NPR published an article a couple months ago about the profitability of social networks and how often the best way to pursue profits is to charge users, instead of using ads.
Their sources? Jill Clapp, a 42-year-old Facebooker who says that the ads on Facebook are unappealing to her since they make a lot of assumptions based on her age and gender (see: Botox, NutriSystem). Well, yeah, I would hate to constantly be reminded that I wasn’t young and beautiful anymore, but that isn’t Facebook’s fault. It’s the advertisers. See, Facebook ads are actually pretty genius. You can target by the most specific things, such as obsessed with Starbucks, a hardcore Chicago Bulls fan who is vegetarian, women interested in law and the color red that live near Anchorage. As long as it’s in someone’s profile, they’ll see your ad. Which is obviously like a goldmine for marketers. The problem is that most haven’t figured out how to target very specific audiences.
Denise Paolucci, formerly of Live Journal and Founder of Dreamwidth, says that the big problem with selling ads on social networks is that “people are there to socialize, not shop.”
That’s interesting, because, I can’t even count the number of times I’ve clicked on an ad on Facebook for a retailer, ranging from online tee shirt shops to American Apparel ads with the latest additions to their collection. Also, I’ve even asked friends where they got the dress, top or handbag they were wearing in their Facebook picture. While my main goal on Facebook, as it is with pretty much everyone, is to find out what my friends are up to and connect with them, another huge aspect is discovery. Facebook is pretty much the holy grail of word of mouth. Users can see what their friends like, whether it’s new movies, bands, products, stores, restaurants. Discovering new things—whether it’s that Mom is into bikram yoga now or that your best friend just went to the White Rabbits concert or your old roommate found a Theory dress on sale—is what Facebook is all about, and ads can play into that, if they are done right.
Paolucci also states that advertising on social media sites is “just like if you’re at a cocktail party and mingling with people having a conversation, you’re not going to want to be interrupted by somebody jumping and shouting, ‘Hey! Free widgets!’”
Right, just like I’m not going to want to be hit up for cash while I’m at a cocktail party mingling…
So, what’s the lesser of the two evils? Well, it depends on the history of the social network. With Facebook, there would be no way they would maintain their numbers if they switched to a paid service. So, much to Clapp’s chagrin, Facebook ads will most likely be here to stay. However, to make the social media giant even more profitable, they could offer premium benefits at a cost, like LinkedIn does, such as premium pages for brands that allow easy customization or such as increasing limits for personal pages (such as increasing number of friends allowed, etc.).