• Wired Magazine , Thursday, March 27, 2008 11 AM

Staggering numbers, puny revenues: thus describes the social networking conundrum. Even Google founder Sergey Brin has thrown his hands up in the air: "I don't think we have the killer best way to advertise and monetize the social networks yet," he told analysts during an earnings call in January.

According to a Wired magazine report, MySpace and Facebook, the undisputed top two of the social networking pile, have achieved an annual rate of growth of over 500 percent since 2005. LinkedIn, a social network for working professionals, has increased by a rate of 182 percent over the same period. And yet, the CPMs for most of these sites remain low. For example, Lookery, a social media ad network that serves display ads on MySpace, Facebook and Bebo, sells ads for 13 cents per thousand times its ads are viewed. By comparison, Yahoo's average CPM is $13. Meanwhile, video ads on MySpace reportedly go for $25 per thousand compared to CBS, which charges $50, and NBC, as much as $75.

Perhaps the answer lies with smaller, more targeted audiences, like what you'd find on LinkedIn. As a business-to-business social networking site, LinkedIn can and does charge a premium for its highly targeted audience, with a CPM of up to $75. Meanwhile, larger sites like Facebook think that giving advertising a more social dimension could be the key. That said, Facebook's recent efforts--Beacon and Social Ads--have drawn the ire of consumer watchdog groups and its own users.

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