BusinessWeek Hammers MySpace on Ad Effectiveness

Catherine Holahan, a young reporter at BusinessWeek, has been venting her spleen on MySpace and other social networks over the past week. First she wrote an article called MySpace Users Build Up Ad Immunity (key quote from former MySpace advertiser: "Users [have become] more or less desensitized to the advertising") and then she contributed to Generation MySpace Is Getting Fed Up (key quote from current MySpace advertiser: "It's really hard to make money on that anemic click-through rate").

Our data -- about to be published -- shows that European users may in fact be cooling to the idea of advertising within social networks. But let's not get ahead of ourselves: with billions of ad impressions up for grabs on MySpace and Facebook and Bebo (often at very low prices), and with ad targeting getting better all the time, it's ludicrous to claim that advertisers can't find cost-effective inventory on the social networks. The real problem isn't that users aren't responsive to banners on social networks, but rather that advertisers and their agencies (and, apparently, even Google) just aren't targeting those ads well enough. The advertisers need to realize that although run-of-site inventory is cheap, it's not always cost-effective -- and that targeted inventory, while more expensive, usually brings a better ROI. Meanwhile, the social networks need to offer better behavioral targeting and ad optimization solutions to help advertisers target the right users. Once (if?) that happens, I'm sure everyone will be happy again.