There's been a lot of interest among users, the media, and potential investors about social networks like MySpace, Facebook, and others recently. But there seems to be one class of people losing interest very quickly in social networks: advertisers.
There was a time when Mark Seremet considered MySpace one of the best things to happen to his business. Seremet, then-CEO of customized clothing company Spreadshirt, saw sales jump sixfold in late 2005 and early 2006 after he ran ads on the popular social networks MySpace and Facebook. "Somebody would get the shirt, then tell a friend," Seremet says. "It was really an amazing change for the business."
But Seremet's love for social networks, including the News Corp. (NWS) flagship, soon diminished. By last year, when he left Spreadshirt for another company, ads on MySpace had lost a lot of their oomph, measured by the number of times users clicked on them. The ads' so-called click-through rate plummeted from one in 100—a decent return by Web standards—in 2006 to one in 1,000 in 2007. "Users became more or less desensitized to the advertising," says Seremet, a veteran of Take-Two Interactive (TTWO) and now president of video game publisher Green Screen. "You won't make money on it."
I think one of the problems with advertising in these venues is a disconnect between the audience and the message. Social networks are perfect venues for general name-recognition advertising, as the "content" is entirely unfocused and the audience is everybody. But click-through advertising is by its nature specialized. Such online advertising flourishes when you offer it in a venue filled with people looking for what you've got. What are people looking for on Facebook? Beats me. In the advertising industry, "beats me" equals "advertise elsewhere."