Rethinking Advertising on Social Networks

It is no secret that attempts to benefit from advertising on social networks are failing.  Only the big players such as Facebook and MySpace are experiencing decent revenue streams.  And this is not down to any fancy techniques for harnessing the power of a community but simply down to the vast membership base they both have.  Even if they experience the pitiful Click Through Rates (CTR) that smaller networks achieve, they are still going to amass a significant amount of advertising revenue.

Google are in a similar, but even more beneficial situation with their Adsense and Adwords products.  Any publisher who has used Adsense to display Google ads on their properties will know that money earned this way is disappointingly low.  The problem is that Google make their vast sums of money taking a little from a huge amount of niche properties like yours.  And without many niche properties of your own, you have to settle for the same small amount as Google is taking from your site.

So how do you take the power back from the big players and start earning more?  Unfortunately, despite the dreamy stories you will have heard of business success on the Internet  – your success is limited by the size and spending power of your particular niche.

But that doesn’t mean that you can’t earn a handsome sum, so let’s aim for the limit of your market.

A typical CTR on a social network might be from about 0.01% to 0.50%, but certainly usually more closer to 0.  So for a decent CTR of 0.1%, and you are charging 20 cents for every time someone clicks on an ad – you are going to be earning 20 cents for every thousand pageviews on your site.  Let’s say you are getting 5,000 pageviews a day – giving you a total of a euro a day.

Obviously this is not a lot and clearly the notion of pageviews is completely outdated when considering social networks.  People who use social networks don’t notice ads every time they open a new page and they are more than likely not going to decide to buy something on a whim.

But let’s consider what you do have – a large and very active community that have similar interests, other regular visitors to your site who are attracted by your content and marketing and the technical infrastructure to deliver benefits to them.  So why not start using the power of your community to find and deliver benefits and build a reliable system that your community can count on.

Forget about advertising and think about the power of attention.  Let’s imagine that you know that members of your community regularly buy certain products.  For example, you have a gardening community and gloves are regularly bought from vendors.  If you know this, why not go to the vendors and instead of offering them a place to advertise (a method you know is not always successful), ask them to give your community a special offer on gloves for a week.  Maybe you could set up a fancy system that allows them to publish special offers whenever they like – these could even appear where you would have usually placed your advertisements.

As I mentioned previously, users of social networks do not tend to notice advertising appearing each time a page is loaded.  But I would bet they are likely to keep their eye on a frequently updated place on the website that offers them fantastic benefits at a cheap price.

Of course, they would pay for the privilege by either giving you a cut of every sale, a tenancy, or with more traditional methods that they would understand like CTRs or CPMs.

I am reminded of Buying Clubs where the power is really with the consumer.  However these clubs where often plagued with problems surrounding the difficulty of organising  a big bunch of people and fluctuating prices.  But why not skip the organising and use your initiative or research to understand what benefits your community wants and then give them an easy way of getting them.

This blog by Andrew Chen is an excellent resource in this area.

No related posts.