Virtual hang-outs like MySpace and Bebo are where brands can reach the elusive young, but poor profit potential and weak control over image prevent many from venturing there, and those that do risk alienating this market with their aggressive commercial stance. Dominic Dudley reports
When Rupert Murdoch’s News Corporation bought MySpace for $580m (&£306m) last year, questions were soon being asked about how the media mogul could turn the investment into profit. Websites with lots of users are not hard to find, but turning them into profitable activity can be.
Last week, the answer was given when News Corp effectively outsourced the “problem” to Google. The search engine has agreed to pay $900m (&£475.5m) between now and mid-2010 to provide search and advertising services on MySpace, easily recouping Murdoch’s entire investment.
Google is a master at turning internet traffic into revenues through ads connected to its search tool, but whether it is the only type of advertising that is going to work remains to be seen. Given the popularity of MySpace, and rivals such as Bebo and FaceParty, brand owners will want to exploit other ways to reach the (mostly young) audiences on these social networks.
Content is king
So far, media companies have found it easiest as they have ready-made content that can be offered to visitors, and other brands can sometimes piggyback on this. For example, Burger King joined Fox Entertainment to promote the television show 24 to US consumers on a special “Have it your way” page on MySpace earlier this summer. Other companies have been creating their own pages and content within the sites. Adidas has 58,000 friends linking to its MySpace page, while Volkswagen has been placing its ads on YouTube.
However, most brands have avoided the area completely until now. “There are big opportunities currently being exploited by film and music companies, but most advertisers are still concerned about being next to inappropriate content,” explains Andrew Walmsley, founder of online media agency I-level.
One example is Christine Dolce, a Californian glamour model and budding actress who has almost 1 million “friends” linking to her ForBiddeN MySpace page. While other brand owners might shy away from associating themselves too closely with her, Unilever has signed her to promote its Axe deodorant.
MySpace is just one, albeit the most popular, of the social networking sites that have come from nowhere to gain tens of millions of users within a couple of years. Its rivals are also growing fast. The importance of these sites to advertisers was made clear in new statistics on media consumption released last week by regulator Ofcom. If anyone was in any doubt as to how they should target the next generation of consumers, its figures seem to clearly point the way.
According to Ofcom, 16- to 24-year-olds spend seven hours less time watching television each week than average. The main winner is the Web, and one of the main places this age group gathers is social networking sites. In the UK, more than 70% of 16- to 24-year-old internet users use them: 66% of them visiting such sites at least once a month, and 54% at least once a week.
According to Ofcom, it is not just a case of young adults abandoning traditional media. “Some of them never got to traditional media,” says Ofcom chief operating officer Ed Richards. “It’s not the death of any media, but an adjustment. Other media will have to respond.”
If that is where teenagers and 20-somethings are, then advertisers and their agencies will also have to react. “All brands are talking about it, they’re all interested, but no one’s worked out the best method in terms of marketing [to these users],” says Tom Hyde, business development director of online advertising agency Profero. “Just broadcasting at them is not going to work. Young people are very good at filtering out messages, especially within their own space.”
Carve out a niche
Offering constantly updated content and other online tools so users can improve their space might provide a useful alternative to a straight banner ad, he suggests. But there are dangers for brands, particularly with the loss of control over their image on these sites.
“If advertisers wish to take advantage of the large audience figures on sites such as MySpace, will they be able to turn a blind eye to potentially damaging or anti-brand content that users may post?” asks Anne Davis, managing director of agency Euro RSCG 4D Digital. But she adds it will be “a missed opportunity for companies that avoid the medium simply because of the risk involved”.
One brand that has inadvertently made its way onto these sites is Subway. In trying to win the sandwich chain’s business, digital specialist Agency.com’s New York office placed a video of the in-house pitch onto YouTube. It certainly highlighted the viral power of such sites, with about 80,000 people viewing the video, but it has been heavily criticised by the site’s users and could end up doing more harm than good. “These days viral is a four-letter word,” one rival states.
Saint Lewis, group account director for Agency.com in London, declined to comment on the issue, but acknowledges there is a delicate balancing act for advertisers and the sites themselves. “The people who make the networks buzz will move on if they feel the social spaces are selling them out. They will move on as more and more jump on the bandwagon, particularly brands.”
Making it pay
The social networks themselves are clear about the importance of advertising. In a competitive market, with a consumer base that is used to these sites being free, it will be difficult, if not impossible, to start raising subscription revenues.
ITV is planning to integrate the advertising sales of Friends Reunited, which it bought last year, with its broadband division. YouTube, which serves up 100 million videos a day, mainly to 18- to 49-year-olds, says it is basing its business model on advertising, and is exploring the options for promotions, sponsorships, contextual advertising, traditional banner advertising and more.
Similarly, FaceParty, mainly used by 16- to 24-year-olds who happily register plenty of personal details, boasts “we know everything about our members” and tells advertisers it can target ads at users based on their age, gender, location and personal interests.
But Hyde warns: “The sites really need to work out a lucrative advertising model to make it work. It doesn’t seem to be happening fast enough.”
Murdoch has followed up his deal with Google by announcing plans to use MySpace to sell films and TV shows from his Fox division. If rival sites can strike similar deals, their commercial future would seem to be assured, although it may be tricky for them to stay relevant to their fickle audience if they become over-commercialised. Meanwhile, advertisers who have yet to experiment with social networks may find that if they want to reach the next generation of consumers they don’t have a choice.
Users of social networking sites:
16- to 24-year-olds
54% at least weekly
12% not weekly but at least monthly
2% every few months
3% less often
25- to 34-year-olds
19% at least weekly
13% not weekly but at least monthly
7% every few months
9% less often
34- to 44-year-olds
10% at least weekly
8% not weekly but at least monthly
6% every few months
5% less often
45- to 54-year-olds
13% at least weekly
7% not weekly but at least monthly
4% every few months
7% less often
12% at least weekly
7% not weekly but at least monthly
2% every few months
3% less often