Brainstorm Tech 2010

Where the Fortune 500 and the innovators meet to shape the future of business. (July 22-24, 2010)

Why social networks are still waiting for their ad boom

July 22, 2010: 7:44 PM ET

The Facebook and Twitter explosions has changed how we communicate -- but isn't resulted in a massive ad spend. That's about to change.

The growth of social networks like Facebook, LinkedIn, social gaming sites like Zynga and services like Twitter are ripe for new forms of advertising as they occupy more and more of our online attention and time. What form that advertising will take is very much a work-in-progress concluded a panel of experts on Thursday at Fortune's Brainstorm Tech conference in Aspen. Online advertising on social networks captures less than 5% of the market, yet people are spending more and more time with a growing variety of social services on the Web. There are other models for making money from the sites  - selling virtual goods and subscriptions among them -  but  it seems clear that advertising will play an increasing role.

"The challenge for us is to figure out how to do it without pissing people off," says Irwin Gotlieb, global CEO of media buying agency GroupM. Gotlieb raised the example of the telephone. Calls were not interrupted by ads, that would have been unthinkable. Similarly, Gotlieb says, "people in these social contexts (on the Web) don't want to be interrupted."

Mark Pincus, founder and CEO of Zynga had an addendum to Gotlieb. "But if you are going to interrupt me it better be for something that I find valuable," Pincus says. He gave a recent example of virtual goods advertising on Zynga's massively popular Farmville game. Cascadian Farm, a producer of organic foods, seeded Farmville with crops of organic Cascadian blueberries. Millions of Farmville players planted and then harvested more than 100 million of the branded blueberries. "We'll pay you for the people but not the blueberries," Gotlieb cracked.

Are growing virtual blueberries brand-advertising? You bet, Pincus says, but a completely different form. Campaigns like the Cascadia blueberry example show that advertising on social networks has incredible value, Pincus says, and that they are massively scalable. "But is it repeatable? Can it go into next quarter's ad budget? We are not there yet."

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About This Author
Michael Copeland
Michael Copeland

Michael V. Copeland joined FORTUNE as a senior writer in September 2007. Copeland has covered everything from electric cars to e-readers. He is a creator of Tech Mate, an irreverent video series in which he debates (and skewers) digital issues of the day. Before joining FORTUNE, Copeland was a senior writer at Business 2.0. Copeland graduated from the University of Pennsylvania.

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