Advertising On Social Networks
A recent article in the Red Herring asked the rather pertinent question, Social Networking, So What? pointing out that while “Social network providers build highly engaging Web sites that have managed to rope in the majority of U.S. Internet users, but they still haven’t managed to find a way to turn those millions of users into a steady influx of greenbacks from advertisers.”
This was based on a recent report from IDC, Social Networking Services in the U.S. – Popular, Yes, But How to Monetize Them?, which stated that social network operators are only beginning to learn how to monetize their services. Few offerings currently generate income in proportion to the media attention they receive. However, the popularity of social networks will eventually translate into revenues. IDC estimates that social networks only made about $400 million in revenues in 2006, but could make as much as $1 billion this year.
To generate new revenues in the future, IDC expects that most social network services will employ a mix of business models, including advertising, subscriptions and e-commerce. Of these three models, only advertising scales well enough to make social networks interesting for portals and major media companies.
The New York Times recently ran a story on Facebook users banding together to force Cadbury to restart Wispa which it had discontinued about four years ago. Just another indication that it is becoming essential for companies to monitoring blogs and other online discussions for feedback on their brands and providing them with information about coming products, as well as placing so-called viral advertisements on video-sharing sites. Take the case of South African winery Stormhoek for example.
By virtue of the sheer audience that such mediums command, it is a treasure trove for companies looking to test drive products, launch products, seek feedback on current products, etc.
This however would imply a change in advertising as we know it - the Internet by dint of its inherent characteristics deserves more than your simple banner advertisements.
Related reads:
Facebook’s new advertising strategy - predicting your interests
Innovations in online social networks
Filed under: Business, Digital culture, Ideas & Innovations