Over the past two years there has been a significant amount of buzz about the social web. Some of that buzz has gone as far as suggesting that social could end up defeating search. I’ve made comments in the past of such things happening. One sign of peoples’ belief that social could take on search is the buzz surrounding Facebook. Microsoft invested in the company at a $15 billion valuation and since then the company has continued to grow and the hype behind it hasn’t exactly disappeared.
So where is the money on the social web? Currently there are a number of theories about where companies in this space will make money in the future, three of which appear most prominently:
- Social Shopping – The concept of social shopping has been passed around for years. The theory goes like this: if your friend ends up making a purchase of an item (possibly reviewing it as well), you will receive a notification of that purchase. As you are notified of friends making a purchase, this comes as a recommendation which ends up driving you to make a purchase. While the theory makes sense, it is still unproven.
- Hyper-Targeted Advertising – A number of sites are already provide this including Facebook and MySpace. Having the ability to accurately target users based on specific demographic information as well as there interests sounds like a marketer’s dream. The only problem? Click through rates are currently horrendous on the sites that offer hyper-targeted advertising.
The remaining hope for this theory is that when these advertisements are moved outside of the social platforms, click through rates will jump through the roof.
- Social Search – Social search provides the best opportunity of defeating traditional search. So far nothing stacks up against the competition (Google) though as Don Reisinger pointed out last night. Even this has a long way to go if it works and there is no proof that social search is feasible.
So where does this leave the social web? Well, we continue to communicate more via the internet but that doesn’t necessarily translate into dollars. This Wall Street Journal emphasizes the promise of social advertising in an article this morning:
One initiative that could be critical to MySpace’s success, according to media buyers and industry analysts, is a system that lets marketers aim their ads at particular groups of users. As part of this “hypertargeting” system, MySpace has analyzed the profiles of its users to gauge their interests and then categorized them into more than 1,000 “buckets,” including rodeo watchers, scrapbook enthusiasts and “Dancing With the Stars” viewers.
So how is this working out for advertisers? The Wall Street Journal article continues:
For some marketers, especially small ones, more generic targeting suffices. The New York Health & Racquet Club spent $5,000 on a MySpace campaign that displayed 2.3 million ads to users on the site. Though the health club could have chosen to target ads at people who say in their profiles that they enjoy rock climbing, yoga or working out, it chose instead to simply target by age and ZIP codes near its facilities. The club said it was relatively happy with the campaign, which generated roughly 1,000 clicks, a response rate of just 0.04%.
Adam Bain, a Fox Interactive executive whose team created the hypertargeting technology MySpace is using, argues that the system won’t just pay off by boosting ad sales. It is also a way for marketers to glean valuable information about their target audience. If the advertiser wanted to reach scrapbooking hobbyists, for example, it could find 236,475 of them on MySpace. But the system also shows that 99% of them are female, and lists several other hobbies they tend to be interested in, including sewing, baking and watching the TV show “Grey’s Anatomy.”
As of yet, hyper-targeted advertising has yet to display any breakthrough profits similar to those produced by search. This is a big problem and if one of these companies doesn’t produce something soon, social platforms and other sites on the social web could be seen as companies where people spend a ton of time but not much money is made.
Will the overly hyped opportunity provided by all this user attention go unrealized or will the social websites pull out a miracle? Do you think the social web is over-hyped?