Targeted-Ad Initiative Is
Crucial for MySpace --- Questions Multiply On Site's
Potential To Turn a Big Profit
Amol Sharma and Emily Steel
The Wall Street Journal
When News Corp. reports its
fiscal 2008 earnings Tuesday, investors will scrutinize
the company's plans to generate more advertising revenue
from the enormous amount of traffic on its MySpace
social-networking Web site.
One initiative that could be critical to MySpace's
success, according to media buyers and industry
analysts, is a system that lets marketers aim their ads
at particular groups of users. As part of this "hypertargeting"
system, MySpace has analyzed the profiles of its users
to gauge their interests and then categorized them into
more than 1,000 "buckets," including rodeo watchers,
scrapbook enthusiasts and "Dancing With the Stars"
The marketing service was launched last fall, and
feedback from some early advertisers has been positive.
Concert promoter Live Nation Inc. got a good bump in
traffic on its Coldplay summer-tour page after buying
display ads on MySpace that were directed at fans of
Coldplay and those of bands with overlapping audiences,
like Modest Mouse and Death Cab for Cutie.
"The closer you get to the audience you want, the better
you get in terms of clicks or sales of the product,"
says Sean Muzzy, senior partner and media director at
digital ad agency Neo@Ogilvy, owned by WPP Group PLC.
Mr. Muzzy has managed several hypertargeting campaigns,
including the one for Live Nation.
James Kiernan, a media buyer at Publicis Groupe SA's
Starcom MediaVest who has handled hypertargeting
campaigns on MySpace for a dozen or so Procter & Gamble
Co. brands, says he has seen the approach yield a 25% to
30% increase in consumer response compared with regular
Other big brands testing the targeting service include
Adidas, which aimed a recent campaign at MySpace soccer
MySpace, which has cheap advertising rates, like other
social networks -- only a few dollars, at most, for
1,000 displays of an ad, compared with the $50 or $60
per thousand charged by some niche sites -- says it can
charge roughly double those rates by offering targeting.
But it's far from clear that the ad-targeting service
will address growing concerns about the business
prospects of MySpace and other online social networks.
Because a significant number of MySpace user profiles
contain suggestive or otherwise edgy photos or language,
many big marketers still worry that their ads could end
up alongside inappropriate material.
No one is committing huge sums yet, media buyers say.
The biggest concern among marketers is that
social-network users simply aren't in the mood to pay
attention to ads -- regardless of how well-targeted they
are -- while they are exchanging messages with friends
or looking at photos.
Privacy concerns about online ad targeting are also an
issue. MySpace rival Facebook faced a wave of complaints
from consumers when it unveiled a new advertising
feature last year that updated users' friends about
online purchases the users had made. On Friday, a
congressional committee asked 33 technology companies,
including Google Inc., Microsoft Corp. and Yahoo Inc.,
to provide information about their ad-targeting
The stakes are high for MySpace and News Corp., which
acquired the site three years ago for $580 million just
as MySpace was becoming a Web phenomenon. The site has
become one of the Web's biggest destinations, with
nearly 118 million unique monthly visitors, according to
Internet tracking firm comScore Inc.
But questions are growing about News Corp.'s ability to
turn that huge audience into big profits. Earlier this
year, the company said its Fox Interactive Media
division, which includes MySpace, would miss its $1
billion revenue target for fiscal 2008. Research firm
eMarketer expects MySpace, which accounts for most of
the division's revenue, to bring in about $755 million
this year. MySpace says it doesn't comment on revenue
forecasts. (News Corp. also owns Dow Jones & Co.,
publisher of The Wall Street Journal.)
Much of MySpace's revenue is coming from splashy ads on
the MySpace home page, such as a recent campaign to
promote the latest Batman film, "The Dark Knight." But
there is a limit to how many of those kinds of ads
MySpace can sell because the homepage has only one spot
Another big source of revenue is Google, which agreed to
make payments to MySpace totaling a minimum of $900
million over three years for the right to broker
sponsored links on the site. But that deal may be
running into some problems. A Fox Interactive executive
acknowledged that consumer response to the ads Google
brokers has been disappointing but said the two sides
are working on technology to improve it. Google has said
it is having trouble monetizing social networks
generally, but hasn't singled out MySpace.
MySpace also isn't the only company betting that
analyzing data on users' profiles will unlock the value
of social networks. Facebook offers its own technology
that marketers can use to target ads based on geography,
age and interests that users have listed in their
profiles. Among the tens of thousands of advertisers
that have used its system, Facebook says, is a
wedding-photography company that aimed its ads at women
whose profiles indicated they were engaged.
For some marketers, especially small ones, more generic
targeting suffices. The New York Health & Racquet Club
spent $5,000 on a MySpace campaign that displayed 2.3
million ads to users on the site. Though the health club
could have chosen to target ads at people who say in
their profiles that they enjoy rock climbing, yoga or
working out, it chose instead to simply target by age
and ZIP codes near its facilities. The club said it was
relatively happy with the campaign, which generated
roughly 1,000 clicks, a response rate of just 0.04%.
Adam Bain, a Fox Interactive executive whose team
created the hypertargeting technology MySpace is using,
argues that the system won't just pay off by boosting ad
sales. It is also a way for marketers to glean valuable
information about their target audience. If the
advertiser wanted to reach scrapbooking hobbyists, for
example, it could find 236,475 of them on MySpace. But
the system also shows that 99% of them are female, and
lists several other hobbies they tend to be interested
in, including sewing, baking and watching the TV show
As Mr. Bain puts it: "The beautiful thing about MySpace
is that people go on every day and share with us what
they're passionate about, what their interests are."