ChasNote

That’s a quote from Michael Nathanson, an analyst at Sanford C. Bernstein & Company, in today’s NY Times.

“On a conference call last month, Peter Chernin, president and chief operating officer for the News Corporation, toned down the grandiose expectations for social networking advertising and acknowledged that selling spots on personal profile and group pages is not easy.

“Social networking represents an ‘entirely new form of Internet activity,’ Mr. Chernin said.

“When MySpace’s parent, Fox Interactive Media, announced a three-year, $900 million advertising pact with Google in 2006, analysts started placing big bets that social networking would be a major new revenue stream. While the Web is becoming more social, it is hard to wring profits from it.

“Indeed, the balloon of unrealistic prospects is losing air. The attitude change was first detected at the end of January when, one year into its $900 million pact with MySpace, Google said that social networking inventory was not earning money as well as expected. (More recently, Google said the situation was improving.)”

Social Media’s Seth Goldstein posits that sponsored questions are to social media advertising what keywords are to search marketing: the ad unit that’s native to the user experience. And the performance metric will become “cost per conversation.”

Excerpts of his IAB keynote via 3 Minute Ad Age.

Projections by eMarketer for 2008-2011 ad spending in social networks have been revised downward, according to B2B Online:

“The slowing economy and the struggle by social networks to develop successful ad models have led to lowered ad spending projections for the next few years, according to eMarketer.”

A little creativity around sponsorship ideas and the industry might get itself back on track!

Eric Eldon at VentureBeat reports on Dell’s “Green” Graffiti contest, among other campaigns that illustrate marketers are finding brand-building value inside of social networks.

“[Dell] is working with ad company called Federated Media and a Facebook application that lets you draw artwork and feature it on user profiles, called Graffiti. Dell backed a contest for top drawings around its theme of environmental ‘ReGeneration,’ where contestants created visual answers to the question ‘what does green mean to you’ within the Graffiti application. The contest, which ran over two weeks in January, generated more than 1 million votes on more than 7300 Graffiti entries. Check out the top 150 here (as well as the ones pictured, above and below) — you’ll be impressed.

“This campaign was a success because Dell both promoted something people cared about and reached out to them through a medium they cared about. The Graffiti application has more than 8.6 million total members and 253,830 daily active users (as of today). Because Graffiti is a Facebook application, users also learned about the contest through Facebook’s news feeds and user profiles. Federated Media (which, in full disclosure, runs ads on sites like VentureBeat), also featured ads about the contest on sites popular with Graffiti users, including sites like Boing Boing and Make. These ads pointed users back to the Graffiti application.

“Even though this was one of the early efforts by a brand advertiser to reach social network users, Federated Media and Graffiti made money from Dell, Federated Media’s publisher, Chas Edwards, tells me…. Dell, meanwhile, accomplished what it set out to do, which was to reach hundreds of thousands of users and have them engage with its brand in a positive way. Whether Dell actually sells more computers as a result of the campaign is still open to question. This was a brand-building exercise, not a direct-response campaign, and so the idea is that Dell will be able to sell more computers in the future.”

From Business Week:

“Social networks have some of the lowest response rates on the Web, advertisers and ad placement firms say. Marketers say as few as 4 in 10,000 people who see their ads on social networking sites click on them, compared with 20 in 10,000 across the Web. Mark Seremet, president of video game publisher Green Screen, stopped advertising on MySpace last spring because of a 13-in-10,000 response rate. ‘It’s really hard to make money on that anemic click-through rate,’ says Seremet.”

Google admits they’re struggling with the same issue, and their stock got hammered on the news.

Meanwhile, advertisers who recognize that building awareness, preference and affinity with customers involves activities other than clicks alone are finding more success in social networks. Examples include Intel, Dell, Wacom and HP, to name a few.

Like Facebook did back in May, My Space opens ups its platform to third-party developers. Better late than never. I can’t way to see how this ecosystem evolves, given how certain Facebook apps have emerged at powerful platforms for brands to engage their customers in more relevant ways. Like Graffiti for Dell, for example.

From Financial Times:

“‘We have found that social networks are not monetising as well as we were expecting,’ said George Reyes, chief financial officer, as Google reported its earnings for the final quarter of last year. Since Google has guaranteed to make minimum payments to a number of social networks that carry its advertising, principally MySpace, the slow growth of the business had left the company out of pocket and contributed to falling profit margins in the quarter, he added.”

And if you look at Nielsen Net/Ratings or Comscore numbers, you see that conversational or social media sites are driving most of the growth in online usage, so it’s fair to say it’s a very big deal. Perhaps Google needs a new approach to advertising within social-networking content.

The WebVideoReport lists open rates for various online video opportunities (via PaidContent). Open rates means the publicly published ad prices, subject to a variety of discounts in most cases. The WSJ is at the high end, at $90 CPMs for a 15-second pre-roll coupled with a 300×250 banner — effectively $45 CPMs for the pre-roll placements and the 300×250 impressions. The community video sites like Metacafe and My Space aren’t doing bad either, with pre-roll CPMs between $25-35.

From MarketingWeek UK:

“As part of the push, created by Universal McCann Digital, users can add Intel as a friend and add an application that allows them to increase the music storage allowance on their page….

‘One challenge to make the most of a social network is how to be truly relevant and add value. It’s about actions and not just words,’ he adds.”

According to inside sources, Intel’s David Veneski had something to do with the above. Which doesn’t surprise me. He’s also the guy who partnered with FM to help Digg launch the Arc visualization application earlier this year.

UPDATE: I spoke to Veneski directly, and he says this was not his program (though he agrees that it is similar to the kind of work he does here in North America). I did some sniffing around at Universal McCann, Intel’s agency, and it sounds like Autumn Martin in the UK office was part of the team on the My Space Europe integration.