AdvertisingBusiness modelsMySpaceWeb2.0

Social network ad spending II

By August 29, 2006 January 6th, 2007 No Comments

In all my posts today on this subject I have been missing a key point – traditional internet ad spend is a tiny proportion of marketing spend on social networks.  The vast majority goes on profile pages and sponsorship.

To put some numbers around that estimates of spend on banner ads on MySpace built up from Nielsen/NetRatings data and estimated CPMs of $0.10 are $11.8m from Jan-May 2006.  That would make it 10-20% of Myspace revenues.

In contrast rumours are that sponsorship/profile pages deals are routinely in the $1m+ range now.  These deals are being likened to early web advertising deals – marketers are excited about experimenting with a new, extremely fast growing form of media.

Another interesting fact is that the silver surfer is on Myspace – well a little bit anyway.  In May 2.9% of unique visitors were over 65.  More interestingly 36.4% of them were 35-54.

Market share wise Myspace is 50%ish with Classmates and Facebook the next biggest.  YouTube is up there if you count that as a social network.

So what does all this tell us?

My 2 cents would be:

  • Profile pages and sponsorship will close part of the gap between how these businesses are being valued and the value I could see coming from advertising, but not all the way (regular readers will know I have been sceptical of some of the valuations being bandied around this sector)
  • Social networks are morphing from places where people meet each other to places where they meet businesses – this creates value for companies.  This reminds me of Yahoo!’s transition from “Jerry and David’s Guide to the World Wide Web” list of links to the behemoth it is today.
  • The age profile data is encouraging evidence that these businesses are sustainable.
  • But the market is still immature, new networks are springing up everywhere and models for networks and advertising/marketing on them are still changing fast.