News Corp. execs did more than just admit that they weren’t going to hit their revenue goals for MySpace and Fox Interactive Media today. They also fessed up to another open secret: Selling ads on social networks is a really difficult.
How difficult? Consider that even while MySpace and all of the other FIM sites continued to grow, FIM revenues dropped from $233 million in Q2 to $210 million in Q3; about a third of that total came from a 3-year guaranteed deal from Google.
That explains why former FIM chief revenue officer Mike Barrett got shown the door last month. But News Corp. COO Peter Chernin didn’t point the finger at Barrett for the shortfall, and he didn’t blame the larger economy, either — even though his boss Rupert Murdoch said that US consumer spending was “stressed”.
Instead, Chernin said, FIM/MySpace’s problem is endemic to all social networks: It’s awfully difficult to turn all those page views into money. Our paraphrase of his remarks:
We remain incredibly optimistic about social media. But there are specific challenges 1) Tons of inventory. Lack of scarcity creates a liquidity challenge. Working on bringing big brands aboard. 2) People who are visiting social networks there for different reasons, different uses. Figuring out how to target. 3) What’s the value of a “friend”? Trying to figure out new metrics to communicate with marketers.
None of this is news. The news is that News Corp. is now saying it out loud, and tempering expectations for MySpace, which a couple of years ago looked unstoppable. Now it looks more like a very big, very hard to monetise Web property.
For the record, Chernin spent much of the call talking up MySpace/FIM’s prospects, which aren’t awful — they’re just not as good as they thought they were a year ago. Here’s a summary of his talking points:
- Branded revenue is up 21% over last year and branded sell-through is trending up for the year with a 19% increase from Q1 to Q3.
- Performance revenues were up 24% year over year.
- Most importantly, as MySpace user base continues to grow, we’re actually earning more money per user. FY 08 revenue [display + search] per unique is up 49% over last year.
- 54% of all social network ad dollars are going to MySpace (eMarketer, 12/07)
- Hundreds of HyperTargeting campaigns have been run in last eight months – with 20% or more of all orders today including HyperTargeting.
- Seeing double CPMs for HyperTargeting vs. non-Hyper-Targeted
- Orders with HyperTargeting are about 60% larger
- Enjoying considerable number of repeat orders with about 75% of advertisers ordering HyperTargeting again.
- Also, seeing successes in sales of key pages with sought-after branded advertisers and attracting many high-profile brands for the first time this quarter, including Novartis, Wrigley, Virgin Mobile, Unilever and Toyota. Several have stepped up to the popular branded “skin” of the MySpace home page which goes for a 70% premium on the standard homepage buy.
- Major category growth including Automotive, up 73%, Consumer Electronics, up more than 300%, Beverage, up 600% and Education up 850% year over year.
- MySpace is at an all time high in terms of audience reach and engagement according to both comScore and Neilsen — more than doubling Facebook’s U.S. audience with 73 million users compared to Facebook’s 36 million.
- And minutes spent on MySpace in the U.S. far surpass Facebook – 242 vs. 167 minutes per user per month.
- MySpace TV continues to grow and is the number two online video site after YouTube.
- IGN and Photobucket are up 40% year to year in unique visitors worldwide. IGN remains the number one games information property and in the past quarter, its Direct2Drive service surpassed one million games sold. Photobucket’s worldwide page views for March 2008 were 2 billion – up 85% year on year
- FoxSports.com is up over 20% in worldwide unique visitors year on year and recently launched its mobile WAP site expanding its reach further – the Number one mobile WAP site for mobile sports information.