Many of us remember the line from the scene in the 1996 film, Jerry Maguire, where the sports agent played by Tom Cruise reacts to a team owner’s request to have Maguire’s client, Ron Tidwell, play for his team.
“Show me the money!” is Maguire’s loud and oft-repeated response.
The same mantra may be coming soon for venture capitalists providing resources for the flashy and mercurial world of online social networks. Several of these sites — most notably Facebook and Twitter — are generating tons of interest among users, but the question remains: Where is the money they are expected to rake in?
In our current era (read month because things are changing so fast), even the social media continue to change and evolve. In the process, a shakeout may be looming: a survival of the fittest scenario.
For example, MySpace was founded seven years ago — a virtual eternity in the world of Web 2.0 media. By 2006, it had become the most popular social networking site in the United States, only to be overtaken in 2008 by Facebook, which had only been in business since 2004.
Today (and I mean that literally), MySpace has lost even more ground as a social networking site, and last summer had to lay off almost a third of its staff, according to Time Magazine.
A drop in popularity
Stephanie Cano, one of my bright college students who represents the age group in the epicenter of the social networking movement, noted recently that MySpace has turned “from trendy to empty.”
More specifically, she wrote in the campus newspaper, The Clause: “It was just five years ago when MySpace was the place for friends and networking. Now it has become as isolated as the Cougar Walk during the weekend. There is an undeniable feeling of abandonment and reminiscence upon logging into the once hottest place on the Web.”
Cano echoes feelings of her peers that MySpace has been deluged and overtaken by too many ads and “annoying applications” that have detracted greatly from its original lure as a site featuring music, links, and pictures, posted by indivdiual users.
Too much spam
Andrew Shortall, a senior journalism major from Los Angeles, said spam is way too prevalent on MySpace, and that part of that spam is made up of fake profiles that lure young people into conversations only to have them discover they are visiting a porn site or some other unexpected sales pitch.
“I really think MySpace has too much junk on it, and is probably used more by high schoolers. I think Facebook is seen more as a college- and professional-level social networking site,” he said.
Laura Jane Kenny, another college senior from Southern California, says MySpace is still a better site for indivdiuals to upload music because Facebook is set up for short-burst messages.
Users aren’t enough
It is ironic that MySpace, which boasts 100 million unique visitors now is experiencing hard times. But the reality is that those kinds of numbers don’t automatically translate into revenue for a site that is finding it tough to interest users in ads, which those same users find annoying anyway.
Bryant Urstadt, writing a technology piece for ABC News, noted in 2008 that most social networking sites are “giving their product away, expecting that the communities built around it will generate ad revenues. It’s a model that stirs memories of the first Internet bubble: build the user base and hope the money comes, from an IPO, a buyout, or ads.”
In 2007, Microsoft purchased a 1.6 percent stake in Facebook for $240 million and valued the company at $15 billion, a value debated by many, Urstadt wrote, inasmuch as Facebook was probably going to lose $150 million that year.
The networking sites have been setting their ad rates low, but even those haven’t been enough to attract media buyers and big advertisers to social networks. One ad agency executive, Anthony Acquisti, told Urstadt, “A lot of advertisers are very hesitant to get into MySpace. We’ve even flat-out told intereste brands, ‘You don’t want to be there.’”
The APC’s of trouble
Why? Three main problems, not just with MySpace but with other social network sites like Facebook: Attention, Privacy, and Content.
Audience members of sites like Twitter and Facebook are jumpy and not very engaged with the content. They talk, but they don’t listen that much. And, even more problematic, they aren’t paying attention to the ads — and there are a lot of them on MySpace. As Andrew Shortall notes, they come at you in irritating, flashing style, and tend to turn users off.
In terms of content, Facebook and Twitter users don’t come in search of content and aren’t too interested in it. They go to Google and other search engines for that, which is why those sites — especially Google — are making more money. If you engage with the content, you will probably notice the ads, especially if you have to sit through a commercial before you can see the content. Happens all the time on sites like YouTube.
The privacy issue concerns the fact that social networking sites don’t
have the exposure that advertisers would like. There may be tens of millions of unique visitors, but they aren’t all seeing the same thing on a Facebook site, for example. Not by the longest shot. The reason, of course, is that individual users can put filters on their sites, limiting exposure to just their designated friends.
Targeting may help
Many are banking on the concept that better targeting of advertising might hold the answer for generating revenue on social networking sites. As Urstadt notes, “Startups that help advertisers and marketers better target the users of social networking sites are fashionable investments for venture capitalists. Such startups hope to selladvertisers detailed information about individual social networkers.”
Some say the targeting answer lies in getting “between” friends on the social network sites.
Advertising analyst Seth Goldstein puts it this way: You come to a social network because you are interested in your friends; ergo, the thinking goes, in order to get your attention, advertisers need to let you know what your friends are buying or thinking about buying, or they must somehow get you to send each other ads.
If these challenges can be met and conquered by advertisers, social network sites will continue to mushroom. If not, we could be looking at a new dot.com bubble bursting.