CPMs on Social Networks Are Low, Deal With It

Yesterday afternoon I had the opportunity to interview Scott Rafer one of the founders of Lookery, an ad network that is currently targeting social network inventory. I’ll be posting the interview as a podcast later this week but Lookery’s strategy stood out to me and it made a lot of sense. Over the past year, social networks have helped drive down the overall industry CPMs as Russ Fradin, co-founder of Adify, pointed out yesterday.

While there is one ad network which is achieving $12 CPMs the majority are not and the majority is what we need to focus on and try to increase. The position held by Russ Fradin was one that was echoed by Scott Rafer when I spoke with him yesterday afternoon. Their argument is that social network data is really not that significant. They tried this before with Hotmail and it failed.

While we all (including myself) would like to see individual CPMs based on our social influence and our social data, there are currently no systems that have succeeded in leveraging social data to target individuals more effectively. As such, all we have really seen is an increase in inventory but not an increase in value of that inventory which has decreased CPMs in turn.

It’s always nice to see a fresh shot of reality pumped into the Silicon Valley echo chamber and I think that this is something that executives like Scott Rafer and Russ Fradin bring. I want nothing more than to have all of the social companies turn social data into extremely value inventory. This sort of shift will also increase the value of my blogs.

Unfortunately for now, the inventory is cheap and this is something developers have to deal with. The competition is on to be the largest owner of inventory no matter how cheap it is. This means we will see consolidation in the industry and it also means that we will see a lot of venture funded organizations lose their backing in the coming months.

Do you think I’m overly cynical or do agree with the “fresh shot of reality” from a small segment of ad network executives?