At a time when advertisers were starting to use the less expensive social networking sites versus the existing web portals, they are discovering the concerns they have about what their content will end up next to are validated. In response, a number of them have been discontinuing advertising on them until controls are put in place.
The fiasco with advertising appearing on the controversial British Nationalist Party page resulted in a number of advertisers abandoning Facebook.
Among the companies fleeing the site recently have been First Direct, Virgin Media, Vodafone, the AA, Prudential and Halifax. Now the British government is also leaving the site as an advertiser, also citing lack of controls as the reason.
Jamie Galloway, the Central Office of Information (COI) director of digital media, said: “Advertising has been paused temporarily on any websites that have not provided COI and i-level with the assurances our bookings require."
The COI is the agency controlling the Government advertising budget in Britain, via its buying agency i-level, which it has ordered not to purchase advertising space on sites the include user-generated content. The BBC has also made the decision to quit advertising on Facebook.
A social media consultant for Tamar, an online advertising consultancy, Henry Ellis said: "My guess is that Facebook will tell its advertisers that if they want greater control over where their ads appear it can do that for them, but that as a result, its costs and its advertising rates will go up."
This is an interesting observation in that we recently talked about the price pressures on web portals like Yahoo, AOL and other large content sites, as advertising was being directed to less expensive social networking sites.
If the social networks, which include user-generated content, raise their ad prices in exchange for controls being put in place, they will lose the advantage they have at this time.
With the rate of advertisers pulling out, this is a legitimate threat that has to be addressed by the online community sites. Facebook and others could take a beating if it's let go, and the rush to exit becomes a stampede.
The other side of the equation to me is the naivete of those using these sites to market on. For the last couple years a number of advertising agencies and companies have said they're not entering the user-generated content space until and unless protections are in place.
Evidently a lot of companies decided to take a chance to find out how it would work. Now they know! I don't think it's something that can be allowed to go on for too long, or it could definitely set back the industry.
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