ARTICLE: Is your social network killing your ad revenues?

Media can no longer purchase attention: ‘Intention’ is the new currency

Is your social network killing your advertising revenues?

By Marc Turkovic, development manager, eHealthForum: November 2008

The importance of social media is growing at a rate that marketers can not afford to ignore. With social networking sites at the forefront (Comscore reported 25% growth worldwide in the sector during the past year), C2C sites are clearly changing the way we think about media and influence. A recent survey of communications specialists across a wide range of industries found that 78% of marketers use blogs, 63% use online video, 56% use social networks and 49% use podcasts in their organization’s communications initiatives. The study, “New Media, New Influencers“, also reported that only 3% percent of communications professionals declare social media has little or no value to their communications initiatives.

Social networks are especially interesting to investors at the moment. The July 2008 Social Media Deals Report by Context Next indicates that social networks were by far the most active social media from Q1 2007 - Q1 2008 with over $600 million invested in 113 companies. “Money continues to flow in and out of the category, which seems to continue to grow in depth and context,” the report summarizes.

So why all the hype?

Simply, information dissemination is by the people for the people. Not only are users posting a massive variety of content, but user-based content is valued. For example, Google seems interested in “democratizing” information (given its current algorithms). In the past few years bloggers, comments, and message boards are continually indexed and gaining rank in Google’s page rank system. Consequently, a bottom-up philosophy no longer favours corporate players. Nonetheless, site managers must mould social networks into a lucrative product before media buyers will be interested.

Beware of chat zones

There are two types of online communities. The first is a straight social network with a focus on chat. On such sites, the primary user need is interaction. As the structure of such websites changes to meet this demand, banner ads are becoming less effective. Messaging friends takes precedence over gathering information; users ignore contextual ads when their main goal is to “write on someone’s wall”.  So, social sites facilitate and engage conversation - at the expense of ad campaigns.

For example, studies estimate that the CTR on chat sites are 8-10 times less than a “regular” website hosting static content. Valley Wag approximated a 0.04% CTR for Facebook ads in March of 2007 and at 0.10% CTR. Recently, an independent advertiser reported CTR .08% on his Facebook ads in (February 2008). AOL discovered a similar trend on AIM’s chat platform. Clearly, on straight social networks, people talk to each other more and are paying less attention to the ads.

But how do these sites make any money?  Users simply aren’t looking to solve problems in online social communities.  To compensate, straight social networks focus on volume of users and page views to balance out low CPM.  Nonetheless, the social context of this type of social media decreases the value of ads.  Site managers, beware! CTR can plummet in a chat zone.

How to create value in social media

On the other hand, content driven social networks engage users in their quest to find information. These may work best as media platforms because they draw users for reasons other than just messaging one another. These social sites meet the need to learn or communicate about a particular topic. It is here that users participate to fix problems and share solutions. Therefore, if the ad content is oriented toward a specific vertical, a social network can experience better conversion. By controlling the context around the ad and keeping content “on topic”, site owners enhance the value of the ad, thereby increasing CTR.

The fact is, media can no longer purchase ‘attention’. The new currency is ‘intention’. Sites need to specify their ‘intentions’ in order to attract the big buyers of social media. Further, social media that is content driven can piggyback off a pre-existing need that drives online service usage.

Seven Steps to attract big buck advertisers

Becoming an interesting social network for media buyers will result in higher CPMs and overall revenue. This is because advertisers are attracted to contextual spaces within their vertical. Content is still king, but quality content brings home the bacon. Content-driven social networks must find a niche and then make moderation a priority, which is central to distinguishing themselves from a chat community (low revenue CPMs).

Moderate interactions

1. Weed out problem users. Ban troublesome users who dwell in negativity or who are not aligned with the mission of your site.

2. Automate communication processes via software. Identify and create template emails and messages.

3. Identify and mobilize community leaders to become allies. Recruit and manage expert volunteers to support your mission and endorse/legitimize decisions by consensus. Then, allow these volunteers to feel important by managing the content. Finally, encourage volunteers to generate quality content and manage the relationships via recognition and appreciation.

4. Be open to feedback and improvements. Use the community at the source of your inspiration to identify development needs.

Moderate content

5. Create a strong terms of use and clear policies. Set high standards for what is tolerated/not tolerated in the community. Set high standards for links — only allow links to other known authorities.

6. Be tough on spammers. Systemically delete spamming content. Completely ban and block spammers to prevent further problems.

7. Make it easy for anyone to participate in content moderation. Emphasize self-government to allow members to do the work for you.

When site owners create an environment where valuable information based on user-experience can be freely exchanged, the model feeds itself. Quality content is consumed and generated in a cycle … and the model will further attract experts within the vertical to participate, bringing even more value to the information. Ideally, a top-notch community of experts capable of generating quality content, that pleases users, should fuel the cycle.

In short: More page views + increasing recognition = value.