The New York Times has a story today " For MySpace Making Friends Was Easy. Big Profit is Tougher " and CNET has a story " YouTube: Too Rough For Advertisers ". Both stories profile the amazing growth and popularity of user generated content sites. MySpace generates over a billion page views per month, more than any other site on the web, except Yahoo. But, can those page views be monetized?
The crux of the issue is contained in this quote from Ross Levinsohn, president of Fox Interactive Media, owner of MySpace. "
A sign of that challenge is seen in Mr. Levinsohn's effort to expand the use of text ads — the rapidly growing format pioneered by search engines. He has been running tests with Yahoo, Google and several smaller ad providers and has sought proposals from them for longer-term deals.
The answer he received was a shock. Not one of them, not even the mighty Google, was sure that it could provide enough advertisements to fill all the pages that MySpace displays each day, Mr. Levinsohn said. The search companies did not want to dilute their networks with so many ads for MySpace users, whom they said were not the best prospects for most marketing because they use MySpace for socializing, not buying.
On the other side of the equation, Google mentioned on its quarterly analysts conference call that they didn't book some ad revenue this quarter, perhaps a billion dollars, because they didn't have enough quality page inventory for advertisers.
MySpace and YouTube generate over a billion page views per month. These sites target the young, tech savvy, market, but advertisers are finding it difficult to target relevant ads to these random pages. In an earlier post I raised the same issue for Riya, the photo tagging site. How can advertisers effectively target an ad to a photo of "Robin, Caelan, and Devan"?
Advertisers are willing to spend billions in on-line advertising. Google has more advertisers than they have quality inventory. MySpace, YouTube, and others have billions of page views and lots of buzz...but how can the advertising be targeted? Remember, Google and other CPC companies only get paid when a user clicks on an ad...not just a view. Advertisers are also worried about being associated with unpredictable, and perhaps objectionable, content from uncontrolled user generated content sites.
Advertisers could opt for simple banner ads and pay much lower CPM rates for page views rather than CPC clicks. But, Google doesn't want to engage in display banner ads. They prefer targeted text ads that pay per click. There are billions of dollars on the table so there will be a solution...it is just a matter of time. The answer will probably be better realtime page analysis, better user profiles, better user history profiles, standards for banner ads, and Google moving to a blended model of CPC and CPM advertising.
Interesting MySpace factoids from the NYT article include;
- Membership doubled to 70 million since NewsCorp bought it
- Revenues of $200M estimated for this year
- Page views of over one Billion per month
- Employees doubled to 250
- NewsCorp has pumped $20M into MySpace this year
Interesting quotes from the CNet article on YouTube;
User-generated video sites have two things going for them, said Gary Stein, director of strategy at Ammo Marketing in San Francisco. First, these sites are attracting a large and hotly sought-after audience: males between the ages of 18 and 34.
"These sites will be totally attractive to advertisers for one reason: numbers," Stein said. "Their audience is big and growing and their demographic are young males bored with cable and broadcast TV and who are spending more time on the Internet."
"It's not a proven business model yet," said Jupiter Research analyst David Card. "There will be some advertisers who won't mind sponsoring lots of crappy content cause they want to get in front the kids who go to these sites. But there are lots of advertisers who don't want anything do with it...One thing I can guarantee you is there's not enough advertising dollars to go around."
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Really interesting post and statistics. It also seems to beg the question about extending these social networks into pure search again. If these huge and established social networks can add a search component that contains primarily user-generated content organized by their communities and sub-communities, the possibility is there for these social networking sites to offer more traditional (and higher-performing) sponsored links as revenue generators in addition to what they are doing now. Since all the social networks know what sub-communities (areas of interest) that any particular user is participating in, sponsored links could be targeted by keyword and sub-community demographic. This could be an even more targeted method than we've seen before in online advertising and a path around the nagging problems discussed here.
Posted by: SteveM | April 24, 2006 at 11:51 AM