Monetizing Facebook Connect
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.
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