• by Diane Mermigas , October 12, 2008

 

MySpace's solution to a dreadful economy is allowing small businesses and individuals outside its social network to affordably create and service their own graphic ads that are hyper-targeted to its 72 million domestic members, beginning Monday.

The coincidental timing of the official launch of self-service MyAds--the populist phase of MySpace's year-long hyper-targeting ad efforts--coincides with the intensified needs of small businesses and entrepreneurs for more cost-effective, higher-return target marketing in recessionary times. Blogs have been buzzing about the new ad platform for weeks in the wake of the launch of MySpace Music and the ability for individual musicians and smaller bands to monetize their brands on the social network with sales of music, concert tickets and other merchandise.

The service is free to set up, although there is a $25 minimum for campaigns using several different size banner ad units. Advertisers' fees are determined according to how many users click on their ad or until they have exhausted their own set spending limit or schedule. Open access to a suite of simplified online tools ranges from creatively building display ads, matching them to thousands of specific user groups and spending plans between $25 and $10,000 (immediately charged to a credit card), and then continuous performance-based analysis of real-time permission, click and cost data.

The turnkey platform "democratizes online advertising" by eliminating the substantial expense, logistics and overall access barriers to small and medium businesses that want to create, place and manage ads online "with access to demographic, behavioral and psychographic data points to be able to hit the right people with the right message at the right time," Jeff Berman, MySpace president of sales and marketing, said in an interview.

Although there have been aggressive cuts in forecast growth for display advertising online into 2009 amid the recession, MySpace executives argue that the distinctive functions of MyAds will prevail.

MyAds goes beyond Google's uniform text-only ads and Facebook's small image and text ads to allow the freedom to import photos and other art. Unlike Google and Facebook, MyAds will not require new advertisers to be account holders or members, and will allow advertisers to direct users to Web sites and links outside the MySpace universe.

One key to making the new platform lucrative will be how MySpace manages the online ad inventory and the price it sells to the highest bidder in an auction modeled after Google text ads. The more advertisers that bid for the same desirable demographics, the higher the CPMs. Hyper-targeted ads will command a premium; the more specific the targeting, the less inventory there is. MySpace CPMs have priced at a few dollars for 1,000 displays of an ad compared to $50 or more per thousand charged by niche sites. Rupert Murdoch recently said he would like to see fewer ads at a higher rate on MySpace, such as the national campaigns that have appeared on the MySpace home page. "I think this meets Rupert's definition of a better ad with a higher CPM," Berman said.

MySpace is the largest display advertising site online, according to comScore--with 72 million unique users domestically (112 million globally) and 40% reach of moms, which speaks to its aging user base (half of these are age 30-plus). Industry experts and analysts have been slashing their growth estimates for online display advertising, warning that a spending pullback could hurt the earnings and revenues even of giant Google. The existing three-year pact that has Google selling text ads on MySpace is not affected by MyAds.

MySpace members will continue to have the same opt-out options that they have had under the hyper-targeting ad program to date, which primarily has included larger advertisers. It has avoided the high-profile disaster that Facebook had with user objection to its short-lived Beacon target ad plan by proactively messaging the users about what they are doing and persistently giving them the opportunity to opt out of the hyper-targeting, "but the vast majority of our users want more relevant ads," Berman said. MySpace is working on a reciprocal solution that will allow users to seek out ads for specific goods and services, as well as e-commerce applications.

Since MyAds quietly went beta online in July, more than 3,000 small advertisers have sought out and used the MyAds platform on their own, and constantly inspire the creation of new hyper-targeting buckets and subcategories and data points. But MyAds is just a beginning. It will eventually lend itself to video ads and a self-service advertising platform to support other News Corp. and Fox Interactive Media businesses.

The importance of this advanced hyper-targeting initiative to News Corp. cannot be overstated. While Fox Interactive Media is expected to generate more than $200 million in earnings on an estimated $900 million in revenues in the current fiscal year--most of it coming from MySpace--News Corp. has been struggling to better monetize the social networking site while stemming losses to rival Facebook.

MySpace recently moved to shore up its relations and image with Madison Avenue by strengthening its sales force with key hires such as Valeh Vakili as senior vice president of sales strategy and operations from Yahoo, where he has been director of media sales operations.

"We are working with virtually every one of the top 100 brands in the country now. So the concerns that advertisers previously had being in the space have largely been addressed," Berman said. "We are going up against major portals and Yahoo for major integrated branded ad campaigns, and winning. I think that is the best proof that there is of where we stand with advertisers."