MySpace, Google, and the Rise & Fall of Behavioral Targeting

This article delves into the author's firsthand experience with MySpace, a social networking giant in the early 2000s, and how Google's massive acquisition of its traffic, coupled with the challenges of monetizing social networks, ultimately led to a failed advertising strategy. It explores the early days of behavioral targeting, the difficulties faced by MySpace in monetizing its user base, and the lessons learned from Google's acquisition.

The Birth of Revenue Science and Behavioral Targeting

The author's company, Revenue Science, was a pioneer in the realm of behaviorally targeted advertising. This innovative approach involved tracking user browsing histories to deliver highly relevant ads. While this technology has become ubiquitous today, in 2004, it was still in its early stages.

• Revenue Science partnered with Yahoo to experiment with behavioral targeting within the Yahoo network.
• They leveraged Yahoo's massive ad inventory and pricing data to demonstrate the potential of behavioral targeting for direct response campaigns.

The Chicken-and-Egg Problem of Ad Networks

One of the biggest challenges in launching an ad network is the classic chicken-and-egg problem: getting advertisers and publishers on board simultaneously. Without a large advertiser base, it's difficult to offer attractive CPMs (cost per mille) to publishers, and advertisers won't participate if there aren't enough publishers delivering impressions.

• Revenue Science's access to Yahoo's ad feed allowed them to bootstrap the advertiser side quickly.
• Most ad networks rely on experienced sales teams who bring their existing advertiser relationships, creating a bias towards advertiser-friendly practices.

Revenue Science's Quest for Publishers

With a stable of advertisers, Revenue Science set its sights on signing up publishers. They compiled a target list of websites, prioritizing those with high traffic volume and a potential audience for their advertisers.

• They used data from sources like Alexa and Nielsen to identify promising websites.
• Their sales pitch focused on the value of their audience and the untapped potential for higher ad revenue.
• Social networks and consumer internet sites, which lacked specific purchase intent, were particularly receptive to their proposition.

Discovering MySpace in 2004

Through their outreach efforts, Revenue Science stumbled upon MySpace. While the site wasn't particularly impressive in terms of design or user experience, its rapid growth (adding 50,000 new users daily) caught their attention.

• MySpace's immense user engagement, characterized by active profiles and frequent interactions, presented a lucrative opportunity.
• The idea was to leverage user profile data to target ads based on keywords and interests.

The Challenges of Monetizing Social Networks

Despite the potential, Revenue Science quickly encountered several obstacles in monetizing MySpace's traffic:

• Free-form keyword data: User profiles were often filled with informal language, jargon, and inconsistent formatting, making it challenging to extract relevant keywords.
• Lack of purchase intent: Users on social networks were primarily focused on connecting and socializing, not necessarily on making purchases. This made it difficult to match their interests with relevant products or services.
• Noisy clickthrough data: The high traffic volume on MySpace resulted in a lot of accidental clicks, leading to inaccurate data for advertisers.
• Scalability challenges: The rapid growth of MySpace, generating billions of ad impressions daily, pushed ad server capabilities to their limits.
• Context-free ad impressions: Ads were displayed in a non-contextual environment, leading to low clickthrough rates compared to search pages.
• Engagement vs. monetization: Excessive user engagement did not necessarily translate to higher monetization. Once premium ad campaigns were exhausted, the value of highly engaged users diminished.

Google's $900MM Gamble on MySpace Traffic

Despite the challenges, Google saw significant potential in MySpace's massive traffic. In 2006, they acquired the site for $900 million, hoping to monetize it through advertising.

• This deal sparked controversy, with many questioning whether the price tag was justified, considering the difficulties associated with monetizing social networks.
• The author believed the deal was based on an overoptimistic assessment of the traffic's monetization potential.
• While Google did successfully integrate MySpace into its advertising platform, the deal ultimately did not deliver on its expected returns.

MySpace's Decline and Google's Monetization Strategies

MySpace's dominance gradually declined after Google's acquisition, with Facebook eventually overtaking it as the leading social network.

• This decline can be attributed to a combination of factors, including competition, changing user preferences, and missed opportunities for innovation.
• While MySpace still exists today, it is a shadow of its former self, and its traffic has plateaued.
• Google, on the other hand, has become a dominant force in digital advertising, leveraging its vast resources and data to effectively monetize its platforms.

Lessons Learned: Monetizing Social Networks and the Importance of Data

This article highlights the challenges of monetizing social networks and the critical role of data in advertising strategies. It also underscores the importance of a realistic assessment of a company's value, even in the face of rapid growth and seemingly lucrative opportunities.

• Social networks present unique challenges for advertising, including low clickthrough rates, noisy data, and the difficulty in matching user interests with relevant products or services.
• Data plays a crucial role in effective advertising, but data alone is not enough to guarantee success. It is essential to understand the nuances of user behavior and the context in which ads are displayed.
• The "winner's curse" can lead to overpaying for assets based on hype rather than a clear understanding of their underlying value.

The Future of Social Media Monetization

The challenges faced by MySpace and Google in monetizing social networks remain relevant today. As new platforms emerge, it's essential to learn from past mistakes and consider the unique characteristics of each platform when developing advertising strategies.

• The rise of mobile advertising and the increasing sophistication of targeting technologies have created new opportunities for monetization.
• However, privacy concerns and the need for transparency are also crucial considerations in the evolving digital advertising landscape.