Is Social Media Rampantly Monetizable?

I was scheduled to attend OMMA Social but the travel gods would not make it happen… so since I took prepared some notes for the audience, I figured I’d share them here.

Here is the description:

A Debate: Social Media Is Rampantly Monetizable vs. No, It Never Will Be Even though banners and buttons inhabit social media just as they do older forms of online media, that doesn’t mean that old methods of digital advertising are what will make social media as easily monetizable as online properties of old. While some believe that a flood of online advertising is a matter of finding social media advertising’s silver bullet, others believe that this most personal of online spaces will always make social media difficult to monetize. Online advertising experts hash it out.

We were going to address four questions, my thoughts and answers below, but first, a grid I devised outlining what marketers look for in audiences and content.

QUESTION 1:
Referring to MySpace, “You can’t ignore an audience of 110 million people.”

• First off, no one is ignoring social networking sites and in particular MySpace (NWS), which generated $750M in revenues in its last fiscal year (FIM did $900M in all), if that is being ignored, then ignorance is bliss.
• But the flip side is that you can indeed ignore it, and advertisers are in fact ignoring it: eMarketer slashed 2011 social network advertising revenue projections to $4.3B globally from $4.7B (in the US, numbers were revised downwards from $1.8B to $1.4B).
• You have to ask yourself why, and I think of a “Rock concert analogy”: you can be in the arena and experience the overall experience without having the need to step into the mosh pit. Social networking sites represent a mosh pit, you tend to come out of it with a bloody nose because of the anything goes environment of the content on those sites. This is why on MySpace, Facebook or YouTube, most pages go unsold.
• A marketer can spend $1M and get – at $0.05 CPM – a whopping 20 BILLION impressions, yet they don’t do that. They might pay $1M to be on the main page.
• Ultimately the acid test is in 2009 when the mammoth $900M deal between FIM and Google (GOOG) is up for renewal. If Google walks away from that deal, expect VCs to totally run for the hills and shun UGC and social media altogether, much like investors bailed on B2B plays after the bubble burst in 2001.

The main take away for me is that not all social networks need to be mainly ad-based. Look at Linked In.

QUESTION 2:
“Corporate behavior…among the largest advertisers for whom marketing is not the dominant expense…isn’t going to change in the near term to embrace social media in a significant way in terms of the hundreds of millions or billions of dollars they spend on other media.”

• People don’t make decisions based on what is optimal or logical, people don’t want to get fired. If an agency buys an ad next to a potential risqué, someone will end up losing his or her job… the risk/reward ain’t there.
• No economic determinism: Agencies fear that 1-to-1 social media advertising could eliminate their role, even if this is not the case, the perception alone is a risk and will create resistance.
• Nuance: I do not equate social media with online media, so while I agree that the risk of social media outweighs the gains and returns, I disagree about the gains and upside of new media. I think that you are going to see an acceleration of dollars flowing online thanks to this recession and the challenges US companies will face in an ever-growing global marketplace.
• But, that won’t translate to social media which includes more progressive elements such as social networking sites, UGC, blogs, etc.

QUESTION 3:
“People will never accept advertising intruding into their social space. What characteristics will make brand messages acceptable in the social environment, and how marketers must change what they think of as advertising.

• Advertising is never fun, or enjoyable etc. Publishers need to be honest with agencies. So at the very least, it has to be somewhat tolerable. We’ve been programmed as consumers to accept a certain limit of obtrusiveness because we want low cost or free content… but from other consumers, it’s perceived as spam, crude and not tolerated.
• Offline, if I become friends with someone, and the next day they start to try to sell me things, guess what, I don’t answer the phone anymore. That’s why you have call display.
• And besides, CPM, CPC and CPA advertising models with scale, so while you might start to plug products hoping to cash in, once you realize you don’t cash in, you will stop it doing it, because at their core, people rarely wake up and say “I want to prostitute myself today,” especially for a few pennies. How many of your friends hold Tupperware parties? Probably none, because chances are you don’t keep friends with people who keep hawking products.

QUESTION 4:
“Content is king – and advertisers won’t buy into amateur, unpredictable content”.

• Search conveys intent, content captures interest. Search and intent to purchase is a fraction of the bigger marketing challenge, so content serves as a conduit to reach users who are not actively looking for your product.
• Content is king is true: in the marketplace, ESPN.com gets higher CPMs than a blog. But content is king plays out in another, more important way.
• Despite what Mark Zuckerberg says about advertising changing every 100 years, I think that marketing by and large has fundamentally not changed.
• The traditional ecosystem will not change: marketer + publisher + users.
• Users ultimately are the client… but the paying clients (advertisers) want publishers to create content and filter the crap. Advertisers always ask us: who creates the content on your site? Once they know it’s professionally produced, it checks off one thing off their list.
• You can apply lots of lipstick on a pig, but it's still a pig. But carry those users from undesirable inventory to professional content inventory, and now you've got bacon. This is why you see MySpace trying to lead users from the low-value inventory to higher valued inventory in MySpace TV (disclosure: we provide content to MySpace TV).

More importantly, what do you think? Is social media monetizable?

Comments

[richullman]

Hi Ashkan,
Sorry we missed you in NY. What you missed was a lot of conversation about traditional ad models into the social environment -- something that I think you'll agree won't work -- or at least it hasn't yet.
No one talked about how all web sites will become more social (beyond just comments) and evolve into communities around their subject. Great communities where better content will rise to the top and flow to people all over -- via friends.
It's what happens when local newspaper sites don't just provide local news, but they aggregate content that's relevant to their local audience, and make the sites the local gathering places for information sharing and relationship building.
And its what happens when publishers turn their sites into specific communities around topics (skiiing, recipes, etc.) that people care about.
Content in these communities will be multi-dimensional because it will come from everyone, not just the publishers. It will be much more valuable because you know that the people there ARE engaged, and you'll be able to measure it, not just in page views and click throughs, but by what people are talking about and who's doing the talking.
This is very different than trying to throw ads and messages into private conversations. It's creating conversatinos that people want to engage in.

[Terry S]

Brilliant!

I've long said it's garbage in garbage out and advertisers will not embrace the inability to target users with specific interests. It's about niche communities with professionally produced content just as you state.

I think companies like Modavox who owns World Talk Radio and VoiceAmerica, the worlds largest online talk radio networks are the most valuable audiences out there. They have millions of listeners that stay online an average of 15 to 20 minutes and since the shows are specific in their interests, the audience is more targetable making it more monetizable. As you point out, the key is to control your content which these social media sites can't do.

Thanks for saying what many of us in the space know. It's niche communities and those who produce and control the quality of their content that online advertisers are now starting to embrace. To advertise on most of these social networking sites that have fetched in excess of billions of dollars in being acquired is paramount to throwing stuff at the wall to see what sticks.

I think the next wave is a rush to acquire some of the smaller sites that posess these more valuable niche audiences.