Facebook Advertising

    October 29, 2007

Much of the reporting of Microft’s acquisition of a piece of Facebook has questioned the ultimate value of the social network.

(Microsoft’s investment puts the total value of Facebook at about $15 billion.) With advertising as the only significant revenue channel, many are wondering if people networking on sites like MySpace and Facebook are paying any attention to the ads.

In a tweet, Todd Defren underscores the point:

For all the hoopla about Facebook, you’d think there would be a wider variety of (classier) advertisements. It’s all “romance” stuff now.

While I did see an ad on Facebook today from Chrysler, you still have to wonder about the generic nature of the advertising in what is surely a venue that is used for mainly niche-focused activites. Consider that I have 259 friends on Facebook, and 258 of them have something to do with the PR/communications business. (The exception is my son who, contrary to conventional wisdom, friended me.) For me, Facebook is a professional pursuit, even if it means keeping up with the personal activities of professional colleagues. (Any executive who ever closed a deal on the golf course knows the value of that.) But what interest would I have when participating in, say, Joseph Jaffe‘s “Jaffe Juice” group, in a Discover credit card? (That’s the ad being served up to me on Joe’s group at this moment.)

The “For Immediate Release” group associated with For Immediate Release—the podcast I co-host with Neville Hobson—is presenting an add from cbCampus.com; my own cause-focused group related to my Stop Blocking campaign dishes me an ad for home furnishings from JC Penney.

I gotta admit, when I’m perusing these groups for communication-related content, an ad for a lamp isn’t going to attract my attention.

On the other hand, an ad from, say CustomScoop, a media monitoring service, or Proofread Now might very well interest me. It’s all about context.

It would be in the interests of profit-motivated social networks like Facebook to explore models that would allow users to choose the ads that will apear on their profiles and groups—particularly if they can share in the profits. This isn’t exactly an original concept. As a member of the Blubrry podcast network, I get offers fairly routinely to run ads on FIR. The advertiser benefits from the aggregate total number of podcasts promoting the product or service.

Some customization is already in the works at Facebook, but most of it is geared to keeping unwanted advertising off off a profile or group, and is aimed at appeasing the advertiser, not the Facebook member. (This got a fair amount of attention when people started complaining about advertisers perceived to be supporting the extreme right-wing political party in the U.K. when their ads appeared in rotation on the party’s Facebook group.)

It would certainly be more labor intensive for Facebook and its peers to set up a targeted ad insertion effort, but the click-through rates derived from relevant ads would certainly be higher than they are now (according to some reports). Ultimately, I suspect Facebook could make more money from thousands of smaller advertisers (think the likes of PR Newswire or Ragan Communications in the communications space) than they can from a few huge, generic brands.