Analysts expect Facebook to eventually launch an external ad network – some Facebook-powered version of AdSense.
A blog post from Hunch co-founder/CEO Chris Dixon made its way to Techmeme, sharing a section from a recent Goldman Sachs analyst report, saying, “We believe there are three obvious opportunities that the company could leverage its platform to capitalize on.” These include developing an external ad network, monetizing paid search, and entering China.
“Of the three options, search is clearly the most interesting,” says Dixon. “An external ad network is inevitable. Google proved this model with Adsense. With an already huge base of advertisers bidding on CPCs, it is impossible for most other ad networks to compete on publisher payouts. But Facebook’s traffic is so great now that an external ad network might increase their revenues by 2x or so. The same goes for entering China. They might get another half a billion users who monetize at lower ad rates than US users. Neither move would put them in Google’s revenue range. They need a better business model for that. The only (known) models that deliver RPMs high enough to compete with Google are search, payments, and e-commerce.”
We’ve been talking about both a Facebook search engine and a Facebook AdSense-like offering for years. CEO Mark Zuckerberg essentially confirmed last week that at least one of those is happening. At the TechCrunch disrupt event on Tuesday, he’s quoted as saying, “We’re basically doing 1 billion queries a day and we’re not even trying…Facebook is pretty uniquely positioned to answer the questions people have. At some point we’ll do it. We have a team working on it.”
Will the other happen? If you ask me, it’s kind of shocking that it hasn’t already. The scenario came back into Blogosphere discussion with Facebook’s IPO as investors and analysts contemplated how Facebook might increase its revenue substantially.
TechCrunch’s Josh Constine speculated about it in May, saying, “Facebook’s ad network [would] essentially turn ad real estate on any website into places to serve the campaigns that advertisers buy for display on Facebook.com. Anyone currently logged into Facebook who visits one of these sites would be shown ads targeted by their Facebook information, such as age, gender, location, work and education history, interests, app usage, and friends. Facebook and the site hosting an ad would then split the money made on clicks or impressions.”
I said at the time that it seems even more likely that this would happen than Facebook getting into search, yet here we are with Facebook apparently getting into search, so I’ll ask again, how can Facebook possibly not launch some kind of external ad network?