Big Social Network Advertising Deals

Social networks continue to do ad deals to try to make some of the money that everyone seems to think they are worth. Google and MySpace just did a close to billion dollar deal and now Facebook and MSN are inking a deal that will put banners and text links on Facebook pages. Of course the Google and MySpace deal put’s actual money in the pocket or Rupert Murdock while Google could be doing the deal just to get more exposure to and more people using their search engine. Here is the press release from Microsoft.

Microsoft Corp. has struck a deal to provide advertising for social networking site Facebook, in one of the first high-profile agreements for the software maker’s online advertising platform.

Under the deal announced late Tuesday, Microsoft will sell and provide banner ads and sponsored links for Facebook using the adCenter online advertising platform and other in-house technology and services.

Financial terms of the deal were not disclosed. It is expected to run through mid-2009. Source: Yahoo.

I am assuming Microsoft is planning on loosing money as well, as everyone that I know who has advertised on MySpace has lost money, and there is no reason to think the Facebook site will be any different, people aren’t there to shop, they are there because their friends are there. Plus, you know some advertisers will be reluctant to advertise knowing there could be some edgy content next to their ad, especially with stories such as this one involving a banner ad infecting a million computers, Banner Ad on MySpace Infects Over 1 Million Computers and this one involving the adware programs from Zango being pimped on MySpace users, Would you kindly shut your noise-hole?.

Techcrunch says this is notable news because Google wasn’t involved,

This news is most notable because the partner that Facebook chose isn’t Google.

Google is generally thought to generate more revenue per page than either Yahoo or Microsoft due to their method of choosing which ads go on top. While Yahoo places the highest bidding ad on top, Google also takes into account the click through rate on individual ads in deciding which go on top. This seemingly simple feature increases revenue substantially, and along with Google’s superior search product is the single biggest factor in Google’s financial success to date. Yahoo, it is worth noting, is developing a similar system, called Panama, which is rumored to be launching later this year.

I really don’t think targeting will matter as much for the same reasons, people aren’t looking to buy something, unless they landed on a page while searching for something from a search engine or another site, and while the page views on these sites are unreal, click thru’s on ads aren’t very good, so, no matter how you slice it, ROI will always be low to non-existent, and that means the ad spots will be worth less and less as time goes on and advertisers spend less money. But, the thing this deal has over the MySpace deal, Facebook has 10 million college age members, while MySpace has 100 million high school age members, these college kids will have more money and more need for “stuff” if they are on their own, so, this might be a better deal for Microsoft.

Microsoft could also be thinking of using this as a test bed in that they can develop new targeting methods for these users which they could use elsewhere. Definitely an interesting deal, just wish we could see the financials involved.

Earlier this month, Google struck a deal with News Corp.’s MySpace.com, the top social-networking site, to pay at least $900 million in shared advertising revenue and become the online hangout’s exclusive search provider. Under the multiyear deal, Fox Interactive Media will add Google search boxes to MySpace and other sites. Google also get first rights to sell any display ads Fox doesn’t sell directly.

About Facebook: Founded in February 2004 by Mark Zuckerberg, Facebook helps people better understand the world around them by developing technologies that facilitate the spread of information through social networks. The site has over 9 million registered users in over 40,000 geographic, work-related, collegiate, and high school networks, and according to ComScore’s MediaMetrix report, Facebook ranks as the seventh-most trafficked site in the United States. Facebook is privately held and headquartered in Palo Alto, Calif.

YouTube also just announced a big deal Tuesday involving branded commercial channels, with Paris Hilton being the first, using this to promote her new album. It’s Hot. (Note: This is a joke, her big saying, I think she’s a skank, but she’s one hell of a promoter.) This is from Techcrunch,

YouTube will unveil a number of custom branded commercial channels tomorrow in its latest move to monetize the site. The bizarre cultural icon Paris Hilton is already highlighted on the front page of the site with her own YouTube channel, to correspond with the release of her debut musical album on Tuesday. Fox has paid an undisclosed sum to advertise its TV show Prison Break on the YouTube channel of Hilton, whose album is produced by Warner Brothers. YouTube reportedly pays more than $1 million each month in bandwidth costs and some people have been concerned that it would be a challenge to turn its huge traffic into money. Thus Paris Hilton to the rescue.

Well, I think this will have the same problems as the other deals, unless they can make the same kind of videos as the ones offered on YouTube, i.e. containing half naked chicks and stupid stunts or jokes. I still think the best way for them to monetize YouTube would be to insert video ads in front of each video, that way everyone has to see it, or at least play it.

Posted by Jimmy Daniels August 2006

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