Seth Goldstein on Social Advertising: It Ain’t Easy
Posted by Nick O'Neill on October 1st, 2008 10:34 AMYesterday Seth Goldstein, CEO of SocialMedia posted an interesting note on Facebook about the paradox of social advertising. As you’ll see in his note, it is summed up with “This is the paradox of social advertising: unlimited inventory of impressions that users have come to ignore, but very limited inventory of commercial experiences that users are opting in to engage with.”
Nobody will deny that the industry faces some substantial hurdles and given SocialMedia’s leadership position in social advertising, they are positioned to know about the hurdles first-hand. Here is what Seth had to say:
With a global reach of over 200 million users and growing each day, social networks have become the new mass entertainment. This scale has become increasingly attractive to brands eager to reach a critical mass of consumers. And yet managing to balance scale and engagement has proven difficult. While it is easy enough to purchase vast amounts of social display inventory at less than $.25 CPM, you tend to get what you pay for: advertising which is universally disregarded as irrelevant if its not ignored entirely.
The social media user has evolved to become immune to the very ads that are supposed to subsidize his online experience.
- advertisers distract users ?
- users ignore advertisers ?
- advertisers distract better ?
- users ignore better ?
This vicious cycle threatens the emergence of a viable business model for the social media industry. There are trillions of display ads in the form of web banners that are being delivered to and ignored by consumers around the world. Internet advertising suffers as a result of the irrelevance of these ad units. And yet IAB-standard ads are the only units that have the web-wide scale required for large consumer brand marketers. Aside from taking over the front page of Yahoo! or MySpace (the web equivalent of advertising on the super bowl), a brand such as Coca Cola can’t afford- from an opportunity cost perspective- to do a handful of one-off campaigns featuring original content in non-traditional formats. While commercial applications and some new social ad formats provide deeper engagement, they rarely offer the scale that drew advertisers to social media to begin with.
This is the paradox of social advertising: unlimited inventory of impressions that users have come to ignore, but very limited inventory of commercial experiences that users are opting in to engage with.
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October 1st, 2008 at 10:47 am
My facebook ads have come to be so un-targeted that I have come to assume that all clicks are mis-clicks and I've paused my ads.
October 1st, 2008 at 10:57 am
Seth is stating the obvious here, but it might be an obvious that the startup industry's been somewhat oblivious too. We're in an ad-supported industry, but where our new social appliances are highly engaging, our advertising space is at the bottom of the totem pole. Where online ads fare best in the context of search, next in the context of context, and least in the context of ordinary page display banners, social media offer what is the equivalent of outdoor ad buys. Read: billboards.
Online ads for social media still need to crack the context of social use and in particular the social graph and their related tastes. Should a Facebook ad speak to me, and my preferences, or should it tie to the tastes and likes of the member on whose profile it appears? We haven't even solved that one yet!
However, I'm optimistic that advertising will produce the creative that is required to engage, and will find ways to approach the fourth wall that separates daily social interactions online, possibly through feed, activity, news and other listreaming posting contexts.
It took a while for the industry to warm up to product placement in movies/videos — socially embedded advertising could likely take a similar route. Advertisers just need to think less about their own image and brand, less about their appearance, and more about their meaning, in daily social conversations.
October 1st, 2008 at 11:26 am
I believe the problem is not so much in social advertising as it is in the quality of advertisers available. We all know that your average SocialMedia etc. ad is crap.
Running with VideoEgg who work directly with large name advertisers I am able to get CPM's between 2-3$ and even more when working with other private companies like Appsavvy.
The problem is not so much with social advertising but how easy it is to sign up to these mass advertisers who cannot fill the inventory with enough decent ads.
October 1st, 2008 at 1:20 pm
I am wrestling with this “paradox” right now as I am in the process of launching a new social media platform.
As entrepreneurs and investors we are looking to create value in exchange for a return on our investment. However, the current atmosphere of “everything is free to the user” leaves very little choice but to pursue advertising as a major source of revenue. Eventually someone, somewhere has to pay for social media platforms.
The trick, as I see it, is to create a platform that offers a robust social experience for users while giving marketers an powerful interactive opportunity. People DO identify with brands, they DO want to have a say, they ARE consumers and love good deals, but they DON'T like to be interrupted or overly PIMPED while they're having a conversation.
So how are we going about it?
The freemium model has legs as LinkedIn and others are demonstrating. Offer the average user a lot of freedom to come and play for free. Yes, we'll have some targeted marketing, or more like sponsorship in our case, but there will also be a value added premium service that power users and enterprise clients can take advantage of to maximize their experience.
Value for everyone, I think that is the true essence of the social media community.
October 1st, 2008 at 2:17 pm
Social Advertising is definitely one of the most challenging avenues of advertising.. that's a fact. People on social networks are more interested in communicating and less interested in buying. Some of me wouldn't even opt for it if I were an advertiser.
October 1st, 2008 at 2:52 pm
http://www.petergreenberg.com/2008/10/01/leadin...
I have been really interested in the advertising industry for quite sometime and what I am trying to figure out is what works online and what does not. The above article is pretty interesting does anybody have any incite?
October 1st, 2008 at 7:09 pm
As true as this may be, I doubt we see advertisers shifting their budget away from site likes Facebook or MySpace. I couldn't agree more that most of the time these ads are just ignored, most people probably couldn't even remember the last ad they saw on their social media sites, however as technology keeps increasing on sites like Facebook and continue to provide ads that are relevant to your interests we may see increased usefulness of ads (even though most find it creepy that an Arrested Development t-shirt ads appear because in their favorite shows Arrested Development shows). Overtime this creepiness may disappear and ads may even become useful because you are receiving ads that are relevant to your tastes. Sites like Facebook and MySpace will continue to press away at marketing their ad platform as a great place to market products and services due to they haven’t found other ways to monetize their other platforms to the amounts that ads provide.
October 2nd, 2008 at 3:30 am
You right. Advertisers and agencies and publishers need to start taking bigger risks and provide consumers with better and more creative incentives to engage them with their brands Everyone ready: Cobrand each other. advertisers and pubs, unite for a cause and help bridge the trust gap to the end user. Think HUGE. I find Advergaming, the new buzzword, a very promising beginning of a new engagement model.
Advertisers, publishers and agencies will have to evolve to higher social engagement standards but its going to take creative risks. There are more and more cases of branded experiences that are engaging consumers to pull out their wallets, more will eventually tip the point. I think the industry will figure it out , but the managed offer platforms that use virtual currency and cpa offers are paving a road down the right path. New ideas and ways to monetize social traffic will take us over the hump. CPA meets CPM halfway
-@miguel23
October 2nd, 2008 at 4:31 pm
Anyone else find it funny that Seth is ripping his own company and business model, essentially saying that in it's current state, it's worthless?
I am founding a new social ad solution that I know will lead the way to the solution to our hair being on fire, keep your ears open.
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