Why re-messaging might save social networks

Please read my earlier post on re-messaging first.

Social networks are really struggling to capitalize on their ad space. Untill now, they have failed to live up to their promise to relevantly target users. Their main source of income is still banner advertising, but they only sell a part of their total banner space. That leaves them with a huge amount (up to 60%) of ad space that can’t be sold, called remnant inventory.  Social networks tend to place Google Adwords or sell their remnant inventory on one of the large ad networks. This only undermines their position: more and more advertisers become aware that large chunks of remnant inventory are sold via ad networks and buy that cheap inventory instead of the “normal” ad space. That, amongst other reasons, made social networks get only $0.20 eCPMs last year (down 54 percent).

That sucks bigtime.

Several social networks (at least Netlog and Hyves) will be replacing their ad systems in the coming months to better target users. Another solution might lie in re-messaging:

1) Re-messaging kills remnant inventory

Re-messaging companies track visitors after they leave an advertiser’s site, throughout the course of their online journey and reconnect with customers to persuade them to complete a purchase or further engage with the advertiser brand (read my earlier post on re-messaging for more info). And re-messaging companies love large networks, like social networks.

Re-messagers track users and the chance these days that a user ends up on a social network, somewhere on his/her online journey is, well, pretty pretty high. That makes a social network ad market an interesting place to shop for ads. There, the re-messagers can buy the ads that are served ONLY to the users they want to target.

Because advertisers know the users they are targetting via re-messaging very well, they pay much more than $0.20 eCPMs, usually between $3.00 and $5.00 eCPMs.

And exactly that makes re-messaging also interesting for social networks. Getting 10-25 times more money for the same inventory makes re-messaging pretty interesting.

2) Re-messaging makes social networks formidable stalkers

But there is something that’s even better: social networks selling ad space outside their domain.

Ok, let’s go back to the basics of re-messaging. A consumer visits a website. The website logs the consumer in a cookie. The consumer visits another website and sees an ad based on his behaviour on the first website.

The better the data on the consumer, the better the relevance of the ad on the other website. And where do consumers spend much of their time these days and where do consumers leave shitloads of personal info? Yes, on social networks.

So, when a social network logs a user for re-marketing purposes, it can fairly accurate define and categorise a user, based on the user behaviour and other info the user is sharing on the network. That would make the re-messaging to a user pretty much as relevant as it can get.

Now, social networks normally wouldn’t really get any benefit of re-messaging users to persuade them to complete a purchase or further engage with the social network brand. However, it would make sense for a social network to re-message users for their advertisers and thus expanding their advertising reach throughout the internet.

Networks could target users not only within their domain based on their user profile and behaviour, but could extend that reach beyond their own domain to pretty much all of the internet. Based on social networks’ surplus knowledge of consumers, they would become advertising powerhouses.

Your thoughts?