Social Networks Urged to 'Raise Ad Rates or Die'

Article excerpt

Social networks will need to start charging brands a premium for ad slots if they are to survive, according to a report released today (Wednesday).

Datamonitor's Business Insights study predicts that charges for advertising on social networks will have risen steeply by 2015, as the leading players attempt to avoid a similar fate to Bebo.

The report predicts social networks will make only pounds 4.14 per user per year, forcing them to rethink how they can make a profit.

It also suggested that marketers should look beyond social networks' user numbers and focus on the proportion that regularly visit the sites The report pointed out that, while the number of MySpace users is falling, it has the highest level of regular users (63%), compared with Facebook's 50% and Twitter's 20%.

Richard Absalom, consumer technology analyst at Business Insights, said that 'streams of ads' on social networks were turning users off and this was prompting advertisers to look for other ways to reach consumers. He suggested that possible approaches included in-game advertising, offering virtual gifts and creating user groups and advertising around premium video content.

Absalom also predicted that, as brands got past the experimental stage of marketing on social networks, they would begin to demand a healthy return on investment.

AOL has announced that it plans either to sell or shut down its Bebo network, while MySpace has scaled back its global presence by closing several offices. Analysts warn that other social networks could go the same way unless they increase their charges to advertisers or develop subscription revenue streams.

However, marketers have expressed scepticism at any plans to raise the cost of advertising on social networks. …