Last week I began asking if social networks can be effectively monetized. The discussion was sparked by Google’s inability to meet Wall Street’s estimates. Google’s primary explanation was that social networking sites were not monetizing well. It was an indirect shot at MySpace who yesterday said they were satisfied with the yearly growth in MySpace which posted revenue of $233 million. Overall revenue was significant but if you view the advertisements that are displayed on the site you may question the value.
MySpace is also much more aggressive with their advertising opportunities by enabling brands to literally brand the entire site. I tend to be fairly critical of these types of branding strategies but then again if you paid me half a million I’d be more than happy to brand this site. I’m also sure that MySpace is bringing in more than half a million for large branding deals. While the social networking space continues to grow, the Wall Street Journal suggests that it isn’t growing fast enough.
Recent reports have shown that the CPMs for social network applications most frequently fall below $1.00. I consistently reiterate the importance of non-traditional advertising. Instead of using banner advertising, developers should be partnering with larger brands to provide custom branding opportunities. By forming relationships with brands, application owners can earn well beyond the $1 CPM that they earn with other advertising solutions. Have you heard of any other advertising models that are effective at generating revenue on social networks? Would you pay to use a social network?
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successful free apps can generate a large social network, and then you convert 1-5% of them into paid subscriptions while selling the rest of them one-off products, trying to create a marketplace between them where you extract a fee (craigslist/ebay style), internal advertising and context-sensitive CPC advertising, and maybe even a link to a tangible product that can be sold in retail stores.
there are so many ways to launch a new social network with an eye to the above, but that's not to say you could monetize FACEBOOK in all of these ways. Facebook is "kid stuff" but good for them, if the kids are united they will never be divided (that's an old punk rock lyric there)
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http://gigaom.com/2008/02/05/who-will-control-a...
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You have omitted the fact that many brands opt for sponsored pages on MySpace because this allow them to create bespoke branded experiences within the social network.
Much of marketing is about extending brand associations and banner or text advertising cannot deliver this as effectively as images and video can.
My take?
The future of social advertising is in branded content.
The Future of Social Media Advertising
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