Ads work on Google because people are looking for information. They do a search, and if the advertisement shows information that helps with the query, that makes everyone happy. However, when it comes to a social network, usage is quite different. People aren’t looking for information about products — they’re looking to communicate with friends. In that environment, ads are seen as an intrusion — which is the exact opposite of ads in a search world.
I wrote about this a couple of days ago. We built both OpenSocial and Facebook applications and what we found is that people don’t use them like they do our other client apps. In fact, the conclusion I drew is that people don’t use social networks to consume external content much at all. They don’t search for things either, which means the CPC is almost certain to be a lot lower than search.
TechTraderDaily sums up nicely the financial consequences of lower monetization, higher traffic acquisition costs.
My advice to companies looking at running ads in social networks would be don’t. Focus instead on tactics that do work, like engaging customers/users in discussion groups and interactive widgets that users commit to and then share with friends (at best these are brand extensions as opposed to monetizable ad payloads).
PS- I haven’t logged onto Facebook in at least a month… I still believe it has value but the current state of the art just isn’t creating any value for me as an individual.