Hi gang, Dr. Media says Om Malik is on the money with this blogpost, read especially the reduced ad revenue numbers. What does this mean? Well there may be many ways to put it but the bottom line is that the big boys are losing faith in the ability of social networking to deliver the consumers. I guess the kids don’t like being shilled as much as Murdoch hoped they would. Looks like everyone is going to have to wake up and realize that you only get responses to things that folks are actually interested in.This is BTW, why Dr. Media stands by behavioral and experiential data collection and analytics. If you want to know what they like ask them, what a concept?

Social Networking Gets a Sanity Check – GigaOM

Social Networking Gets a Sanity Check
Om Malik, Friday, June 13, 2008 at 8:30 AM PT Comments (55)

After years of hype, noise and funding, the social networking sector is finally getting a harsh, but necessary, sanity check.

Today there are numbers out from comScore that indicate plateauing growth for the big two — MySpace and Facebook — in the U.S. Last week, Revision3 canceled “SocialBrew,” an online video show dedicated to social networking. Meanwhile, Monster killed its Tickle social networking service (first reported in April by TechCrunch), following closely on the heels of CondeNast’s shuttering of Flip and Verizon’s decision to close up its virtually unknown network, which had managed to garner a mere 18,000 members. (Verizon has shifted its community to Facebook.)

And these just might be the tip of the iceberg, for there are way too many me-too networks out there failing to find the traction, and hence the volume, needed to grow their revenues. The lack of monetization will only accelerate this process.

Google CEO Eric Schmidt never misses an opportunity to dis the social networking sector, typically by pointing out how hard it is to monetize social media inventory. Which could just be his way of trying to excuse his company’s inking of an exclusive $900 million deal to serve up advertising on News Corp.-owned properties including MySpace.

But Schmidt’s motivation notwithstanding, what he says is true: In a recent report, eMarketer, a N.Y.-based market research agency, lowered its 2008 advertising estimates for U.S. social networks to $1.43 billion from $1.6 billion. They expect Facebook will take in $265 million and MySpace will bring in $755 million, down from earlier projections of $305 million and $850 million, respectively.

I’m not sure how they came up with these new projections, but let’s assume for a moment that they’re right. That means that MySpace and Facebook together will bring in $1.02 billion in U.S. ad revenue, which leaves about $400 million for dozens of other social networks. eMarketer also calculated revenue per unique visitor for some of the big five:

* Google: $65.55
* Yahoo: $31.25
* Microsoft (MSN): $17.74
* MySpace: $12.85
* Facebook: $11.79

Now juxtapose these numbers against the U.S. traffic trends. Andrew Chen points out that U.S. visitor traffic for both MySpace and Facebook is beginning to show signs of maturing — and plateauing. The latest comScore data released today only reaffirms Chen’s point of view. Couple the new, lower revenue estimates with the flattening in the growth rate of U.S. visitors, what you end up with are tough times for social networking going forward.

Both MySpace and Facebook are seeing the bulk of their growth overseas, but that traffic is even harder to monetize than traffic in the U.S. Indeed, when it comes to making money on overseas traffic, with the exception of Google and Yahoo, most companies have had a mixed scorecard. What’s more, rather than a service unto itself, social networking is becoming just another feature on many web services.

All of these changes are going to continue to have a negative impact, and not just on all-purpose, also-ran social networks, but on the entire ancillary economy, including widget makers. (See our post on Userplane, the really big widget ad network.)

The way I see it, the market has shifted its focus onto niche social networks, such as those dedicated to sports, music, automobiles and pets. You know, sites like Dogster! They have focused, engaged communities, which means they can attract a higher amount of advertising dollars. (Liz came up with a taxonomy of social networks back in February 2007 that offers up an easy way to understand the nuances of the social networking landscape.)

Not only do they have a purpose, but they don’t depend on hit-or-miss behavioral targeting-based ad systems that many hope will one day turn social networks into a gold mine. After all, if you sell dog food, then everyone on Dogster is a potential customer. As for the rest of the sector, it’s only a matter of time before more companies go the way of Tickle, Verizon and CondeNast’s Flip.