June 26, 2009
Advertisers want to reach people and social networks want to make money from their audience, so all the two parties need is a fair way to exchange. But, creating a marketplace between advertisers and social networks based on selling “clicks” is sure to leave both sides very unhappy. The social networks will be unhappy because they will not be receiving full value for their inventory, as people have a tendency to avoid clicking on advertisements. Advertisers are likely to be unhappy with the quality of the traffic generated by those clicks that eventually occur simply by delivering a massive volume of impressions.
Just because pay per click (PPC) turned out to be the golden goose for Google, does not mean it can solve social networks’ monetization issues. And if a recent TechCrunch post, “Facebook Click Fraud Enraging Advertisers,” is any indication, advertisers are quickly discovering the challenges of paying for traffic coming from social media.
If Google was able to monetize so well using PPC, why can’t PPC work in social networks? Because for Google, PPC factors in that people (aka: consumers, aka: audience) might actually want to “click” on the advertisement, therefore benefiting from Google’s advertisements. The two main times people come across a Google PPC ad unit are when they search the Web using Google, or when they are on a site that uses Google AdSense. Holding aside AdSense for a moment, when people are using a search bar, they are stating their intention to navigate to another site that might have information they are looking for. In short, they are looking to click on something. If Google’s advertisers can provide that “something,” then everybody wins — users are happy, Google is happy and advertisers are happy. AdSense works similarly people’s intentions to “click” have to be guessed at, but the same theory applies. If I am on a site that is all about running, I may want to click to another site that has something to do with running. If Google can provide an advertiser that wants that click, then everybody is happy again.
But when you get to social media, the formula doesn’t work anymore. Even Google, the uncontested master of PPC technology, couldn’t make people click in its deal with MySpace. Here’s the simple reason why: If I go to a friend’s page and my friend loves to go running, it is likely that my friend will have lots of content on his/her page about running — which might tell Google, or any other AdSense-like program, to offer me a chance to click on an advertisement about, or related to running. But I didn’t come to my friend’s page to learn about running; I came to learn about my friend. Therefore I had no intention to click going in, and the PPC model falls down.
Even when PPC ads target me using the data my social networks have about me — for example, Facebook knows I am getting married in September — they end up serving ads that they hope are so relevant that even though I had no intention of clicking on anything to do with weddings, they can get me to anyway. It’s easy to see the difference between serving me a wedding advertisement when I am searching for it, or when I am on a page about weddings, but how does that translate to when I am on my Facebook homepage? It might be relevant in one way, but it is not relevant in BOTH context or timing. This causes lower click rates; and while some of the clicks that do happen would be valuable, it’s just that the total value advertisers and social networks can derive from those clicks isn’t enough to make the relationship work.
In the end, selling clicks and traffic when people don’t want to click or navigate the Web will inevitably fail.
Joe Marchese – What are your thoughts? Drop me a line, or just follow the continued conversation on twitter @ www.twitter.com/joemarchese. You can also leave a comment on the Spin Board.