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MySpace and Friends Need to Make Money. And Fast.

Posted by Mort Greenberg on March 27, 2008

Source: http://wired.com

By Kevin Kelleher Email 03.24.08 | 6:00 PM

 

Wired 2008 Business Trends: Sure, there’s bad news out there, what with the panicky Fed and people whispering the R-word. But somehow, the wired world continues to churn out smart, useful, occasionally game-changing ideas.
From the rise in instant manufacturing to the growth of open-source business models, these trends show that innovation can bloom even in a grim economic climate.
Here’s a look at nine trends driving business in 2008 — and a deeper explanation of the surprising secrets to Apple’s success.
 
The numbers are amazing. MySpace’s membership has ballooned from 20 million people in 2005 to 225 million today, an average annual growth rate of 513 percent. Rival Facebook grew at 550 percent a year during the same period. LinkedIn’s rate was 182 percent.
Yet one social networking metric is distinctly underwhelming: the one with a dollar sign. Lookery, an ad network specializing in social media, offers display ads on MySpace, Facebook, and Bebo for only 13 cents per thousand times the ad is served (CPM); Yahoo’s average CPM is estimated at $13. Video ads on MySpace reportedly fetch just $25 per thousand showings; CBS charges $50 on affiliated sites, NBC as much as $75.

Social networking was supposed to be the Net’s next rocket to riches. But many social sites are having trouble capitalizing on their audiences, and it’s looking like the convivial atmosphere that promised to boost the value of commercial messages may actually diminish it. Even the big brains at Google are stumped. The search king, which pays a special rate to place ads on MySpace, has suggested that it may be paying too much. “I don’t think we have the killer best way to advertise and monetize the social networks yet,” Sergey Brin admitted during a January conference call with analysts.

Some smaller competitors are doing better. LinkedIn, for example, has a CPM as high as $75. The difference: The site caters to professionals, making it easier to target ads. (It helps that the company also charges for premium features and job listings.)

For sites with broader audiences, the key may be to give advertising a social dimension. Facebook tried to do just that with Beacon and Social Ads. These formats send users an alert or display ad when one of their pals patronizes an advertiser. But Facebook has yet to gauge the effectiveness of these programs because online privacy watchdogs pounced, and the site moved quickly to let members opt out.

Still, the idea that ads can be a social experience is the industry’s best hope. Social Vibe encourages members to choose brands to endorse on their pages. AdRoll shares ads across related niche sites, turning a blogroll into an ad network. But it may take time to work out the business ramifications of online friendship. The first site to meld commercial messaging gracefully into these new group dynamics will have advertisers poking them to be friends.

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