Wednesday, December 17, 2008

Ads and Social Networking Sites Go Together Like Orange Juice and Toothpaste

Which is to say, people hate that combo. I came across a useful summary to that effect this morning:
Social Networking Sites and Advertising
Here's a summary for those of you who are too busy to, you know, read:
  • Consumers have a very low tolerance for online ads
  • 29.9% of visitors surveyed will immediately leave a site they see as cluttered with ads
  • Ads on social networking sites result in substantially fewer click-throughs, and even those who do click are less likely to make a purchase
  • Don't even think about charging customers for an ad-free site; they like that idea even less.
So what's to be done if you're running a social networking site? Frankly, there only appear to be three options (only one of which is good):
  1. Hope that your cash in the bank is enough to tide you over until advertisers are willing to pay a lot more for click-throughs (or until some marketing genius develops a much more clickable banner ad)
  2. Get really smart, really quickly, about contextually targeting your ad inventory to your visitors
  3. Forget about the idea of monetizing social networking, and figure out how to make that a side-project to your core business of selling something else
Overall, #3 has the best chance of success. At the very least, it's less dependent on brilliant flashes of insight; those things are great when you have them, but "we'll figure it out later" is a poor excuse for a business model (are you listening, Twitter?).

The bottom line in this scenario is not everything can be monetized. There are times in every person's life when you have your wallet out, and other times when you're simply not interested in spending money. Successful online businesses are likely to be the ones whose services most closely align with those "wallet-out" moments. Social networking sites are trying to swim against that tide, and will continue to do so as long as they're exclusively focused on social networking.

Looking into my crystal ball, here's what I forecast for Web 3.0: Facebook, MySpace, Twitter, Friendfeed, etc.: they will all go away (at least in their current forms). In their place will be a bunch of online businesses that incorporate social networking elements by default. Web 2.0 taught us how powerful the Web could be as a social mechanism, but it was a stop along the way, not a destination.