Social sites stir risky biz

Can online hot spots like MySpace be turned into lasting media enterprises ?

Congloms have recently opened their pocketbooks in a big way to get more involved in the “community.” But it remains to be seen if popular social networking destinations like iVillage, MySpace and Neopets can be transformed into lasting media businesses and useful integrated marketing tools, or if they’ll go the way of fickle online gathering spots like Friendster.

For their part, film and TV marketers recognize that Internet users have moved way beyond the simple homepage. And if you want to find them in any appreciable numbers these days, social networking sites — where users post their own profiles and content, and interact with other users — are good places to be.

“The popularity of blogging has made it very clear that media consumers really want a conversation with content creators,” says USA Networks/Sci Fi Channel topper Bonnie Hammer, who is overseeing USA’s own recently launched social networking site, ShowUsYourCharacter.com.

The $8 million project — which is an extension of the network’s “Characters Welcome” branding campaign — was launched with “the intention of creating an online community to show off from a marketing perspective” USA Network programming, Hammer explains.

Meanwhile, Viacom — which purchased Neopets last year for $160 million and placed it in its MTV Networks operation — hopes the online kiddie community will provide backdoor access to the elusive tastes and preferences of young consumers.

For example, Hollywood research firm OTX uses Neopets to poll youthful Internet users about movies. Neopets officials say that on most days, there are between 15 and 20 surveys running on the site, and that a forthcoming survey will measure the

relative effectiveness of TV commercials and movie trailers.

Of course, as with any trendy hotspot, it’s hard to tell if the kids will keep coming to the same place long enough to justify the sizable purchase price.

“The fear is that they’re fads,” says a stock analyst who covers News Corp., which purchased the biggest social networking phenom of them all, MySpace, last year for $580 million. “And when you have a large media company taking over sites like these, and putting the proper precautions in place to protect advertisers, the concern is that you’ll alienate users at the same time.”

That’s not been the case so far for MySpace, which boasts more than 65 million users, many of them ages 18-24.

Screening for offensive elements such as pornography and hate speech, News Corp. has removed nearly 200,000 user profiles since taking over MySpace in June. Still, traffic on the online net has more than doubled since the acquisition. In fact, during March, MySpace generated more than 3% of all combined unique usage on the Net.

Of course, with that kind of traffic and for the price they paid, News Corp. officials think of MySpace as much more than merely a means to steer a youthful audience demographic to films and TV shows.

“If you’re an advertiser seeking the youth of this country, I would say it’s the No. 1 must-buy, because this is where they’re living,” News Corp. interactive chief Ross Levinsohn told analysts at the Bank of America Media, Telecommunications and Entertainment Conference in Gotham last month.

According to one stock analyst, News Corp. has identified MySpace as the biggest growth opportunity it has. And they’ve pledged to expand the MySpace’s ad sales force and raise ad rates, which are currently priced at rock bottom in terms of cost per thousand impression (CPM).

NBC Universal also sees ample advertising potential in pioneering women’s network iVillage, which it purchased last month for $600 million.

The conglom hopes iVillage and its related properties — which include gURL, and — will give it broader exposure to the online advertising market and form the backbone of a Web distribution strategy for TV and film.

“We see some fantastic opportunities to marry our television content with iVillage content,” NBC U chairman Bob Wright said shortly after the acquisition. “After the integration is completed, we’ll be able to bring video to bear to better take advantage of the community that iVillage has built up.”

As for ShowUsYourCharacter.com, Hammer too envisions a full-blown media business someday, with profitable ad sales. Sponsorship deals revolving around funny 15-second interstitials featuring original USA series stars such as Tony Shalhoub are just one original programming idea being kicked around.

Still, she concedes that the day when online CPM prices rival those of the tube is probably not soon. “They call it ‘new media’ for a reason,” Hammer says. “We can count page views, but we still can’t really quantify (an online CPM) in a way that makes sense.”

By the time the online ad market — projected to grow to about $19 billion overall by 2010, according to Jupiter Research — finally matures, will these social networking sites still be viable assets for their owners? Hammer thinks so.

“People want to be heard,” she says. “For years, we’ve talked about interactive media, and this is the first time that talk is catching up with use.”