MySpace - the ultimate black hole of the on-line advertising?
Robert Young has a very interesting piece today on GigaOM called The Future of Social Networks – Communication. In this piece Robert argues that the key to the rise of the social networks is communication. In particular, he talks about MySpace innovation called the wall – a personal bulletin board, which enabled direct communication between MySpace members. Robert also argues that new and innovative form of communication, like personalized video messages, will be the future fuel of MySpace and the likes.
Robert’s analysis is very good and he is right - communication and user generated content is the key to the new web era that we live in. But I’d like to take look at a different issue that has been on my mind for the past month or so: Is MySpace worth the money spent on it? It might seemed like an odd question at first because it is widely recognized that Rupert Murdoch’s instincts once again proved right. I do not doubt that, because he is not the one who pays for MySpace, he is the one who is now making money off it. MySpace’s funding comes from advertising, as large corporations and small businesses put increasing amounts of money into online ads. So my question is what are they getting out of it?
Here now we are entering murky waters where the laws of physics simply break down. Who can tell if the reaction is related to the action to when it comes to on-line advertising? It seems like Google should be able to, but this is not quite the case. Just because someone clicked on the ad, it does not mean that they actually purchased the good or the service. To complicate things further, there is such thing as click fraud, and it is big. Just a few weeks ago, Business Week proclaimed that as much as 13% of ad clicks were fraud. So this means that not only we can not track the effectiveness of the advertising, we can’t even be sure if the click was real or not.
Leaving the issue of accounting and statistics aside and coming back to MySpace, there is also a question of whether the target of the advertising is meaningful. Who is the audience on MySpace? One of the comments in Robert’s article drums a common theme – there is a seventeen year old who is hanging out on MySpace all the time. I bet, because MySpace is so cool. But the problem is how much money is she going to spend on-line? This is not a trivial question, because she does not make much now and if she is going to keep hanging out on MySpace, she likely to miss out on school big time. So yes, no one doubts that MySpace hosts a huge audience, but I ask is this the right audience? Are they going to spend the money? I am not so certain that the answer to this question is ‘yes’.
If it turns out that I am right, then what we have here is a kind of black hole. The money floats from companies big and small via Google and Yahoo! advertising channels through the growing pockets of Mr. Murdoch right into big nothingness. There is no ROI for the business in this scenario. There are big advertising budgets, large audiences, but there is no feedback. So is this true? I hope that it is not, but please tell me what you think.
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Robert’s analysis is very good and he is right - communication and user generated content is the key to the new web era that we live in. But I’d like to take look at a different issue that has been on my mind for the past month or so: Is MySpace worth the money spent on it? It might seemed like an odd question at first because it is widely recognized that Rupert Murdoch’s instincts once again proved right. I do not doubt that, because he is not the one who pays for MySpace, he is the one who is now making money off it. MySpace’s funding comes from advertising, as large corporations and small businesses put increasing amounts of money into online ads. So my question is what are they getting out of it?
Here now we are entering murky waters where the laws of physics simply break down. Who can tell if the reaction is related to the action to when it comes to on-line advertising? It seems like Google should be able to, but this is not quite the case. Just because someone clicked on the ad, it does not mean that they actually purchased the good or the service. To complicate things further, there is such thing as click fraud, and it is big. Just a few weeks ago, Business Week proclaimed that as much as 13% of ad clicks were fraud. So this means that not only we can not track the effectiveness of the advertising, we can’t even be sure if the click was real or not.
Leaving the issue of accounting and statistics aside and coming back to MySpace, there is also a question of whether the target of the advertising is meaningful. Who is the audience on MySpace? One of the comments in Robert’s article drums a common theme – there is a seventeen year old who is hanging out on MySpace all the time. I bet, because MySpace is so cool. But the problem is how much money is she going to spend on-line? This is not a trivial question, because she does not make much now and if she is going to keep hanging out on MySpace, she likely to miss out on school big time. So yes, no one doubts that MySpace hosts a huge audience, but I ask is this the right audience? Are they going to spend the money? I am not so certain that the answer to this question is ‘yes’.
If it turns out that I am right, then what we have here is a kind of black hole. The money floats from companies big and small via Google and Yahoo! advertising channels through the growing pockets of Mr. Murdoch right into big nothingness. There is no ROI for the business in this scenario. There are big advertising budgets, large audiences, but there is no feedback. So is this true? I hope that it is not, but please tell me what you think.
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posted by forex-affiliate at 8:47 PM
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