Social Network Advertising

Social Networking Growth in 2008

noreply@blogger.com (Hussein Fazal) — Thu, 31 Jul 2008 19:33:00 +0000

I just wanted to post a table which I found on InsideFacebook. It illustrates the growth and overall size of the major social networking sites - with the core data coming from comscore as usual. Check out the article on InsideFacebook for an analysis of these numbers.

On another note - I am working on a White Paper which will be highlighting several real examples of how companies that have successfully used social media as a part of their marketing campaign, with tips and best practices on how to achieve a high ROI. I hope to publish this paper some time next week...

Developers Forum Launched

noreply@blogger.com (Hussein Fazal) — Thu, 24 Jul 2008 07:13:00 +0000

I just wanted to make a quick post to announce that AdParlor has launched a forum for facebook, myspace, and all social networking application developers to freely discuss advertising. We hope that this will be an open and unbiased forum where users will be able to freely exchange ideas and strategies for monetizing their apps. You can check it out at: http://www.devtok.com

Facebook Profile Redesign - How will it effect advertising?

noreply@blogger.com (Hussein Fazal) — Thu, 10 Jul 2008 06:18:00 +0000

There are two components to speak of when discussing how the new facebook profile will effect advertising. First, let's look at the ads put out by facebook themselves throughout the site. Secondly, we'll try and see if the facebook profile redesign will affect applications and the ads which may appear on these apps.

Let's talk about the facebook ads themselves first - These ads will now be appearing in the right hand column but beginning higher up on the page. In the current version, the ads appear in the left column but underneath the applications. This is a better placement for facebook ads as it seems to be more prominent. Have a look at the screenshot below. The blank white space on the right is where the ads will go. Although this is not confirmed, this is the feeling I got while speaking to Rebecca Sawyer of Facebook's Monetization Team at the Facebook developer garage in Toronto. Note also that the left hand column for ads is 150px wide in the current design and it seems that the right hand column in the new design has room for an extra 15px of width - this could give the standard 120x600 banner a little more white space to stand out.

Now on to custom facebook applications and ads that may appear on the new application canvas pages. Let me first mention that the canvas page will now be 760px instead of 646px - meaning that social networking ad networks should probably be offering a new ad size!

More importantly however than the width change, is how user engagement with applications will change as a result of the redesign. Applications can now have their own tab in the new tabbed profile design - as seen above. Unfortunately however, many apps will end up losing overall user engagement as they are automatically being moved from the main profile page to the new 'boxes' tab.

Really user engagement is what will effect advertising on these applications the most. It seems as if developers who take advantage of the tabs and who have an engaging application will benefit - while those apps that are not that exciting and are not updated will lose daily active users - a key metric in determining how many advertising dollars app developers can attract.

btw, the new facebook profile is still buggy and incomplete but you can try it out by going to http://www.new.facebook.com. It should be launched to the public next week!

US Social Network Ad Spending

noreply@blogger.com (Hussein Fazal) — Tue, 24 Jun 2008 05:42:00 +0000

I just came across an interesting graphic from the MIT Technology review and wanted to post it here. Users and Advertising revenues in the US. Full credit given as usual:

http://www.technologyreview.com/Biztech/20978/page2/

Looks like the data came from eMarketer - but it is definitely an interesting view of that same data.

facebook passes myspace in unique users, but what about advertising revenues?

noreply@blogger.com (Hussein Fazal) — Mon, 23 Jun 2008 04:12:00 +0000

Over the past couple of weeks, there has been a lot of talk about facebook passing myspace in terms of unique users. Comscore reported that facebook had 123.9 million unique visitors, while myspace had 114.6 million in the month of May. This was foreseeable for some time as facebook created a social networking site with superior functionality and ease-of-use. Throw in custom application development, an exciting friend news-feed, and international expansion, it was a recipe for success.

The important question for me would be, 'Does this now mean that more advertising dollars will flow into facebook?' The answer for now is a simple NO. Reason being - THE U.S.A.

The US has the highest penetration rate of any country in terms of Internet usage at 71%, and the US has by far the most mature Internet market (Consumers comfortable buying goods online, Advertisers confident in a positive ROI on their investment). This means that the majority of online ad spending is by US companies, targeting US consumers. myspace has a majority of it's audience in the US, hence the advertising dollars flow in their direction as opposed to facebook.

However, facebook should not be scared. Although I try my best not to stray off topic in this blog, some brief research into the world economy indicates that economic strength is shifting from the US to other countries, and facebook is well positioned to take advantage of International growth. In fact, facebook has recently expanded into China. China is expected to PASS THE US in terms of total internet users this year. (China is currently at ~210 Million while the US is at ~215 Million). Although it may take some time for the non US Internet market to mature , it seems that soon facebook will be passing myspace in terms of a more important statistic - Ad revenues!

In Response to 'Exec: Ad industry must think small to tap social sites'

noreply@blogger.com (Hussein Fazal) — Wed, 04 Jun 2008 22:10:00 +0000

In keeping with the trend in my previous blog posts, I have decided to comment on recent industry news - this time a post by CNET writer, Caroline McCarthy. She posted an article titled: Exec: Ad industry must think small to tap social sites

The purpose was to summarize the keynote speech by Seth Goldstein, co-founder and CEO of SocialMedia Networks. Seth made an interesting comment about click-through rates on social networking sites tanking. Now, there is no doubt that the CTR is dropping for standard ad placements on facebook (left-hand column) and myspace (top-right box), however, having dug deep into the numbers at adparlor.com I can tell you that the CTR remains high on custom applications for reasons I mentioned in my previous post.

I agree with most of the statements Seth made. For one, applications like super poke and food fight are "not important because the content is serious; they're not important because they're high-utility; they're important because people are spending an ungodly amount of time using them." Although an advertiser may question how effective their ad will be on a food fight application, the reality remains that this is where the users are - and as these users are highly engaged with the application and everything on the screen, ads displayed on these applications will get a high click-through rate and will see meaningful results.

The beauty of these application is the ability to grow phenomenally fast. When launching, for example, a new poker site, it would take a large marketing budget and a significant amount of time to grow your user base. However, on myspace 'Texas Holdem Poker' has acquired over 350,000 users in just a couple of months. Application developers can quickly own a valuable property on the internet, and if monetized correctly, they can be earning over a $1 CPM rate. That application then becomes a mutually beneficial property for both the developer and advertisers trying to tap into the social networking market.

In Response to 'eMarketer Lowers Social Networking Ad Spending Estimate'

noreply@blogger.com (Hussein Fazal) — Wed, 21 May 2008 19:04:00 +0000

After having read Debra Aho Williamson's article titled 'eMarketer Lowers Social Networking Ad Spending Estimate', there are a couple of quick points I would like to make.

In the online world, and especially in the social networking world, things are changing extremely fast - so to say that advertisers will spend 2.2 Billion instead of 2.4 Billion in 2011 doesn't change my perspective on the future of social network advertising.
One trend which was not mentioned in this article, is that advertisers are starting to move away from advertising directly with these social networking sites, and looking at ad networks that place advertisements into custom applications. Why is this relevant? Because it has been shown consistently that click through rates and advertising effectiveness is higher on custom applications than advertising directly with social networks. This is because the user is more engaged with an application whereas they have gotten used to 'blocking out' the ads that they know will always appear in the 'left column' or the 'top right'. Once advertisers discover the effectiveness of advertising within applications, I believe social network ad spending will go up.

Worldwide Internet users vs social networking users [Corresponding Advertising Markets]

noreply@blogger.com (Hussein Fazal) — Tue, 13 May 2008 02:10:00 +0000

There are some interesting numbers that I am always looking for - so I decided to bring them together and post them on my blog, as I am sure others will also find them useful. These numbers are taken from three sources: The Economist, USA Today, and eMarketer with some extrapolation of course.

Worldwide Internet users: 1.2 Billion
Worldwide social networking site users: 506 Million
% of Internet users registered on at least one social networking site: 42%

Worldwide online advertising spending: $40 Billion
Worldwide social networking advertising spending: $500 Million
% of online advertising dollars spent on social networking sites: 1.25%

Seems to be quite a discrepancy however, I expect advertising spending on social networking sites to increase steadily over the next few years as marketers become more comfortable with the concept and more aware of the benefits.

Social Networking World Map

noreply@blogger.com (Hussein Fazal) — Wed, 07 May 2008 22:00:00 +0000

It shocks my every time I speak with a Canadian who thinks that facebook is the only social networking site or when I speak to an American who thinks the same about myspace. There are plenty of other ones out there - hundreds in fact. Different countries actually are 'dominated' by different social networks. Although my blog is usually dedicated just to advertising in social networking sites, I though it would be prudent to try to clarify this. Please see the images below, with due credit given to the original sources of these images:

From Valleywag - The world map of social networks

From Le Monde.fr - Réseaux sociaux : des audiences différentes selon les continents

MySpace Featured Apps. Mathematical Analysis - Is it worth $75k?

noreply@blogger.com (Hussein Fazal) — Fri, 02 May 2008 03:21:00 +0000

It is quite late, but I just read Nick O-Neill's article MySpace Begins Charging for Application Promotion and felt the need to blog. Instead of taking the approach that most are taking by simply declaring it outrageous, I decided to take a mathematical approach and look at the ROI. I have made many assumptions and obviously every app is very different. I have tried to take an average or an educated guess in some cases - PLEASE let me know if you have any reason to believe they are far off.

MySpace has ~15 Million unique visitors / week. Let's say of those 15 million, 1% check out the application directory - 150,000 people. Assume a conversion rate (people who see your promotion click on in and add your application) of 30% (It is quite the prominent display) so 45,000 people add your application. Also assume that each person has an average of 3 friends who also add the application, so you are looking at a total of 180,000 Installations from your $75,000 Investment!

Now, Assume each person that adds your application will visit your canvas page 5 times a week.
Showing ads on your canvas page, an ad network like AdParlor has an ~eCPM of $2/1000 impressions, let's be conservative and use an eCPM of $1/1000 impressions so each person who adds your application will earn you about 0.5 cents / week. Earning 0.5 cents/week from each of these 180,000 people = $900/week. That translates to about 83 weeks (~1.5 years) to earn back your $75,000.

I will leave it up to you now to decide if it is worth the investment?

Are high CPM rates for Social Networking App Developers possible?

noreply@blogger.com (Hussein Fazal) — Mon, 28 Apr 2008 00:32:00 +0000

After reading Justin Smith's Post on Inside Facebook about CPM rates - it got me thinking. I would think that getting advertising dollars would be one of the primary reasons for developing a popular social networking application, so a high eCPM would be the key to monetization. Looking at the huge differences in the values he reported, I wonder why such a disparity exists? Are high CPM rates really achievable by advertising networks resulting in real profits for social networking application developers?

I think high CPM rates are possible - but there are certain things ad networks need to keep in mind.

1) The advertising must be relevant. A teen myspace user looking for some entertainment will not be interested in an ad to purchase furniture. What is relevant usually are ads for other cool applications similar to the app that he/she is currently using.

2) The advertising must be targeted by demographics. The beauty of social networks is the information you have available to you - Use it!

3) The advertising must be targeted by topic. Someone playing a poker game application will probably be interested in a BlackJack game application - and not a celebrity gossip news application. Advertising networks should keep this in mind, and be sure to show that blackjack advertisement more often on that poker application than other ads.

I believe that these social ad networks are evolving slowly - soon they will have figured out the optimal way to serve ads, and I expect average CPM rates to climbs steadily.

3 Classifications of Social Network Advertising

noreply@blogger.com (Hussein Fazal) — Fri, 25 Apr 2008 17:15:00 +0000

I classify social network advertising to come in three major forms:

1) Direct Advertising that is based on your network of friends

2) Direct Advertising placed on your social networking site - usually uses demographic information from your profile.

3) Indirect Advertising - usually building a brand - by creating 'groups' or 'pages'

Let me dig deeper into each one of these.

The first format can be the most effective but also causes the most controversy. Heard of the facebook beacon project? That would fall into this category. Based on an action your friend has taken, you might see a message in your news feed saying 'Hussein has just bought a 'RadioHead CD from MusicWorld'. I definitely consider this a form of advertising and it is using your friends to influence you. This can be the most effective means as often people make decisions to purchase something or do something based on their close group of friends. However, there is also a lot of controversy surrounding this as it can be considered exploiting the personal relationships you have with your friends and also raises privacy concerns.

The second format is what you would consider 'normal' advertising. Just like you see google AdSense or banner ads on many many sites, this is the same thing except on a social network site. You can see these - for example - as a brick in the top right of myspace pages, or as a banner on the left of facebook profiles and so on. There are two differences however. One is that these social networks can take advantage of demographic data on your profile and hence target the ad directly to you. Secondly, these types of ads can also be placed by individual developers on their application pages. They have access to the same data and can generate income for application developers giving them further motivation to create apps.

The third format I called indirect advertising but perhaps that is not the correct word. Many times a company will use this method specifically as a marketing technique - the difference is that it is not 'in your face' without you asking for it. It is usually a 'page' or 'group' that they have created that you can choose to join. These can quickly grow in numbers of subscribers and fans and become a very effective marketing tool.

No matter which format or combination of formats your company chooses - realize that it will most likely be far more effective than traditional methods. The very nature of social networking creates a more personal feel and - although this is open for debate - creates a more comfortable setting for marketing your product or service.

Purpose of this blog

noreply@blogger.com (Hussein Fazal) — Thu, 24 Apr 2008 21:52:00 +0000

We all know the size of the Internet advertising market is huge... and growing. Estimates by the Kelsey Group put the Global advertising market at $45 Billion for 2007 (7.4% of the total global advertising market) but expect it to grow to $147 Billion by 2012!

We all know the number of people on social networks is huge... and growing. Estimates puts the worldwide Global active memberships around 250 million people - primarily dominated by the top 6 sites (in order of size) - myspace, facebook, Hi5, Friendster, Orkut, and Bebo. As for the number of total page views on these sites, it is difficult to say.

Do these mesh together?
That is the question this blog is here to answer - along with the many other questions related to social network advertising. Can advertisers use this phenomenal social networking platform to promote their products? Can the unique and personal relationships between members of social networking sites be 'exploited'?

I will do what I can to stay on top of news in the industry - whether it be comscore reports, facebook beacon experiments, or myspace launching an ad network. I welcome your feedback at all times as I tackle this complex and interesting topic.