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MySpace Makes Advertising Feasible For Small Businesses

Posted on: Tuesday, 14 October 2008, 07:35 CDT

On October 13, social networking site MySpace unveiled MyAds, a new approach to advertising that allows businesses to create their own advertisement banners that are displayed throughout the MySpace community. 

Ad campaigns can be started for as a little as $25, and will allow businesses to target and track the results.  

Getting companies to take a chance on social networking advertising won’t be an easy task, especially as the economic slowdown forces many businesses to cut marketing expenditures.

"Social networking is still unproven," says Jeremiah Owyang, analyst at Forrester Research.

Late last week, Viacom cut its sales forecast due to uncertainty in the ad market.  Other companies are also tightening budgets, meaning less spending on display advertisements that emphasize brand building, and more focus on search-related advertising that has a measurable sales impact.

MySpace believes many companies will turn to online marketing as a cheap alternative to traditional advertisements.

"In these economic times, marketers want to use their dollars more efficiently," says MySpace founder Chris DeWolfe. "This is the most efficient way you could do it in a low-risk way."

MySpace has focused on large advertisers and ad agencies up to this point, but the MyAds program focuses on small businesses, giving them an opportunity to reach specific markets among MySpace’s 122 million users.

The MyAds program is derived from MySpace’s Hypertargeting program that was developed for Madison Avenue, and other large advertisers.  Hypertargeting searches through users’ information that is published to the site, such as music preference, age, gender, hometown, etc…and uses the information to create target audiences.

Justin Esch and Dave Lefkow, founders of gourmet seasonings maker Bacon Salt, used the MyAds program by searching through target audiences such as dining, restaurants, and bacon. 

The company saw website traffic double, and online sales increase by 30% over a month long period. "We've seen really good results," Esch says. "This experience taught us there is more that we can do to get word of mouth out there."

A recent report from the Interactive Advertising Bureau showed that display ad sales rose 13% to almost $1.9 billion in the second quarter, but some don’t believe they will work effectively in an online social setting.

According to Forrester’s Owyang, people don’t go to social networks to buy products. 

"We're trying to smash traditional advertising into a social environment, but its entirely different behavior," Owyang says. "They're still throwing a lot of pasta against the wall to see if it will work, and we expect that to continue for years."

According to MySpace’s DeWolfe, Hypertargeting is already allowing some advertisers to see 50% to 300% increases in ad clicks.  He expects the MyAds program to boost overall revenue for the company.

But David Hallerman, senior analyst with eMarketer Inc., believes many advertisers will try MyAds once, but will not return because text ads elicit more clicks than display ads.

Around 3,300 small businesses are already giving the program a try.  In an economy where advertisers are cutting back, MySpace has little to loose, and a lot to gain with MyAds.

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On the Net:

• MySpace MyAds Beta

Source: redOrbit Staff & Wire Reports

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