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Wednesday, June 25, 2008

The cynic is right

I had almost given up on the prospect of social networks ever making money. Targeted ads? Hardly work, so long as it doesn't exactly settle the question of whether targeting, even if it avoids the worst of users' privacy concerns, will ever be able to punch through the attention barrier. Now I get an endorsement from Technology Review.

“Advertising on Google works because visitors come to Google looking for specific information. If a user who types "scooter" in the site's search field is hoping to buy a scooter, the keyword ads that appear at the right of the search results can be more useful than the results themselves. In social networks, on the other hand, users show up to find friends; ads are, at best, irrele­vant to that goal. The click-through rates on social-­networking sites bear this out. While around 2 percent of Google users actually click on a given ad (and the number is much higher when users are conducting searches for purchasing reasons), [less] than .04 percent of Facebook users do….”
Call me a cynic. Still it doesn’t stop me from letting you in on some consensus. Before we see sophisticated databases that are applying social mapping to ad display and selection, we'll see something much more basic, like funneling people into channels that advertisers already understand how to buy. Not many advertisers want to be up on user-generated sites, because it's not where they want their brands to be. 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.

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