July 11th, 2006
Distributed Revenue-Sharing Ad Platforms Are the Paradigm For Monetizing Social Media
I’ve been critical of AdSense of late, but let’s give credit where credit is due — AdSense, i.e. a distributed, shared-revenue advertising platform, represents the new paradigm for monetizing content. That’s why I remain skeptical that MySpace, despite being the current center of gravity for social media and despite its current off-the-charts traffic growth, will necessarily be a boon for News Corp.
Robert Young has an interesting post on GigaOm which got me thinking about this — Robert argues that traditional media companies should focus on building “socially-integrated media empires,” with News Corp’s acquisition of MySpace being the touchstone example:
At the end of the day, the media conglomerates should view social media much like they did the rise of cable TV. Cable eventually took half the market away from traditional broadcast TV, so the media conglomerates vertically and horizontally integrated their way into cable in order to buy back market share. They should do the same with social media by pursuing a strategy of social integration. Rupert Murdoch already made his first move, and it looks like NBC is about to take their first baby steps. Welcome to the new world of socially-integrated media empires!
As I said to Robert in a back-and-forth in the comments of his post, the notion of a socially-integrated media company assumes that media companies can “own†social media in the old media sense.
As I’ve argued before, the reason why News Corp is struggling to monetize MySpace is that most people who visit MySpace are not visiting “MySpace,” the News Corp media property  they are visiting EACH OTHER.
Contrast what News Corp is trying to do by directly monetizing the content it “owns” on MySpace (with the issue of ownership leading to incidents like the Billy Bragg brouhaha) with what Google did with AdSense.
AdSense has been so successful because it does not attempt to own either the content platform or the content itself  note that Google does not run ads on Blogger per se  they provide bloggers with a distributed, self-serve, revenue-sharing ad platform to run the ads themselves, and then Google takes a (big) piece of the action. But they don’t have to own Blogger to do it  owning Blogger simply allows Google to provide the blogging platform for free and thus drive more content creation that feeds AdSense.
News Corp needs to stop thinking in terms of “owning†MySpace’s page views  advertisers don’t want to advertise on those pages because News Corp doesn’t control the content. And MySpace users don’t want the ads appearing on “their” pages uninvited.
It would seem the real opportunity is for someone, News Corp or a third party, to offer MySpace users a platform like AdSense to monetize their content. In this scenario, MySpace is merely a free host, like Blogger  it gives them no advantage in providing this distributed ad platform.
As Robert pointed out in response to this idea:
Currently, if users place those ads on their pages, they would be in technical violation of MySpace’s TOS. It would be very interesting to see how they deal with such a situation.
News Corp could simply buy the new ad network, of course. But that wouldn’t really resolve the core issue.
It would indeed be very interesting to see what would happen. There is a BIG opportunity to monetize MySpace and social media — just not in the old 1.0 way.
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Shared by: don l on 7/11/2006 at 10:38 PM - DetailsPublishing 2.0 » Distributed Revenue-Sharing A…
Would some hybrid of the Gmail approach work? I use Gmail because it’s free and handy, subsidized by the AdSense box on the right side of the screen. Unlike on my blog where I feature AdSense and get a cut, I make no money from AdSense on GMail. But, what if MySpace/News Corp. started their own AdSense-like network for all their web properties? Further, what if this network became a required component of anyone’s MySpace page over time? I realize that will turn off some number of current subscribers, but I still think it could be implemented in a manner to minimize the losses. Plus, it would enable News Corp. to have their own advertising network, for which they would capture the bulk of the revenue stream. I’m seeing more and more companies with broad web properties head in this directioin, most notably IDG and their TechWords campaign (see http://jwikert.typepad.com/the_average_joe/2006/03/idgs_techwords.html).
I’m not sure I see people rushing to put their own ads on their profiles. I think they’d be more interested in the opposite — paying to remove the ridiculous ads myspace puts there already.
Most people are on MySpace for attention, not money. People put movie posters and corporate logos all over their rooms and bodies, but do they charge for it? Not generally (minus a few high profile celebrities and the occasional crazy person).
Jim — you’re still thinking in old media terms. It would be focused on sharing with your friends products and services that you use, enjoy, and that help define your identity. There is a huge word-of-mouth, peer-to-peer network that is already selling products this way — this just gives people a piece of the action. And the key here is “action,” as in cost-per-action — so, no, you don’t charge for putting up the “poster,” but you do charge if that poster leads one of your friends to buy the product.
Scott, I think there’s a good case to made that by distributing revenue earning responsibility down to its members MySpace would increase the overall, aggregate earnings of all the individual profile properties.
However, the revenue that News Corp would see in this scenario would only be some subset - as those that “owned” the profiles would be taking home some of those ad dollars.
The site that I work for made the decision to distribute Adsense to our contributors (profile creators can earn 100% of the ad revenue from their profiles) and “give away” some of our revenues to our users, partly because we believe that the overall size of the pie would increase such that our net revenues would increase.
But in the case of MySpace, with their spectacular grown and utter dominance of the social networking space, do they need to share revenues? Is it really going to increase the size of the pie so much that their net revenues go up?
In an extreme example, let’s say that MySpace decided to share their revenues 50/50 through some Adsense like program with those that were contributing content. In order for News Corp to maintain the same level of revenue, the total, aggregate earnings of all the individual MySpace profiles would have to double.
Even if you assume that individuals will be more effective in monetizing their own pages that News Corp (which is debatable), you would still need a massive increase in traffic to subsidize the revenue share. And is there that much more traffic that MySpace can be getting?
The bottom line is that I think that for the foreseeable future, revenue sharing will be a tactic of the “up and comers.” The market leaders, like MySpace, won’t do it because they don’t have to. They’re growing so fast without sharing revenue, that unless they’re seriously pushed by another sns, there’s no reason for them to share the loot.
Lawrence,
Great points.
Think of it terms of CPM — right now, most user pages on MySpace have a very low CPM because advertisers are afraid to run their ads and there is effectively a glut of inventory.
Individual users can and should have the ability to drive up the net effective CPM for each of the page views they generate because they know much better than MySpace does how to market/recommend products and services to their friends — because they are already doing it.
This is what is necessary to full embrace the social media model — you need to relinquish control not only of the content but of the advertising as well, because peer production is far more efficient at driving up the net effective CPM by operating at the peer-to-peer level rather than the old media “shove the marketing message down everyone’s throat” model.
So MySpace could make this work by keeping page views the same but increasing CPM five fold and sharing half of the incremental revenue with users.
Scott, you’re preaching to the choir. Just to up the rhetoric a little bit, the “economies” of social networks right now are the equivalent of centralized planning in the former Soviet Union. A centralized agency (News Corp) is trying to set uniform prices (cpm) on something which is radically decentralized (profiles) and of wildly varying quality. A much more efficient market would emerge by freeing up the, uhhh, MySpace proletariat to get market value for their contributions.
Or something like that
My only hesitancy is that the obscene growth that MySpace is managing without revenue sharing makes it hard to imagine the numbers working out in News Corps favor with revenue sharing.
Yes, if they could increase CPM 5 fold (or even 2.1 fold assuming a 50/50 rev share), it would make all the sense in the world. To see this sort of jump, though, I think there would need to be a far more sophisticated selection of self-monetization tools (like Adsense) available to MySpace users. It could be that the self-earning infrastructure is just not there yet.
Lawrence,
All very well said.
Here’s my question — if MySpace’s CPM is as low as it’s rumored to be, would it really be that hard to increase it dramatically? MySpace is indeed wildly successful based on traffic, but I haven’t seen any good data on how successful it is from a revenue standpoint (if you know of any data, please share!).
2.0 economics are fundamentally counterintuitive — it’s almost a Zen thing. If you would have described the dynamics and economics of Google’s business back in 1998, everyone would have scratched their heads.
It’s not easy to let go — you have use the Force, make a leap of faith (choose your metaphor).
I do agree with your point that the “self-earning infrastructure” may not be there yet — it certainly represents a huge opportunity, though.
I think we all agree that the content on MySpace is the users themselves. Therefore it seems only logical that the MySpace user should derive some benefit out of the ads that are there, at the very least let them have some say in what is displayed.
If you look at http://www.uendorse.com you will see that they are heading down the road of providing just such a model. The beauty of their approach is that it does not look to interfere with the advertising that is already there.
Apparently Bear Stearns is making these revenue estimates for MySpace:
Many analysts estimate that MySpace will generate $200 million in sales this year. Bear Stearns estimates that MySpace could grow those sales to $413 million next year and $528 million in 2008. Apply a 30% cash flow margin, which is an assumption based on Yahoo’s 40% margin and CNet’s 23% margin, MySpace could earn $158 million in 2008.
I am working for a company right now that has plans for implementing almost exactly what you are describing in offering users a way to monetize their content.
The personal engagement factor inherent in personal media outweighs any loss of production value. If you are in the content, media or advertising business, think about what that means for your business. Scott Karpcounters that the model assumes that media companies can “own†social media in the old media sense, and in fact they cannot: As I’ve argued before, the reason why News Corp is struggling to monetize MySpace is that most people who visit MySpace are not
Yes, yes, and yes
By empowering your participants, your users, to do what they want to do, and deriving some revenue from such transactions, the more opportunity you have.
Btw - not only is social media ‘made up of people’ - but so is the web
See good ‘ol BlogAds.com.
Markets can “create” markets (e.g., markets for financial assets “create” derivatives markets).
Market-centered media can be profitable (e.g., CNBC, the movie Wall Street).
Now that you have accepted the above, you are ready to visit landof.opportunitv.com and learn how a TV sitcom and complementary online content can give rise to the most liquid online market for the advertisement spaces on single-creator media (e.g., blogs, podcasts), how this market can give rise to the most liquid online market for customized education and career services, how the latter market can give rise to millions of good jobs for U.S. residents, and how these job-holders can dramatically increase educational and economic opportunity for all.
So you’re right re: the BIG opportunity
(Why am I sharing the above if it is so valuable? Because I’ve locked up the essential 1.0 IP — intellectual property, that is…)
Stay tuned
“Jim  you’re still thinking in old media terms. ”
You’re totally right.. after reading your response, I realized that’s exactly what my business already does.. I just never thought of it as cost-per-action advertising with a revenue split. I just think of it as people giving & selling my dvds to their friends/neighbors/co-workers, because they want to bring attention to the issues they care about. But yeah, it’s the same basic thing.
Can users really be motivated to monetize their profile better than the site owner, especially when the amount of revenue users can generate is very small? Assuming a profile even gets 1000 views, at $1 CPM the site owner will only get $1. Multiplied by millions of profile this makes a healthy number. But the individual profile owner will only get $0.50. It’s more of a bother to collect it…
In any case, the vast majority of page views on MySpace are almost certainly from the internal mail system. A gmail-like monetization system makes more sense.
In a post contrasting Google’s successful approach to AdSense with News Corp’s difficulties with MySpace,Scott Karp makes the case that the key to monetizing social media is recognizing that it can’t be owned: [T]the reason why News Corp is struggling to monetize MySpace is that most people who visit MySpace are not visiting “MySpace,†the News Corp media
Mark, same as I said to Jim, you’re thinking in old media terms. If you had an affiliate model with a 5% revenue share, then someone who could drive $1000 worth of product sales would get $50 — or part to the profile owner and part to the ad network (i.e. not necessarily MySpace). This is not a function of page views but rather peer networking and peer-to-peer influence, which is what social networking is all about.
Scott, can you elaborate on how the person would be able to drive $1000 of sales?
If users are actively contacting friends on the system to sell product then that seems to be a kind of multi-level marketing. Some people could succeed at this (with a lot of work), but it could be seen as an abuse of the network by users who dont want people to become their friends just to sell them something.
If users are waiting for people to turn up at their profile then we are back to CPM calculations, only in the case of affiliate programs the value might be higher, say $2 CPM.
Mark — now you are at the hard part. As Lawrence pointed out above, the “self-earning infrastructure” may not be there yet. But I think the answer will be found by following the principle of empowering users to drive up the net effective CPM by leveraging their social networks. I do know that a lot of folks are working on this.
“Leveraging the social network” sounds very like MLM to me. In Web 2.0 everyone can be a salesperson
Don’t you think Mark that everyone is a salesperson one way or another?
And if you think of the web as an environment that reflects human nature in a number of ways, then wouldn’t it make sense that this would be successful if people were so empowered?
I find new music to listen to via my social networks. I find new TV shows to watch via my social networks. I find new books to read via my social networks.
Via word of mouth. Via my friends.
Blogging and social networks are word of mouth machines.
And forget about my friends *actively* searching me out to sell these things to me - it happens via casual conversation. It’s just human nature.
What if folks could earn a little each time the made such a recommendation to me? And what if service providers took a little off the top of each of these ‘transactions’ to pay for the service?
This is why, Scott, I had disagreed with you earlier about advertising and MySpace.
This discussion reminds me of an article I saw recently by Robert Young over on the GigaOm blog where he writes about how MySpace, or any social network really, could become an “agent” for their members in order to monetize their site. It involves making them, or at least some of them, into “micro-celebrities”. Here is a quote from that article which you can find at http://gigaom.com/2006/06/19/of-social-networks-and-business-models:
“Imagine the following scenario:
A teenage girl is checking her MySpace profile. She notices a new video ad for Old Navy on her page. But this particular ad jumps out at her because she immediately notices that the person in the ad is actually someone from her high school!! Without hesitation, she hits the “play†button and watches her friend talking and dancing, while modeling Old Navy’s new line of Madras casual wear. The ad seems homegrown in some ways, yet professional overall… a feel that was intentionally designed into the creative execution by Old Navy’s ad agency. Excited, she notices that her cousin (who’s attending college) is online so she IMs her to describe the ad she just saw. Her cousin IMs back to say that she saw the exact same Old Navy ad on her own MySpace page earlier, but in her case, the girl in the ad was someone she knew at her college.
Now, let’s step back and digest the implications of what just happened. In a broad sense, this type of program is no different than what advertisers do when they sign-up mega-celebrities (e.g. Catherine Zeta-Jones and T-Mobile) or superstar athletes (e.g. David Beckham and Motorola) as spokespeople for ad campaigns or for product endorsement deals. When it comes to advertising in mass media, a big name is required since such campaigns are only effective if the viewer already knows who that celebrity is. But in a social network, micro-celebrities who are well known within their network of micro-communities could prove just as effective and potentially even more so, particularly if such campaigns are able to generate buzz, excitement and a cool-factor.
As for MySpace’s role in all this, they are in the unique position to know better than anyone (as the owner of the platform with all the user data) who the “brand-safe†users are within its network.
Thus MySpace can effectively play the role of talent agent by aggregating a list of users who would be appropriate for advertisers within various categories. In fact, the incentive “to be discovered†is likely to spur many users to express themselves in a manner that will position them favorably for consideration. The result is a win for everyone involved.
By enabling advertisers to partner with users, this is the type of program that would create trust between the parties. This trust, multiplied by the number of ad campaigns and the users enlisted, could then be propagated throughout the entire social network in a manner that is completely native to the medium itself. In this vein, it’s worth noting that a campaign like this cannot be implemented efficiently or cost-effectively in any form of mass media.
Remember, social networks are a new medium for self-expression and, unlike traditional media, the content is being produced and owned by the audience itself. This is a new model that requires new rules… and for advertising, the most important rule is to launch programs that integrate users and advertisers, not segregate them. By aligning their interests, trust will be created and social networks will be able to offer advertisers, and users, benefits that are truly unique to the new medium.
So as is the case with money, trust will enable social networks to develop business models with sustainable value.”
So, in other words, any social network that can figure out to play the role of “talent agent” for its members and turn them into “micro-celebrities” would be better able to make their member generated content monetizable and profitable for both the network and the individual.
The size of the monetary reward actually might not matter as much as we might think. Even a few dollars from something like this is found money but the potential prestige factor of being thought important enough to be a “micro-celebrity” might be attraction enough. After all, the idea is to endorse and promote products and services that you actually like and use. The trick will be in figuring out how to measure the influence individual members have and then to aggregate it. And, if that can be done, its not a great leap to see how it could be applied outside of any single social network, thus making Scott’s idea of a distributed ad revenue platform a reality.
[...] Endorsing a Brand A recent article by Scott Karp on Publishing 2.0 speaks on just such a need for a model like uEndorse. As one of the pudit’s of Web 2.0 and social networks, Scott has hit the nail on the head with what is needed to bring advertising into the Web 2.0 world. uEndorse has already built the model that fulfills this need, allowing for user selected advertising on a social network site. While Scott and others who cover Web 2.0 are very correct, there will be pushback from advertisers and even potentially the social networ themselves. Below are some of the common reasons not to implement user “owned” advertising on social networks. [Read More!] 07/13/06 - 12:38:02 - uendorse - No comments [...]
[IMG 184905888_b9a7969d1a] Publishing 2.0, he sez people don’t visit MySpace, they visit eachother. And you can’t force people to take ads on thier own spaces, but you can give them the tools to do it. We sort of agree.Distributed Revenue-Sharing Ad Platforms Are the Paradigm For Monetizing Social Media. As I’ve argued before, the reason why News Corp is struggling to monetize MySpace is that most people who visit MySpace are not visiting “MySpace,†the News Corp media property  they are visiting EACH OTHER.
[IMG 184905888_b9a7969d1a] Publishing 2.0, he sez people don’t visit MySpace, they visit eachother. And you can’t force people to take ads on thier own spaces, but you can give them the tools to do it. We sort of agree. Distributed Revenue-Sharing Ad Platforms Are the Paradigm For Monetizing Social Media. As I’ve argued before, the reason why News Corp is struggling to monetize MySpace is that most people who visit MySpace are not visiting “MySpace,†the News Corp media property  they are visiting EACH OTHER.
[...] Scott Karp reminds me of how right I was back here and goes a bit further explaining just how MySpace can monetize that traffic, by getting out of the way. [...]
ads themselves, and then Google takes a (big) piece of the action. But they don’t have to own Blogger to do it  owning Blogger simply allows Google to provide the blogging platform for free and thus drive more content creation that feeds AdSense. read full article
a gentle seaway into targeted, fine-tuned behavioral marketing for national and local advertisers wanting to reach MySpace’s 15- to 34-year-old core user.” This is apparently going to add to the bottom line, with MySpace’s much-maligned inability to monetize set to change: “The prospects for generating revenue and profits are just as limitless. Murdoch said FIM will post at least $350 million in revenue this year, up from $47 million last year, and at least $500 million in 2007. Some analysts, who expect
a gentle seaway into targeted, fine-tuned behavioral marketing for national and local advertisers wanting to reach MySpace’s 15- to 34-year-old core user.” This is apparently going to add to the bottom line, with MySpace’s much-maligned inability to monetize set to change: “The prospects for generating revenue and profits are just as limitless. Murdoch said FIM will post at least $350 million in revenue this year, up from $47 million last year, and at least $500 million in 2007. Some analysts, who expect
a gentle seaway into targeted, fine-tuned behavioral marketing for national and local advertisers wanting to reach MySpace’s 15- to 34-year-old core user.” This is apparently going to add to the bottom line, with MySpace’s much-maligned inability to monetize set to change: “The prospects for generating revenue and profits are just as limitless. Murdoch said FIM will post at least $350 million in revenue this year, up from $47 million last year, and at least $500 million in 2007. Some analysts, who expect
[...] There is also an opportunity for ad networks to cut out the social network middleman — uEndorse, for example, is creating an ad channel that allows social network users to chose ads that appear on their pages and to endorse those commercial messages. [...]
[...] Who Will Make Money with User-Generated Online Video? Distributed Revenue-Sharing Ad Platforms Are the Paradigm For Monetizing Social Media [...]
It’s true that I’ve got a ton of blog widgets on my sidebars. I am sorry about that. But I can’t help myself.’ TagWorld launch a ‘widget platform’ that allows any widget they have in their system to be placed in any external site. Publishing 2.0 thinks ‘MySpace users don’t want … ads appearing on “their†pages uninvited.’ Quite. Widgets: SkinnyR. Blaugh (bleagh). flickrinspector. The Hype Machine. August Om Malik reports the Skype widget ‘
[IMG] 利益共享å¼çš„广告是MySpaceç‰ç¤¾ä¼šåŒ–åª’ä½“çš„ç›ˆåˆ©ä¹‹é“ åŽŸä½œè€…: Scott Karp | 译者: ä¸ä¸ [IMG] | å‘表时间：今天 00:36:39
I don’t think you have to worry too much about News Corp or Rupert Murdoch. I’ll think they’ll probably do okay with this!