Andrew Chen

The leader in online advertising tries to monetize social network inventory
Great article from the WSJ on the issues Google has faced monetizing user-generated content. Here’s a couple excerpts:

Then, when Google tried putting ads on the site, it ran into trouble.
Critics in Brazil released a report showing advertisements on Orkut
alongside pictures of naked children and abused animals. Google
immediately suspended the ads, but the Mountain View, Calif., company
is still grappling with the fallout from critics’ Orkut campaign.

And of course, for brand advertisers this is even more embarrassing because just one ad can cause a lot damage, versus direct response guys who just lose out on reduced ROI:

Liquor maker Diageo PLC of London says it stopped advertising on all of
Google’s properties after learning that its ads ran alongside
pornographic images on the site. Spokesman Stuart Kirby says Diageo
didn’t realize that ads for its Johnnie Walker brand had appeared on
Orkut, where many users are below legal drinking age.

… and more:

On Aug. 17, Mr. Tavares sent an 18-page complaint to Brazil’s
advertising watchdog, known as CONAR, documenting cases of embarrassing
juxtapositions: advertisements for Diageo’s Johnnie Walker whiskey next
to pornographic images; a pet store pitch on a community dedicated to
stabbing animals with knives. In the report, Mr. Tavares alleged that
Google’s "flagrant illegalities" had resulted in ads appearing next to
"barbaric" content.

Key obstacles for UGC + brand advertising
The intersection of issues that cause this come down to three key points:

1. UGC content means some percentage leakage of inappropriate content
2. Blind ad networks mean that advertisers don’t know where they are buying
3. Brand damage can happen via one single false negative – it’s not about % of leakage

This, in addition to users not being in a buying mindset is what causes social networks to be so hard to monetize via brand advertising. The only way to solve this is to use a direct ad sales team that is selling a very transparent ad unit on a page with no UGC content (editorial pages, section homepages, etc.). Of course, this means that all the profile views end up being managed via remnant ad networks, which is no good either.

Of course, this also means that anyone who can figure out how to make this inventory safe is sitting on a billion dollar+ business.