Michael Arrington of Techcrunch has come up with a model to try and value social networks
http://www.techcrunch.com/2008/06/23/modeling-the-real-market-value-of-social-networks/
It involves looking closer at where each of the main networks has usage numbers and looking at the average Internet advertising spend per user in each of those territories (ie a valuation based on where your numbers are strong and if the market is bouyant in those areas)
He does admit the model is somewhat flawed as the modelling is based on some one dimensional data ... but he still pushes it through.
Personally I think he has ballsed this one up. I love Arrington and read his work religiously ... but this is way off mark.
It assumes:
1) Social Networks are an effective place to place display advertising. (unproven)
2) It assumes advertisers value eyeballs over anything else (they don't)
3) It doesn't take into consideration how people are using each network and the advertising contexts each offers (ie Linked In is fantastic for a higher yield C suite target in a relevant environment, whereas myspace has a load of 14-17 males which can be reached elsewhere)
4) Unique audience (ie eyeballs they have that are tough to find elsewhere)
5) Engagement (Unique Browsers combined with page views combined with time spent and repeat traffic)
6) Growth (where is it coming from - what areas, what demos?)
Personally, neither myspace or Facebook are doing a particularly good job of bringing in money. They are both probably the largest single sellers of remnant cheap inventory and in doing so are doing a great job of devaluing their audience. I don't think this is just limited to Australia either, as the consensus amongst the marketers at Ad:Tech SF seemed to be the same. Yes they have shedloads of users, but that offers them minimal advantage because this doesn't alone appeal to advertisers.
These hypothetical valuations are nice and make for interesting reading - but they completely miss the mark. The challenge for FB and myspace isn't just finding the killer application, it's finding the killer spin that brings in the advertising dollars they want more than anything.
Showing posts with label social networking. Show all posts
Showing posts with label social networking. Show all posts
Monday, June 23, 2008
Tuesday, March 4, 2008
Social Media here to stay: Executive Director of 'Thanks for the Add' to be appointed
So social networks are here to stay says a new report from TNS Media Intelligence/Cymfony out of the US. They even say it is a facet of the marcomms mix that needs to be overseen by senior execs in a specialised manner.
"In the survey of 71 marketing professionals in the U.S., Canada, France and the U.K., not even one respondent saw social media as a passing fad. Approximately a fifth (21.1 percent) said it was worth monitoring at the staff level but "should not absorb significant resources," while nearly half (49.3 percent) said it should be monitored at the executive level and receive significant resources. Another 29.6 percent called it a "revolutionary new opportunity that must be grasped with a sense of urgency." The U.S. had a higher concentration of exuberance, with 45 percent of respondents calling social media revolutionary. " - http://www.clickz.com/showPage.html?page=3628607
Well, what does this mean?
It appears the majority consider social media if not essential, revolutionary to a point of urgency.
So what is pushing their buttons?
"Monitoring social media activity for brand and category-related sentiments ranked highest among marketers' priorities for the channel and scored considerably higher than brand awareness and customer loyalty initiatives. Whereas roughly 20 percent said it offered the greatest potential for either increasing loyalty or building awareness, 36.6 percent described it as ideal for "gaining consumer insights."
The first point is really no different to offline media monitoring ... checking media to ensure you are on top of market sentiment and being able to respond accordingly. Utilising it for brand awareness and loyalty doesn't score as well (which would be troubling for some), yet over a third consider it ideal for gaining consumer insights (which is an area neither of the big players have really tapped into which could be a ridiculously large goldmine if executed correctly).
Will we see the major social utilities look to gain insights from consumers and actively monetise these beyond what straight targeting? Will we see social networks and utilities partner with brands (ie really partner, not just sell inventory and some production) to allow them to truly understand their audience and connect with them in a meaningful way?
Lets not forget these are o/s stats - I would wonder what the data would look like locally. Still, promising news for the social media gang.
"In the survey of 71 marketing professionals in the U.S., Canada, France and the U.K., not even one respondent saw social media as a passing fad. Approximately a fifth (21.1 percent) said it was worth monitoring at the staff level but "should not absorb significant resources," while nearly half (49.3 percent) said it should be monitored at the executive level and receive significant resources. Another 29.6 percent called it a "revolutionary new opportunity that must be grasped with a sense of urgency." The U.S. had a higher concentration of exuberance, with 45 percent of respondents calling social media revolutionary. " - http://www.clickz.com/showPage.html?page=3628607
Well, what does this mean?
It appears the majority consider social media if not essential, revolutionary to a point of urgency.
So what is pushing their buttons?
"Monitoring social media activity for brand and category-related sentiments ranked highest among marketers' priorities for the channel and scored considerably higher than brand awareness and customer loyalty initiatives. Whereas roughly 20 percent said it offered the greatest potential for either increasing loyalty or building awareness, 36.6 percent described it as ideal for "gaining consumer insights."
The first point is really no different to offline media monitoring ... checking media to ensure you are on top of market sentiment and being able to respond accordingly. Utilising it for brand awareness and loyalty doesn't score as well (which would be troubling for some), yet over a third consider it ideal for gaining consumer insights (which is an area neither of the big players have really tapped into which could be a ridiculously large goldmine if executed correctly).
Will we see the major social utilities look to gain insights from consumers and actively monetise these beyond what straight targeting? Will we see social networks and utilities partner with brands (ie really partner, not just sell inventory and some production) to allow them to truly understand their audience and connect with them in a meaningful way?
Lets not forget these are o/s stats - I would wonder what the data would look like locally. Still, promising news for the social media gang.
Friday, February 15, 2008
Feb: Social Networks plateau
Interesting stats on the state of Social Networking sites.
For the second straight month both Facebook and Myspace have not seen growth in user numbers. For January, Myspace had 2.93m users (down 2.5% on December) and Facebook had 2.51m (up 0.7%). The category as a whole (which includes Bebo, Blogger etc) was flat at just under 6.5m.
In January, Bebo lost just under 7% of its audience, with 700,000 unique users (down from 750,000). It is interesting to note that in the past 12 months Bebo has seen modest growth at best, adding 198,000 users
In terms of engagement between Facebook and myspace the two are reasonably on par. Myspace users spend 1 hour 29 mins on the site and visit on average 8.84 times; Facebook users spend 1 hour 12 minutes on the site and visit on average 7.48.
Whilst these social networks are all the rage, it's important to actually look at the data behind them. And the data tells a pretty clear story.
Usage is flat. Myspace has essentially remained stagnant in UBs for 7 months despite adding a heap of new channels. Facebook has gone from extreme growth to none in a very short amount of time. Bebo hasn't made a splash despite local operations and an alliance with Yahoo!
Engagement is stagnant. Users are not spending increasing time on these properties ... I think the people behind them need to try a little harder to keep these users engaged and on board ...
This phenomenon is also happening in the US ... see here (http://creativecapital.wordpress.com/category/its-official-us-social-networking-sites-see-slow-down/) that shows that myspace's issues here may just be the start (in the US it is experiencing a decline in engagement).
Saturday, February 9, 2008
Revenue heat on social networking and video sites
One trend we're seeing in 08 is closer scrutiny on social networking and video sites to start generating the revenue expected of them when their parents outlayed big dollars to acquire them.
Business Week featured this article this week - http://www.businessweek.com/magazine/content/08_07/b4071054390809.htm
WSJ covered a similar issue here - http://online.wsj.com/article/SB120217154978142763.html?mod=hpp_us_whats_news
Mediapost covered it as well in their Thursday eDM - 'The Past Repeats Itself: Social Media Needs advertising'.
Obviously this isn't a new issue - social networks and video sites have struggled since day 1 to monetise the hype and eyeballs surrounding them ... and in many ways it's been a case of build it and they will come ... or more to the point, spend the money and we'll work out a way to make it profitable sometime in the future.
The Business Week article raises a few key areas (mainly around social networking but also applicable to video sites too)
- Slowing growth on social networks
- Declining response to advertising - lower CTRs
- Google are struggling to generate the revenue required out of their myspace search distro deal - Google's Brin: "I don't think we have the killer, best way to advertise and monetize social networks yet."
If these issues are hitting the States - you have to wonder why the reverberations will hit locally ... AU is probably at best 3 years behind the states and Fox already have reasonable staff levels locally selling the dream of myspace.
For me, the main issues around these properties are
- targeting sophistication. Yes, a lot is talked up around the ways you can target on these sites but very little follow through is shown. It may be novel that I can target 21 year old males who live 15km from the city and enjoy The presents and drive an 83 honda civic but how can I use this to satisfy a business objective.
- low response. We're talking very low ... but the story isn't all bad. However it could get worse if the networks response to lower revenue is more ads per page
- the networks have done a poor job of connecting advertisers and users ... they talk up the idea of UGC and 2 way brand dialogue but it is not being faciliated. No one knows these networks more than the networks themselves, right?
- Social Networks are like accessories - Facebook and MySpace are no different from the nightclub/bar that is the coolest thing in the world in 07 but completely passe in 08. Messenger and Mail are utilities - they don't profess to be cool ... they simply help you do something. Facebook has done a better job of being neutral - Myspace has intentionally aligned itself with culture/fashion/music/movie brands/bands etc and tried to leverage this as 'cool'. Which approach will work?
- For video in particular - what is the advertising model? It doesn't seem to be pre-rolls anymore ... and overlays are being talked up but there's little evidence that shows these will not be as intrusive and annoying. It's been almost 5 years since video was hailed as the next big thing ... you have to wonder if it can be the next big revenue thing.
- With YouTube, I wonder whether if, in isolation, it can handle advertising beyond cheap med rec's? Amazing site, great useability, huge numbers ... but would overlays, brand channels, targeting etc be accepted?
Anyway, I'm all for the pressure that's being placed on these sites through the media and stakeholders. More pressure means more actions, which ideally means better ad products and better client solutions.
Business Week featured this article this week - http://www.businessweek.com/magazine/content/08_07/b4071054390809.htm
WSJ covered a similar issue here - http://online.wsj.com/article/SB120217154978142763.html?mod=hpp_us_whats_news
Mediapost covered it as well in their Thursday eDM - 'The Past Repeats Itself: Social Media Needs advertising'.
Obviously this isn't a new issue - social networks and video sites have struggled since day 1 to monetise the hype and eyeballs surrounding them ... and in many ways it's been a case of build it and they will come ... or more to the point, spend the money and we'll work out a way to make it profitable sometime in the future.
The Business Week article raises a few key areas (mainly around social networking but also applicable to video sites too)
- Slowing growth on social networks
- Declining response to advertising - lower CTRs
- Google are struggling to generate the revenue required out of their myspace search distro deal - Google's Brin: "I don't think we have the killer, best way to advertise and monetize social networks yet."
If these issues are hitting the States - you have to wonder why the reverberations will hit locally ... AU is probably at best 3 years behind the states and Fox already have reasonable staff levels locally selling the dream of myspace.
For me, the main issues around these properties are
- targeting sophistication. Yes, a lot is talked up around the ways you can target on these sites but very little follow through is shown. It may be novel that I can target 21 year old males who live 15km from the city and enjoy The presents and drive an 83 honda civic but how can I use this to satisfy a business objective.
- low response. We're talking very low ... but the story isn't all bad. However it could get worse if the networks response to lower revenue is more ads per page
- the networks have done a poor job of connecting advertisers and users ... they talk up the idea of UGC and 2 way brand dialogue but it is not being faciliated. No one knows these networks more than the networks themselves, right?
- Social Networks are like accessories - Facebook and MySpace are no different from the nightclub/bar that is the coolest thing in the world in 07 but completely passe in 08. Messenger and Mail are utilities - they don't profess to be cool ... they simply help you do something. Facebook has done a better job of being neutral - Myspace has intentionally aligned itself with culture/fashion/music/movie brands/bands etc and tried to leverage this as 'cool'. Which approach will work?
- For video in particular - what is the advertising model? It doesn't seem to be pre-rolls anymore ... and overlays are being talked up but there's little evidence that shows these will not be as intrusive and annoying. It's been almost 5 years since video was hailed as the next big thing ... you have to wonder if it can be the next big revenue thing.
- With YouTube, I wonder whether if, in isolation, it can handle advertising beyond cheap med rec's? Amazing site, great useability, huge numbers ... but would overlays, brand channels, targeting etc be accepted?
Anyway, I'm all for the pressure that's being placed on these sites through the media and stakeholders. More pressure means more actions, which ideally means better ad products and better client solutions.
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