Social networks face uncertain future

By on February 18, 2009

With the Ruckus and JuicyCampus Web site terminations, the future of many social networking sites is up in the air. While both sites generated their fair share of controversy, that wasn’t the only reason they both had to shut down permanently. Today’s economic woes have led to serious consequences for online marketers, and it appears ad companies are cutting back on spending.

“These sites were structured to be advertiser supported, and basically the idea there is if you can get enough traffic in there, and get enough advertisers who will pay for banner ads and click-thru rates,” Quinnipiac Professor of Marketing William Keep said.

According to a survey of adult Internet users in the U.S. conducted in December 2008, 87 percent of the 18-to-29 demographic said they used the Internet. Unsurprisingly, this is the highest percentage by age in the country, giving most Web site owners an idea of who they should be targeting.

“At any rate, the fact that “Generation Y” – those born roughly between the late 1970’s and the late 1990’s – represent over 25 percent of the U.S. population means that marketers will not ignore them,” Quinnipiac Associate Professor of Marketing Blaine Branchik said.

In addition, 90 percent of those with at least a $50,000 a year income say they use the Internet as well. Therefore, it is safe to say that advertisers have to find other ways to be able to reach out to a demographic that includes students in high school, college and graduate school.

“If almost all your revenue is coming from advertising, anything that disrupts that one revenue flow – you’re in big trouble,” Keep said.

Ruckus and JuicyCampus were only two of the many specifically college-oriented sites visited by viewers across the country. Facebook was originally intended to be available only for college students, before allowing high school students in 2005, and tends to tailor many of its ads towards the user by looking at the person’s information. Digg and CollegeHumor are other sites aimed at college-aged students that rely on advertising to fill out revenue.

“If firms cut their advertising budgets, marketing dollars spent on online advertising may very well fall, Branchik said. “If this happens, sites that generate a significant portion of their revenues from advertising may need to find other sources of revenues.”

Twitter, on the other hand, is a social networking site geared largely towards those in business, yet it has managed to last without advertising so far. Keep suspected that in the future, organizations that wanted to join Twitter would have to pay, thus creating a more efficient revenue flow without the overbearing hassle of online ads.
“If Twitter can demonstrate that they can provide thousands of people to follow The Economist (a weekly news magazine), as an example, literally 24 hours a day, every day. that is worth money to The Economist,” Keep said.

Quinnipiac Professor Abhik Roy, chairperson of marketing and advertising, believes advertisers might feel they are taking too much of a risk in supporting a site such as JuicyCampus, especially in a situation where students tend to vent about university life.

“Maybe there is a need for a site like that but advertisers seem to be shunning such online outlets until economic conditions improve,” Roy said. “Similarly, since there are not too many legal sources of music for kids to download there will always be demand for sites like Ruckus but their main source of revenue – online advertising – has also dried up. There might be some consolidation with music sites teaming up the way concert ticket providers like Ticketmaster and Live Nation merged.or Ruckus might simply get taken over the way JuicyCampus was.”

For students at Quinnipiac who are presently looking to enter the fields of either marketing or advertising, there are vital realizations that they must recognize before making their way into the professional world.

“Every QU marketing student has to be sensitive to the changes that are going on around the Internet,” Keep said. “There are simply too many ways in which companies can either save money or save time by linking their product on the Internet.”

Faculty members also have a lot to learn about the nonstop developments in online marketing. With the evolution in both technology and advertising, teachers have to keep up with new techniques just as much as their students do.

Branchik had faith that Quinnipiac would keep pace with the changing world of advertising.

“I have no doubt that QU advertising instructors adapt their course content to economic or technological changes that have significant impacts on the advertising industry,” Branchik said.


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