social networking statisticsA recent post seems to have struck a chord with Google with ‘Lies, damn lies and social networking statistics‘ currently among the top few positions on Google in a number of markets for the search term social networking statistics.

As an update, Wired claimed in March 2008 that MySpace had an average growth rate of 513%, moving from 20m users (2005) to 225m (2008), with Facebook’s equivalent figure 550%.

For me though, the interesting question is less the size of the overall market – we already know it’s big – but the next challenge of monetising those audiences. It’s somewhat ironic that in a sector where there is such richness of personal data, that ad targeting remains in its infancy and the low value network ad dominates.

So why is that and what’s holding back the full potential of the social networking ad market? Let’s summarise some of the key reasons:

  • Concerns from advertisers about associating themselves with the uncertainties of user generated content.
  • The shear size of the inventory available.
  • Lack of relevancy of ads. It’s partly a technical challenge, but rightly, there are legal and privacy issues with processing user data as Facebook Beacon found out to their cost in having to scale back their ambitions.
  • Mindset – are those surfing social networks in the right mindset to respond to advertising? Google Adsense works because it’s contextual and the better ads help task-orientated users solve a problem.
  • Lack of innovative creative tailored to those environments.
  • Leave your thoughts in the comments section.

These challenges can be at least partially addressed through ad targeting technology, informed consent from users and better data about what users respond to and what they don’t. Also the emergence of niche social networks offers more potential to provide advertisers with a targeted audience focused on a particular activity and in theory more receptive to relevant ads within that niche.

Get close to solving these problems and the really interesting statistics will be the financial ones…