Generation MySpace is getting fed up

When News Corp. reported its earnings, it said revenues for Fox Interactive Media surged 87 percent, to $233 million. But $62 million of that came from Google's guaranteed deal with MySpace. It's unclear whether Google, which ad experts believe is losing money on the deal, will sign similar agreements in the future.

Another big slug of ad revenue is coming from companies experimenting with social networks because they are such a popular new medium. But for some, the results have not been encouraging. Many of the people who hang out on MySpace, Facebook, and other sites pay little to no attention to the ads because they're more interested in kibitzing with their friends.

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.

MySpace and Facebook recognize the issue but say increased targeting and other innovations will spur users to pay more attention. Last fall, both rolled out programs allowing marketers to pitch products to people in hundreds of categories of interest, such as fashion and sports. News Corp. President Peter Chernin said on Feb. 4 that response rates on MySpace improved as much as 300 percent. Owen Van Natta, chief operating officer at Facebook, says there will be more experimentation in the future. "There's so much innovation that needs to happen," he says.

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But there's a Catch-22: More aggressive ad programs can lead to more frustrated users. Ryan Lake, 34, just left MySpace because of the ads. "There are so many, and they are getting more and more obtrusive," he says.

Facebook, the second-largest social networking site, which continues to grow rapidly, introduced an ad program in November, called Beacon, that alerted users to the purchases of friends in hopes of spurring sales. More than 75,000 Facebook members signed an online petition against the effort. Carol Kruse, Coca-Cola's vice-president for global interactive marketing, says that while she thinks social networks present a big opportunity, Coke is avoiding Beacon for now.

MySpace has had complaints, too. Nina Pagani, a 20-year-old New York student, grew furious last year when MySpace began automatically posting on users' home pages notifications of friends' favorite products. "Your personal MySpace page became an advertisement," she says. Pagani, a five-year MySpace member, deleted her account in December. "It caused too much drama in my life," she says.

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