Sites like MySpace and Facebook have made progress with some advertisers by the sheer magnitude of their traffic and audience. But it's a work in progress, given advertisers' reluctance to associate their brands with sometimes-inappropriate user material.
New technologies are on the horizon now to help social networks appeal to these discerning advertisers.
RelevanceNow, for example, is an Australian start-up with a technology it calls "social intelligence," an analytics tool that can size up members of a community via their so-called psychographics, which classify people's attitudes and values, likes and dislikes. With the technology, a social network could segment groups of people based on details they've divulged in member profiles or blogs. The network then could target an advertisement appropriate for a specific group. The technology also could help identify people in the network with certain needs--vulnerable teenagers, for example--and then be used to invite those teens to a group on building confidence.
"Social intelligence understands users' interests even if they don't explicitly say (what they are)," said RelevanceNow CEO John Zakos, who previously helped develop search technology at the company Mooter.
This is no easy trick. On social networks like MySpace only a fraction of their millions of members participate in affinity groups, such as those that cater to motocross fans or sushi lovers, groups which could make it easier to target ads. But if the technology works as intended, a site might, for example, show an ad for a local sushi restaurant to a member of the sushi-lovers' group.
Such targeted ads typically garner higher responses from their intended audiences, and thus cost the advertiser more money. As it is now, general site-wide banner ads can dominate social networks, and those banners typically sell for lower rates.
"Those guys are getting such low CPMs (cost per thousand ads)--that's true of Friendster, MySpace and Tribe," said Paul Martino, the founding chief technology officer of Tribe.net He left to found a new ad-targeting company, Aggregate Knowledge, in 2005. "Not many advertisers want to be up on user-generated sites, because it's not where they want their brands to be. Having these affinity-based matches might be a way to bring in advertisers who are leery of social networks."
MySpace's hefty take
Still, MySpace, as the giant of social networking and one of the top five most-trafficked sites online, seems to be holding its own in the ad marketplace, drawing movie and food marketers that want to appeal to younger generations. MySpace commanded almost 15 percent of the estimated share of image-based advertisements sold online in September (not including sponsored links or search ads), according to Nielsen NetRatings' AdRelevance. That was up from roughly 7 percent in September a year ago.
Nielsen doesn't estimate sales figures, and MySpace parent company News Corp. does not break out advertising revenue for the social network.
MySpace has also increasedfor companies like Wendy's and Burger King. These profiles often feature fictional, company-created characters whose age, likes, dislikes and personalities fit in with those of prospective customers. In one example, a company-created member profile for "The King"--a character featured in Burger King ads--can sell for anywhere between $500,000 and $1 million, according to a company spokesperson.
Such advertiser profiles could get more sophisticated, too, with technology from RelevanceNow. The privately held company makes so-called chat-bot technology that could be used to create specialized virtual characters with which fans can have an instant message conversation. The technology platform, which it calls My Cybertwin, includes a number of set personality profiles, like "cheeky" or "happy," that RelevanceNow can customize into a character or corporate mascot. For example, it could create a Bart Simpson character that fans could chat with online.