MySpace testing targeted ads: money time for social media?

August 10, 2007, 1:59 PM UTC
Fortune

MySpace, News Corp.’s (NWS) social networking juggernaut, has begun testing targeted advertising – a program that, if successful, could dramatically boost revenues for the site and for the social networking sector.

In an interview with Silicon Alley Insider, Fox Interactive Media Chief Revenue Officer Mike Barrett said MySpace has been testing the ads for two weeks. From the interview:

The plan was to cume large segments in the most attractive lifestyles for advertisers: Auto, lifestyle, beauty, health, etc. We’re testing it with house creative: If someone’s been identified as someone who’s interested in fashion, we target ads to them that have nothing to do with fashion, and then ads that would direct them to say, the MySpace fashion channel. Then we test the clickthrough and refine the algorithm, to make certain that this target audience that we say are fashion aficionados are truly going to perform better than if you just ran a fashion ad on run of site.

Within the next week or so we’ll take it public, probably on a limited charter basis so we can learn a little bit more. By October or November we’ll have broken these 11 segments into 100 segments. So you can target people who are not just interested in beauty, but makeup. Or people not just interested in travel, but safari travel. Being able to break down the segments even more finely will add more value to marketers.

Barrett said that if the test is successful, the company hopes to charge more for placing the targeted ads.

The ad rates, or CPMs, for social networking sites such as MySpace are notoriously low; while social network users tend to view a lot of pages, marketers have found it hard to monetize their online habits. So far, the sites seem to be making most of their money through old-fashioned exclusive placement deals. Google (GOOG) agreed to pay MySpace $900 million for the right to handle search ads on the site for three years; Microsoft (MSFT) similarly paid Facebook for the right to place banner ads on the site. Yahoo (YHOO), the third big online ad competitor, is also experimenting with targeted ads on its site, though it has not yet done a big social networking deal.