Social Networks Make Poor Advertising Bedfellows

Things aren’t looking good for social networks. The bandwagon web platform which has everyone starting a new company has proven effective in attracting an audience yet, to add insult to injury (I think it is safe to say Friendster and MySpace have proven retention a challenge – the injury), it seems monetization is still out of reach.

Compounding the fact that I have yet to even see a case studies reinforcing the effectiveness of advertising on a social experience, it seems Facebook users are moving en masse to support a MoveOn.org complaint protesting their “Beacon” advertising technology. Beacon allows them to serve ads against personal user behavior.

“Facebook’s “social ads” so far appear to be a flop.”

While personally targeted ads are seemingly big brother, I for one look forward to the day when ads are personally and behaviorally relevant. So why are media rates and results from ads on social networks so low? A social experience delivers the same user as that which is on email; that is, a purpose driven user: write an email, update a profile, check in on peers. Marketing to such an audience has always been an insurmountable challenge as they are least disposed to alternatives actions and messages. It is not the distaste for behavioral and personal targeting social networks have to overcome (that just makes good press) but that that social features are merely retention vehicles that need to be supported by a compelling experience.

Google helps users find websites. Layering social features on that experience allows Google to increase time spent and retention as users engage with what their peers are searching; at the end of the day though, advertising there works there because we reach that search audience actively engaged with finding something relevant. That’s not to say all social networks are doomed to poor monetization. Social Network LinkedIn is a good example of an environment in which a compelling experience (focused networking with professionals) is enhanced by its social features. That suggests that advertising is more effective and to some extent I could argue it should be: I’m not there just to play with the latest viral app or see who my friends friends are but to interact with a niche; by nature that improves the quality of the audience, an audience predisposed to improving their professional life.

It is for that reason that I have always been frustrated with Yahoo’s inability to deliver a singular social experience throughout yahoo.com. Yahoo’s compelling experience includes Shopping, Sports, News, and Y! Search; environments in which advertising works. Consider the value of a social experience that integrates users’ photos, messenger, email, calendar, Autos and Personals. Effective advertising is enhanced by user preferences, behavior, and peers.

Be careful with my supposition though, notice I referred to Advertising, not Marketing as the challenge facing social networks. Clearly the social graph creates a wealth of user data allowing marketers to identify targets, understand audiences, and leverage relationships but that only furthers my point that social networks themselves are poor advertising platforms. You can learn from a social network but you need that medium on which to advertise (search or content). And so we’re full circle: a social network is a feature not a business; it is a wonderful addition to Google, Yahoo, or even LinkedIn’s professional environment. If I were Facebook, I’d be investing in ways to monetize that data.