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Friday, October 19, 2007

AdSense Failure: Social Networking Sites (MySpace + Facebook)

A question about social networking sites from the Google Q3 2007 Earnings Call Transcript is worth noting:
You have been working with MySpace for a while and to get a better sense of what you have learned, how monetizable these social networking sites are out there and as these social networking sites engagements are growing so quickly, are you concerned that that could be a point of entry on the web?
The answer indicates the current failure of Google AdSense on these social networking sites as well as the potential for a new form of social advertising:
We’ve been very pleased with our partnership with MySpace. We’ve been pleased with the advertising performance. It has been a lot of work and innovation, actually. I know you might not see it from kind of a the user interface point of view that you see, but we are developing really new technologies and I think these social networks are going to require a different kind of targeting technologies, difference concepts of advertising.

We’ve already made big strides. It’s obviously a challenge because there is so much inventory, people can be distracted by very many different things and it is very personal, so there are a lot of things that make it hard.

But our technology, our targeting, all those things are actually coming along very well and we are really happy. We view it as a great opportunity. I mean, it is just so much more inventory that if done correctly can create that kind of win-win I was talking about between advertisers and users.
Ignoring the hype right now surrounding sites like MySpace and Facebook, the current model of contextual advertising simply doesn't work. Pages on these social networking sites have no unifying theme to match ads via contextual targeting. Any AdWords advertiser can see this by examining the new placement performance report. Consider this example:

myspace google adwords

Note the massive amount of impressions but the horrible CTR. Either MySpace users aren't interested in ads or the contextual targeting of the AdWords/AdSense system does not work on social networking sites. Perhaps both. Kara Swisher cuts through the Facebook hype with these insights:
Facebook is not Google: Although many in the tech sector make the comparison to the search giant, it is simply incorrect.

Is Facebook like Yahoo a bit? Certainly. A newfangled version of AOL? Absolutely! A very well done media play with all sorts of interactive bells and whistles hanging off of it? Yes, ma’am.

Indeed, it is growing its media business nicely, with $30 million in profits on $150 million in revenue.

But in comparative terms to the search giant, Facebook is a lemonade stand. Google brought in $3.9 billion in revenue in just the second quarter alone and, um, is increasing its dominance over the search sector in a mighty scary way.

Facebook, on the other hand, gets half its annual revenue right now from a sweetheart guaranteed revenue deal with, drum roll, Microsoft. No matter what either Facebook or Microsoft says, it is a money-losing deal for Microsoft so far.

How do I know this? According to many sources, Google is struggling to make ends meet in its own sweetheart guaranteed ad deal with Facebook rival MySpace, which is much larger, and Google has the best monetization engine out there.
Yep. AdSense doesn't work on MySpace. Note to all AdWords advertisers - you might want to block via site exclusion.

Related Posts:
GOOG - Google Stock to $600 or $700 After Hours Today + + Facebook = 9rules?
Will MySpace Degrade the Quality of Google's Ad Network?

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Anonymous Anonymous said...


Social-networking sites have eyeballs -- a whole lot of them. There is money to be made in advertising when there are eyeballs. You just have to find the right advertisers for the gathering of specific eyeballs.

Search engines are primarily involved in a form of "direct marketing." Trying to place direct marketing advertising anyplace has always been extremely difficult.

Search-engine marketing represented an amazing new venue for direct marketers; the advertiser finally had a really significant tool to reach out and target those who were really interested in what he was selling when he could match an advertisement based upon the words the potential customer typed into the search engine.

Most of the successful search engine advertisers are not going to be able to carry their specific advertising campaigns to the social networking sites. Their campaigns -- and in many cases, their products -- simply will not fit in the model.

The social networkers would do better to seek advertising agreements with big "brand advertisers" rather than trying to strike deals with the search engine companies whose long-term advertising base is largely made up of direct marketers.

Of course, the networking sites have to find the specific brand-advertisers who "fit" with their visitors -- advertising something like "Depends Adult diapers" on MySpace would be a flop (unless one could accurately target the campaign to identifiable senior citizens on MySpace)!

There is still "targeting" on a social network site -- just like there has been targeting in magazines and television. The methods for targeting needs to be based upon the demographics of the target and not on the "content" a computer can see on a web page -- which is the method a company like Google uses to "match" advertising for its direct (or maybe more like "directed") marketing customers.

Fri Oct 19, 10:29:00 PM EDT  
Blogger Richard said...

Eyeballs?! No, that metric worked during the dotcom craze last decade. Nowadays, you need metrics like, well, revenue. ;-)

The potential is there. Sure. That's why I linked to this post. Having experienced the dotcom craze firsthand (at AOL from 1995-2001), I'd think twice about using "eyeballs" as a primary metric.

Mon Oct 22, 11:36:00 PM EDT  
Blogger Adrian said...

In another blog the writer commented that one of the reasons for this failure is because there is no “buying intent” on the part of the user ( because they are at a social networking site to, well, be social. Let’s, for a moment, believe that advertising can be successfully executed on these sites; what does it need to look like instead of AdWords, or Facebook Flyers Pro? In what ways could we think a little outside the box to get that horrendous CTR up? Maybe this an opportunity for Slide (et. al.) to monetize their widget?

Tue Oct 30, 09:56:00 AM EDT  
Blogger Richard said...

Hi Adrian. I left a comment on your Ad CTR On Social Networking Sites post.

Tue Oct 30, 12:42:00 PM EDT  
Anonymous markus941 said...

Very good points raised here.

Any money Google has made on MySpace HAS to come from advertisers who were not savvy enough to turn Myspace off in the site exclusion tool.

Tue Oct 30, 02:49:00 PM EDT  
Anonymous Anonymous said...

If you want a really good success story of a free social site that's pulling in a lot of revenue with Adsense then you need to take a look at

The creator of this site used to create this site and is quite wealthy now.

Fri Jun 20, 12:07:00 PM EDT  
Anonymous Anonymous said...

Fri Oct 30, 04:17:00 AM EDT  

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