Like a lot of people I am skeptical of advertising potential in social networks, insofar as it being massively disruptive to traditional display ads. The reason for my skepticism is simple, Facebook and Myspace both have positioned their ability to target based on profile data and activity as far superior to dumb display ads but the data doesn’t suggest their ad systems are more effective than display ads.
Facebook has a lot to prove with the new ad format, which it began quietly testing in August and started making available to all advertisers this month. The company says 70 of the U.S.’s 100 largest advertisers have advertised on its site since 2007. But its share of total number of U.S. online display ad views was just 1.1%, according to market research firm comScore Inc., in its most recent report in June.
It may well be that the schism here is that the user experience is so fundamentally different than a content site, therefore any form of ad detracts from the user experience in such a way that repels users rather than just making them ad blind. We have seen countless examples of social network users rebelling at efforts to monetize their activity, proving once again that Facebook doesn’t own Facebook but rather the millions of people who use it own it.
Having said that, the fact remains that Facebook in particular is generating some decent revenue and should continue to grow, even if that growth doesn’t come at a rate that Zuckerberg doesn’t find acceptable. Despite his pronouncements that revenue is not their focus, they seem to be expending a lot of energy over the last year in mechanisms that are solely focused on extracting dollars from advertisers.
The advertising market really does need something more effective than display ads and despite years of talk about behavioral targeting the fact remains that there hasn’t been a lot of that going on and contextual advertising continues to dominate the stage.
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