The company plans to extend its new advertising platform beyond News Corp websites such as MySpace

News Corp has announced plans to enter the online advertising market, saying it will roll out a platform across its own websites – and sites belonging to other companies – in the first half of next year. Peter Levinsohn, president of Fox Interactive Media (FIM), said the platform – known internally as FIM Serve – was initially built for MySpace, the social networking site owned by News Corp, but would ultimately have a broader reach. “We’re well down the path in terms of discussions with some of the other News Corp properties to do ad serving,” Mr Levinsohn told the Reuters Media Summit in New York. “Ultimately we’ll take the company off network and become an ad network for assets outside of the News Corporation empire.” Mr Levinsohn said that FIM was already in discussions with companies outside News Corp, the parent company of Times Online, and that the new platform could be ready by the first half of 2008. He added that the platform served only display ads – which account for the majority of the advertising revenue from sites such as MySpace, and that the new venture would not conflict with an existing arrangement with Google to serve MySpace’s search ads. FIM’s announcement comes after a wave of frenzied purchasing of ad platforms by internet companies keen to capitalise on the burgeoning online advertising market, which is predicted to grow to $48 billion globally by 2009. European anti-trust authorities are still scrutinising Google’s $3.1 billion purchase of DoubleClick, announced in April, while Microsoft bought aQuantive, a DoubleClick competitor, for $6 billion, in August, and Yahoo! acquired the New York-based ad auction site Right Media in in July. MySpace also recently announced plans to target more closely the ads it serves 110 million users by gathering information from interests expressed on profile pages, for instance movies or sport. Facebook, MySpace’s main competitor, said earlier this month that it would let users send messages to friends with advertisements attached, advising, for instance, when they had made a purchase online – a move that has been criticised by privacy campaigners. Mr Levinsohn said that he used both MySpace and Facebook, and that he thought there was room for the two sites to co-exist. “I use them for different things…I think we’re seeing an ‘uber-user’ develop that is using both,” he said.  

Compliments of Jonathan Richards, Times Online

It’s likely to be one of the most talked-about ad deals of the year. The company they are jockeying to sign up with is attracting 200,000 new users a day. Last week it was valued at $15 billion (£7.3 billion), though it has yet to make a profit.

Facebook is a three-and-a-half year old “social network” site that offers people a way of communicating with their friends online. So far, some 50m people have signed up to it. The company says it expects to break even this year.

Last week, Microsoft beat Google to buy a small stake in the firm, valuing it at $15 billion — more than twice as much as British Airways, a company that made a profit of $602m last year.

For some, the deal indicates a return of the “irrational exuberance” that former Federal Reserve chairman Alan Greenspan identified in the mid-1990s — an exuberance that ended when the dotcom bubble burst in 2000.

Facebook is the latest in a series of ever-bigger deals for a new generation of so-called web 2.0 companies.

Once again, internet start-ups with lots of buzz — but next-to-no profits — are being snapped up for huge sums by the world’s big media and technology firms.

For others, including Microsoft, the prices are not irrational but a concrete sign of the value of online advertising.

In recent years, internet advertising has soared as advertisers have shifted more and more of their spending from television, newspapers and other traditional media to a host of websites.

Online advertising is now a $16.5 billion business in America, according to Jupiter Research. Shoppers spend 10% of their money online. Compared with mature advertising markets such as TV (worth $74 billion in America), online advertising spending remains small, but it is growing by about 14% a year, and by 2011 it will be worth $32.1 billion.

Only a small slice of this goes to “social network” sites like Facebook and its larger rival MySpace (owned by Sunday Times parent News Corporation).

This year, according to eMarketer, $900m will be spent advertising on social-networking sites in America and $335m elsewhere. The growth of these sites is phenomenal. Facebook believes with Microsoft’s help it can reach 300m users worldwide in the next few years.

“It’s anybody’s guess how big Facebook will get,” said John Delaney, an analyst with the Ovum consultancy. “But 300m doesn’t sound completely ridiculous.”

Other sites with similar features to Facebook and MySpace have failed to take off — the British site Friendsreunited and America’s Friendster have both been left behind. But the success of Facebook and MySpace shows “there is a market for people to interact on the net in a similar way to the way they interact in real life”, said Delaney.

Advertisers, too, are increasingly enamored of the sites.

Carlton Cribb, the digital buying director at Zed Media, a London ad agency, said clients now see online sites as an intrinsic part of their advertising strategy.

“In the past couple of years there has been a major change from the clients’ perspective,” he said. “Online was kept very separate from the rest of the budget. Now online is another viable medium for reaching their audience — it’s part of the media mix.” A part of the mix that is growing swiftly.

Social networks collect a lot of personal data about their users. People share their taste in music, books, films, their political views as well as their location. All this information can potentially be turned into well-targeted ads. The danger is that users may turn against the “commercialization” of the sites.

When Google bought YouTube, the video-sharing website, Delaney said there was a lot of complaining from users, many of whom warned the company to stay away from Facebook.

“We heard the same sort of stuff when News Corp bought MySpace. People moan but they still use MySpace. It’s not the first site to put ads on its website. People understand that they get a lot of cool stuff for free on the internet because it carries ads,” he said.

But the internet is a two-way street, and advertisers now have to figure out how to reach an audience that has the power to talk back in a way that was denied them with more traditional forms of ads.

“That’s the promise and also the danger of social networks,” said Delaney. He points to the success of Arctic Monkeys, the indie rockers who built a following on MySpace.

“They were selling their brand. People will engage with you on a very deep level. The problem is that you are not in control of what is out there.”

Some advertisers have stopped using social-network sites, concerned that their ads will come up alongside unsuitable material put up by the sites’ users.

Cribb said these were problems to which the sites and advertisers were now finding solutions in what are still early days for a rapidly changing medium.

When Facebook boss Mark Zuckerberg started the site it offered simple web pages for college students to list information about themselves and send messages to friends. Increasingly the site and its rivals offer an array of services, from e-mail to online photo galleries that have historically existed independently.

The aim is to make Facebook the first port of call for internet users in the way that many people now have Google as their home page.

It’s not a new strategy — AOL tried something similar and failed and Yahoo, which also courted Facebook, has a similar approach. But Facebook has the buzz and the momentum to more than rattle its rivals. As it adds new services, advertisers will be watching developments as closely as Facebook’s users, Google, MySpace and Yahoo.

Unlike the first internet boom, “big media” has in the main fought shy of paying huge prices for online firms. News Corp bought MySpace in 2005 for $649m and more than recouped its investment with an ad deal with Google worth $900m over three years.

For Microsoft the $240m investment is chump change. But it marks a significant evolution for the software giant as it increasingly moves its muscle online. Whether or not Facebook lives up to its $15 billion promise remains to be seen.

Dominic Rushe is a writer for the Times Online

Compliments of the Times Online