The Importance of Facebook
Posted by scottjduffy on February 23, 2011
On a recent blog post, some random Internet person declared that Facebook was basically a Ponzi scheme with no real revenue model, the whole house of cards would come crashing down.
One of the examples he gave was an author he knew spent $1,000 on Facebook ads, and sold one book as a result. (Terrible ROI.) Therefore, Facebook ads suck. Therefore, people are going to stop using them. And, similar to a Ponzi scheme, after the last sucker has been scammed, the train comes to an end. Or something like that.
As an aside, some analysts estimate Facebook had $2 Billion in revenue in 2010. And will have $4 Billion in revenue in 2011. That’s a lot of people buying Facebook ads I guess.
I see Facebook completely different. I’ve had the privilege, over the last few months, to see some of the technologies people are developing to leverage Facebook as an ad network, and I think we’re only beginning to see the potential here.
One company has developed an ad optimization platform. It will take one ad (or four) and spread it across hundreds or thousands of segments (gender, age, location, likes, marital status, month you were born, etc.) Then measuring the success of each ad, it will allocate more money to the most successful segments. Almost like doing core samples to find where the gold is and then spending all your money on the best samples.
Also, I am involved in a few projects that involve a “social media component”. Actually, what advertising campaign in 2011 does NOT involve a social media component? Anyways, big multinational multi-billion-dollar companies woken up to the “engage your customer” movement.
So the reality is Facebook (as a concentrated microcosm of the wider Internet) is attracting more big advertising budgets. Newspapers, magazines, television, and other traditional media are all suffering. Maybe it’s working to Facebook’s advantage that some people question if it’s able to generate revenues – while it silently rakes in the dough.
