MySpace has unveiled ‘MyAds’ to the world, an advertising platform aimed at small businesses with small budgets. Display ads can be bought on a cost-per-click basis.
The company wants to increase revenues during the economic downturn / correction / recession, but is this the magic bullet?
As I see it, there are five problems areas for MySpace to overcome (aside from the minor complaints that the site requires the latest version of Flash to work, and doesn’t work in Google Chrome).
Problem #1: Social networkers don’t click
There is a lot of activity on social networking sites, resulting in lots of page impressions. Pages are checked frequently by their owners. Pages are refreshed by those who interact to update whatever conversation they are taking part in. By their very nature, these sites drive interaction and gazillions of page impressions, but do they drive enough clicks for advertisers?
I’m not convinced that they do. Advertisers will see some kind of response, for sure. But it won’t be anywhere near as good as the text ads we see on search engines (because they are linked to a specific search query). On content networks text ads are far less appealing to web users, who aren’t especially in the right frame of mind to click.
So what about display ads? Well we have banner blindness to deal with, which might be even worse on a social network site with all those distractions. In any event, banner click rates have declined in the past decade to around 0.10%. Other formats work better, such as medium rectangles (0.37%), though note that positioning is a major factor.
Meanwhile, Facebook advertisers such as Nick Denton reported click rates that were as low as 0.04%. Not quite the same format, placement, demographics or targeting technology as MySpace, but certainly an indicator that social media traffic isn’t terribly engaged with advertisers.
That said, Nick Denton noted that MySpace was delivering a click rate of around 0.10%, the same as the average banner click rate. Choose a better ad unit, then add to that better targeting and profiling and we may have a result.
Problem #2: Page clutter, and ad avoidance
We know that well-designed web pages normally contain lots of white space, with content units and ads spaced out neatly, and a fine blend of colour and typography to complete the visual look and feel. Meanwhile on MySpace, users design their own pages. Sometimes, the results are truly horrific.
This is a nightmare scenario for any advertiser. Most of MySpace’s users are (obviously) not schooled in the finer arts of usability or design, and more often than not pages are an example of how-not-to-do-it. Customisation might be cool for users, but it doesn’t work so well for advertisers.
The only saving grace here is that the banners on MySpace are placed at the top of the page, rather than in-line with the content of the page (presumably the rectangles and skyscrapers will appear lower down the page, among the clutter?).
I question, in an age of ad avoidance, whether MySpace's non-engaged users will even notice these ads?
Problem #3: Targeting
This is as much an opportunity as a problem. Indeed, the future of the media industry is going to be reliant on various degrees of targeting, with segmentation - via demographic and behavioural profiling - being the first thing any forward-thinking media company will introduce.
But, unless MySpace does wonders in this area I can’t see that there will be enough uplift in click rates for advertisers. Even if the targeting methodology is amazing, you still have the various negatives to factor in (such as page design / ad avoidance). There is also the fact that people don’t always tell the truth on their profiles, which could put a spanner in the works.
I do hope MySpace sees success in this area, to prove to other publishers that targeting works.
Problem #4: Pricing, ROI and the G-word
The price of an ad “begins” at 25 cents per click. That doesn’t sound like very much, but you can also buy Adwords clicks for that kind of money, and I’ll wager that they’ll perform better than the average MySpace display ad.
Google Adwords is the de facto starting point for cost-per-click advertising, and advertisers will find that text ads deliver much better results because they are normally tied into search activity, rather than content-based browsing. Why? It is about consumer mindset, as much as anything. When searching, people are in ‘search mode’; they type in a search query to activity find information, and are far more likely to click links.
On a news site (or a social networking site) the search query isn’t there… and as such third party links (and display ads) aren’t clicked so often. The user is in ‘browse mode’. They are engaged with the content on that page, rather than hunting for some other page. Anything else is an interruption.
I know that we’re not quite comparing apples with apples, but we are comparing click costs with click costs.
There’s definitely a place for display ads in the online publishing world, and MySpace is to be commended for introducing smart targeting tools to give advertisers the upper hand. But if display ads work well on MySpace, then why can we buy them on a CPC basis, when the vast majority of publishers use a CPM charging model? Worth pondering...
Problem #5: Economic factors
I feel a bit sorry for any firm that is currently launching a spangly new advertising product or venture, because they are really up against it. The internet should theoretically withstand a recession better than other channels, but honest Marxists will tell you that theories don’t always work out in practice.
Online publishers will most likely find themselves swimming harder against a rising tide of negative advertiser sentiment, and getting nowhere fast. I don’t think it will be 2002 all over again, but the mantra among advertisers will surely be ‘tried and tested’.
People are less willing to take risks or try out new things when the going gets tough. Innovation goes out of the window. Advertisers get scared and revert to type. And oftentimes we see ad budgets slashed due to economic pressures, a terrible idea, but something that happens every time the market starts to spiral downwards.
On the one hand, you have display ads being charged for on a performance basis (CPC), which makes a kind of sense. And on the other hand you have the poorest performing display ad format on a social networking site, where users are otherwise engaged. I think we’re talking about where you want to get your performance from: search or display.
Go on, give it a whirl
I don’t want to be unnecessarily down on MyAds, and suggest that you experiment, if the MySpace demographic is the right market to reach out to. Throw a little ad budget at this and measure the results carefully. Then see how it compares with other channels.
I’d love to know your click rates once the results are in. Anything over 0.10% seems to be better than the norm. Leave a comment below or email me (firstname.lastname@example.org) if you’d like to share the results. Good luck.