Thursday, May 18, 2006

[political-researchp] Bloglines - Correction Looms as Social Nets See Traffic and Ad Prices Boom

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Steve Rubel explores how social software is transforming marketing, media and public relations.

Correction Looms as Social Nets See Traffic and Ad Prices Boom

By (Steve Rubel) on Social Networking

The Social Software Weblog reports that the top 10 social networking sites saw traffic grow 47% over the last year, according to Nielsen. MySpace had the biggest growth at 367%. See the chart below for more. (MySpace is an Edelman client).

Naturally as traffic balloons, so do ad prices. Inside Facebook quotes a New Yorker report that the going rate for a banner ad on social-networking sites was pennies per thousand (CPM). Today, MySpace's CPMs have risen to about ten cents, while Facebook commands a whopping $4.

There's definitely a power shift underway. Sites that are "made out of people" - what I call galaxies in this social media universe - are starting to command big traffic. However on some sites the CPMs are getting way out of control.

I don't expect the traffic to these sites to subside. But I would not be surprised to see pockets of this ad market get too far ahead of itself and then correct. This is healthy. We saw it with the 1.0 run-up in the late 1990s. Get ready for a pullback, especially if inflation in the US economy remains high. It will eat into the ad market, which historically it always does. It's cyclical. Who's most at risk? Yup, the one with the furthest to fall - Facebook. I predicted this late last year.

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