Social Nets Sit on Goldmine of Behavioral Data, Says Jupiter

Social networking sites are fertile ground for behavioral targeting, but publisher concern about privacy invasion is limiting growth, a JupiterResearch analyst said today.

Discussing JupiterResearch’s U.S. Online Advertising Forecast, analyst Kevin Heisler said social networking sites such as MySpace and Facebook have the potential to wrench significantly more ad revenue from their audiences. However, the keys to this un-tapped revenue, including the increased use of behavioral targeting, are being held close to the vest by reluctant publishers, he said.

“Social networks are kind of like the portals of the 21st century,” said Heisler. “They are where most folks are spending their time now. It’s a natural community, a network of friends.”

As salivating advertisers realize, every MySpace profile is ripe with information about its creator, facts that could be used to tailor advertising to the page owner and his or her visitors. “You have a tremendous amount of behavioral data available,” said Heisler. “If somebody wanted to target a person of a specific age who likes a certain type of music, you could use that as a way to offer advertisers a chance to reach them.”

But that’s not happening, at least to the extent JupiterResearch believes is possible. In a statement about the report, JupiterResearch analyst Emily Riley said the rapid growth of social sites “has accounted for considerable growth and availability of inventory now available to advertisers,” inventory being sold through ad networks and contextual advertising.

However, as the sites age “they will begin to use tactics such as behavioral targeting that allow for better monetization of their inventory,” predicted Riley.

Heisler said it appears publishers of social networks are “staying pure to their original vision” and resisting behaviorally targeted ads.

“Facebook really hasn’t gone out of its way to find ways advertisers can target its users,” he said. “I think it’s a great approach… I admire them for having a goal of being the best social network. Google had a goal too. It wanted to be the best search engine, but found a way to monetize the traffic in a way that benefited the people who are actually searching.”

Eventually, the lure of all that potential revenue might similarly soften the resolve of the social net publishers who now fear offending users or scaring them away.

“I think privacy is a key issue and just basically not interrupting people is a major concern,” said Heisler. “That’s why paid search has been so successful. It’s a user going out and raising his hand saying, `I want to find this.’ Some social nets are trying to advertise, but what they are doing is giving those targeting capabilities over to the broader network. LinkedIn.com in has ads for Google AdSense running on the pages based on your profile.”

Increases in behavioral targeting on social net sites will fuel part of the growth in overall online advertising predicted in the new JupiterResearch report. The paper says U.S. online advertising spending will nearly double by 2012, with most of the spending going to search and display ads but with “better targeting technology” also playing a big part.

JupiterResearch projects total online advertising spending will increase from $19.9 billion in 2007 to $35.4 billion in 2012.

The researchers found static image and text advertising will be the two most popular display formats this year, comprising over two thirds of online display revenue. They said growth of text and static ads can be attributed to large increases in remnant impressions on rapidly growing social networking properties. “However, new publishers will continue to improve their advertising mix, and will shift towards more lucrative rich media and video formats over the next few years,” said JupiterResearch.