Advertising: The Revolution Won't Be Through Friend Requests

from the skip-this-step dept

Yesterday Facebook announced its long-awaited advertising program. This was inevitable: if you're going to justify a valuation just shy of Iceland's GDP, you've got to eventually propose a means of generating revenue. Facebook will no doubt earn quite a bit of money at the ad game. But the initiatives disclosed yesterday are likely to be a mixed bag — and not at all as innovative as founder Mark Zuckerberg would have you to believe.

The most straightforward of the new offerings is Facebook's contextual advertising system. Drawing on the vast amounts of data provided by its users and supplying metrics and query capabilities will no doubt prove to be lucrative. Much has been made of Facebook's particularly rich user data — perhaps too much. Although that data is likely to be better structured and therefore easier to leverage, it's not obvious that Facebook will be able to target ads to its users more precisely than, say, Google does within Gmail. Still, it's hard to imagine these ads being anything less than a huge financial success.

The same can't be said for Facebook Pages, which will provide brands with profiles on Facebook. Facebook has already tried this approach with Wal-Mart, and the results were disastrous. Not only did the nominally back-to-school-oriented page fill up with complaints about the retailer's business practices, but — perhaps more tellingly — many users attacked Wal-Mart and Facebook for bringing corporate shilling to their beloved social network. MySpace's brand profiles have met with a similarly lackluster response: An Inconvenient Truth's MySpace page was something of a marketing coup, but once the novelty wore off the practice failed to produce anything of significance. Although other companies will attract less ire than Wal-Mart, it's hard to imagine users being any more keen to engage with them (except, perhaps, for already-elite brands like Apple or Nike).

The final and most interesting prong of Facebook's strategy is Beacon, a system that will allow partner sites to post users' actions back to Facebook. Having your Amazon purchases or Netflix selections displayed in your mini-feed are the sorts of applications that are being hyped. As you might imagine, Beacon carries privacy concerns, as well as worries that the move will result in a further dilution of Facebook's already annoyingly low signal:noise ratio.

But to my mind the biggest unknown is whether the new data will be considered meaningful by consumers. There's no question that endorsement of a product by a peer is the most effective form of advertising available. Beacon is built with the hope that there are many marginal cases in which users would be willing to recommend the products they're consuming, but can't be bothered to take deliberate action to do so. But does purchasing a product necessarily mean a user wants to endorse it? Or do consumers prefer to curate their public purchases, picking and choosing the brands that they want to use to define their online identity?

It's not clear what the answer is, but I think there's reason to be skeptical of any initiative that attempts to automate individual peer recommendation. After all, genuine human enthusiasm is the sole reason why such recommendations are so effective.

Filed Under: advertising, brands, endorsements, privacy, social networks
Companies: facebook

Why OpenSocial Is Unlikely To Dethrone Facebook

from the where's-the-networking? dept

The announcement of Google's new OpenSocial API has generated a blizzard of commentary around the blogosphere. Yesterday Mike argued that it was a smart move on Google's part because it creates a broader web platform that will be more attractive than any one social network could be by itself. However, the various news reports I've read suggest that OpenSocial is missing probably the most important element of a social networking site: the networking. Most people don't join Facebook because they want to use the latest Facebook widget. They join because that's where their friends are, and because it offers basic functionality like messages and photos. Widgets are just icing on the cake.

Filed Under: open, social graph, social networking, social networks
Companies: facebook, google

Facebook And Google Compete By Flipping Each Other's Models Inside Out

from the it's-about-time dept

For years, we've been disappointed with the fact that none of the big web companies seemed to recognize the importance of establishing themselves as core to the web platform. In fact, Google has quite often done things to move away from being such a platform -- which seemed like a dangerous strategic move leaving things open to other providers. Early on, it had seemed so obvious that Google should set itself up as a "web operating system" on which others could build applications -- but the company has been slow to embrace that kind of vision, preferring to remain somewhat closed off. So far, surprisingly, Amazon had seemed like the most eager to embrace enabling the web platform with its S3 and EC2 services. However, in the last few months, Facebook has received much of the attention for its platform play. To be honest, we initially had high hopes for Facebook's platform play, but despite the hype and attention it has generated, it's actually gone in the wrong direction. It seems like Facebook's attempt at being the platform is more about bringing apps into Facebook, rather than allowing outside apps to make use of Facebook as a component. In fact, it's a little bit like Google's misguided strategy -- focused less on enabling things outside of its system, and more on bringing things inside.

However, both Google and Facebook are getting ready to launch new offerings that look like they hit directly at the other company -- but which really demonstrate some of the tactics both companies are hoping to use in branching out from their core areas of business to become more of a web platform. And both involve hitting the other provider by doing what it won't do in terms of opening up certain data to outside uses.

First up is Facebook, which is rumored to be launching a major ad network initiative designed to compete with Google's ad platform. The key is using Facebook profile information tied to an ad cookie to make the ads that someone sees as they surf around the net a lot more relevant (or creepy, depending on your point of view). It's this vision that Microsoft is buying into (as the supplier of the ads). This is a clever move. It's something that Google can't do as directly or efficiently, as Facebook in many cases will have a lot more data about the user's specific interests and profile. But, it's also an example of Facebook finally doing something that involves pulling data out of Facebook to do something useful elsewhere.

Then, there's Google. The company is launching a new set of standards designed to make it easier to build apps that run across any willing social network. The company has built up an interesting alliance of networks, including (no surprise) its own Orkut, but also LinkedIn and Salesforce.com. The idea here is that developers can now have their apps easily work with a variety of social networks. Facebook hasn't signed on to the deal, and may resist it for some time -- but if it really starts to get some traction, the company may feel it necessary to join in. In effect, this is Google's way of forcing social networks to open up more and be a part of the larger web platform -- rather than being stuck in their own little silos. If it works well, Google could conceivably then build a similar ad offering on top of multiple networks of information, and it would also serve to protect Google somewhat from the faddish nature of social networks, as it wouldn't matter if one particular network declined as another gained prominence -- as long as they're all using these standards.

Comparing the two strategies is interesting -- as both revolve around doing the sorts of things the other company doesn't want or cannot easily do, yet which will directly impact the other's business. But, both also involve a somewhat tricky cat and mouse game of determining which parts of a business are really open and which are closed, with both seemingly hitting at each other's key weakness within their core offerings. In other words, it's about to get a lot more fun to observe how these strategies play themselves out. As for who wins? Despite thinking that Google should have opened up years ago, I think Google has the stronger position here. On top of simply having a lot more money available, it's strategy is much more about enabling others to do much more online. Facebook's strategy, on the other hand, risks consumer backlash over having private info spread outside of Facebook, and also leaves the company reliant on everyone staying within Facebook just as Google is about to make other social networks potentially more interesting.

Filed Under: advertising, social networks, web platform
Companies: facebook, google

What Else Can We Blame On Facebook? How About Helping The Mob?

from the any-other-conspiracy-theories dept

Constantine von Hoffman has been doing a nice job tracking both how security firms are blaming Facebook (or any other popular social network) for just about anything, but also how the press keeps falling for it. His latest find is to trash an Australian news organization for writing up a whole article on how Facebook, Linkedin and MySpace are popular feeding grounds for organized criminals without bothering to talk to a single other source than a security firm who has a vested interest in generating headlines and making people worried about security. As Constantine notes, he has no reason to doubt that the claim true, but it seems like the press should at least look for a second, less biased, source for confirmation.

Filed Under: organized crime, security, social networks
Companies: facebook, linkedin, messagelabs, myspace

Microsoft's Facebook Deal Might Make Sense If It's An Ad Subsidy... But What About The Hedge Funds?

from the still-scratching-my-head dept

We had some good comments on yesterday's post trying to do the math on Microsoft's $240 million investment in Facebook, for just 1.6% of the company. A few people pointed out that if you ignore the ownership part, and just think of it as something of a marketing statement for Microsoft's ad network, then perhaps it could make some sense. Maybe. Since the deal does come with a big advertising deal, if Microsoft thinks of the $240 million as a marketing spend or ad subsidy with the chance of eventually having some payback then it could potentially make sense -- depending on how valuable Facebook ads turn out to be, and whether or not it then helps Microsoft sign up additional ad partners. However, what's a lot more difficult to figure out is the corresponding rumor that on top of the $240 million from Microsoft, two hedge funds combined to dump another $500 million into Facebook at the same valuation. It's been reported that Facebook had been looking for $750 million, but those hedge funds don't get any of those additional benefits that Microsoft gets. For them, the best has to be on the fact that Facebook is going to be worth a lot more than $15 billion at some point in the relatively near future. That seems like an awful lot of money to bet on a risky situation without that much upside.

Filed Under: ad network, hedge funds, social networks
Companies: facebook, microsoft

Turns Out Those Six Thousand People Who Are Your 'Friends' On MySpace Aren't Really Your Friends

from the no,-really? dept

This seems unlikely to come as a surprise to most people, but despite the number of tools and applications such as social networks for getting people to network with each other, the number of close friends that most people have hasn't really changed -- and it almost always involves people who have gotten to know each other face-to-face rather than online. This isn't particularly surprising or new, nor does it suggest that there's anything less real about online friends. It just confirms what pretty much everyone knows: while it's certainly possible to meet and get to know people quite well through online venues, meeting in person still has plenty of benefits -- especially for reaching a closer level of friendship.

Filed Under: friends, relationships, social networks
Companies: facebook, myspace

Some Reasonable Advice On Facebook At Work From British Trade Unions

from the ain't-so-bad dept

We've seen a bunch of ridiculous reports lately blaming Facebook for lost productivity and saying that nearly half of all companies now ban Facebook at work. Those studies were both biased and misleading -- often coming from companies that were trying to sell filtering solutions to companies. Over in the UK, however, it's nice to see the Trades Union Congress (TUC) there say that banning Facebook at work is going too far and throwing the baby out with the bathwater. Instead, the group recommended that companies come up with some straightforward usage policies. All in all, the group's comments seem quite reasonable, noting that there are benefits to these services and banning them outright is simply an overreaction. The report also notes that banning sites like Facebook won't stop employees from slacking off at times and it probably won't even stop them from figuring out ways to get to Facebook. Instead, it makes more sense to focus on encouraging them to use social networking sites in a reasonable way and then just focusing on whether or not the employees are actually getting their jobs done.

Filed Under: internet filters, personal surfing, social networks
Companies: facebook, myspace

Wal-Mart Tries Social Networking Again... But This Time With An Actual Social Network

from the well,-that's-better dept

You may recall (or, actually, probably not) that last year around this time, Wal-Mart decided to launch its very own social network as a back-to-school promotion, except it took out all the fun parts of social networking, and then put in fake kids who talked about the clothes they were buying at Wal-Mart. It was either entirely ignored or mocked by the few who came across it. After a few months, the experiment was quietly abandoned -- and almost no one noticed. This year, Wal-Mart is back in the social networking game, but at least they've realized that rather than copying the hot trend of the year, it might be better to embrace the leader. To that end, the company is launching a Facebook group to try to get college kids heading back to school to "design your dorm room together." It's still a bit cheesy, and may not attract too many users, but at least the company finally realized it needed to go where the real kids were actually hanging out. Maybe next year the company will realize that it helps to have an application that's actually fun or useful as well.

Filed Under: back to school, social networks
Companies: facebook, wal-mart

Shocker: School Boards Notice That The Internet Isn't Dangerous

from the about-time dept

While Congress has been busy rushing through all sorts of legislation to try to ban social networks from school in the name of protecting the children, it seems that they never bothered to ask schools what they thought of the internet and social networks. Instead, as politicians are known to do, they simply took the sensational headlines about the supposed "threat" of social networks as if it must be true (or, at least, as if it were the perfect opportunity for some grandstanding). However, someone who prefers to remain anonymous has passed on the news that the National School Boards Association has put out a report noting that fears concerning students on the internet are greatly exaggerated and that social networks can be quite positive for children. In surveying students, they found that most students understand the message that they should be wary of strangers online (just as they should be when walking down the street). They know not to reveal too much and they know not to go meet strangers without permission. Sure, there will always be a few exceptions, but it's very rare. Based on this, the report says that it makes sense for schools to explore more constructive uses of social networks in educational settings, rather than worrying so much about locking them down. Of course, if some folks in Congress have their way, that won't be possible.

Filed Under: internet, schools, social networks

After Accusing Them Of Being Criminals For Years, Record Labels Want Kids To Shill For Them On MySpace

from the somehow,-I-think-not dept

Do the record labels really not realize how much they've pissed off their best customers for the last decade? It would appear so, because they're now hoping that the kids they've alienated for all these years will become shills for them on MySpace and other social networks, pushing all their friends to buy music as well. That might have worked years ago, but these days it seems like plenty of kids have been so turned off by buying music from record labels that treat them like criminals first, that it seems like an uphill road to convince them to not just start buying music, but shilling for the record labels as well. Especially as reports are coming out that legal purchases have stagnated as unauthorized downloads have continued to grow -- it's hard to believe that the record labels are suddenly going to get everyone over to their side this easily.

Filed Under: music, recording industry, social networks
Companies: myspace, riaa, snocap