TechCrunch, CNet: New ways to gauge social network ad effectiveness

Newspapers should keep an eye on these trends, because they could affect online advertising outside of social networks in the future.

CNet reported that Internet start-up companies like Social Media Networks and 33Across are currently experimenting with social network advertising that is based on users close online relationships instead of ads geared towards the general public.

These start-ups are using algorithms, like SocialMedia’s FriendRank, to help them pick which friends receive a particular ad by using “social banners.” For example, people might be asked to pick with whom they would like to go see a given film, and those people might then receive the ad for that film.

“The next step (in online advertising) is to understand people's relationships," said Martin Green, business vice president of instant-chat site Meebo, who recently signed an ad deal with 33Across to help “monitor the effect of advertising promotions from Universal Pictures,” CNet reported.

Users may express privacy concerns, like they did with Facebook’s Beacon application, which alerted friends when someone bought something from Yelp or eBay. After complaints, the feature became “opt-in,” according to CNet.

“People need to have clear notice and the clear opportunity not to participate. The lesson of Beacon was that people have no expectation that they will be linked to or targeted in any way outside of a social network,” Leslie Harris, president of the Center for Democracy and Technology, told CNet.

Digital Media blog TechCrunch is attempting to rework the way social network users are valued by suggesting they be assessed according to “the average Internet advertising spend per person in the country they live in” because the bigger the spend, the more value the network “can get by serving them advertising and other products.”

TechCrunch’s model looks at social networks regionally and compared them to data on total Web advertising spend in those countries. According to the model, valuations of social networks change as you go from one country to another.

“(The model) bumps down networks like Orkut and Friendster who have tens of millions of users in markets with very little advertising spend, and bumps up networks with lots of users in higher value markets,” stated Michael Arrington, TechCrunch's co-founder and editor.

According to Arrington, the model has flaws, particularly with data availability, nature of social networks and the “execution at a company level.”

Arrington stated that the “real-world revenue numbers being reported for the big networks supports this approach to valuation and shows a direct tie between monetization efforts and where a network’s users are.”

For previous articles on social networks, click on the following, by our partner site, Editorsweblog.org:

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