On August 27, Mashable reported Facebook has a $33.7 billion valuation – wow. Too high? Maybe to some, and maybe not to others. Instead of debating that point, let’s look at some things that Facebook might do in the future to a) serve advertisements and b) make more money.
Facebook has some pretty amazing things going for it. It’s becoming ubiquitous in terms of its appeal, so all walks of life are flocking to it. Second, people spend tons of time on Facebook and visit it on their computers and phones every day – if not more. Third, with its massive loyal user base, no matter what your niche audience looks like chances are you can effectively target them and reach them in large numbers on Facebook. Finally, user growth is still expanding and has a long way to go before peaking.
What does this mean for online marketers and media buyers? Well, consider these two factors: unprecedented targeting to a massive audience and the possibility of a new ad network layered over the social graph already installed on millions of sites. (You know all those Like and Share buttons, Facebook Connect, and fan widgets?) In many ways, these sites are already connected to Facebook on code/technical levels.
Let’s explore these two things with the disclaimer that a lot of what I outline here is based on predictions on what Facebook could do – not necessarily on what it will do.
Whether privacy advocates or Facebook users like it or not, Facebook is amassing incredibly rich and detailed profiles on its community from a variety of sources that can be used to target ads with ever more effectiveness. Furthermore, you can target unique niches of people in quantities that really no other media property could possibly match. For example, “women in 10 particular cities between 18 and 28 who love bike riding.” The source of this data from what I can see are as follows:
- Registration information: Of course, this is obvious. Our basic information like age and a location we enter when we set up our accounts.
- Posts: The topics (and revealing keywords) we post on our wall that express our interests.
- Likes: The other posts and brands on Facebook we “Like” and sites outside of Facebook we visited where we clicked on the “Like” button.
- Geo-targeting: Our listed address and of course the IP address of where we are coming in.
- Location-based information: Now Facebook will know what kinds of restaurants and activities you like to engage in.
Facebook Ad Network
I’ve heard a lot of opinions that Facebook will give Google a run for its money in search. But I totally disagree – that is like saying Groupon is going to give Amazon a run for its money.
Facebook and Google are different. Google is for finding things and Facebook is for finding out what your friends are up to – two completely different and compatible activities. Where they do compete is for ad dollars. Just like Groupon competes with Amazon for consumers’ income and online purchases. However, I have asked rooms full of people this simple question, “How many of you go to Facebook before you buy something?” No one raised their hands. Then I asked the same question about Google (and search in general) and everyone raised their hands. So, Google and search is about timing and Facebook is about targeting – therefore I have a feeling Google is going to be OK.
Still, Facebook poses a threat to Google in advertising dollars (not search dollars) and the AdSense Google Network in particular. That’s because Facebook could turn on an ad network and sell incredibly targeted ads that reach Facebook-profiled users on other sites. So its ad inventory would go through the roof and it would not have to clutter up its site to reap the rewards of that additional ad space.
So, what do you all think? Will Facebook turn on an ad network? I think it will.