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More on Facebook and the problem with online advertising
I only skimmed over it briefly but this guy may have hit the nail on the head. The problem with social networks is that its too difficult to target the advertising thus they get a very low CPM on their ads. The author states:
“One of the dirty little secrets about the internet is that much of the advertising inventory is sold as remnants for well under $1 per thousand pageviews. The CPM that advertisers would pay to be on the front page of CNN Money could be closer to $40. But, a large portion of the advertising run online is dancing aliens selling mortgages. This is because much of the internet’s traffic cannot be organized and sold to highly targeted audiences. So, this inventory goes for a song.
Social network audiences probably carry the lowest value of any ad inventory on the web. An educated guess would be that if MySpace will do $200 million in revenue this year, Facebook might do $50 million. And, that is not likely to hit $500 million anytime soon, It may never happen.”
Having been in the Internet ad business for the last two years I can tell you that he couldn’t be more right. The more targeted you are and the more traffic you have of a targeted audience the higher the CPM. Banners go for a buck because they stink. In podcasting (audio) we charge something north of a $20 CPM for highly targeted “on podcast product mentions” or product mentions that come directly from a trusted podcast host (similar to what you hear on shows like Glenn Beck and Rush Limbaugh). Video commands a $80 CPM, which is one main reason most online media companies are going after targeted video. Its where the market and the money is.
Facebook needs to figure out how to target audiences on their network. If they can do this then they will get a significant increase in revenue just based off advertising CPMs. How do they do it and what other revenue opportunities exist for Facebook? I really don’t know…Â
All I have to say is what I said before. Mark, if the MS offer is real…take it!