The push to ramp up revenues is clearly on at Facebook. If Mark Zuckerberg wants to prove Facebook’s valuation (something he won’t budge on for new investors), he is going to have to start showing some serious revenues. That means figuring out how to make social advertising pay. At Davos, Facebook COO Sheryl Sandberg told us to expect to see “the evolution of the advertising products” this year. One big evolutionary step the company is working on is the combination of Facebook Connect and Facebook Ads, in effect turning Facebook Connect into a social ad network. We’ve learned this from two independent sources, one with direct knowledge of the product. Asked for comment, a Facebook spokesman offers the following statement:
We are always looking at new opportunities for our developers but have not launched anything new. Last month, we did announce that we are working with a few developers to test the placement of Facebook Ads within their applications specifically on Facebook.com as part of our efforts to help developers monetize. The results of those initial tests will help us determine if and how we could extend Facebook Ads to additional applications and developers in the future.
The introduction of ads through Facebook Connect is an obvious way to expand revenues, and our sources say it is part of Sandberg’s larger efforts to do so. Just last month, as the statement notes, Facebook began testing ads for the first time on third-party application pages. It also introduced a commenting widget for sites that use Facebook Connect which expands the footprint of FB Connect on sites that install it. One can imagine other Facebook Connect apps, and even third-party apps, appearing on partner sites. The more real estate those apps take up, the more room there will be to insert an ad or two.
Our understanding is that the ads will initially appear on this expanding real estate rather than in traditional advertising spots, where Facebook would have to compete directly against Google, Yahoo, and all the other established ad networks. Given the known under-performance of ads on Facebook’s own site and social networks in general, that is probably a prudent strategy.
For now, Facebook Connect remains a developer program for partner sites to allow visitors to sign in using their Facebook ID and voluntarily exchange data about their activity on those sites back to their Facebook friends via their activity feeds. But targeting ads to Facebook members on partner sites through Facebook Connect could become a potentially powerful revenue generator. At the very least, it would multiply Facebook’s available advertising inventory beyond its own site. At most, it would create better returns by letting Facebook place highly targeted ads in different contexts where people may be more receptive to them.
One of the reasons ads perform so poorly on social networks is because they are the worst place to show someone an ad. People on social networks tend to be in a socializing mode instead of a shopping or information-gathering mode. But if you show the same people an ad on another type of site (say, a clothing ad on a fashion blog), and you can target that ad based on their social profile (you know their age, gender, and where they live), that in theory should be a formula for better response rates. Facebook started down this road before with Beacon, before that effort blew up in its face because of privacy concerns. So it has to tread carefully. But it learned from Beacon, and FB Connect is completely opt-in. So far, it is a success.
Now it is time to make money off of it, and leverage the data Facebook has about its 175 million members. And have no doubts: If Facebook doesn’t create a viable social ad network, somebody else will. In fact, all the major social networks have plans to use access to their members, and their member data, as a wedge to create social advertising networks that can target ads based on profile or demographic data. For instance, Google Friend Connect, Google’s answer to Facebook Connect, is laying the groundwork for what Google insiders call “Friendsense” (Friends + AdSense). Even MySpace and AOL are working on their own flavors of socially-targeted ads. While these efforts are all couched in terms of making it easier for consumers to share data about themselves between the sites they care about, don’t be fooled. They are less about sharing data than about targeting ads.
This is the next evolutionary step in online advertising. it is only a matter of when, not if, it will occur.
Quick… Brace yourself to be underwhelmed!!!
hahaha, hope it’s something worth taking a 2nd look.
TechFilipino
Do we assume that Facebook will share the revenue with the partners? Would anybody allow ads on their site if they don’t get a cut?
That would make the most (Ad)sense.
This will probably happen. I don’t think it will really compete with Adsense though.
There are way too many good developers at Google compared to Facebook.
I thought I was immune to these economic conditions. Today I find out that no matter how big the company, they’re starting to slide and the grapples are snapping under the tension flying out of the rock face.
I applied at Google for the dev manager in Santa Monica. I’m not ashamed to say it. I’m scared of people unloading just because everybody else did it. It’s getting contagious and I think Google is like the last semi-safe haven on earth for developers right now.
The dev manager position that is.
Erick – ur dead on w this post, but I beat you to the punch, check out my last few posts at adsonfacebook.wordpress.com
“If Mark Zuckerberg wants to prove Facebook’s valuation (something he won’t budge on for new investors), he is going to have to start showing some serious revenues.”
Facebook will make it’s revenues, and I tell you why.
We are currently developing an application that will pretty much provide a super huge killer app for the video industry.
We looked at 2 systems to integrate into our app and no matter how much I wanted to go with the other solution, I chose Facebook Connect and here is why:
1) The application needs to monetize through a system where eveyone is “connected” and being that everyone I know from all over the world is on Facebook = no brainer.
2) The advertising system is the best we have seen for mainstream commercial product advertising, again, right now only moderate advertising is going on, but when you see ads for “Buy Michael Jordan’s complete career videos, click here”, it will be another issue
3) Their API is controlled by dev keys, so if a developer starts making $500 million a year off integrating Facebook API, then they will just get gangster and request a percentage of your company as a partnership to keep your API keys active… Trust me, no one has developed such a killer FB API app yet, but its coming. If this happens to be us, by all means we will pay them and you will too.
4) Hardware licensing, yep thats right! Our application opens a new door to consumer electronic products and the FB logo and login will be huge part of the functionality, so requesting $5 a unit for FB connected major hardware devices is not a shabby revenue stream.
5) Retail logo fees – associated with in-store media but thats all I can say for now.
Facebook has been smart in setting up their infrastructure and more so, allowing any developer to come in and create any possible thing imaginable. Probability says that one of those things one day will be a trillion dollar enterprise and at its core will be Facebook partaking in a healthy chunk.
Yesterday on cnet site I was commenting an article with my facebook account and later on I found out the comment had appeared on my facebook comment wall. The moment I see it, I removed it.
I don’t want any comments I put in other sites to appear in my facebook and in fact I may not use my facebook account in other third party that much.
But I am not sure how others would see this.
Lets think about it, maybe Google already owns the ad market for SN’s. By that I mean FB is trying to make money from online advertisers but that market is only so big; Google already owns it…
Google monopoly will die soon or later in online ad market.
So what monopoly has died within your time-frame of online existence? Dude, Google ain’t going anywhere, ask Twitter..!
Google’s ad co. is not dying anytime soon. They are hands-down the most agile fortune 500 company in the world. They may morph into more than an ad co, but they will definitely remain a key player.
A formidable advertising competitor is disparately needed. Facebook will be the competition, but they are not filling Google’s shoes.
What leads you to believe this? They are still MILES ahead by far. Their systems are the best, their traffic is the best, their volume is the best, their support is… decent.. What leads you to believe someone is about to takeover?
fadbook could create ad revenue best by spamming banner ads like myspac. and selling there homepage to the highest bidder. i dont think people would mind much. most users realize that everything cant be free forever. most users “auto pilot ignore” the banner ads anyway. if users are in social mode and not consumer information ad mode how can you change that? your gonna need a outside business social domain channel. fadbook cant be everything to everybody. neither can myspac. both have serious growth issues. hard to take either one of them serious from a business ad platform perspective.
ExperienceLocator.com – know yourself
my question is how many sites will continued with facebook connect on their sites once facebook starts rolling out ads on that platform
My guess is that the benefits provided by FB Connect will outweigh any hesitation the publisher/site has about ads being served through the system. However, in order to serve ads through FB Connect, Facebook would have to:
1. Share revenue with the publisher/site (obviously), and
2. Provide controls to said publisher to allow them to customize/filter the types of ads and advertisers they’re willing to accept.
My gut tells me that Facebook Connect will end up becoming the de facto online identity system on the web, doing what OpenID is unlikely to do.
Perhaps. Facebook Connect is easy to use although I don’t see it widely used across the web yet. Providing other website owners a share of the revenue would most likely increase its uptake.
But bare in mind Facebook hosted the last OpenID User Experience meeting and things like JanRain RPX make it as easy to sign in to a third party site using an OpenID based identity as it is FB Connect.
For Facebook to support OpenID too would mean they get a whole bunch of additional users that they can place ads with.
Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz
Interesting. December 2007, I founded an advertising network that was based on using social data (interests, age, gender, networks, etc.) gathered through Facebook applications, to target ads to users throughout the web.
I dropped it because soon afterwards, Facebook released Social Ads, and it was difficult to compete with that.
Admittedly, I was 15 then, and had NO idea how to market a product well or to get people to use the network.
As a media buyer with a pretty substantial performance-based budget (I’ll spend 200K on facebook ads this year), facebook is actually a significant and growing part of my team’s portfolio. It is the only hyper-targeted platform that comes close to working, and mark my words, it will continue to make serious and growing revenues for FB in the coming years.
It’s “cool” right now to discount the potential of social ads on a social network, but once you consider that the platform is very young, and that the targeting capabilities are actually very rudimentary at the moment (and advertisers are still making a pretty penny), there is much upside to be seen.
Each month FB is releasing new targeting capabilities and so far it has myspace’s self-serve platform soundly beat.
Cool – so what ROI are you offering on a 200k FB investment John?
Hmm…might not be prudent to say exactly, but the margin hovers from breakeven to well above 30%. The platform is very volatile, which is to be expected in a much less than mature market, which requires a lot of optimization. But if you’re willing to keep up with the latest releases and manage it closely, the potential is definitely there.
So basically what your saying is that incumbent online advertisers (i.e. the big guns with budgets) will shy away from SN networks because of their “volatility.” Meaning; Google already owns the space without even trying!
In response to Paul – not at all. Our team will spend upwards of 2MM this year on Adwords, but try to get commensurately large margins in what is a very very mature market – not likely.
In order to be a successful performance-based advertiser it’s only smart to devote time, energy, and money to both the tried and true (which used to be print and then banner, by the way) and what is the way of the future.
Just be judicious with your team’s time and invest for both the short and long term.
I started working with a media technology called Spongecell they are utilizing facebook connect inside the standard IAB units. @ John Yi love to pick your brain more about this… – Andrew
andrew.simon@gmail.com
http://zacknmir...ack/choose_role ( see rough example here )
http://demos.spongecell.com/
@andrew – just saw this comment. Funny, one of the spongecell guys used to work for one of my companies. Small world. Feel free to ping me – john {at} dublit dot com.
Good job on your posts!
Indeed, facebook is one good way to promote your business. If you do know how to make the best out of it, you sure can gain loads of leads which would also mean more profits. Another thing about facebook is that you can add videos so you can use video marketing for a more appealing and interesting means of catching people’s attention and making them buy your products or sign-up to your services. All you have to do is be able to learn video marketing tips and tricks so you’ll have a more effective online marketing and social networking.
This would be a perfect guest post for AllFacebook
I’ve written about this topic a number of times.
This would be a perfect guest post for AllFacebook
I’ve written about this topic a number of times.
Sounds like just another version of Google Adsense, contextual ads
Developers,Developers, and more Developers=$$$
nsfw_$20_illpayifitworksvideo {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/gpJcFEjbAA_th1.jpg”}”title”:{”value”:”nsfw_$20_illpayifitworksvideo ”}”videoUri”:{”value”:”http://www.seesmic.com/video/SqgQyyDiiL”}}}
seesmic_working_nice {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/VbqSknzCie_th1.jpg”}”title”:{”value”:”seesmic_working_nice ”}”videoUri”:{”value”:”http://www.seesmic.com/video/4BmWGiPdpA”}}}
I imagine Google already bought facebook.I think it will more easy to mark to get money from his struggling to seek “how to monetize well social advertising”I imagine if Google take control to facebook I think they will add more “ad base recommendation” words of mouth type.rather then old type advertising PPC.or CPC like that.
I just hope it doesn’t end up like Myspace. You can’t even log in now without being hit by some kind of advert before going to your account. It is every where and I just don’t visit the site as much anymore.
I like the way Google have added ads on the right hand side of gmail. You dont even notice they are there and yet depending on the topic of the email some really great ads come up that have been useful.
Maybe they can do it that way because its less intrusive.
Diane
This is the same route that Google Friend Connect is rumoured to be taking. As long as it’s not intrusive I don’t mind because I have been impressed with Facebook Connect so far!
Facebook needs an affiliate system going, so other website owners can display there banner or text ads and gain commission the same way you can with google
I hope it doesnt end up being an ad filled version of myspace…
@ Octo
Completely agree with you…
I din liked myspace coz of lots of ads n same thing gng to happen here
I see upwards of 60% to 120% ROI on search networks. I don’t advertise on facebook. Am I missing out?
Not unless you like overpaying for clicks and getting your entire ad copy, landing page and offers ripped off immediately.
That’s what I was afraid of and reason why I don’t advertise there. You have 16 year old no brain kids trying to make money. Because they know, getting a campaign running on adwords is much harder and they will never make there so you have clutter these affiliates running their campaigns on facebook
Ads are dead. People are trying to keep some money in their pockets right now, they are buying only the absolutely necessary stuff and ARE DOING THEIR BEST TO NOT PAY ATTENTION TO THE ADS. It’s a psychological state of the market: people are turning away from ads INTENTIONALLY.
And it will last until the dust settles.
lol that’s why you will never make any money.
Very interesting evolution for Fb Connect. Media plays stand to benefit from the rev share, but brands will obviously think twice before integrating with a platform that delivers contextual ads to their sites.
Why are people even thinking that Facebook would put ads on Connect sites and take all of the money?
It seems obvious that it is an optional feature that webmasters can choose to insert into their ad system. This isn’t Geocities or some free hosting where they’ll stick an ad at the top…
My only suprise is that it has taken them this long. Minority Report here we come.
Oh, and I bet most Connect sites will choose to use FB’s ads as it will only allow for higher eCPMs. Perhaps they’ll even partner with other ad networks like advertising.com, etc to establish themselves as the industry standard. But they can probably do it without them too.
Half a billion in funding and not one penny in profit. Somebody tell me why we still care about Facebook as a business?
Give me $500M with no need to make a cent and let me be hailed as a genius. PLEEEEEASE. This whole profitability thing my company keeps achieving quarter after quarter apparently isn’t important.
You know what I call an executive team that can’t turn a profit with $500M in funding? MORONS.
It’s going to be tricky to keep it transparent, profitable, and sustainable. The TOS backlash was severe and repeated offenses won’t be tolerated lightly, that much is obvious. I think this particular methodology might be a step in the right direction. I’m still going to be checking justaskgemalto to keep up to date with the associated digital security concerns.
@erickschonfeld
@finkd
(Erick, come to the Wharton Exec MBA Panel in SF “Is AdSense Outdated?”, to be covered by Financial Times (FT).)
2 PROBLEMS:
1) AdSense is becoming more and more overexposed on the web, and the average website visit is dropping beneath 8 seconds. Low quality ads+overexposure = Low CPMs
2) Ads on social networks are receiving the lowest CPMs compared to all other types of websites due to overexposure. Even placing contextually targeted ads via Facebook Connect websites does not entirely correct this overexposure problem. It’s a supply vs. demand problem. Facebook can gain more control by deciding the placement of the ads and requiring a higher quality of the ads from its ad providers.
SOLUTION:
3) Social networks and other websites know their audiences the best, NOT AdSense. They should also control which specific ads they serve and get better quality ads (text, display, flash, video) through flexible ad providers like http://ad-village.com
Some additional comments re: AdSense are here on LinkedIn Answers:
http://tinyurl.com/adsenseq
Mark, you know where to find me.
-Marissa Louie, AD-Village.com
Just testing FB connect… Love Techcrunch BTW!
Cheers,
Matt
They are getting closer every day to the “Social Ad Network”. When they are finished it will be an “online ad buy” must along with adwords.
im blogging about the facebook ads program over at FacebookAds.net
techCrunch
so gr8!!!
Facebook is truly great for social networking as well as advertising campaign. You can get many targeted customers from their. Great info, Thanks
facebook connect live sites
http://facebook...cebook-connect/
http://facebook...cebook-connect/