Facebook and other social networks appear to be the holy grail of advertising, allowing advertisers to tap into personal information and the social graph for extremely targeted – and thus profitable – ads. However, a new ComScore analysis of online advertising shows that advertising on social networks yields a CPM (cost per thousand impressions) of only 56 cents on average – compared to about $2.43 for the internet as a whole. Read on for more explanations of how social networks are impacting the online advertising business.
The CPM for the internet without including social networks would be as high as $2.99 – meaning that Facebook, MySpace and others are pulling down CPM prices by about 18%. And while social networks hold 20% of all ads online, they only offer 5% of total ad revenue.
Some analysts interpret these depressed advertisement prices as a direct result of social networks, while others say it’s an indication that social networks have opened up more opportunities for ads to be displayed, thus increasing supply while demand remains steady.
Not surprisingly, Facebook is the top U.S. website in terms of the amount of ads it displays: 16.8% of all online ads in the U.S. for the month of May 2010. MySpace is in the top five with 6.8%. Taken together, Facebook and MySpace make up one fifth of all ads online while bringing in the lowest revenue.
Perhaps even better targeting that really leverages personal and demographic data along with brand building on social networks can help advertisers recoup some of the profits that are lost when they move their ads from the internet in general to a social network.
