mix of business models, including advertising, subscriptions, and eCommerce. Of these three models, only advertising scales well enough to make social networks interesting for portals and major media companies.
So far, however, little advertising can be found on social networks. And while the issues underlying slow ad sales may eventually be solved, some services may never be able to attract brand advertisers on a large scale, according to IDC.
"Social networks cannot guarantee a brand-safe environment. Advertisers don't want to see their ads displayed alongside illicit content, for example," says Karsten Weide, program director of IDC's Digital Marketplace: Media and Entertainment. "The dilemma for social networks is if they start to control what content users can post, they will lose popularity, which is what attracted advertisers in the first place."
I believe that the failure of marketers to fully utilize social networking platforms for advertising is a direct result of the inept ad agencies that they hire to guide their online strategy. Obsolete approaches, like banner ads as an example, deliver a predictably poor ROI. Regardless, legacy ad agencies stay within their comfort zone -- at the expense of their client's squandered budget.
Social networking shouldn't be viewed like the radio or television medium of a bygone era. Granted, this clarification may not be profound, but some people apparently don't see the disconnect.
Imagine going to a physical networking event in your local community and investing all your effort in designing and producing your "name badge," but totally avoiding the opportunity to open your mouth and engage the other attendees in a meaningful dialogue -- that's exactly how brand advertising is typically applied on a social networking platform.
My point: if you employ the mind of a legacy broadcast media expert -- that's operating with the mistaken belief that mass-market advertising methods are appropriate on an interactive online forum -- then frankly you deserve the pitiful results that you're experiencing.
That said, the upside for creative consumer engagement campaigns on social network sites is essentially untapped, and devoid of competitor activity. The raw potential justifies the time and effort required to experiment with new techniques that demonstrate respect for the individual -- targeting methods based upon segmentation research and content personalization.
Spreading like wildfire, social networks have a stickiness among consumers that potentially make them prime real estate for advertising. However, a new report from IDC argues that sites like MySpace, Facebook and YouTube have not yet realized their full potential as advertising media.
According to IDC's assessment, social network operators are only beginning to learn how to monetize their services. Few offerings currently generate income in proportion to the media attention they receive.
However, the popularity of social networks will eventually translate into revenues. IDC estimates that social networks only made about $400 million in revenues in 2006, but could make as much as $1 billion this year.
To generate new revenues in the future, IDC expects that most social network services will employ a mix of business models, including advertising, subscriptions, and eCommerce. Of these three models, only advertising scales well enough to make social networks interesting for portals and major media companies.
So far, however, little advertising can be found on social networks. And while the issues underlying slow ad sales may eventually be solved, some services may never be able to attract brand advertisers on a large scale, according to IDC.
"Social networks cannot guarantee a brand-safe environment. Advertisers don't want to see their ads displayed alongside illicit content, for example," says Karsten Weide, program director of IDC's Digital Marketplace: Media and Entertainment. "The dilemma for social networks is if they start to control what content users can post, they will lose popularity, which is what attracted advertisers in the first place."
I believe that the failure of marketers to fully utilize social networking platforms for advertising is a direct result of the inept ad agencies that they hire to guide their online strategy. Obsolete approaches, like banner ads as an example, deliver a predictably poor ROI. Regardless, legacy ad agencies stay within their comfort zone -- at the expense of their client's squandered budget.
Social networking shouldn't be viewed like the radio or television medium of a bygone era. Granted, this clarification may not be profound, but some people apparently don't see the disconnect.
Imagine going to a physical networking event in your local community and investing all your effort in designing and producing your "name badge," but totally avoiding the opportunity to open your mouth and engage the other attendees in a meaningful dialogue -- that's exactly how brand advertising is typically applied on a social networking platform.
My point: if you employ the mind of a legacy broadcast media expert -- that's operating with the mistaken belief that mass-market advertising methods are appropriate on an interactive online forum -- then frankly you deserve the pitiful results that you're experiencing.
That said, the upside for creative consumer engagement campaigns on social network sites is essentially untapped, and devoid of competitor activity. The raw potential justifies the time and effort required to experiment with new techniques that demonstrate respect for the individual -- targeting methods based upon segmentation research and content personalization.