Social media and the future of online advertising

Back in June I went to the Conversational Marketing Summit in New York.  I was struck by a comment made by Fred Wilson in the opening session that within a year traffic to social networking sites would outstrip that on search engines.  Well, I thought, that’s a provocative idea, and quite possible in time, but within a year?  Then I saw Techcrunch’s piece on the growth of Facebook and my jaw dropped.

Growth of Facebook usage in UKWhat’s pretty clear is that in the UK there are two online players and many also rans . And only one of the players – Google – is a search engine.

So maybe Fred Wilson is right and we are going to see ‘social traffic’ on the web become the dominant force online in the near future. Arguably that point is getting very close with Facebook having a significant lead already in terms of time spent online (that’s shown by the size of the bubble in the chart).

I believe this trend has got some very important ramifications for the way money is made on the web today and specifically for online advertising models.

Text-based PPC advertising is a fantastic way to monetise traffic flowing through search engines.   However, that model does not in itself translate well into social sites where the focus is not search, but engagement/interaction/sharing/promotion.   In other words, if the power of text-based PPC is in its relevance to the search term, then it struggles in a medium where it needs to be relevant to the specific context of the exchange taking place in the social networking site.

Facebook’s performance ad platform seems to offer very granular targeting based on demographic data and interest profiling.  But the challenge is to make the ‘social ad’ relevant to the exchange taking place for people who aren’t buying, or even interested in buying anything, at that point in time.

The dilemma for advertisers is set to get even more complex with the continued growth of micro-blogging/real-time search on Twitter and Friendfeed etc.  Conventional online advertising models don’t stand a chance to deliver value in an environment which is constantly updating and in flux.

The good news is that online ‘audiences’ are still growing and where there is an audience there has to be a way to advertise to it! But advertising vehicles are going to have to change dramatically to exploit social.  The answer will be in becoming a participant in the conversation with a potential customer and making your advert a relationship builder rather than the mechanism to convert the customer directly to a sale.

Ironically, with old-style display advertising continuing to falter and spend often justified on the dubious basis of ‘brand building and awareness’, new social advertising models are likely to become a new form of ‘above the line’ marketing that is as much about establishing reputation and influence as it is about making sales.