While News Corp. is thrilled about its social network's ad-revenue growth, Google and many marketers are frustrated about click-through ratesThere was a time when Mark Seremet considered MySpace one of the best things to happen to his business. Seremet, then-CEO of customized clothing company Spreadshirt, saw sales jump sixfold in late 2005 and early 2006 after he ran ads on the popular social networks MySpace and Facebook. "Somebody would get the shirt, then tell a friend," Seremet says. "It was really an amazing change for the business."
But Seremet's love for social networks, including the News Corp. (NWS) flagship, soon diminished. By last year, when he left Spreadshirt for another company, ads on MySpace had lost a lot of their oomph, measured by the number of times users clicked on them. The ads' so-called click-through rate plummeted from one in 100—a decent return by Web standards—in 2006 to one in 1,000 in 2007. "Users became more or less desensitized to the advertising," says Seremet, a veteran of Take-Two Interactive (TTWO) and now president of video game publisher Green Screen. "You won't make money on it."
Seremet's experience reflects growing frustration at a lot of companies hoping for a boost from advertising on social networks like MySpace. Across the Web, companies large and small, from Spreadshirt to Google (GOOG), are throwing money at social-network advertising but not getting the hoped-for returns.
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