In Sunday's NY Times Business Section, there was a huge article on MySpace.com called Making Friends Was Easy. Big Profit Is Tougher and I found it eye-opening....


If you don't know what MySpace is, let me give you a quick synopsis: MySpace is owned by News Corp., who bought it last year for $649 million. It has over 70 million profiles. These profiles are personalized web pages created by mostly under-30 types whLogodotcomere people can link to friends, post likes and dislikes, video, interests, pretty much anything that could describe you. For the corporate types that read this blog...think of it as LinkedIn for kids.
Now let's ignore some of the issues with MySpace (see Business Week article) which includes sexually explicit posts, trolling for minors, and so on...because MySpace is a social network place for over 14-year-olds. According to the NY Times article, MySpace taps into three passions of young people: expressing themselves, interacting with friends, and consuming popular culture.
I'll revisit the social impact a little later on because that's the only place MySpace can make money. Right now, MySpace is displaying more web pages than everyone except for Yahoo and theoretically can be targeted to users based on interest. However, who is buying these ads?
Quoting the article, "the company will have $200 million in revenue this year." Later on, it points out that it is charging around 10 cent CPMs for such ads. That rate is pathetic...and when you spend time on MySpace you get a ton of ads from E*Trade, University of Phoenix, Verizon, Napster, etc. -- the usual cast of characters you see on Pay for Puglsey performance network buys that are probably charging back to these MySpace advertisers on a CPA (cost per action) basis or a CPC basis.
Ross Levinsohn, president of Fox Interactive Media says, "If we can raise that by 10 cents, think of the upside." Yes, and if my cat had a college degree, he'd be a professor.
MySpace has plans to expand the advertising opportunities -- letting advertisers create MySpace pages so that kids can link to them. Say, have an advertisers put a page up for cute deodorants and then let kids link to them saying, "This is what I use to cure bad odor!" Another idea that Fox has, according to Mark Jung, COO of Fox Interactive, is to let a car dealership create a page and then sell enhancements to attract business.
Both these ideas -- plus selling plain old banner ads at a pathetically tiny CPM -- misses the point of a social network. To throw more cold water on these grandiose revenue ideas, MySpace ran testing with Google and Yahoo for search ads and then tried to get into a long term deal with them. You know what the search companies told them? You guessed it: No thanks, and according to the article, MySpace users are not the best prospects for most marketing since these kids use MySpace for socializing not buying.
Now what? First of all, if you are one of these marketers and you need credit worthy customers, you should probably stay away from running typical banner ads on MySpace. Personally, I'm a little surprised that any financial services companies are directly advertising in MySpace; I know that when I ran the 17th largest US internet advertising program, I NEVER WOULD HAVE DIPPED A TOE into MySpace.
It is the wrong demo target, even if it was a CPA deal. I wouldn't even run on a CPC basis because there was nothing I disliked more than a clicker deal that didn't convert. However, there is something to social network or conversational marketing if you are in the broadcast, movie, music, clothing, video game, and so on, business.
If I was marketing a musician or a TV show, targeted at the youth market, this is where I would advertise. Sure, I'd even run banner ads at 10 cent CPMs, but I would create pages to link to MySpace users. I'd also want to know how many people are linking and what they are saying. MySpace would not only provide great advertising opportunities, but a wealth of information and market research for their advertisers.
Creating MySpace pages for a toothpaste advertisers, seems like a bad idea that the youth of America won't get fooled into playing along with. I think they can figure out a commercial from a mile away. Using MySpace for pushing out TV shows, movies, music, new music downloads, etc., is really where social network advertising could work especially by providing critical market intelligence.
Mr. Levinsohn should forget about doubling his pathetic CPM with traditional advertisers and embrace what News Corp. bought -- a social network opportunity for the youth market the best the internet has seen since AOL from the '90s.
PardonMyFrench,
Eric