• by Diane Mermigas , October 13, 2008

The prospect of turning every online user into an advertiser is second only to transforming every online user into a buyer--especially in these trying economic times.

That remains the lost opportunity in the online advertising space for every player from Google to MySpace--which officially takes the wraps off its MyAds initiative today, although more than 3,000 small businesses and individuals have found their way to the self-service platform in beta since July. This do-it-yourself advertising on a relative shoestring, from start to finish, could have significance on several fronts by bringing viral marketing to the mainstream.

Although the recession may make tight-fisted electronics consumers more interested in hyper-targeted marketing and niche spending, Madison Avenue generally doesn't seem ready for that level of interaction. Few online users engage in transactional advertising--although it is the future--and more digital devices and platforms support it.

But transactional advertising could gain steam if it is embraced by a grassroots platform such as MyAds, where the masses (both buyer and seller) will have some say in the matter. The recently announced alliance between MySpace Music and Amazon is an intriguing step toward moving social networking into the commerce space by utilizing all of its peer trappings, from recommendations to chat.

There is little doubt that Rupert Murdoch's News Corp. will lend the resources necessary for MySpace to take MyAds to that next level--if it means transforming its 112 million global hyper-targeted members into e-commerce buyers. It would not only give advertisers the ultimate ROI they seek--it would theoretically provide MySpace with transaction fees and another lucrative way to monetize its intensely social user base. A transactional advertising model would keenly draw on consumers' ultimate desire for relevance. This is, after all, the interactive age.

To be sure, MyAds is the opening salvo in a full-fledged Fox Interactive Media-MySpace assault on sizable advertising budgets earmarked for Web portals. It sidesteps the much-smaller social networking spend. MySpace is leveraging all of its strengths (every 12 minutes online is spent on MySpace) to go toe-to-toe with Yahoo, MSN and even its text ad sales partner, Google.

One big step in that direction will be to empower MySpace members with the Web tools needed to command specific advertisements they seek for targeted products and services. Jeff Berman, MySpace president of sales and marketing, says they are working on such a solution, although nothing is imminent. Given the premium CPM that could be attached to such a reverse hyper-targeted ad search, I would predict such applications within a year.

A protracted recession affords just the kind of economic pressure to jolt eager players like MySpace and frustrated brand advertisers to develop surer, inexpensive ways to go from the proverbial pitch to a sealed deal. With consumer discretionary spending at a bare minimum, where best to drill down for dollars than the targeted consumer?

In an interview, Berman told me that less than 1% of MySpace users have opted out of hyper-targeted ads during the past year. They have been used primarily by larger advertisers paying thousands. In some cases, like McDonald's, this has meant bringing major campaigns to the social network rather than to Yahoo or Facebook.

With its lead in engagement, in breadth of use and its user time spent online behind AOL and Microsoft, MySpace is leveraging its social network across every device and platform, including mobile. To that end, MySpace has developed applications for Apple's iPhone, which has been downloaded by about 15% of iPhone users, and is working with RIM to on special BlackBerry applications. Its recent Web site redesign and fortifying its sales force were necessary supporting steps. Up next: exploding CPMs that come as a result of all of these other moves.

The MySpace CPMs that have cost a few dollars for 1,000 displays, compared with $50 or more per-thousand price tags on niche sites, have been overshadowed by seven and eight-digit national brand campaigns on the MySpace home page. (Can you say Dark Knight and McDonald's?)

Those CPMS will rapidly increase once hyper-targeting begins to expand from big brand marketers to the mainstream. They will be rooted in accountable metrics and analytics, a simple but effective format of which is available to MyAD advertisers in the new self-service platform. Add reverse user ad searches and an e-commerce component, and you suddenly have a new digital interactive dashboard for advertising. It not only monetizes, but exceeds the special needs and value of a social network. Who needs Google?

Revenue at MySpace and FIM has been growing 30%. FIM is expected to post earnings near $250 million on revenues of more than $900 million in fiscal 2009, according to Goldman Sachs. The company values FIM at $3 billion or 15 times FY09 earnings--double News Corp.'s $1.5 billion acquisition investment in Intermix ($550 million), MySpace/IGN ($650 million) and Photobucket ($300 million).

"Given the traditionally difficult time advertisers have reaching the elusive young adult demographic, we believe this concentration should continue to help MySpace improve CPMs and potentially drive above-industry level ad revenue growth rates as branded advertisers continue to integrate the site into their audience buys," says Mark Wienkes, a Goldman Sachs analyst.