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But you can triangulate all you want, if a user doesn't care, it doesn't matter
Facebook continues to improve its ad-targeting capabilities.
But is advertising the right business model for the world's biggest social network to pursue? After all, the fundamental problem with advertising in social networks isn't that the marketer doesn't have enough information.
The problem is that in a
social-networking environments, it doesn't matter if a marketer knows a
person's age, gender, preferences, language and location, if a person
is socializing or communicating, they're just not going to have time to look at ads.
Nonetheless, Facebook is improving marketer's ability to target its users, according to a recent Facebook blog post.
At the same time Facebook re-launched its new homepage this week, the social network also announced that it's providing advertisers more filters to target Facebook's 175 million-strong user base. Advertisers can now narrow down to their target list to people who speak a certain language or people in a certain area.
Now, advertisers can type in "spanish" into the "Languages" targeting box. They'll see that there are over 1 million people who are identified as "spanish speakers in the U.S."
As for geo-targeting, Facebook now allows advertisers to target a certain mile radius - 10 , 25 or 50 miles - of their target location. The feature is available in the U.S., the U.K. and Canada.
It's an improvement to Facebook's current capabilities offered to advertisers to help them narrow in on their demographic. But the big question remains: Is this geo-targeting really going to raise the effective CPM (cost per thousand of impressions) that this social network gets?
An excellent article written by Benchmark VC Bill Gurley, suggests that Facebook, and MySpace, would be wise to focus on digital goods and casual games as a monetization strategy.
He essentially argues that regardless of how effective social networks are in delivering a potential customer, the user is not in the right frame of mind to acknowledge an advertisement. In a social setting, as I've raised many times in my articles and shows, is not the right environment to deliver an advertisement. When communicating and interacting - which is what people do on social networks - people are more inclined to ignore advertisements. People love to multi-task, but acknowledging an advertisement isn't on the list of to-do's.
Social networks will have difficulty pulling advertisements in for the same reason instant messaging services, such as ICQ, AIM, and free email, such as Yahoo Mail and Hotmail, have failed to generate significant ad dollars. Advertising doesn't work in these "networking" environments.
What does work? Virtual goods and casual games.
Gurley points to TenCent, Mixi, DENA and Gree as examples of social networking sites/communities that are making moeny off of virtual goods and casual games. You can see from the spreadsheet below, based on his best estimates, that on a per-user basis, these companies generate far more revenue than Facebook and MySpace.
Mixi, which is most reliant on advertising and yet has more monthly active users and pageviews than Gree and DENA, has a lowest per-user revenue ratio than DENA and Gree, as well as TenCent.
Clearly, there are other ways to monetize users more effectively.
So, for Facebook, should it continue to help marketers target ads?
Or, should it start thinking about a new monetization model that can really help this company take off? It's clear which direction public shareholders would want Facebook to go.
(Image source: Michael Rubenstein's "Party Kids in Portland, October 3, 2008," an image from Redux's upcoming American Youth book*, published by Contrasto and due out in May 2009. © Michael Rubenstein https://images.americanyouthbook.com/c/americanyouthbook)
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