Social networks flourishing but still to solve advertising problem

Everyone knows that social networking is popular but probably not this popular - a recent Nielsen study has shown that almost two thirds of the global online community contribute to a member community at least once a month.

In terms of individual social networking sites, unsurprisingly facebook came out top. According to Nielsen´s figures, its global audience of 108.3m users each month is equivalent to 30% of the world´s web users. In the UK, Facebook is used by a staggering 47% of the online population.

However, despite the huge membership base of facebook and other social networks, none of them have really turned their membership advantage into major revenue streams. One of the reasons for this is that advertising (at the moment the major revenue stream installed into social networking websites) is not as profitable as was previously envisaged. The reason for this is that social networks are personal spaces, people go on to these sites to interact with their personal community, as such they are not in the mood to browse away from the site.

So what does this mean? Should social networks just abandon advertising? Well, it would be tempting to throw the advertising toys out of the pram but let´s not be hasty. It´s true that online advertising in its current guise may not work for social networks, but there must be another guise of online advertising that can work. Surely?

As report author Alex Burmaster notes media companies should be innovating in such a crucial space:

"The magic bullet will be forged advertisers and publishers partnering to developing new and creative ad formats and inventory models," he said. "That advertising will be based on the notion of having a conversation with consumers that is candid, authentic and adds value."

It surely won´t be long before the magic bullet arrives. But will investors in social networking sites be able to wait that long? That´s the big question.

You can read more about this here.