As social networks work out their monetization strategies and try to figure out how to leverage their user base, there is an internal battle between offering advertising versus other types of pay-to-play interactivity. It’s not hard to see - it’s happening very publicly on Facebook - but what’s going to win in the end may not be the best option for marketers. Advertisers spend more and more money online and social media is showing considerable growth. Companies are adding social strategies and constantly experimenting to find what works. Advertising may be the popular option, but there is a twist at the end that should help you.

Here is a breakdown of sites and which option will inevitably win in each one (according to my crystal ball.)

Facebook - Advertising will win. Despite the weak initial ROI reported by some companies, and Facebook’s mistake with Beacon (which I still think was a pretty good idea) advertising is the most scalable, predictable model and will be easiest to control. Thus, advertising will rule on Facebook.

Twitter - This one is trickier because advertising is already being used to monetize Twitter outside the US. It’s the only option that makes sense for Twitter, and the format is perfect for it really.

Myspace - I’m pretty sure Myspace will one day be nothing but ads.

Last.fm - This site has a lot going for it, and advertising will certainly be a strong option, but I actually see Last.fm monetizing the site in diverse ways. This site will prosper because it will not live and die by advertising alone.

Linkedin - I think they will suprise people with an innovative approach to advertising. But never-the-less it will be advertising that wins.

It won’t surprise anyone that the way most social networks will make money is advertising, but before you go set aside a significant chunk of next year’s budget for social advertising there is a light at the end of the tunnel. To really get the most out of social media, advertising isn’t the right option. Brands that create unique, interactive engagements will find less expensive and more effective ways of using social media to connect with consumers.

Here is an example that will illustrate my point: for every ad you’ve seen for soap, how many caused you to try a new bar of soap? Now, how many times when a company sent you a free sample did you try that soap? When you can get someone engaged directly with your product or brand you will get a higher return on that investment than advertising every time. Social media has built a brilliant platform for creative grassroots marketing strategies, which really benefit the small business.

Over the next few months the outcome of these internal battles within social media companies will finish and we will see how these sites plan on monetizing their networks. In the meantime, I’m encouraged by companies who are creating unique and creative ways to leverage social networks now from a grass roots level. Do you plan on leveraging advertising, grassroots networking, or some other aspect of social media to market your business?

Tags: social media campaigns, social media applied, Social Media Marketing

This entry was posted on Wednesday, July 30th, 2008 at 5:50 am and is filed under Social Media Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.