The summer of Facebook

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More attractive to advertisers?

Because advertisers love nothing more than campaigns that yield an ROI that borders on 0%. MySpace has already been dogged by other advertisers and the tech media for how weak it performs (and that was before the invasion of the low-end advertisers via comment spambots, which have dilluted it even further.) Now take an audience that is potentially even MORE resistant to advertising (with reports of even weaker ROI than MySpace) and that somehow is a more attractive audience?

Social media marketing is an extremely difficult proposition and there's currently no advertising models in place that will scale to match the financial hype Facebook's currently getting. Viral marketing is by its very nature low-cost, and far too hit or miss to consistently bring big ad revenue. Behavioral-based models can bring bigger money, but still only reach a certain threshold (see Yahoo which excels in this area.) Google was able to grow into the financial leviathan it is today because its ad revenue model scaled wonderfully with future growth. Facebook just doesn't have that type of bottom-line financial potential right now so I still don't understand the valuation, at least standing on its own.

From a pure financial standpoint, I think Facebook (or any major social networking site) would be best utilized as a loss-leader to gain eyeballs by major players like Google/Yahoo/Microsoft which can afford to makeup the revenues elsewhere. And given their recent ad platform acquisitions, maybe they could increase the ad performance on social networking by bring those resources to bear to integrate with other data they have on users (email, search history, IM conversations, etc.)

Posted by: RustyShackleford   Posted on: 07/30/07 You are currently: a Guest | Members login | Terms of Use

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