Yesterday's article on TechCrunch about Lookery, a company specializing in selling ad inventory for social apps on Facebook, that is struggling to break even despite serving about three billion ad impressions per month, sparked an interesting discussion in the blogsphere about the ability (or inability) of social networks to monetize their traffic through advertising, and the outlook for online advertising supported businesses in general.

According to the article, Lookery lowered its guarantee from 12.5 cents per thousand ad impressions (CPMs) to a CPM of 7.5 cents, raising the question of whether there is any value in these ads. However, the article went on to point out that Social Media, another ad network focused on serving ads for social networks, has been able to command higher CPMs of around 50 cents by focusing on higher quality inventory.

The chain of comments posted to the article raised a slew of interesting points with some suggesting that even Google, which controls a lot of the inventory on MySpace, is struggling with social networks. Others, however, were more optimistic pointing out the successes of more targeted social networks like Linkedin, who has been able to command CPMs as high as $75.

According to Lookery's CEO, Scott Rafer, who joined the discussion: "Rather than 'Nobody can make money on social network ads,' we think the accurate statement is closer to, 'Ads on consumer communications tools are high-volume, low-unit cost businesses.' If one designs a business to make money at low eCPMs, as we have, one has a good shot. If a consumer social network business needs to consistently achieve multi-dollar eCPMs averaged across all pages, there’s going to be serious trouble."

For more on this, see Techcrunch's article, Are Facebook Ads Going to Zero? Lookery Lowers Its Guarantee to 7.5-Cent CPMs, and the comments following. Also, see Second Collapse of the Internet Economy Underway?

Photo by cibomahto from Flickr.