ADOTAS EXCLUSIVE – The challenge of monetizing ad space on social networks isn’t related to a lack of inventory. With tens of millions of current users and high stickiness levels, social networking sites are easily one of today’s hottest mediums.
While in theory social networking sites have terabytes of monetizable data, the reality is that much of that data is irrelevant for advertisers. Why does it matter, for instance, who consumer X is friends with? True, one person could be recognized as ‘influential’ over others but what does it mean? Does it mean that when someone is looking to buy a DVD, they will ask that person for his or her opinion? What are the odds that, even if asked for his or her opinion, that influencer bought a DVD recently and has any idea what DVD his ‘influenced’ friend should buy?
Take the most grandiose effort so far, Facebook’s Beacon – where do they get data as to prospects’ purchases and purchase intent? They get it from advertisers’ sites. If they knew consumer X was buying a cell phone, then why did they need the advertiser data?
Leveraging social networking sites’ audience member data is a ‘low-hanging-fruit’ approach that will inevitably lead to enhanced ad space monetization for those sites. Nevertheless, there is a better solution that stands to benefit consumers, advertisers, and the sites themselves.
It all comes down to purchase-intent. When a user goes to Google, or any other search or vertical site for that matter, and types in “Laptop” or “Car Insurance” or “flight to Atlanta,” in most cases they are declaring their intent to purchase one of the aforementioned products in the near future. This is one of the main benefits of advertising on a search engine or a vertical site. Google’s success stems from it being the world’s #1 aggregator of consumer purchase-intent data.
Internet users spend roughly 5% of their time declaring purchase intent (i.e. searching) on search results pages that seize approximately 40% of Internet ad spending, and 95% of their time browsing ad-supported content (i.e. social networking sites, news sites, Web-based email sites) that are mainly unsold or sold for relatively low rates and difficult to monetize via contextual means.
While leveraging their own audience member data via increased ad content relevance (behavioral targeting) will undoubtedly reap short-term benefits for social networking communities, the long-term monetization opportunity lies with the monetization of purchase-intent data, which they will either need to buy or acquire through partnerships.
The enhanced targeting that the acquired data will provide will enable social networks to deliver better targeted campaigns that maximize advertiser ROI and the networks’ own effective CPMs. This is because purchase-intent data has been proven to deliver results.
On that note I offer a word of advice to Facebook and Myspace. Facebook – you were right to reach outside your properties for purchase-intent data. You were wrong as to the way you used the data. Rupert Murdoch – I have no idea whether and what shape a partnership with Yahoo will look like but I would advise both Myspace and Facebook to partner with a company or companies that can provide you with access to lots of purchase-intent data– data that will be instrumental for monetizing your ad space.