I moderated a panel yesterday about Hype-targeting called " The Advertising & Commerce Platform, Hypertargeting: Ad Networks, Serving & Targeting" and was happy to use this article as a keystone to the questions asked of the speakers. (http://digitalhollywood.com/08BBlocks/BBlocks08-Tues9.html) . Below is the articla from the WSJ.
Wall Street Journal – ADVERTISING Targeted-Ad Initiative Is Crucial for MySpace Questions Multiply On Site’s Potential to Turn a Big Profit By AMOL SHARMA and EMILY STEEL, August 4, 2008; Page B1
When News Corp. reports its fiscal 2008 earnings Tuesday, investors will scrutinize the company’s plans to generate more advertising revenue from the enormous amount of traffic on its MySpace social-networking Web site.
One initiative that could be critical to MySpace’s success, according to media buyers and industry analysts, is a system that lets marketers aim their ads at particular groups of users. As part of this "hypertargeting" system, MySpace has analyzed the profiles of its users to gauge their interests and then categorized them into more than 1,000 "buckets," including rodeo watchers, scrapbook enthusiasts and "Dancing With the Stars" viewers.
The marketing service was launched last fall, and feedback from some early advertisers has been positive. Concert promoter Live Nation Inc. got a good bump in traffic on its Coldplay summer-tour page after buying display ads on MySpace that were directed at fans of Coldplay and those of bands with overlapping audiences, like Modest Mouse and Death Cab for Cutie.
"The closer you get to the audience you want, the better you get in terms of clicks or sales of the product," says Sean Muzzy, senior partner and media director at digital ad agency Neo@Ogilvy, owned by WPP Group PLC. Mr. Muzzy has managed several hypertargeting campaigns, including the one for Live Nation.
James Kiernan, a media buyer at Publicis Groupe SA’s Starcom MediaVest who has handled hypertargeting campaigns on MySpace for a dozen or so Procter & Gamble Co. brands, says he has seen the approach yield a 25% to 30% increase in consumer response compared with regular ad purchases.
Other big brands testing the targeting service include Adidas, which aimed a recent campaign at MySpace soccer fans.
MySpace, which has cheap advertising rates, like other social networks — only a few dollars, at most, for 1,000 displays of an ad, compared with the $50 or $60 per thousand charged by some niche sites — says it can charge roughly double those rates by offering targeting.
But it’s far from clear that the ad-targeting service will address growing concerns about the business prospects of MySpace and other online social networks. Because a significant number of MySpace user profiles contain suggestive or otherwise edgy photos or language, many big marketers still worry that their ads could end up alongside inappropriate material.
No one is committing huge sums yet, media buyers say. The biggest concern among marketers is that social-network users simply aren’t in the mood to pay attention to ads — regardless of how well-targeted they are — while they are exchanging messages with friends or looking at photos.
Privacy concerns about online ad targeting are also an issue. MySpace rival Facebook faced a wave of complaints from consumers when it unveiled a new advertising feature last year that updated users’ friends about online purchases the users had made. On Friday, a congressional committee asked 33 technology companies, including Google Inc., Microsoft Corp. and Yahoo Inc., to provide information about their ad-targeting policies.
The stakes are high for MySpace and News Corp., which acquired the site three years ago for $580 million just as MySpace was becoming a Web phenomenon. The site has become one of the Web’s biggest destinations, with nearly 118 million unique monthly visitors, according to Internet tracking firm comScore Inc.
But questions are growing about News Corp.’s ability to turn that huge audience into big profits. Earlier this year, the company said its Fox Interactive Media division, which includes MySpace, would miss its $1 billion revenue target for fiscal 2008. Research firm eMarketer expects MySpace, which accounts for most of the division’s revenue, to bring in about $755 million this year. MySpace says it doesn’t comment on revenue forecasts. (News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.)
Much of MySpace’s revenue is coming from splashy ads on the MySpace home page, such as a recent campaign to promote the latest Batman film, "The Dark Knight." But there is a limit to how many of those kinds of ads MySpace can sell because the homepage has only one spot for ads.
Another big source of revenue is Google, which agreed to make payments to MySpace totaling a minimum of $900 million over three years for the right to broker sponsored links on the site. But that deal may be running into some problems. A Fox Interactive executive acknowledged that consumer response to the ads Google brokers has been disappointing but said the two sides are working on technology to improve it. Google has said it is having trouble monetizing social networks generally, but hasn’t singled out MySpace.
MySpace also isn’t the only company betting that analyzing data on users’ profiles will unlock the value of social networks. Facebook offers its own technology that marketers can use to target ads based on geography, age and interests that users have listed in their profiles. Among the tens of thousands of advertisers that have used its system, Facebook says, is a wedding-photography company that aimed its ads at women whose profiles indicated they were engaged.
For some marketers, especially small ones, more generic targeting suffices. The New York Health & Racquet Club spent $5,000 on a MySpace campaign that displayed 2.3 million ads to users on the site. Though the health club could have chosen to target ads at people who say in their profiles that they enjoy rock climbing, yoga or working out, it chose instead to simply target by age and ZIP codes near its facilities. The club said it was relatively happy with the campaign, which generated roughly 1,000 clicks, a response rate of just 0.04%.
Adam Bain, a Fox Interactive executive whose team created the hypertargeting technology MySpace is using, argues that the system won’t just pay off by boosting ad sales. It is also a way for marketers to glean valuable information about their target audience. If the advertiser wanted to reach scrapbooking hobbyists, for example, it could find 236,475 of them on MySpace. But the system also shows that 99% of them are female, and lists several other hobbies they tend to be interested in, including sewing, baking and watching the TV show "Grey’s Anatomy."
As Mr. Bain puts it: "The beautiful thing about MySpace is that people go on every day and share with us what they’re passionate about, what their interests are."