MySpace Stats Show Huge Disproportion in Online Advertising

Yesterday at TechCrunch 50 conference Michael Arrington interviewed MySpace CEO Chris DeWolfe. One of the questions they discussed was about revenue the social network generated and the most interesting revelation of the discussion was that only 9 countries generate 95% of all advertising revenue for MySpace.

Sure, it is a well-known fact that users from some countries are monetized easier than users from other countries - with usually everything beyond the Northern America and Europe considered to be poorly monetized international traffic. But it is still rather disturbing to know the disproportion is that huge.

It is no doubt an interesting thing since you’d expect that one of the most popular social networks in the world with very strong international presence is supposed to draw revenue from all the markets it operates in - while MySpace’s example proves that users in different countries are monetized at different levels because advertisers spend more per user in different countries because these users have different potential for buying anything from those advertisers.

But small presence in some key country with the highest advertising spend per user is not any key to success - a very strong presence in the market seems to be an essential condition. This is the conclusion I arrive to based on Chris DeWolfe’s words that in all the 9 countries bringing most revenue MySpace has the number of unique users 30% higher than its closest competitor. Solid presence in these countries mean that the social network has 2 advantages simultaneously there:

1 - traffic to monetize

2 - arguments to speak to potential local advertisers (after all, it is easier to sell ads when you are the best and the biggest when you are the 2^nd biggest)

And it looks like only these two advantages combined guarantee good advertising revenue to the company in the market.

Unfortunately we don’t know what are the 9 countries in question for MySpace but I know for sure that Russia is definitely not among them simply because MySpace is still tiny here - even if it is growing faster than predicted.

So the only thing we can is try and guess what exactly the 9 countries are. I suggest that we assume that countries where “myspace” is one of the most popular search terms should also have many users registered with the social network. In this case we will get a list including United States, Puerto Rico, Australia, United Kingdom, Malaysia, Mexico, Jamaica, Dominican Republic, and Canada. In the regional interest chart France is actually on the 10^th position but I could easily replace Dominical Republic or Jamaica on the list with France, I think.

But no matter what countries in reality generate the most advertising revenue for MySpace, the most intriguing thing about this is a huge disproportion between the best and the worst monetized countries: while advertisers are ready to pay nice amounts to have their ads displayed to US users, they will be very unlikely to pay anything at all for the same ad to be seen by a user somewhere in Africa.

I think this demonstrates two big problems in the way advertising market operates today. First of all, the market itself is far from mature and there are no or virtually no local advertisers in some countries - which makes it impossible to find any relevant ads for users arriving from these countries.

And the second is a problem with international brands that are well-known for their solid presence in online advertising: they are still absolutely unwilling to pay for what is often referred to as international traffic instead of introducing some diversification when the same ad is priced differently with different geographical targeting.

I believe this shows there is a need in the market to do something about international traffic and its monetization. As an international user myself I can actually feel how bad the situation is constantly when I am served all the “you are the millionth visitor” and smiley ads even on the most serious and respected websites I visit. And I know that I am hard to monetize because I will hardly ever click any of such irrelevant ads or notice them at all. At the same time as a web publisher I also know that such banners pay virtually nothing to website owners and many of these owners don’t even realize what type of banners their ad network serves to international visitors.

And while we all know that advertisers will be more willing to work where people are willing to pay more money, there is still market outside of Northern America and Europe - and that market also features rapid growth of web population in many countries, something we should not expect in the US or some European countries due to a high level of internet penetration. So I do think we are ready to see at least a few startups launched looking into better monetization of international traffic. I do feel there is a market need for it and I’d really love someone to address that need and finally make me a valuable visitor as well.