The advertising system that's in the works, according to a Wall Street Journal report last week, could bring Facebook a lot closer to nabbing the dollars of some smaller, AdWords-type advertisers. Those advertisers might not have a lot of dollars to offer individually, but collectively they helped turn Google into a multibillion-dollar juggernaut.
Under the plan, Facebook would create an automated system that uses a member's profile information to direct relevant text advertising messages to the user's news feed.
Advertisers already are able to put messages into users' news feeds, the default news section that lets members know what their friends are up to. But these "sponsored stories," which can be text, graphical or click-to-play video ads, are expensive; the price tag limits them to mostly large brand marketers who have six-figure budgets to spend with Facebook's sales staff. An automated system could open up Facebook to smaller, more niche-targeted marketers, much as Google's system has done.
"Facebook is saying, 'Where within our infrastructure can we make money?'" said Micah Nyatsambo, search-engine-optimization manager at MediaContacts. The speculation also underscores the industry's effort to efficiently and automatically match marketers and impressions. Already Yahoo, Google and Microsoft have made major investments in media exchanges and ad-serving technology.
Facebook wouldn't comment on the ad plan. The company is on track to generate well over $100 million in revenue this year, according to public comments from board member and investor Jim Breyer of Accel Partners. It already allows marketers to target its users by activity and interest, with the price increasing along with the targeting filters. What would be new is using the information gleaned from people's friends to offer users targeted ads and, in a sense, predict what might be important to people even before they know it.
Marketers are intrigued
Such a system also would help monetize the social-search aspect of Facebook -- the idea that people find things through recommendations from their friends, not just by actively searching for information on a search engine. While there's no guarantee Facebook's plan would be successful, its promise intrigues marketers.
"It's called peer influencing," said Chad Stoller, director-emerging platforms at Organic. MediaContacts' Mr. Nyatsambo gives an example of what he said would be an incredibly valuable tool: Facebook could decipher data such as a group get-together its members have planned and serve advertising related to things the group might need -- pizza, for example. "If [Facebook] can figure out how to anticipate what someone might be looking for, they would be an enormous value," he said.