In 2006 and 2007, big things were predicted for the social networking sites. Yet the companies that invested on the hope of that idealistic wave are now finding out that monetizing that traffic is less than easy.

Similar to other multi-national corporations this year, NEWS Corporation reported a first half net loss of $US5.9 billion ($9.19 billion) due to a $US8.4 billion write-down on Dow Jones and other assets. MySpace, which is part of Fox Media (owned by News Corporation), didn’t fare much better: in the most recent quarter, Fox Interactive Media posted revenues of $226 million, down 3 percent over the same quarter a year earlier; operating income was $7 million. Clearly the MySpace acquisition is not reaping the big rewards for Rupert Murdoch (or even small ones, it seems).

One problem (of many) with social networking websites such as MySpace and Facebook is they do not provide a receptive audience to advertisers. Quite simply, the end-users of these websites are there to socialise and interact with friends, not to go window shopping or even consider any sort of digital sale. As any online marketer will tell you, CPM and CPC rates on social networking sites are ridiculously low, and are only going to go lower during the current financial crisis. There’s a reason for this: the conversion ratios are absolutely terrible, of course before the conversion stage you at least need to get some click throughs, and social networking sites are also notorious for their completely dismal click through ratios (CTRs) as well.

So while they possess huge amounts of visitors and page impressions, social networking sites have yet to figure out how to make a viable business model of it all. Until some bright spark finds a way to monetize that traffic and actually help companies drive online/digital sales, social networking sites will continue to struggle to attract advertisers and their bottom lines will continue to run flat.

Despite their reluctance to spend, consumers are still increasingly turning online to find the best possible “bargain” or “hot” deals. One advantage of the online/digital space is that consumers are easily able to shop around and compare prices. This has let to a whole new industry of websites that focus on delivering the best possible deals as often as possible. Initially the wave was started by price comparison websites, and while they’re still the core traffic drivers, there is now a raft of websites which themselves promote exclusive or “time limited” deal offerings. Consumers, in their hunger to grab the best possible price, are signing up en-masse to these sites, often just to wait for the “once in a blue moon” deal that they can’t resist.

For traditional stores this is an increasing threat to their market share, as they are simply not able to compete with this “on-demand” model, where consumers do not leave their desks to get a great price.

It seems, that despite consumer’s continuing economic worries, they’ve now become much more value conscious.

“The current economic situation has caused retailers to slash prices and offer highly attractive offers, such as free shipping, to appeal to cost-conscious Americans this holiday season,” commented Jack Flanagan, executive vice president of comScore Media Metrix.

The annual Black Friday and Cyber Monday price slashing bonanza deals still managed to attract the crows, with such sales seeing a growth of 20%.

Google continues to dominate in the online space, with the network of Google properties attracting over 144 million unique visitors in November. Despite Yahoo’s recent share price implosion, its traffic levels remain healthy with almost 144 million visitors. The smallest kid on the block, Microsoft, still managed a respectable 123 million visitors.

It will be interesting to see just how much Christmas sales are impacted by the current recession, and whether the trend will continue for value orientated consumers to shift their more limited budgets online, rather than turning to traditional brick and mortar retailers.

comScore stats for November, 2008:
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Well, according to comScore, online sales have been pretty slow during the US holiday season. But now things seem to be picking up a bit. The million dollar question is, however, will the online sales pickup be enough to help recover some of the losses from the last few months.

Knowledge about online shopping trends is still something which is very much up in the air at the moment; we simply do not have enough data to make any sort of educated estimates. It will be interesting for us online marketers to watch how this global economic downturn affects consumers spending.

Online Holiday Sales

Does a recession make consumers more hesitant to buy online? Or does it make them more likely to ferret around and find the best deals… online? The next few months will be a very good educational lesson for those of us that focus on driving digital sales online.
Read more at the TechCrunch article