Friday, August 24, 2007

Facebook Ad Targeting Could Be Revolutionary

Facebook Ad Targeting Could Be Revolutionary
by Gavin O'Malley, Friday, Aug 24, 2007 6:00 AM ET (Media Post publications)
IN SEARCH OF ITS SILVER bullet, Facebook is preparing a highly targeted ad system powered by the personal information provided by members of the trendy social network. The initiative, reported by The Wall Street Journal on Thursday, could eventually justify a huge increase in online ad spending, some analysts said.

Beginning this fall, the privately owned Facebook plans to implement complex algorithms that can predict members' receptivity to ads. Rather than banner advertising, the Journal reported, Facebook is exploring placing ads within news and content feeds on users' profile pages.

Facebook did not return press inquiries regarding the system.

Still without a robust monetization strategy, Facebook must clear several hurdles for this grand plan to work.

Noted Forrester analyst Josh Bernoff said: "Unlike Google's automated AdSense product, Facebook's system will depend on a large sales force operating smoothly." There is also the issue, he added, of whether users will object to their behavior being tracked so closely.

Still, if all goes according to plan, this could represent the most significant move in the world of online advertising since the advent of AdSense, according to Bernoff.

"What began as a shift in traffic online resulted in a massive shift in dollars when people realized AdSense worked," he explained. "Two years from now, this might be seen as the beginning of a similarly huge shift in dollars online, if not bigger, because this has the potential to be a whole lot more relevant than AdSense."

Thanks to its sheer popularity among young, college-educated consumers, Facebook is already profitable and will post a positive EBITDA this year, according to Jim Breyer, managing partner of Facebook investor Accel Partners.

Breyer, a Facebook board member as well, recently told attendees of Fortune's iMeme conference that the social network would take in well over $100 million this year, according to press reports.

Facebook has grown three times as fast as MySpace in the past year, according to Nielsen//NetRatings. Seeing a massive influx of first-timers, Facebook U.S. visitor numbers reached 26.6 million in May--up a full 89% year-over-year and 3.6 million more than in April, according to comScore.

Worldwide, comScore reported, Facebook reached 47.2 million visitors in May--8.4 million more than in April, and with an average of 20.6 visits per user.

Last August, Facebook did a deal with Microsoft to place all banner ads and paid links on the site, following closely on the heels of a similar partnership struck between MySpace and Google.

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