Under the covers

Way back in March, I wrote this post on my blog about the problems in monetising user generated content.

Last week, my namesake at MySpace announced that they have been trialling contextual display advertising based on user behaviour. Unsurprisingly, there were no technical details as to how they would segment the users as if they can crack the magic algorithm and make a success of it then they will be well ahead of the pack.

It’s a bold step with many unanswered questions, I believe the issues are twofold: -

Firstly, can they make it work?

If they can, then can social networkers be enticed to click on ads?

As to the first point, if it works then they will be able to charge a healthy premium for access to target groups. Barrett is claiming that a premium of between 30-50% is “within the ballpark”.

However, if they don’t get it right then the potential to alienate clients is huge. FaceBook found this out recently when the government suspended advertising on the site after their ads were run against BNP groups.

The second question is harder to anticipate, this recent article bemoaned the poor CTR on FaceBook. Of course, this could be down to many factors, poor creative, lack of targeting, uninteresting products will all have an effect on lowering the CTR. However, there is also the possibility that social networkers just don’t respond to ads in the same way that users do when browsing traditional content sites.

If this is true then no amount of targeting will command a premium without a measurable ROI for the clients.

Only time will tell…