Advertisement on Web 2.0 Websites as exemplified by Social Networks

Seminar paper from the year 2008 in the subject Business economics - General, grade: 1,7, Humboldt-University of Berlin, language: English, abstract: The internet is one of the newest communication technologies and has run through fundamental technological progress during the last years. During the end of the 1990's many internet firms were established whose investors expected high revenues. However many of these platforms could not meet the expectations, the stock prices of many firms declined rapidly and many firms filed for bankruptcy. Since 2004 the internet developed to the Web 2.0 which suggests that a better version of the web exists today. Spendings in online advertisements were interestingly not effected by the crash of the internet market at the beginning of the 21st century. Since 1998 the net advertising revenues have increased constantly. In 2008 US-American companies will spend more for internet advertisements than for TV commercials. In the past, famous Web 2.0 websites were sold for high prices: the Holtzbrinck publishing group bought StudiVZ for around 85 million euros, the video website Youtube was sold to Google for 1.65 billion dollars and News Corporation paid 580 million dollars for Myspace. However all of these social networks still have to supply evidence that their company value is not overestimated. As far as the advertisement revenues are concerned none of them generate significant profits yet. In this paper I will analyze the performance of advertisements on Web 2.0 websites as exemplified by social networks. First I will trace the developments that led to the so-called Web 2.0 and define their characteristics. Then I will focus on social networks, analyze their features and the possibilities to use them for advertisement purposes. Finally I will analyze several possibilities to advertise on Web 2.0 websites.