Archive for July, 2010

Why Facebook Keeps Google Awake At Night

With more than 400 million users, Facebook now accounts for 11.2% of the world’s total time spent online and 42% of Canada’s population are members. Facebook is clearly a global a force to be reckoned with. Facebook also continues to battle Google for online market share and mindshare, as well as for talent. While Google far surpasses Facebook in search capabilities as an information aggregator, Facebook had one clear advantage – people implicitly trust information that comes from their networks and friends. Roughly 110 million people worldwide use their data-enabled phones to update their Facebook status and read their newsfeeds from literally anywhere. For these users, Facebook is just a click away at all times. So, what does this mean for advertisers?

Highly-targeted self-service ads based on information about users, which individuals or small businesses can design with a simple jpeg image, easily afford and closely track the results of, is one reason Facebook ads have taken off. Facebook ads are organic – designed right on the site. Due to Facebook having such a rich data set, advertisers no longer have to track users behavior to determine where to advertise – they can join conversations in targeted environments using Facebook’s market research. The data of 400 million people: where they reside, what their interests are and more importantly, who their friends are, is invaluable to marketers. It is no wonder why 66 percent of all marketers have now integrated social media into their strategy in some way.

Whereas Google returns advertising results when searches are conducted by users, Facebook targets ads to you to help you determine what consumers need or what might be interesting to consumers – generating demand and building a proposition for brand advertising. Facebook’s revenue, likely to reach $1 billion in 2010, is largely driven by low-priced small self-serve ads ($300-400 million), engagement/brand ads ($100million) and Microsoft’s ad campaigns ($50 million). In addition, applications inside Facebook that host ads to direct users to other applications get roughly fifty cents per click-through.

Media companies or outlets also have an important use for Facebook. If an organization is represented on the site and frequently updates its page, its information is aggregated into its “fans’” news feed – right where information about the “fan’s “friend’s reside.  Given that Facebook likely will challenge conventional media financially overtime, many media outlets are embracing Facebook as a way to interface with the masses. In fact, Verizon recently incorporated social media sites such as Facebook into its FIOS package – subscribers can now update their pages right from their TV.

Google has had a long-standing interest in acquiring Facebook, though much to the chagrin of his fellow board member s and advisors – Mark Zuckerberg (founder of Facebook) is not motivated by money. In fact, that is why he refuses to disrupt user’s experiences with banner ads and page takeovers – even though he has been approached and offered large sums of money to do so. To Zuckerberg, growing Facebook’s user base is far more important than monetizing it.

In the meantime, advertisers will continue to get highly-targeted ads for what many consider to be “a steal.” With more than 50 percent of active Facebook users logging in daily, spending a combined 500 billion minutes each month on the site, Facebook will continue to shape the media landscape and generate incremental ad revenues that surpass Google in the next five years. That’s my prediction, what do you think?

**Note: The information and data contained in this post is based on the data presented in “The Facebook Effect” by David Kirkpatrick.

-Posted by Danielle Millerick

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