-
Website
http://publishing2.com/ -
Original page
http://publishing2.com/2006/07/11/distributed-revenue-sharing-ad-platforms-are-the-paradigm-for-monetizing-social-media/ -
Subscribe
All Comments -
Community
-
-
Top Commenters
-
Popular Threads
Most people are on MySpace for attention, not money. People put movie posters and corporate logos all over their rooms and bodies, but do they charge for it? Not generally (minus a few high profile celebrities and the occasional crazy person).
However, the revenue that News Corp would see in this scenario would only be some subset - as those that "owned" the profiles would be taking home some of those ad dollars.
The site that I work for made the decision to distribute Adsense to our contributors (profile creators can earn 100% of the ad revenue from their profiles) and "give away" some of our revenues to our users, partly because we believe that the overall size of the pie would increase such that our net revenues would increase.
But in the case of MySpace, with their spectacular grown and utter dominance of the social networking space, do they need to share revenues? Is it really going to increase the size of the pie so much that their net revenues go up?
In an extreme example, let's say that MySpace decided to share their revenues 50/50 through some Adsense like program with those that were contributing content. In order for News Corp to maintain the same level of revenue, the total, aggregate earnings of all the individual MySpace profiles would have to double.
Even if you assume that individuals will be more effective in monetizing their own pages that News Corp (which is debatable), you would still need a massive increase in traffic to subsidize the revenue share. And is there that much more traffic that MySpace can be getting?
The bottom line is that I think that for the foreseeable future, revenue sharing will be a tactic of the "up and comers." The market leaders, like MySpace, won't do it because they don't have to. They're growing so fast without sharing revenue, that unless they're seriously pushed by another sns, there's no reason for them to share the loot.
Great points.
Think of it terms of CPM -- right now, most user pages on MySpace have a very low CPM because advertisers are afraid to run their ads and there is effectively a glut of inventory.
Individual users can and should have the ability to drive up the net effective CPM for each of the page views they generate because they know much better than MySpace does how to market/recommend products and services to their friends -- because they are already doing it.
This is what is necessary to full embrace the social media model -- you need to relinquish control not only of the content but of the advertising as well, because peer production is far more efficient at driving up the net effective CPM by operating at the peer-to-peer level rather than the old media "shove the marketing message down everyone's throat" model.
So MySpace could make this work by keeping page views the same but increasing CPM five fold and sharing half of the incremental revenue with users.
Or something like that :)
My only hesitancy is that the obscene growth that MySpace is managing without revenue sharing makes it hard to imagine the numbers working out in News Corps favor with revenue sharing.
Yes, if they could increase CPM 5 fold (or even 2.1 fold assuming a 50/50 rev share), it would make all the sense in the world. To see this sort of jump, though, I think there would need to be a far more sophisticated selection of self-monetization tools (like Adsense) available to MySpace users. It could be that the self-earning infrastructure is just not there yet.
All very well said.
Here's my question -- if MySpace's CPM is as low as it's rumored to be, would it really be that hard to increase it dramatically? MySpace is indeed wildly successful based on traffic, but I haven't seen any good data on how successful it is from a revenue standpoint (if you know of any data, please share!).
2.0 economics are fundamentally counterintuitive -- it's almost a Zen thing. If you would have described the dynamics and economics of Google's business back in 1998, everyone would have scratched their heads.
It's not easy to let go -- you have use the Force, make a leap of faith (choose your metaphor).
I do agree with your point that the "self-earning infrastructure" may not be there yet -- it certainly represents a huge opportunity, though.
If you look at http://www.uendorse.com you will see that they are heading down the road of providing just such a model. The beauty of their approach is that it does not look to interfere with the advertising that is already there.
Many analysts estimate that MySpace will generate $200 million in sales this year. Bear Stearns estimates that MySpace could grow those sales to $413 million next year and $528 million in 2008. Apply a 30% cash flow margin, which is an assumption based on Yahoo's 40% margin and CNet's 23% margin, MySpace could earn $158 million in 2008.
I am working for a company right now that has plans for implementing almost exactly what you are describing in offering users a way to monetize their content.
By empowering your participants, your users, to do what they want to do, and deriving some revenue from such transactions, the more opportunity you have.
Btw - not only is social media 'made up of people' - but so is the web :)
See good 'ol BlogAds.com.
Market-centered media can be profitable (e.g., CNBC, the movie Wall Street).
Now that you have accepted the above, you are ready to visit landof.opportunitv.com and learn how a TV sitcom and complementary online content can give rise to the most liquid online market for the advertisement spaces on single-creator media (e.g., blogs, podcasts), how this market can give rise to the most liquid online market for customized education and career services, how the latter market can give rise to millions of good jobs for U.S. residents, and how these job-holders can dramatically increase educational and economic opportunity for all.
So you're right re: the BIG opportunity :-)
(Why am I sharing the above if it is so valuable? Because I've locked up the essential 1.0 IP -- intellectual property, that is...)
Stay tuned :-)
You're totally right.. after reading your response, I realized that's exactly what my business already does.. I just never thought of it as cost-per-action advertising with a revenue split. I just think of it as people giving & selling my dvds to their friends/neighbors/co-workers, because they want to bring attention to the issues they care about. But yeah, it's the same basic thing.
In any case, the vast majority of page views on MySpace are almost certainly from the internal mail system. A gmail-like monetization system makes more sense.
If users are actively contacting friends on the system to sell product then that seems to be a kind of multi-level marketing. Some people could succeed at this (with a lot of work), but it could be seen as an abuse of the network by users who dont want people to become their friends just to sell them something.
If users are waiting for people to turn up at their profile then we are back to CPM calculations, only in the case of affiliate programs the value might be higher, say $2 CPM.
And if you think of the web as an environment that reflects human nature in a number of ways, then wouldn't it make sense that this would be successful if people were so empowered?
I find new music to listen to via my social networks. I find new TV shows to watch via my social networks. I find new books to read via my social networks.
Via word of mouth. Via my friends.
Blogging and social networks are word of mouth machines.
And forget about my friends *actively* searching me out to sell these things to me - it happens via casual conversation. It's just human nature.
What if folks could earn a little each time the made such a recommendation to me? And what if service providers took a little off the top of each of these 'transactions' to pay for the service?
This is why, Scott, I had disagreed with you earlier about advertising and MySpace.
"Imagine the following scenario:
A teenage girl is checking her MySpace profile. She notices a new video ad for Old Navy on her page. But this particular ad jumps out at her because she immediately notices that the person in the ad is actually someone from her high school!! Without hesitation, she hits the “play†button and watches her friend talking and dancing, while modeling Old Navy’s new line of Madras casual wear. The ad seems homegrown in some ways, yet professional overall… a feel that was intentionally designed into the creative execution by Old Navy’s ad agency. Excited, she notices that her cousin (who’s attending college) is online so she IMs her to describe the ad she just saw. Her cousin IMs back to say that she saw the exact same Old Navy ad on her own MySpace page earlier, but in her case, the girl in the ad was someone she knew at her college.
Now, let’s step back and digest the implications of what just happened. In a broad sense, this type of program is no different than what advertisers do when they sign-up mega-celebrities (e.g. Catherine Zeta-Jones and T-Mobile) or superstar athletes (e.g. David Beckham and Motorola) as spokespeople for ad campaigns or for product endorsement deals. When it comes to advertising in mass media, a big name is required since such campaigns are only effective if the viewer already knows who that celebrity is. But in a social network, micro-celebrities who are well known within their network of micro-communities could prove just as effective and potentially even more so, particularly if such campaigns are able to generate buzz, excitement and a cool-factor.
As for MySpace’s role in all this, they are in the unique position to know better than anyone (as the owner of the platform with all the user data) who the “brand-safe†users are within its network.
Thus MySpace can effectively play the role of talent agent by aggregating a list of users who would be appropriate for advertisers within various categories. In fact, the incentive “to be discovered†is likely to spur many users to express themselves in a manner that will position them favorably for consideration. The result is a win for everyone involved.
By enabling advertisers to partner with users, this is the type of program that would create trust between the parties. This trust, multiplied by the number of ad campaigns and the users enlisted, could then be propagated throughout the entire social network in a manner that is completely native to the medium itself. In this vein, it’s worth noting that a campaign like this cannot be implemented efficiently or cost-effectively in any form of mass media.
Remember, social networks are a new medium for self-expression and, unlike traditional media, the content is being produced and owned by the audience itself. This is a new model that requires new rules… and for advertising, the most important rule is to launch programs that integrate users and advertisers, not segregate them. By aligning their interests, trust will be created and social networks will be able to offer advertisers, and users, benefits that are truly unique to the new medium.
So as is the case with money, trust will enable social networks to develop business models with sustainable value."
So, in other words, any social network that can figure out to play the role of "talent agent" for its members and turn them into "micro-celebrities" would be better able to make their member generated content monetizable and profitable for both the network and the individual.
The size of the monetary reward actually might not matter as much as we might think. Even a few dollars from something like this is found money but the potential prestige factor of being thought important enough to be a "micro-celebrity" might be attraction enough. After all, the idea is to endorse and promote products and services that you actually like and use. The trick will be in figuring out how to measure the influence individual members have and then to aggregate it. And, if that can be done, its not a great leap to see how it could be applied outside of any single social network, thus making Scott's idea of a distributed ad revenue platform a reality.