Adify exec: Social networks eating away at CPM value

This post was corrected to clarify when Adify was purchased by Cox Enterprises.

NEW YORK--Some have said that because of the wealth of personal information they store, social networks are the future of online advertising. Russ Fradin, co-founder and president of Adify, disagrees.

"Social networks, to date, what they've really done is drive performance-based CPMs down a lot," Fradin said in reference to the fact that a CPM (clicks per thousand impressions) rate of a dollar used to be considered low, but thanks to the influence of social networks, it's as low as three cents.

Fradin was speaking on a panel called "Networks and Beyond" at ContentNext's EconAds conference, which was held Tuesday as part of the Internet Week New York digital-media festival.

Adify, which lets enterprising media moguls create their own niche-oriented ad networks, was sold to Cox Enterprises two months ago for $300 million.

That wasn't the only potshot Fradin took at social networks, which have been subject to debate as industry thinkers try to figure out whether it's possible to do something about tepid revenues on popular sites like Facebook and MySpace. For the most part, social networks have held up behavioral targeting as the solution, using the amount of personal information on member profiles as a base. But even that isn't what it's cracked up to be, Fradin said. "I am highly, highly skeptical about (the value of) the data in social networks," he explained, saying that there were "legislative and technological" difficulties that could get in the way of use by advertisers.

"I think we've been dealing with the issue of social networks since Hotmail in 1995," Fradin concluded. "I don't fundamentally believe it's going to be such a secular shift because social networks have 'data.'"

[marketman400]

I love how someone is trying to explain to us that "CLICKS" per thousand impressions is declining when in fact it's the COST per thousand impressions of online advertising that's dropping. LOL.

[desmondhaynes]

Could you tell this to AOL who bought Bebo for $850MN USD???
http://techwatch.reviewk.com/2008/05/aol-completes-acquisition-of-bebo/

[desmondhaynes]

Tell this to AOL who bought Bebo for $850MN USD
http://techwatch.reviewk.com/2008/05/aol-completes-acquisition-of-bebo/

[DevManiac]

I think the surge in social networks will reside given the fact that most depend on click through ads for funding. This will be a major issue for them as users are becoming more and more "blind" to PPC ads. The only way they can survive long term is to charge for their services. Or develop top-notch ad campaigns with major businesses as apposed to low-key click client ads.

DevManiac,
Social Network Graphics Management