Andrew Chen Archives

As a followup to my previous post, "5 things that make your social network monetize like crap" there’s been some recent news about the Google financial results for this quarter related to social networks.

Here are some excerpts, the first from Techdirt:

In the discussion, what we agreed on, was that the social networking sites had done a good job in doing an "upfront" monetization, with MySpace getting a guaranteed ad deal from Google and Facebook getting a guaranteed deal from Microsoft. However, all the details suggested that on the backend things were pretty ugly. It’s not hard to figure out why.

Ads work on Google because people are looking for information. They do a search, and if the advertisement shows information that helps with the query, that makes everyone happy. However, when it comes to a social network, usage is quite different. People aren’t looking for information about products — they’re looking to communicate with friends. In that environment, ads are seen as an intrusion — which is the exact opposite of ads in a search world.

… and the second from CNet:

Chief Financial Officer George Reyes referred to "a few AdSense partners" to whom Google is required to make guaranteed payments. "We have found that social-networking inventory is not monetizing as well as expected," he said.
Under further questioning, co-founder Sergey Brin said the company was disappointed in experiments it had run on some of the approximately 20 social networks it works with, which include MySpace and its own Orkut.
"I don’t think we have the killer best way to advertise and monetize social networks yet," Brin said. "It’s a big opportunity because it’s so much inventory."
MySpace executives were not available for comment Thursday night and a Facebook spokesman did not return a call seeking comment.

Worth thinking about how these monetization issues ultimately impact the growth potential of the social network industry. Absolutely these are some tough problems.

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