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Andrew Jenkins:
With audiences fragmented and snacking on content when and where they want (on their PCs, laptops, netbooks or mobile phones), advertisers face difficult decisions regarding where to spend their ad dollars and how much to spend in each instance.
For example, U2’s recent concert streamed on their official YouTube channel garnered nearly 10 million viewers, the video site's largest streaming event ever. The event, despite its success, raises a number of questions regarding the evolving online advertising model. Recent news about MySpace’s advertising deal with Google and their inability to meet their minimum requirements also raise questions about viable ad models online and within social networks.
How, as an advertiser, do you determine your advertising budget and strategy if the property you are using to attract an audience is attracting viewers from all over the world? If you are a global brand, do you pool funds from regional ad budgets? If you are a regional advertiser, your budget is likely not sufficient for a global buy and, even if it is, do you run the risk of advertising to a diluted target audience?
Ted Morris:
This also brings into question the economics of advertising given the current depression in adspend worldwide. Some media buying and ad agencies experienced top line revenue declines of up to 15% in 2009 over 2008. WPP, for example, has expressed that they haven’t been able to cut staff fast enough in line with revenue decline.
Has this economic downturn been the main reason and catalyst for people to buy cheap advertising on social media sites that are generally undifferentiated and not measureable in terms of target demographics? Some client companies such as Unilever and Mars have resorted to the recent phenomena of ‘crowdsourcing’ - relying on mass markets to generate product ideas, advertising creative and even participate in creative agency selection. While these activities are taking place on the margins, it does signal something between desperation and propensity to experiment in very uncertain economic times. In the worst cases, agencies accounts are being lost to the so-called creative “crowds”.
But caution is easily thrown to wind when in comes to placing advertising within the social medium. Juxtaposed against proven media, there are few mechanisms in place to measure more than clicks and page views on the Internet and a dearth of metrics to identify consumer behaviour with respect to the purchase funnel.
In the very least, while traditional adspend is not perfect, especially as the advertising world deals with the confusion and early adopter pitfalls of social media, traditional media such as radio, television and print are proven and measureable. In fact, television is being watched more than ever across all target audiences, according to The Nielsen Company. Don’t be surprised if there is a swing and surge back to what is considered ‘traditional’ in the world of adspend once the global economy has recovered some time in 2011 – 2012.
Julie Tyios:
It may be hard to measure ROI, but social networks are always evolving – They’re collecting more and more data about their users, making it possible to fine-tune advertising messages down to the last detail. As more niche networks are coming to the forefront, more advertising opportunities are made possible for very specific demographic targets. Sounds like a dream for every advertiser, doesn’t it?
But, there’s a catch: How much is the audience worth? The $900M MySpace deal was based on user numbers that weren’t sustainable for various reasons. In the end, Google lost out as MySpace fell victim to what’s becoming a typical pattern for social networks: Rise, peak, and subside. Even Facebook, still the most popular social network, lost $11B in value nearly overnight this time last year while its yearly advertising earnings fell short by $35M, creating a lot of trouble for the company and its shareholders.
There are literally thousands of social networks in existence right now. Social networks can be highly targeted niche markets for advertisers, with plenty of tracking tools in place. In theory, there’s incredible opportunity with these networks but, with such finicky audiences and competitors constantly vying for a chunk of the pie, it’s hard to maintain a constant level of users and value. Is it worth buying a long-term advertising contract with any social network? If there’s any lesson to be learned from the MySpace example, it’s that either advertisers start putting more of their ad budget back to more traditional, proven, quantifiable mediums, or they take out multiple short-term contracts instead.
Perhaps their problem is the global reach of these social networks, which creates a large, more generalized audience. I predict that niche markets will thrive in the future because they create solid, personal communities with core groups of users who will remain loyal to the service. It’s quality over quantity: Smaller groups, cheaper advertising, more targeted audiences. It’s a win-win situation all around.
The behemoths like Facebook and YouTube will only continue to thrive so long as they cater to their audience’s wants and needs, which are constantly changing. Brand loyalty is changing. How long will it last before the next big thing comes along in an already oversaturated market?
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