Facebook Connect is a game-changer. But not in the way you think.

This post is a reply to Om Malik’s review of Facebook Connect, the new Facebook data-sharing system that allows 3rd-party websites to share data with Facebook about Facebook users.

Here is my reply to Om’s post, which was posted as a comment on GigaOm. Text below. I would love to hear your thoughts.

Monetizing Facebook Connect

Om,

While your initial post is insightful, I disagree with your notion that FC will primarily make money by better ad targeting through more profile information. I have done significant advertising as an advertiser, and FB already has enough detailed information to reach almost any kind of audience profile that you are looking for as an advertiser.

The big problem is that online, as in other mediums, users continue to ignore ads. This is especially true in social networks given the high PV / Visit ratio.

Google got around this problem by showing relevant ads WHEN and WHERE people were looking for a particular something. This was a great and natural extension of Google’s main product: search. If you were searching for X, or on a site about X, Google would show you ads related to X.

Search is not Facebook’s forte. The social graph is. So how can Facebook use what it has to get people to care about ads?

The answer is almost wickedly simple: through friends and friends-of-friends. I will care about an ad for X if I’m interested in X at THAT time (Google search) or in that location (Google Adsense), OR if my friends and trusted connections care about it (Facebook). Nobody else on the internet can tell me what my friends are interested in, what new products they are trying, or new services they are using. Facebook Connect will be able to do that.

FC will make money by getting me to “care” about the “ads” and charging advertisers premium rates for higher CTRs and better converting traffic. This works because of the social graph, NOT because FB has 5 new pieces of information about my profile.

Think about the following example: I have 649 friends on Facebook. If I buy a new video game for my Xbox360, and that information shows up in the feed for my 649 friends, the chances for them to click-through and buy the same game are much higher than if you took the same ad and showed it to 649 random users on the Internet. The CTR these days on SNS sites are abysmal – 0.01 – 0.1% on average. If even 1 of my 649 friends clicks on the video game link to learn more through Facebook Connect, FB has just outperformed the entire SNS ad sector by 3x – 10x.

THAT is game-changing. And not in the way you think.

About these ads

3 Responses

  1. Forget about what Om said, this is a highly informative and clearly written post, specially from a user’s point of view. I am actually looking forward to see this in action, as it seems like a really promising business move based on the social networking concept. Show me what my friends are looking at, buying and using; and more often than not, count on me to do the same. Nice work FB guys.
    And thanx Ali, for the post.

  2. Thanks for the thoughts Balach.

  3. Its funny I found this blog because of Xanga surveys and actually started reading it, but it strikes an interest with me. Since I do comedy now and before that went to school for psychology I like thinkgs that involve getting peoples attention and trying to anticipate what they will do. But youre right about advertising online, its close to useless, unless you can target an individual. But this is an idea that seems too simple but also seems like something I would relate to and do. If I ran a social networking site and was deciding what advertisements to show who, I would be up front about it. If they posted something like “Hey guys we at facebook know you dont like advertisements clogging up your page but we offer this service free and we need some way to stay afloat so instead of having a bunch of random ads that you dont care about we developed a survey to better address things you enjoy. This helps us and you, at least if you arent clicking the ad it is no longer something random and its persaonally tailored to you. Things like do you own an xbox360 or ps3. Your information will not be shared with any companies advertising on this site, its strictly for us and you” I dont know, honesty like that usually catches my attention, and if its an ad I care about I will click it. Even if the users dont complete the survey they will still have the same ad campaign they are using now for those specific users. I guess the big thing is a cost benefits analysis of someone to make the survey and how much they will make from the ads with a more targeted campaign….

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