Nobody can make money on social network ads. Even Google (which controls a lot of the inventory on MySpace) is having a hard time. How worthless are these ads? Lookery, an ad network for social apps on Facebook and elsewhere, is renewing a promotion, guaranteeing 15 cents per thousand page impressions to app developers who sign up. With two ads per page, that comes to 7.5 cents per thousand ad impressions (CPMs). Back in January, Lookery was offering 12.5 cents per ad impression. So that means Lookery has cut its ad rates nearly in half.
Other social app ad networks, such as Social Media, are commanding CPM ad rates of around 50 cents by focusing on higher-quality inventory. Lookery is not so picky, and thus is probably more reflective of the what the majority of Facebook apps can expect to get (85 percent of its inventory is from Facebook).
Promoting a guarantee to starving app developers who have no other options is working for Lookery. When it offered its first guarantee in January, it was serving 140 million ad impressions per month. Now it is serving about three billion per month. (Social Media serves two billion).
Lookery is hoping all of those pennies will add up, but it isn’t counting on it. CEO Scott Rafer says the ad network is running at break even in terms of gross profits. But his plan is to use it to “bootstrap a data services business.” To that end, he is beginning to collect age and gender audience metrics from all the publishers in the Lookery network. For instance, the Facebook app Friendzii (which seems like it is geared towards people with no friends who are hoping to meet some) is actually most popular among 35-to-44-year olds.
If Lookery can’t sell ads to marketers, maybe it can sell the data.
I agree with every word and sentiment of this article.
TL - http://offur.com/BetterThanTechCrunch
lame
Has anyone tried the free 100 dollars worth of ads that facebook is offering? I’m skeptical about it because it’s done through the mastercard app and you have to enter in a CC, but people claim it’s legit.
A little back of the envelope arithmetic here. Now of course this is very rough, but I think it gives a good indication of the kind of revenue that FB is capable of generating. And unsurprisingly, it is very little.
Markus Frind, CEO of POF recently posted on his blog, that he is looking to get $0.80 CPM rate from advertising on PlentyofFish.com which is a dating site with 1.4 billion page views per month. Now I know the comparison isn’t perfect, but dating sites are similar to social networking in terms of page views so they are somewhat comparable.
At that rate, Plenty of Fish will haul in roughly $1.12 million per month. POF will gross this based on 3.3 million uniques according to quantcast. Now, FaceBook has 10-times the US traffic of POF (not massively more really). So based on this they have 10 times the traffic at 1/10 the CPM ad rate.
That adds up to FaceBook pulling in the same gross $ as Plenty of Fish. So based on that information, FaceBook is pulling in about $1.2 million on US traffic.
I realize that this ad rate was based on advertising for apps running Lookery, but I don’t think FBs entire inventory is worth much more than that to advertisers. They may have some prior ad deals that locked in higher rates, but those will expire and FB will be saddled with huge infrastructure and employee costs. Combine that with navel gazing when it comes to development and this whole sorry adventure can only end with a high body count and lots of broken furniture and plenty of tears.
FB - 35 million uniques per month @$0.075 eCPM
POF - 3.3 million uniques per month @$0.80 eCPM
http://www.quantcast.com/plentyoffish.com/traffic
http://www.quantcast.com/facebook.com/traffic
guarantee, not gaurantee
If it can’t be profitable, I think the company will end up merging. The ad market is competitive… http://blabtech.blogspot.com
In the Advertising 2.0 conference, the panelists debated for over an hour on the way people socialize online, and the best way to use social media to sell ads and came to the unspoken conclusion that no one agreed with each other.
Thanks for the post, Erick. We do pay out hundreds of thousands to publishers each month, so there’s a number of folks who aren’t “going to zero” by any stretch.
As a slight clarlification, we only gather the (completely anonymous) targeting data where it isn’t a TOS violation.
Selling Facebook data is pretty over the line in terms of the TOS.
Lookery has built a ton of impressions buying audience cookies from developers. I’m curious to see how the future pans out for the company now that Facebook is cracking down.
A friend of mine was suppose to go to F8 tomorrow but he cancelled after few of his friends who have FB apps cancelled as well. They’re all feeling pretty pessimistic about FB platform and none of them like the new profile page design. Many developers feel betrayed.
But the biggest issue seems to be monetization. Ad revenue is down and a lot of developers have now problems paying for servers etc.
All in all, a pretty depressing state of affairs
Die Slide and RockYou, die.
Pardon the self-promotion, but the fact that “nobody can make money on social network ads” is symptomatic of a problem my company, which hopes to launch at TechCrunch50, means to solve. TechCrunchers, please take a good look at the submission for which I’m the contact person.
LOL… riiight.
Very interesting. Kind confirms some of, if not all of, what I had been thinking would happen. Thanks for highlighting the facts for us.
To expand on Erick’s post and Scott’s comments - Lookery is building a data services business that amongst other things helps app developers better monetize remnant inventory. We’re extremely publisher focused to the extent that instead of handing outbound ad sales ourselves rely on a network of relationships to fill our inventory. We focus on making our publishers the most money possible while our partners focus on selling our ad inventory.
The challenge a lot of ad networks have in working with social app focused ad providers is that they’re all competing with each other. They are all calling on the same media buyers on Madison Ave. Friend or foe is hard to tell. We solve that problem by maniacally focusing on our publishers and let the pros do their thing selling to brands and other advertisers.
My company averages $10 per 1000 ad impressions through google adsense so these social networking metrics look minuscule. Then again, our page views are minuscule by comparison so what do I know.
Joe that is because you have a very specialized content. Lawyers looking for folks to participate in class action lawsuits are the highest CPC google has. An app like super poke does not attract that audience.
As the CEO of AdParlor, I thought I would add some comments on this.
We face a similar problem of trying to bring in a high CPM rate from advertisers that we can then pass on to Publishers.
We try as much as possible to stay away from the standard media buyers and CPA offers, and leverage our sales team to negotiate CPM and CPC deals directly with advertisers.
A major problem however comes with the fact that at the end of the day the CTR on ads within social networking sites - and even within social networking applications, is just not that high. What this means is that if we negotiate a CPC deal with advertisers, they will not get the volume of clicks they desire - and if we negotiate a CPM deal, they will not see the traffic back to their site that they would expect from that many impressions.
Thanks,
Hussein Fazal
http://www.adparlor.com
If no one clicks on the ads — how are you getting $1.10 CPMs? Sounds fishy. Google can’t get close to that, nor any one else.
jackmayhofferr,
Thank your for your comments - A few of points to make:
|ON CTR|
1) People do click on these ads - just not at the CTR which non-social networking sites have been able to realize.
2) The CTR on social networking applications is higher than when advertising directly with facebook or myspace. Reason being that users expect an ad in the left hand column of facebook and the top right corner of myspace and pretty much block out the ad. On custom applications, the placement is different in each case, the colors are customized to blend in with the rest of the application, and the user is highly engaged with the page.
3) One thing we have done specifically at AdParlor is to have advertisers ‘tag’ their advertisements and publishers ‘tag’ their applications with keywords, giving us the ability to serve related ads and increasing the CTR further.
|ON eCPM|
The numbers on our web site are the actual average eCPM as seen by our publishers on June 11th. Since this date, we have grown dramatically and as applications with a larger number of impressions do not see as high of an eCPM - admittedly our average eCPM has gone down. We will be posting updated numbers later this week.
So, you say that AdParlor has a problem getting good eCPM for social publishers.
Does that mean your business is failing?
Lookery states they see a problem and are not going to play in the ad network game - instead, Lookery will be a data company.
What are the plans for AdParlor?
John,
Getting a good eCPM for social publishers is a challenge - but not a problem that cannot be overcome. By leveraging the obvious advantages of social networking sites such as the multitude of targeting options and by having a dedicated sales team, we are able to negotiate guaranteed CPM deals directly from advertisers - which we are then able to pass on to our publishers.
It is interesting that Lookery is not going to play in the ad network game, because we on the other hand believe that it is a profitable business and have thus far been quite successful. We have a few ideas up our sleeve but unfortunately I cannot share our upcoming plans. Feel free to stay tuned on the news section of our web site to keep up to date.
Who thought you can build a business on totally out-of-workflow advertisements? Those days are over.
I think Facebook is close to being in decline. The apps businesses will mostly fail as Facebook struggles to monetize their pages. A recession will wipe them out because advertisers will be in no mood for experimentation. They want results and that is something facebook cannot deliver!
where does it go from here? Simple…cost-per-million…will look quite juicy compared to cost-per-thousand…
Right now, the Adsense ad on the right shows as a public service ad next to the comments of this article.
Doesnt surprise me one bit. I dont know anyone who clicks on advertisements…even people who arent very computer inclined dont click on them.
“Nobody can make money on social network ads.”
Uhh.. Linked In??
Rather than “Nobody can make money on social network ads,” we think the accurate statement is closer to, “Ads on consumer communications tools are high-volume, low-unit cost businesses.”
If one designs a business to make money at low eCPMs, as we have, one has a good shot. If a consumer social network business needs to consistently achieve multi-dollar eCPMs averaged across all pages, there’s going to be serious trouble.
LinkedIn’s primary value is not consumer communications tools. Facebook’s and MySpace’s values are.
I like the news room best, they pay good
Not true — many people ARE making money on social network ads, and some people are getting downright rich from them.
The key is what anthropocentric stated earlier — that the days of building a business on totally out-of-workflow advertisements are over.
My company, Offerpal Media, is an ad network of social apps and online communities where we embed our ads directly into the user experience. We provide a virtual currency platform where app users can earn points for taking part in CPA offers.
Need more “Friends For Sale Coins” so you can buy more friends as pets? Take a free trial or fill out an online survey. Want more “GreenBucks” within (Lil) Green Patch so you can send the Foxglove rather than the White Daisy? Try downloading a ringtone or viewing a movie trailer.
Most of these apps are seeing eCPMs that are easily three figures.
So maybe traditional ads don’t work well on social networks, but that doesn’t mean that nobody can make money. We as an industry just have to get creative to come up with other solutions.
I’m sure Google would be happy to see Lookery and Facebook stumble. Then they can sweep in with whatever Ad network they create or buy to hook into their Open Social system - and later offer that system to FaceBook and MySpace and their app developers.
The fact is that even though Google AdSense/AdWords really isn’t as lucrative as it once was, it is the only viable system left. None of the other networks pay worth a darn. I’d gladly raise a toast to anyone who could monetize better. Please!, Someone create an Ad network that really pays.
OK honestly, who remembers this post: http://www.techcrunch.com/2008...../#comments
Scott and Rex defended their “Fake Facebook” ads and in continuing to run them are now incrementally losing money as users catch on to the scam ads in apps.
To Reiterate:
1. Don’t rely on App install revenue, which is in essence VC money that is being used for Marketing by the other App developers
2. Get a Direct Saleas team to contribute significant Ad Revenue from direct sales
3. Don’t Rely on 3rd Party ad networks to pay you (a 3rd party ad network). This is a bad idea because they will likely circumvent you when they find out which of your apps are high traffic and you are only getting a 24% rev share on any advertisements in your network (Lookery gets 60% from VideoEgg and of the 60% from VideoEgg pays 60% to the app developer, leaving them with 24%).
Here is some free advice:
1. Start building, acquiring apps or at least get exclusive rep agreements
2. Hire an ad sales team
What most folks wont tell you is that in online ad networks (that don’t own the sites/apps) are as valuable as their ad sales team.
The Social Media conventional wisdom is to rely on triage, 3rd party networks and CPI$. That is wrong and will not build a successful or sellable (meaning an exit/buyout) business. The hardest work is in building your own successful ad sales team.
Rely on triage? Wow this is getting bad in the ad space.
Perhaps you meant arbitrage
@Isaac - You keep referring to fake facebook ads - we don’t run fake facebook ads.
Ping me at my e-mail - rex [at] lookery [dot] com - and we can discuss your statements about fake fb ads - which we do not run and we have never run ads that violate fb tos.
We have even pulled ads at the request of our publishers and even their users. So we listen all the time. Even ads that only offend a small percentage of the user base, we work hard to get them off our ad network - these are ads that don’t offend 90% of the population - we do what we need to in order to make our publishers and their users feel comfortable with our ad network.
Also you stated the following: (Lookery gets 60% from VideoEgg and of the 60% from VideoEgg pays 60% to the app developer, leaving them with 24%)
Where did you get the above numbers from concerning a supposed deal with VideoEgg? Or were you pulling numbers out of thin air and using VideoEgg as some example?
I’d like to know. I have an open office door - my inbox.
Rex
Publisher Relations, Lookery
I am no advertising expert but it seems to me that if you break it down to pure human behavior you see why search advertising has the highest return - people are on a mission to find something and if you present them with what they are looking for they buy it.
Second comes advertising such as AdSense where the reader of a site or article might not be directly seeking something but at least your ad relates to what they are reading and therefore thinking about for a reasonable span of time.
Enter social networking. What are people using it looking for or thinking about at any given moment? The dynamic changes so fast that unless you have derived from all of the conversations that Johnny really wants a fire truck for Christmas you are just taking stabs at it and yes getting crappy returns.
Someone will figure this out and everything will change.
Facebook has served my quite relevant adverts. They’ve served me a few snowboarding ones and some electronic dance music (for beatport.com). So I don’t think you should downplay the relevance of their targeting.
Unfortunately for them, I’ve never clicked on them. I already use Beatport anyway, don’t need snowboarding lessons as I’ve been doing it for years and don’t need assistance booking a snowboard trip for the same reason.
Probably more to the point is your first point. Google paid search is the darling of Advertising because, as you point out, YOU ARE LOOKING FOR SOMETHING. I just searched for LCD Television, yes, I’m looking for one, click-through, $, thanks.
I contacted App developers about advertising and some wanted USD $9 per CPM !!! or 0.9 CPC! hatching egg wanted for 6K for 3 days- these prices are insane, the simple fact is that the CTR Very low conversion rate is a catastrophe. with that we managed to make money with an App in face book. the developer earned about USD $2000 a month. if you Have an App, Common sense and you want to make money you are welcome to contact me Ian@tgseller.com
Google used to offer me $6/1000 pageviews . . . over the last two years, despite my site quality improving, it’s slowly dropped to $2/1000 pageviews.
But at least Google has lower minimum bids than yahoo or msn advertising.
If there’s one thing I know is that Dave knows how to sell data. He’s good at what he does. Who will buy the data? Remember all companies looking to market ON social networks need this data. Data never gets old. Every month its new product. Everyone buys the same product Data. The more data you want the more you pay. Simple. Good execution.
My FB app makes a solid $1 CPM across two ads on the page (around $0.50/slot, based on CPC), and has done for the last year. Lookery’s minimum guarantee is aimed at applications where users load lots of pages and barely pay attention to them, such as the proliferation of gaming applications.
Minimum guarantees like Lookery’s are always going to cater for low quality page views. That doesn’t mean that all social networking page views are low quality.
Lookery not doing well based on their approach paints a wrong picture for social media advertising. Everywhere I go, people talk about how the social ad is not doing well. They give examples of lookery buying the market, and now giving the market away. Lookery needs to rethink its approach for the sake of the industry.
I’ve got VC friends who say this market is not attractive. They use Lookery as an example of why.
@commenting
Don’t confuse low prices for doing poorly. We’re doing enough volume to be achieving our business goals — as are many of the people we send money to each month.
As for the VCs, Lookery is a low-capital business, so they have no reason to be interested as VC funds. Instead, we have several prominent VCs who have invested personally in Lookery. “Not attractive” for VC funds is different than “not attractive” in general.
.
@scott
you guys have done a great job. we just need to get over this hump and generate some revenue for these social networks so they don’t paint such a gloomy picture.
who is your PR firm by the way? Lookery is fricken everywhere!!!
@Mike or Erik:
How willing would you be to talk about how well your advertising on TC does?
@commenting (wow, is this the same person?)
So far, I am our PR firm. A couple of contractors are starting work for us in the next couple of weeks to really make some noise, but i’ve been solo to date.
@scott
i just give news as i see and hear it. i’m a no sugar coat kinda guy. i’m excited about social media as i think it is the “portal” for the next 10 years. i wish you guys luck.
I happen to believe otherwise. Promoting your website, business or service on a social site like facebook is lucrative…if you put up relevant ads aimed at relevant age groups.
Hunn… it seems that linkedin is doing much better than these guys:
http://download.linkedin.com/c.....tecard.pdf
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