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MySpace Woos Small Business Ads

With MySpace's new MyAds service, anyone can launch an ad campaign on News Corp.'s social network for as little as $25

Justin Esch and Dave Lefkow, founders of gourmet seasonings maker Bacon Salt, went out on an advertising limb. Typically, the Seattle entrepreneurs used MySpace and Facebook profile pages or small text ads placed next to Google (GOOG) search results to promote their line of seasonings. Then MySpace encouraged them to test a new ad service tailored to businesses like theirs, so Esch and Lefkow shelled out $500 for a trial campaign.

To their surprise, blog buzz about their product picked up, site traffic doubled, and online sales jumped 30% over the past month. "We've seen really good results," Esch says. "This experience taught us there is more that we can do to get word of mouth out there."

MySpace is hoping more small businesses will see the light. On Oct. 13 the social network owned by News Corp. (NWS) takes the wraps off MyAds, a new approach to advertising that allows small businesses and individuals to create their own banner ads—illustrated messages in fixed places on a Web page. The service, initially available in a test phase, also will let advertisers decide who they want to target on MySpace and then track the results of the campaigns. MySpace is aiming at advertisers who want to spend under $25,000—though marketers can start by laying out as little as $25.

Cheaper Alternative to Traditional Marketing

Getting some companies to take a chance on social network advertising won't be easy, especially as the economic slowdown forces many businesses to curtail marketing. "Social networking is still unproven," says Jeremiah Owyang, an analyst at Forrester Research. On Oct. 10 media colossus Viacom (VIA) cut its full-year sales forecast, citing uncertainty over the ad market. And when companies are in belt-tightening mode, they're more likely to reduce display advertising, which typically focuses on brand building, than search-related advertising, which tends to have a more immediate and measurable sales impact.

MySpace is betting that small businesses will turn to online ads as a cheaper alternative to traditional marketing. "In these economic times, marketers want to use their dollars more efficiently," says MySpace founder Chris DeWolfe. "This is the most efficient way you could do it in a low-risk way."

Until now, MySpace catered to large advertisers and ad agencies. Search advertising led the way in making advertising affordable and easy for individuals and small businesses. But MyAds is one of the few programs selling small-business display ads on social networks, giving small businesses an opportunity to reach specific local or national niches among MySpace's 122 million users. "It looks really good," says Edward Cotton, director of strategy at ad firm Butler Shine Stern & Partners, which handles online marketing for clients that include Converse and Mini Cooper. "Finely targeted ad opportunities for small business are going to be an emerging market."

Buckets of Likely Targets

MyAds is an offshoot of Hypertargeting, a service MySpace launched a year ago for Madison Avenue and big advertisers. Hypertargeting sifts through all the information people publish on MySpace, be it age, gender, hometown, or a preference for Coldplay vs. Rhianna. Hypertargeting uses that information to create 1,100 buckets, or target audiences, ranging from basketball fans to people who read Chicken Soup for the Soul books. MyAds puts those and other tools into the hands of individuals. With MyAds, the Bacon Salt founders created a banner ad using their site logo and tagline, "Everything Should Taste Like Bacon." Then they sifted through MySpace's buckets, picking categories such as dining, restaurants, and of course, bacon, and targeting people in cities and states, including Atlanta and Ohio, where Bacon Salt was launching in Kroger (KR) supermarkets.

MySpace is hoping that letting companies specify targets will make social network advertising more effective and lucrative, helping marketers overcome their aversion to the medium. Forrester's Owyang says his firm's research shows people don't go to social networks to find product—they go to communicate. In this new environment, many don't look at traditional ads, even targeted ones. Social networks also don't have sufficient data to demonstrate that their targeting causes people to consider buying or to buy products based on advertising, Owyang says. "We're trying to smash traditional advertising into a social environment, but it's entirely different behavior," he says. "They're still throwing a lot of pasta against the wall to see if it will work, and we expect that to continue for years."

MySpace's DeWolfe argues that Hypertargeting is already making an impact. Early results show that some advertisers have seen a 50% to 300% jump in people clicking on an ad, he says. He also says MySpace expects MyAds to help raise the price of ads sold on the site, boosting overall revenue. Around 3,300 small business and individual advertisers signed up for the test service even before it was officially announced. In a world where advertisers are cutting back and many are leery of marketing through social media, MySpace has little to lose and everything to gain from persuading more advertisers to give MyAds a spin.

Green is an associate editor for BusinessWeek .

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