January 14th, 2009 by Nils Maier
After Thestrategyweb.com had explicitly published the survey’s results of Community Monitor 2008 for Brain-Injection consulting and the Cologne Business School, I would like to take a closer look on the presented profits models of each network. The survey’s results show a fresh a quite sober picture. Banners are still the prevalent marketing tools in social networks, but at the same time brand’s marketers appeared to be somehow completely ignorant of the fact, that those kinds of advertising are actually inefficient in the realms of social media. Myspace and Google have had their experience, e.g. the click rates of banner ads in Dickschiff social network is sinking continuously:
The ads’ so-called click-through rate plummeted from one in 100—a decent return by Web standards—in 2006 to one in 1,000 in 2007. “Users became more or less desensitized to the advertising,” says Seremet, a veteran of Take-Two Interactive (TTWO) and now president of video game publisher Green Screen. “You won’t make money on it.”
Google was quite unhappy about the development, considering that the internet empire based in Mountain View, California had promised different numbers, when it bought the sole commercialization rights in 2006 for the News Corp. network for almost $ 900.000.000 (article).
Trouble is, Google pays News Corp. for that right even when the ads don’t generate much, if any, revenue. “We have found that social-networking inventory is not monetizing as well as expected,” said Google Chief Financial Officer George Reyes…
This development is certainly not specifically for Myspace, but rather it applies to the whole networks. I agree and support the comment made by the authors of the survey:
“We assume one of the reasons is that the advertising industry needs time to adjust to new ways and possibilities of advertising in Web 2.0.”
Firstly, marketers must learn to actually listen in social media. Hence, after all the years of doing the talking, it’s now high time that they go into open dialog with the consumers. Invitational ads as banner can certainly be a medium to connect users or consumers to brand community etc. but the dialog with consumers should be the core focus.
Unfortunately, if it’s about profit models, then a central investigation object is missing in this analysis. Brand communities, Fan pages or sponsored groups should have been definitely subjected to the analysis. After all there are excellent examples, which accentuate, how important and meaningful these advertising forms are in social media. German version of MySpace is one of it and for me Jägermeister and Niveacamp of Beiersdorf stand out the most.
Even StudiVZ is successful with its sponsored group of Brands4Friends. This shows again how meaningful a brand community in social networks can be used as an oriented dialog marketing tool.
Well I do think that the survey lacks in the pivotal choice of investigation for profits models of social networks. Since the future of profits models lies for certain also in the area of brand communities.
Profits models like, e.g. Membership fees are certainly not for the big networks. It’s quite different for niche products like the business networks Xing or Linkedin. There, users are pretty concrete about their value added, which they expected from the usage of these networks and therefore willing to pay the fees. On the other hand the value added in Facebook&Co. is much more diffuse.
It’s quite interesting as well that 26% of the investigated networks do actually offer the integration of shops and this development has potentials, which yet to be fully exhausted. A good example from social media E-commerce is e.g. Brands4Friends and also edrugsearch.com. The American search engine for pharmaceuticals had huge success with the implementation of a community. It’s not of importance if at first the shopping and then the network or vice versa, since the outcomes would still be the same. Communities and E-Commerce can have a successful relationship and as former StudiVZ CEO- Markus Riecke said to this connection:
“Online Marketing is easy there, since user’s interests equal the offers”. Therefore shops can certainly be the profits driver for the big networks.
To sum it up: In my opinion the profits drivers lie in the future of social networks in the brands communities and in the alliance with E-Commerce. These two advertising forms are the closest as tools to generate an adequate successful marketing in social media, hence creating a profitable model for social networks. Overall, the future success of big communities would surely lie less in the area banner ads as well as membership’s fees.
