The recent BusinessWeek article titled "Generation Myspace is Getting Fed Up" - http://tinyurl.com/2sbebp is interesting in that it reveals certain advertisement metrics which are really pathetic and shocking.
Let me explain. The article says that social networks have some of the lowest response rates on the web, and advertisers and ad placements firms all agree on this. Well the shocking metric here is that only 0.04% of people who see their ads on social networking sites click on them compared to 0.2% on the web. How can 0.04% be an acceptable number for ROI? In fact how can even 0.2% be an acceptable number? These kind of response rates should make those who spend money on advertisements on the web do a double-take and stop to think about it. As one industry executive put it, "its really hard to make money when the click through rate is that anemic". I mean empires have been created based on these rates!?
MySpace and Facebook have supposedly recognized the issue and seem to think that increased targeted advertising will spur users to pay more attention. Let me be clear about this. I am willing to bet that any user who goes to an application as a "boredom response" will not be interested in any ads. You have to give the user products and services that actually help them and provide greater value than these unbounded desktop centric social networking sites to be able to monetize them. Just tying relevance to a search or tying relevance to a location ain't going to cut it. You will still frustrate the user because they were not interested in seeing the ad in the first place.
How exactly do the current crop of social networking sites bring value to a paying customer? The above rates are a sure sign that while there are millions of users on the sites, none of them are interested in looking at or clicking on the ads. There are some very stupid people who aren't realizing that they are losing a lot of money to display ads on a medium that only promises the huge potential of impressions, but delivers none.
The current idea of relevance as voiced by many of these companies (portals, search engines and social networking sites) is that if someone searches for something then display an advertisement based on the text entered in the search. Can you really tie relevance to that. You have to think bigger. You have to find ways to capture the real intent behind the search. The above response rate metrics prove that relevance certainly cannot be gleaned from the search "text" alone.
Innovation lies ahead, in being able to track the intent and then tie it to relevance and deliver information to the user that is of value to them.