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Pinterest, Snapchat moves point to challenges of monetizing on social

Pinterest?s acquisition of an analytics specialist and Snapchat?s loss of its revenue chief point to smaller social sites? monetization challenges and how their success will turn on knowing how to effectively target advertising in the footsteps of Facebook and Twitter.
 
Pinterest acquired Kosei, whose analytics prowess would ostensibly help Pinterest target ads more precisely, while Snapchat?s head of revenue and advertising strategy, Mike Randall, departed after just seven months on the job. The moves underscore how smaller social apps are putting a high priority on setting monetization strategies, whether that means acquiring an engine to surface relevant content and advertising to the user, or ensuring the person heading up the effort fits the challenge.

?It?s all about embracing big data for better personalization campaigns and 1:1 marketing,? said Sheryl Kingstone, Toronto-based research director of Strategy Analytics. ?Accuracy is critical.?

Different challenges
Newer social sites can learn from studying how Twitter and Facebook struggled to put their monetization strategies in place, although they face different challenges. 

?Advertisers are more receptive to advertising on mobile than they were a few years ago, particularly where social apps have better user profiles through which to deliver targeted advertising,? said Nitesh Patel of Strategy Analytics. 

Groupon campaign on Snapchat.

?Clearly, a major remaining challenge is how to deliver those adverts in a manner so as not to irritate users or damage the user experience to promote customer churn ? getting the balance correct is crucial.?

The conundrum for social marketers is that people love social, but figuring out how to make money in those platforms remains the eternal question.

?I would argue that social services, like Facebook and Twitter, have actually done pretty well in terms of monetizing mobile,? Mr. Patel said. ?The wealth of data they have on people?s likes and dislikes combined with the network effect of social apps makes advertising on social appealing both to brand and performance advertisers.?

Michael Lopp, Pinterest?s head of engineering, blogged on the site that Kosei has been building a technology stack that drives commerce by making highly personalized and powerful product recommendations, as well as creating a system that contains more than 400 million relationships between products. 

?As people use Pinterest to save and discover the things they want to do in the future, we have a unique and growing data set of more than 30 billion Pins that will only get more powerful over time,? Mr. Lopp wrote. ?With the addition of the Kosei team, we can supercharge our existing graph to help brands reach people at the right moments, and improve content for Pinners.?

Randall, whom Snapchat hired away from Facebook in June 2014, departed last week, Re/code reported. No reason was given for his departure. 

Snapchat had launched its advertising platform in October.

What Facebook and Twitter have learned about making money is simple: It is hard to revolutionize the marketing industry, but it is easy to just sell ads. 

?That means social marketing doesn't look like we thought it would a few years ago,? said Nate Elliott of Forrester Research. 

?Mark Zuckerberg's 2007 promise of a once-in-a-hundred-years change to the way advertising works now looks laughable, because his company now makes its money the same way every other media company makes money: by selling lots and lots of ad impressions. 

?We expect most up-and-coming social networks to skip over the hard part and simply sell advertisers access to their audiences,? he said.

Going granular
Data has proven key to this effort. For instance, the more granular Facebook's ad targeting has become, the better its ads have performed. 

Anthropologie marketing on Pinterest.

?Oddly, Facebook has asked marketers to bring their own data to the site for ad targeting purposes,? Mr. Elliott said. ?But we expect other social sites to leverage their own data for ad targeting purposes. 

?Pinterest in particular collects rich and detailed data on the products people would like to buy, giving it a fantastic opportunity to effectively target ads,? he said.

Final Take
Michael Barris is staff reporter on Mobile Marketer, New York