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In Pursuit of Revenue, Social Networks Ramp Up Ad Targeting

Facebook Goes the Route of Direct Marketing, While Twitter Plays It Safe With Focus on User Interests

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For the dominant social networks, the pressure is on. Facebook's IPO cast a harsh light on its ad business, which isn't growing as fast as Wall Street had hoped. Twitter, on the other hand, has to prove that it has a business that scales enough to keep the doors open.

One way to gain more ad dollars is to ramp up ad targeting, which both companies have done over the past few weeks. But while Twitter is playing it safe, Facebook is pushing the envelope with new tools that could bring the web equivalent of junk mail to your Facebook page.

Most Americans are accustomed to the rules of engagement for direct mail, which is very much an offline practice. (Subscribe to a new magazine? Don't be surprised to see a raft of offers for credit cards in your mailbox.) But Facebook is allowing its big advertisers to match the email addresses and phone numbers they've collected with profiles matching that data.

Giant brands will be able to sync their entire CRM databases to Facebook to more efficiently target their customers, rather than waiting for them to "like" the brands' content or page.

The move raises a number of privacy questions. When a consumer gives an email address or number to a marketer, there's the expectation he will get communication from the brand. But what about when it comes to Facebook? "I don't think anyone who has given an email and phone number to Facebook expected it to be used by Tide to target ads at them," said Alan Chapell, an attorney who consults with ad-tech companies on privacy policies.

Twitter's gentler approach
Facebook says it's giving users two opportunities to opt out. First, a marketer must ask permission from customers to reach them on Facebook. Second, users can opt out by clicking a box on the ads themselves.

Twitter, which billed its new targeting option as the biggest change to its ad capabilities since they were first introduced, is taking a more cautious approach. Twitter's interest targeting includes 350 prepackaged categories, from the broad "pets" or "films" to more niche subcategories like "documentaries" and "Bollywood."

The categories are not created from the content of tweets themselves, but from user actions on Twitter such as retweets and favorites, and whom users follow. If you follow Anthony Bourdain, for example, that 's a clue that you're a foodie.

Unlike Facebook, Twitter is intrinsically public and users have no expectation of privacy. Yet Twitter's approach to targeting is likely to be perceived as less invasive than, say, Google's mining of search data or Gmail. "We have always been thoughtful and deliberate in how we roll out our advertising products and features," a spokeswoman said in a statement. "This certainly applies to targeting as well."

From a revenue standpoint, Facebook is under decidedly more pressure to ramp up revenue -- fast. One could also argue that users have higher switching costs since many have spent years accumulating connections, photos and apps. That's why we predict it will keep pushing the envelope until the scope of its business matches the ubiquity of its user base, and why the ad targeting has only just begun.

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