Web 2.0 hype: Popularity without profits

MySpace, as a member of the News Corp. family, claims Tom has more than 100 million friends at the site.

“Old” stalwart Yahoo still clings to its homepage claim of  “the most visited page on the web,” while adding a new “largest community in social media” claim of 100 million users through Flickr, Yahoo Answers…

YouTube founders negotiated a $1.65 billion stock acquisition by $143 billion market cap Google, MySpace founders sold-out to $57 billion in assets News Corp. for $580 million and Yahoo is a $36 billion market cap company.

IS EVERYONE A WINNER?

The millions of individuals taking advantage of the content, application and hosting largesse of YouTube, MySpace and Yahoo win, as do the four young founders of YouTube and MySpace.

What about the shareholders of Google, News Corp. and Yahoo? Is there a payoff commensurate with the multi-billion dollar video sharing and social networking investment bets made to provide free-to-the-consumer online services?

To date, the “hardest” performance metrics YouTube, MySpace and Yahoo tout involve user "engagement," visitor traffic and page views.

YouTube, MySpace and Yahoo Social Media are popular, but will they be profitable?

Social media monetization models are unproven. Moreover, as the no-fee sites grow in popularity, infrastructure costs rise to support the delivery of free services to the video sharers and social networkers.

STATE OF THE SOCIAL MEDIA AD MARKET

The rise of social media is not a “good thing” in every way. Daniel L. Rosensweig, Chief Operating Officer, Yahoo, signaled an ad “inventory glut” and downward ad pricing pressure due to the popularity of Web 2.0 free to the consumer services at the company’s recent Q3 conference:

you see a whole proliferation of a lot of inventory in sort of the lower end of the non-premium range. A lot of the social media stuff, a lot of the network stuff that is being created, a lot of the ad networks are able to serve it. That is really focused on the low-end of the people who are not interested in the environments that they are in. They are simply interested in a specific performance ratio.

Rosensweig put forth nevertheless that Yahoo will win in the social media game, sometime:

From our standpoint, we are going to move ahead as the market leader and better position ourselves to take advantage of this new inventory and this new market opportunity.

We have products like Answers. We have products like Flickr that are not yet really monetized right now. But we have assets that nobody else has and we plan to leverage those assets, so those assets are not only the quality of our audience, which I think is debatable in some of these other environments, but our targeting capability of not only the environments that they are in, but our profiles of being able to know who they are and that is why our large registered audience base, which continues to grow, is becoming so important.

SOCIAL MEDIA MONETIZATION HAZARDS

In “Can Google, Fox turn YouTube, MySpace buzz into cash?” I recount how brand marketers are questioning the bottom-line worth of Web 2.0 “popularity” and holding back ad spends from social networking properties.

At the Interactive Advertising Bureau Summit in New York City earlier in the week, Mary Bermel, Director Interactive, HP, itemized her reluctance to put HP money into advertising at social networking sites such as MySpace and Facebook.

At the same event, Fran Kelly, President & CEO, Arnold Worldwide, discussed Smirnoff’s “Tea Partay” marketing film YouTube "campaign." Kelly indicated that despite a “viral” million plus views, Smirnoff dismissed the agency and did not gain bottom-line sales results.

I conclude:

Regardless of the MySpace million friends sales pitch and the YouTube million plus views buzz club, brand marketers need a lot more bottom-line ROI metrics before they relinquish their brand marketing millions to the social networks.

WHY ALL THE WEB 2.0 HYPE?

Web 2.0 popularity without profits is not dampening investment in the space. AdTech comes to NYC next week—I will be there—and brings with it a bevy of emerging players in the social media space.

I received a press release from ICMediaDirect.com, billed as an AdTech “Gold Sponsor,”  announcing its “new online video ad network.” The bulk of the release touts the online video market opportunity:

No online business is generating more media buzz today than the model of an advertising-based video-on-demand network.  Knowing this, ICMediaDirect.com, a full service online advertising agency, will be keen on introducing the public to its new online video ad network at the adtech:NY Conference...

ICMediaDirect.com could not embark upon its video ad network venture at a more auspicious time.  For several months heavy media coverage has highlighted a convergence pattern between two worlds: that of web-based video sharing sites with online social networks.  This trend portends heady times for companies with the infrastructure in place to capitalize on the marketing opportunities that will undoubtedly result.  

Data from a leading market research firm, eMarketer, indicates that only about 2% of the $15.9 billion dollars spent on online advertising this year will be on these two merging sectors; yet 3 of the top 15 trafficked websites are directly in this space, including the behemoth MySpace.  The growing consensus is that ad spending in this sector will explode.  Subsequently, companies with proper networks like ICMediaDirect.com with its new video ad platform, will be beneficiaries of this impending growth within this new convergent sector.

What market "intelligence" supports ICMediaDirect.com’s launch in the online video space?

No online business is generating more media buzz today

heady times for companies with the infrastructure in place to capitalize on the marketing opportunities that will undoubtedly result.

growing consensus is that ad spending in this sector will explode.

impending growth within this new convergent sector.

Web 2.0 confidence may be good for morale, but hard Web 2.0 ROI would be good for the bottom-line.