Does Facebook Have What It Takes to Succeed in Advertising?By: Abby Johnson - June 22, 2012
Can Facebook build a strong revenue model out of its advertising platform? This is the big question that a lot of people are asking of late, especially given the social giant’s IPO fiasco. With its more than 900 million users, it’s clear that consumers are fond of the service. However, the question of how Facebook can monetize all these users is the big concern now, especially since it must deal with Wall Street and investors.
Tom Rikert, the Director of Product Development at Wildfire, which is a company that works closely with Facebook and provides a social media marketing software suite, is familiar with the position that Facebook is up against. You see, Rikert used to work at YouTube and, of course, also faced the challenge of monetizing a massive amount of users through advertising.
According to him, Facebook is the centerpiece of the majority of brands’ social media efforts. Through Wildfire’s close relationship with the company, it understands that Facebok has a huge audience, a global reach, and that it allows for rich forms of engagement for brands through the use of images, video, and more.
“We find brands are finding Facebook… to have a lot of staying power, and ultimately… they’ve built an audience [and] they’ve accumulated a lot of fans,” said Rikert.
“The question is now,” he continued, “what do I do with them to really engage them and to enlist them as advocates for word-of-mouth marketing and to also help them become customers, not just fans or conversation partners?”
While this is a challenge, Rikert is confident that Facebook can succeed in its advertising efforts. As he explained to us, Facebook has a “treasure trove” of data. This, combined with its user base, could potentially give the social giant a lot of leverage on the advertising front.
“I do believe, in the long run, that Facebook is sitting on a mound of amazing data on one of the largest audiences in mankind’s history,” said Rikert. “I think if they are smart about how they turn that into dollars through a strategic ad product – mobile [and] ads that could reach across the whole Internet beyond Facebook.com – I think they have incredible legs for long-term growth.”
Rikert believes that Facebook is being aggressive in its advertising approach but that it has an advantage given all the information it has on users. The social network knows that users can get “ad fatigue” really quickly, which could completely turn them away from the service. But, he thinks Facebook is being smart in its strategy by providing relevant ads based on user’s activities and interests.
“When done right, ads are actually value add,” Rikert said. “They are connecting people to information they care about and entertainment they care about.”
“It allows a lot more advertisers to reach the users and gives them the higher comfort level that their ads are gonna be worthwhile and well-received by the users,” he added.
He, along with Wildfire, feels so strongly about Facebook and its ability to be successful in advertising that he thinks its ad platform will become a critical factor in all online advertising going forward. Specifically, he envisions Facebook having a universal log-in system that could essentially be an open door for all things on the Internet and mobile devices.
And, to answer the questions about Facebook developing its own version of Google AdSense, Rikert said he could “definitely foresee that” since it already has a “huge footprint of their social plug-ins on hundreds of thousands, if not millions now, of publisher sites.”
Facebook has also been questioned for its mobile advertising efforts, especially since the company openly admitted in its S-1 filing that its monetization efforts for mobile were yet to be proven:
“Growth in use of Facebook through our mobile products, where our ability to monetize is unproven, as a substitute for use on personal computers may negatively affect our revenue and financial results.”
Still, Rikert has no doubts about Facebook’s mobile strategy either. The company has, of course, started out slowly in mobile, but he expects it to pick up its efforts in the near future.
“What’s gonna be more interesting is when Facebook can take the mobile experience and really tailor ads based on where a user is and what they’re doing [and] who they’re with,” he said. “That’s when the ad becomes super relevant and much more interesting, and I think it will generate greater click-through rates and better results for advertisers, and more revenue for Facebook.”
Overall, Rikert is confident in Facebook’s advertising efforts and believes the company’s new real-time exchange ads will further its goals of being profitable.