More Difficulties Monetizing Web 2.0

February 7, 2008
A Branding Me First: I Was Right About Something!!!

It’s a bittersweet day for those of us who keep repeating over and over and over again that advertising on social networking sites is not effective. I think I have been spouting the same line since I started this blog: advertising, although it may create revenue, is not the most lucrative way to monetize Web 2.0.

Google’s stock tanked recently, falling 8.6%, which is the sharpest fall since it went public. As many of you already know, this is in large part due to the recent “bear hug” Microsoft gave Yahoo. But another key reason for the dive was the (semi)lack of revenue growth: although the net income rose 17% compared to a year earlier, that figure fell short of analyst expectations, and may represent the peak of continued growth.

So how come Google did not meet expectations? CFO George Reyes said, “We have found that social networking inventory is not monetizing as well as we would like.” Translation: we bought a helluva lot of advertising inventory for a helluva a lot of money, and it’s not performing. How bad is this problem? the reporter for the NY Times continues: “People involved in [the MySpace deal] said that Google never assumed that it would earn its $900 million back from that deal, but it appears to be losing even more than it had expected.”

Now, don’t get me wrong; I don’t think advertising is worth throwing out completely. I just want more creative business models for Web 2.0; there has to be other, more profitable ways to monetize these services.

Anyways, so much for me being a “naysayer” (the link back to me is in the last paragraph of this other blogger’s entry).

EDIT

Also check out AU Interactive’s rundown of a Facebook Social Ad experiment. 

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