Article By: Sabrina Tabarovsky (Sabrina@aclion.com)
Original Source: NY-Times article MySpace Might Have Friends, but It Wants Ad Money

While MySpace, the social networking site, is flourishing as there are 118 million friends this growth has not translated into revenue from advertising. Google who has a 900 million dollar contract with MySpace is not as enthusiastic as it was August 2006 when the pact was finalized. Fox Interactive Media, the parent company for MySpace has announced it will not meet its 1 billion dollar goal for this year. Yet, amidst the pessimism and confusion some are still optimistic. Lehman Brothers’ Anthony DiClemente and Jeff Berman, president of sales and marketing for MySpace note that revenue for the company has been increasing from year to year. Berman, highlights this by stating “We’re seeing the dollars come in.”

MySpace seems like an ideal network for ads because of the high traffic, yet advertising in this space is more difficult and is a new terrain for companies to maneuver. Thus, MySpace is working on smarter advertising to assure the ads reach the right audience and that people will stop and pay attention. To accomplish these not so easy tasks MySpace has begun using hypertargeting that places people in groups based on interests so ads that match the user can be presented to them. MySpace is also cleaning up their act by streamlining their homepage to make it easier to spot the ads and draw attention to them. These changes are a step in the right direction but the future of advertising on social networking sites is still uncertain.

Mr. Berman notes that page ad displays are available on the homepage, which are able to reach approximately 40 million people daily. Yet, as noted by their missing their target this year it is not just how many users visit the site that is important. The right users at the right time need to view these ads. It really is not an accomplishment if 50 million men are exposed to a Tampax ad. Facebook is taking a step in the right direction

(one that MySpace should follow) by using social ads. Social ads integrate themselves fully into the social networking process and demonstrate an understanding of the space. Users would first identify themselves as a user or fan of a product or service. Afterwards, ads noting that you are friends with a fan of x, y, or z will be sent to the users’ friends. Social ads are wonderful as they are using psychological principles to attract people. One is publicly committing oneself to a product and fulfilling their need for belonging and interactions with others at the same time. When one makes a public commitment one is more likely to follow through with the action. Peer pressure principles can also apply here as the ad telling you your friend is a fan is saying come on everybody is doing it! MySpace and other social networks need to realize this is a whole new game and they need to find ways to translate their high user numbers into revenue. To accomplish this task the ads need to reach the right people and ads need to be formatted to fit this new environment. If this is accomplished I predict high revenue for MySpace and other social networking sites in the future.

Sabrina Tabarovsky | AC Lion