Tuesday, April 24, 2007

Cashing in on Social Media: A Cost-Effective Advertising Medium

A new research report announced by online ad network BlueLithium provides some interesting insights as to how valuable social media sites are as an advertising medium. When comparing ads shown on non-social media sites to social media sites, the ads shown on non-social media sites had a 32 percent higher rate of converting users into action-takers. However, due to the lower cost of advertising on social media sites, the cost per conversion for non-social media sites was 58 percent higher. This would imply that there's a a considerably lower cost per conversion via social media, but there's a flip side to this stat. A second phase of the study revealed that the conversion rate of ads shown on non-social media sites from the comScore top 250 was 175 percent higher as compared to social media sites. BlueLithium points out that the non-social media comScore 250 sites have a resulting 7 percent higher cost per conversion as compared to social media sites.

So if you're going with a leading media site you're going to do well on conversions both from a penetration and cost of conversion standpoint as compared to social media. However, this data may be sidestepping one of the most important aspects of a social media site - their ability to create conversations on a more personal level. To some degree existing advertising services, being more tailored to major media outlet content, may not be providing the most effective messaging for social media sites. Social media has enormous potential for providing high multiples through advertising but the missing link may be to be able to target the people available through social media outlets in a personal enough way to take advantage of social media's ability to play to audiences as peers. It's nice that social media is a cost-effective medium for creating conversions but I'd rather hear that social media is worth its weight in gold in creating conversions. All in time.
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