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5 reasons why social networks are a “Failure” in monetization

If social networks don’t find a way out to resolve CPM issues, there will be more social network failure like Mash’s in the future.

It’s hard time for popular social networks to get the much desirable payback from the networks they have built all over the world.And it’s not one but the majority of such networking sites,that aren’t able to find an antidote to this problem.

For instance, Orkut have a massive following in Brazil and India but when it comes to monetizing its network, it is still struggling to even find a ray of hope.One reason can be below average(compared to Myspace, Facebook) CPM rates as the majority of the audience isn’t from the US. Due to meagre payback,there were rumours that Google might close its doors as any investment won’t be worth it.(BTW, Yahoo! recently announced its social network Mash’s Shutdown)

Myspace and Facebook are also finding it hard to get healthy returns from their huge networks(which comprises majorly of US visitors).According to, Facebook is currently commanding 59.4 Mn unique visitors and Myspace,having around 38.2 Mn visitors and page views are in multi-billions but the networking gaints, besides their best efforts aren’t able to leverage maximum from their properties.


Here are the 5 reasons which are to be blamed for all this…

  • Low CPM Ad inventory : Not just Orkut, but Myspace, Facebook, Bebo and many others are no exception when it comes to CPM rates.They are way too low than any content driven website’s CPM rates. Lookery, a social media Ad network offers display ads on Myspace, Facebook and Bebo for as low as 13 cents per thousand page impressions(CPM). In contrast,CBS charges $50 and NBC as much as $75 for the same number of page views.
  • Right ads,Wrong audience : In a social network,the maximum probability of monetization is from the ads that are of adult nature (probably a dating site,or a porno site,if allowed by the network). But such advertisements deplete the image of a social network as a whole. On the contrary, the ad inventory is huge in technology sector (ex. web hosting,software selling, etc.) but the right audience for such ads is hard to find in social networks. This mismatch results in pathetic conversion.
  • Crappy user data : Going by the facts,more than 65% of the members of any social network maintain a fake profile. This means,fake user information (such as age, sex, marital status, qualification, hobbies, etc.) which results in poor judgement of user behaviour, hence “Ad-audience mismatch“.
  • Over-sensitive audience : The outburst of Facebook users on Beacon implementation which resulted in its immediate removal clearly indicates the growing user authority over the social networks. As there are plenty of options available for a user to choose another site for his/her social pass-time, no social network is ready to experiment with their existing audience any more.
  • Placement limitations : Majority of the hottest areas of Ad monetization(ex. middle,top,left and right panel) are dedicated to other relevant things from a user’s perspective(eg. user picture, friends,communities, etc.), which leaves the site owners with residual real estate to monetize.

What next?

If social networks do not find a way out to get rid of these issues, we will witness more shutdowns like Mash’s in the near future.The biggest two will continue to survive because of their huge user database.

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