Back in 2007, when Facebook was only a few years removed from being called "The Facebook" and had a mere 20 million users to MySpace's 150 million, Buddy Media CEO Mike Lazerow made what seemed a risky bet. Even though it appeared that there would be multiple winners -- or at least multiple players -- in social networking, Mr. Lazerow went long on the startup from Palo Alto.
Why? Unlike MySpace, Facebook shared its source code with developers, meaning companies could build real businesses on the platform. What sealed the deal was when Facebook launched "Pages" in 2009, which allowed brands to have a presence on the network beyond individual apps.
"It was by no means a done deal that Facebook would emerge, but that opening would fundamentally change consumer relationships with each other and with brands," Mr. Lazerow said.
Buddy stopped building apps altogether and started building software. It was a big shift -- a "pivot" in startup parlance -- but the idea that people would interact with branded apps was flawed. But with "Pages," Facebook became a much friendlier place for brands.
What happened in the intervening years no one could have predicted: Facebook ballooned to 650 million users worldwide, including 150 million in the U.S. Today it accounts for 12% of all time spent online in the U.S., and a staggering 23% of all ad impressions, according to ComScore. It has become cliche to call it a "parallel internet"; rather, Mr. Lazerow argues, it's a better internet, free of the anonymity, abuse, spam, comment trolls and viruses that plague the real web. Indeed, Facebook is the only major web property still in growth mode, and it's happening at the expense of all others. "How do people vote? With their money and with their time," Mr. Lazerow said. "If you look at the time, people are saying this is the better internet."
In short, what looked like a narrow world in 2007 is starting to look like the game, or at least a big part of it. Just as no consumer brand would consider opting out of a web page, very few would consider opting out of Facebook, which is great for Buddy Media. Buddy isn't an agency, and it doesn't "manage" Facebook pages for brands. Rather, it licenses software so the brands can do it themselves. If Starwood Hotels wants to help 1,000 of its locations -- whether it be the St. Regis, W, Meridien or Sheraton -- have compatible pages (they do), Buddy licenses an app for that. Want each to have booking capability? A calendar of events? A shopping cart? Buddy's already built it; its part of the stack.
Buddy is working with hundreds of brands and agencies, including eight of Ad Age's top 10 brands. It has raised nearly $40 million, including $5 million from WPP, and has more than 130 employees. There are plenty of other tech enablers for brands on Facebook, such as ContextOptional, Involver and Vitrue (now featuring former Facebook sales chief Mike Murphy as an adviser) but none with Buddy's client list -- and none with as many Facebook fans (33,000). That's a lot, as Mr. Lazerow said, for a brand that no consumer should care about (much less know anything about unless they happen to see one of Buddy's ads at JFK).
Facebook doesn't earn any money directly from Buddy Media, but all of Buddy's clients end up Facebook advertisers to direct traffic to their well-honed "pages." In that sense, Buddy -- and other companies like it -- is actually on-boarding advertising clients for Facebook, while helping them create something worth advertising about. EMarketer estimates Facebook brought in $1.86 billion in ad revenue in 2010, much of that ($1.12 billion) from small, self-serve clients, meaning big brands are spending pennies a year to reach Facebook's 150 million U.S. users. Mr. Lazerow believes it is a matter of time before the marketing spending starts to better resemble usage.
"There is this clarity in the market about what marketers can do," Mr. Lazerow said. "With Twitter, who knows? There is a lot of uncertainty out there, but with Facebook we know where everyone plays."