Digg, a leading social news site, is allowing people to rank the ads based on their likes and dislikes. Its new ad platform applies the same voting system it uses for news to advertising. It says Digg Ads will look like user-submitted content but will be marked as sponsored.

Social networks have been experimenting with different advertising and business models to improve their viability. While most are still struggling to attract consumers, majority of consumers are hardly interested in ads displayed on social sites.

There are very few Internet users who are interested in buying based on product promotions on social media sites. While 83% of the Internet population (ages 13 to 54) participates in social media – 47% on a weekly basis – less than 5% of social media users regularly turn to these sites for guidance on purchase decisions. A new report by Knowledge Networks revealed this last month. According to the report, only 16% of social media users say they are more likely to buy from companies that advertise on social sites. (Read: Can Social Media Help You Sell?)

With similar findings research firm IDC says ads on social networking services (SNS) have lower click-through rates than traditional online ads and they also lead to fewer purchases.  IDC expects that lower-than-average ad effectiveness on SNS will continue to contribute to slow ad sales unless publishers get users to do something beyond just communicating with others.

Even YouTube, a seemingly popular social media site for video sharing, is struggling and costing the owner Google $1.65 million a day. The revelation comes from Internet Evolution that discusses the future of Internet.

Like deep-pocketed Google invested in YouTube, most of these social networks are surviving on investors’ money. Facebook too has just raised some capital. Digital Sky Technologies, an investment group with stakes in Eastern European and Russian internet businesses, has made a $200 million investment in Facebook.

And Twitter, which was launched in 2006, says: “While our business model is in a research phase, we spend more money than we make.” (Read: Twitter TV On, Twitter TV Off)

According to Digg, it’ll empower its community to vote and move the ads up or down. Marketers, it says, will get real-time feedback on the performance of their advertising messages, ensuring effective campaigns.

To target marketers and display ads business, Yahoo! has introduced its display advertising solutions for marketers. They will leverage third-party advertising technologies from display advertising solutions providers, Teracent and Tumri. The solutions will be for the Web as well as mobile phones.

In the current online market development phase, most publishers as well as advertisers are trying to operate aggressively. The U.S. and U.K. markets are particularly showing a lot of potential in the online advertising business. (Read: Top 25 Ad Networks in the U.S.) and (Read: Top 10 Online Ad Leaders in U.K.)   

The Digg Ad platform will roll out to the site in several phases, beginning with the integration of ads that appear alongside organic content on the Digg website. As users “Digg,” or vote up, ad content, they’ll see the best and most relevant ads more often, while lower performing ads will be seen less until they are priced out of the system.

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About Rakesh Raman

Have extensive editorial, content management, and integrated communications experience and have worked as a senior tech journalist, analyst, and columnist with different newspapers, magazines, and Web/online properties in India.

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