Gauging the threat of social networking sites to traditional b-to-b media

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B-to-b marketers are beginning to experiment with display advertising on social networking sites such as Facebook and LinkedIn. How afraid should b-to-b publishers be of this trend? There's Makino, a manufacturer of machine tools, which is currently running a 90-day trial program on LinkedIn using display ads to target specific job titles. “The results are still under evaluation,” said Mark Rentschler, marketing manager at Makino Inc. “I am encouraged by some of them, which should lead us to future refinements in any programs we undertake with LinkedIn.” Additionally, uTest Inc., which crowdsources app testing services, is also running ads on social networking sites Facebook and LinkedIn. Matt Johnston, uTest's CMO, cautioned that social networking advertising is a “nascent space.” However, he added: “The results have been very strong—a CPL [cost per lead] that's half that of paid search, display or email marketing, as well as lead flow that's consistent, predictable and scalable.” Could advertising on social networking sites be a Google-style threat, which would pull significant revenue from b-to-b media companies and do substantial damage to the industry? Or is it a minor worry that amounts to just one more pesky competitor in an already crowded field? Andrew Frank, VP-research at Gartner Inc., said he has not seen excessive money flowing to social networking sites yet. However, he doesn't believe the concern that social networking sites will grab money from traditional media sites is “far fetched.” LinkedIn, for instance, generated net revenue of $93.9 million in the first quarter of the year, a 110% increase over the same period last year, according to a Securities and Exchange Commission filing. LinkedIn said that last year, its marketing solutions were used by about 33,000 customers. Cost-per-lead ads on Facebook increased in price by 22% in the second quarter over the first quarter of this year, according to a report released by social media agency Efficient Frontier. “Facebook advertising is moving from a "nice to have' to a "must have' for global brands, which is illustrated by their increasingly competitive marketplace,” David Karnstedt, president-CEO of Efficient Frontier, said in a statement. In Outsell's “Annual Advertising and Marketing Study 2011: B2B Advertising,” the research firm projected that advertising spending on social networking sites would increase 29.0% to $700 million this year. Chuck Richard, Outsell VP-lead analyst and author of the study, doesn't see an immediate destructive threat to b-to-b media companies from social networking sites. He said the key is engagement. Ultimately, the winners will be the sites that amass not just an audience but also deliver engagement. For now, he said, he remains unconvinced that social networking sites represent a significance menace to traditional b-to-b media sites. “I feel the risk is moderate, but the jury is still out,” Richard said.
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