Social networkers less tolerant of online ads

25 Nov 2008

Social-network service users are less tolerant of online advertising, and ads on these social networks have less click-through rates than traditional online ads, new research claims.

According to research by IDC, consumers are spending ever greater amounts of time on social networks. In the US, more than half of internet subscribers use social-networking services.

IDC found that consumers who use social-networking services also tend to visit the services often and spend a lot of time per visit.

More than three quarters of these users visit at least once a week, and no less than 57pc visit at least once a day. During each session, 61pc of social-networking service users spend at least 30 minutes on the respective site or stay logged in permanently, and 38pc spend at least one full hour per session (or stay logged in).

There. are four major reasons why consumers use social-networking services: to connect and communicate; in response to peer-pressure; for entertainment; and for work-related purposes

Advertising does not factor into consumer motivations. In fact, users are less tolerant of social-networking service advertising than the best-tolerated forms of online advertising.

Ads on social-networking services have lower click-through rates than traditional online ads (on the web at large, 79pc of all users clicked on at least one ad in the past year, whereas only 57pc of social networking service users did), and they also lead to fewer purchases (web: 23pc; social networking services: 11pc).

“The thinking has been that the popularity of social-networking services will attract a big audience and generate a lot of traffic, which in turn will produce enormous amounts of user-generated content and therefore advertising inventory – without any expenses for editorial staff or content distribution deals,” said Karsten Weide, programme director, Digital Marketplace: Media and Advertising.

“All of the above has proven true – except that, almost invariably, social-networking services have had a hard time selling this inventory.”

One of the potential benefits of social-networking services that the advertising industry has discussed is whether peoples’ connections could be used for advertising.

For instance, publishers could show a car manufacturer’s ads to a user’s contacts because that user’s online behaviour has indicated that she is interested in a particular brand of cars.

Anecdotally, there has been some indication that this ‘social advertising’ might be more effective than behavioural targeting. However, that idea is stillborn. Of all US internet users, only 3pc would allow publishers to use contact information for advertising.

IDC expects that lower-than-average ad effectiveness on social-networking services will continue to contribute to slow ad sales, unless publishers get users to do something beyond just communicating with others.

If the major services succeed in doing so, they will become more like portals, such as Yahoo! or MSN, and they will come closer to the audience reach of the top services. If that happened, publishers would be better able to monetise their social-networking services.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years