From Dan Dodge's "Page Views Required to Generate $1M in Ad revenue?"
"Which new model will work? No one knows at this point, but there will be billions of dollars for whoever figures it out.
Beacon was innovative, but privacy concerns killed it. We are often influenced by what our friends buy, maybe just a slightly different approach will work.
Social recommendations are very powerful. Back in the early days of the web there were several attempts to consolidate buyers into groups to get better prices. Could social networks do something similar?
Businesses and advertisers are anxious to tap into the power of social networks. The social networks are building huge audiences but can't figure out how to monetize them. When they learn how to connect effectively the benefits will be amazing for everyone involved.
This is a business problem, not a technology problem. The answer will be simple and obvious. In fact, it has probably already been considered and rejected several times. Someone will come along and put a slightly different twist on it and...Eureka!!! Don't you just love business? How do you think this will play out?"
I think this pretty much sums up where social networks are right now. I think the key will be using far more sophisticated analytics to serve up ads that actually faciliate product discovery leading to direct purchase or a positive change in brand perception.
The key issue will be changing consumer behavior - the problem with curent social networks is that they tend to yield data that simply direct consumers to products/brands they are already going to buy - hence little value add. Google's contextual ads do the same - BUT with the added benefit of hitting the consumer at the right time (because the consumers were searching for something similar based on keywords).
Conceivably social networks could do the same - but they are limited in their ability to serve ads at the right time because consumers don't necessarily search for a whole bunch of stuff on social networks. Instead social networks serve ads based on data in the user's profile and that of his/her friends profiles. However, doing so can lead to ads for products/services the consumer is already using or else is content with a cmpetitor's offering.
The real advantage will come when sophisticated analytics are used to predict what will facilitate discovery of new stuff. I have personally already experienced this on Facebook, unfortunately, I think the only reason I have discovered a few new things is because they businesses/candidates (one of theme was a politician's site) could afford dirt cheap social media ads - it's easier to discover stuff from up and coming advertisers - but that model is not sustainable. And none of the ads I clicked on led me to become even remotely interested in buying stuff.
Bottom line: it's going to come down to analytics - that's where the strategic power will be
Another issue is the potential for using social networks to actually facilitate product development - this is an area that will lead to fortunes being created over time, but it requires businesses understanding that they need to bring consumers directly into the literal process of product development - the first companies that do so will reap rich rewards - furthermore these rewards will keep coming because most companies will be too clueless to change their business models. We've seen this before in many old media industries - the next industries that will be radically disrupted will be those that offer actual products/services - in other words internet-driven disruptive innovation will start reaching backward along the production value chain from the media that offers up ads to the advertisers and their actual operation departments.
