February 07, 2008 | Comments: (0)

Is Facebook the new Hula Hoop?

TAGS: Facebook, Google, LinkedIn, Online ads, Web Search

Social-networking sites are fun and even useful. But when it comes to attracting advertising dollars -- or the interest of IT mangers and other execs -- fugetaboutit.

Sure, social networking is hot. Most of us get more invitations to make a connection on sites such as LinkedIn or Facebook than we have time to manage. And you don't have to search very hard to find a news story touting the political impact of YouTube and viral marketing.

Not on IT's horizon
But if you worry that your enterprise will ask IT to support social-networking software and functions, you can relax -- at least for now. A recent survey of more than 2,000 IT and business professionals by The 451 Group and ChangeWave Research found that 54 percent were either unwilling or not very willing to use "social software" -- including blogs, wikis, social networking, and collaborative tagging technologies -- for business purposes. Just 14 percent said they were "very willing" to climb onboard.

The consumer-based business model is iffy, at least today
So maybe social networking isn't ready for business prime time, but surely there's a play around using the technology to reach consumers. After all, it seems that some days the news media are filled with nothing but stories about Facebook and other Web 2.0 trends.

But when it comes attracting ad dollars -- the lifeblood of the online world -- social networking lays an egg. In 2007, advertisers poured $21.4 billion into ads on the Web and within e-mail, and that number is expected to jump to $27.5 billion this year, according to eMarketer.com.

But social-networking sites attracted just $920 million in advertising revenue, an anemic 4.3 percent. And despite the buzz, the share in 2008 will grow to only 5.7 percent.

If anyone could cash in on a hot, online trend, it would be Google, which dominates online search and advertising the way Microsoft dominates the desktop. But on Google's most recent earnings call, CFO George Reyes said that his company's huge investments in MySpace and Orkut "are not monetizing as well as expected." Translation: We're not making money there and we're not sure when we will.

Google co-founder Larry Page said, "We're running lots of experiments," including better demographic targeting and "optimizing" the look and feel of the ads on social-networking site. Well, be careful what you wish for, Mr. Page.

John Verret, who runs the advertising program at Boston University's College of Communications, warns that "the fastest way to make YouTube and Facebook irrelevant to young people is to invade the sites with commercials, taking away what was once a place only for the kids." Indeed, when AOL started loading up its AIM service with ads, usage plummeted, Verret told me.

What's more, young people find online ads boring. "One reason why the ads may not be doing as well is because people tend to ignore them on social networking sites. There is so much other interesting content that the ads get overlooked," Susan Barnes and Neil Hare of Rochester Institute of Technology wrote in a recent research paper.

The freewheeling culture of the Web's social-networking sites also poses something of a dilemma for advertisers. "Social networks cannot guarantee a brand-safe environment. Advertisers don't want to see their ads displayed alongside illicit content, for example," says Karsten Weide, program director of IDC's Digital Marketplace: Media and Entertainment. "The dilemma for social networks is if they start to control what content users can post, they will lose popularity, which is what attracted advertisers in the first place."

Usually when I post a disclosure near the bottom of this column, it has to do with a stock that I own. In this case, I'll disclose that I'm one of those aging Baby Boomers who are a lot closer to retirement than to college. So maybe I don't get it. (I'm sure my daughters would agree.) But cool and fun don't necessarily translate into sales dollars, let alone profits. Nor do they necessarily translate into useful tools for business operations.

Freud is reputed to have said, "Sometimes a cigar is just a cigar." This may be an overstatement, but I'm tempted to say, "Sometimes a fad is just a fad."

I welcome your comments, tips, and suggestions. Reach me at bill_snyder@infoworld.com.

Posted by Bill Snyder on February 7, 2008 03:00 AM