Some are making a big deal about advertising dollars going to social networking sites as if it is some type of confirmation of their attraction or success.
It's no surprise that the majority of that money is primarily going to MySpace (NWS-A) and secondarily Facebook. Together they account for 72 percent of the US market for social networking advertising spend.
While it's true this migration is happening, it's not for the reasons it may seem. It's really very practical: it's cheaper. That's the dirty little secret. It's not because they're more desirable to advertisers from a quality standpoint, as the Facebook fiasco recently proved.
Now that the bigger social networks are drawing the scale to compete with the web portals, there's no reason to stay with the web portals as much if you can get similar results from the online communities.
The reason this is happening is because portals and social networks, as far as those achieving scale, aren't niche networks. So why would a company pay higher prices to portals if they can go to social networks and get far lower pricing for a general audience? The answer is they won't. That's why the social networks are getting a lot more ad dollars.
Of course the problem is already rising on the profit side. Just because we hear the big numbers being thrown around about the size of the ad spend, that doesn't mean it is bringing good profits. As a matter of fact it is the exact opposite.
That's why MySpace is working hard to get targeted advertising out there so they can start charging premium prices and differentiating.
The idea there is to attempt to get niche site benefits without being a niche. In the end, that's what targeted advertising really is. When you have a niche site, the target is already there, and there isn't a need to create tools to find what the interests of the visitors are, the fact they're on your site reveals their interests; at least as it connects to the topic.
It's interesting to think if Facebook had maintained its niche focus and hadn't opened it up to everybody, they would probably be in a much more profitable place. Now that anybody can join, they can't command the premium prices for ad dollars they could have if they had stayed focused on the college demographic.
This is one of the reasons niche sites for the majority of online marketers will always be the best way to make money when it comes to an ad-supported model. You just can't get the prices you want if you are focused on general audiences.
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