MySpace Banks On 'Hypertargeting,' But Plain Targeted Ads Continue To Suffice

Although MySpace continues to maintain that its hypertargeting solution will ultimately lead to higher revenues, significant hurdles remain. A day before the Fox Interactive Media unit's parent News Corp ( NYSE: NWS). releases its Q2 earnings, WSJ outlines the challenges to greater ad spending on MySpace.

-- Engagement: While there's little question that users of social net sites like MySpace and its rivals are engaged while they're on the site, it is uncertain whether they are too focused on changing their profile pages and sending messages to friends to pay attention to ads. And so, basic targeting placements are considered perfectly adequate for media buyers and their clients' needs.

-- Privacy: The rumblings from the Federal Trade Commission, Congress, state lawmakers and digital rights advocates have spooked some advertisers who don't want their marketing efforts to turn into an embarrassing footnote in a legal case. While there wasn't much backlash against participants in Facebook's Beacon ad targeting program last fall, the initiative still has many marketers and agencies wary of being associated with the kind of negative publicity it drew.

-- Looking long-term: While FIM has touted the importance of hypertargeting, executives are taking care not to talk it up too much. Keeping investors in mind, the company often highlights its $900 million, three-year deal with Google ( NSDQ: GOOG) for featuring sponsored links on MySpace. And ads that take over the site's home page are also a source of value. Executives also argue that the hypertargeting program is beyond being able to charge high ad rates. Placing the emphasis on the long-term benefits for advertisers who use the program over time, by offering broader insights into consumers' offline behavior beyond the basic targeting on the site.

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