Advertise Space - Blog Avertising » The Incorrect Advertising strategy of Facebook

Facebook falls prey to the most common adage that I hear over and over again with any web 2.0 or social media, or in fact almost any new online start-up:  Our business model is simple.  Build a cool app, get lots of users, have tonnes of traffic, and THEN put up some ads on the site to make money.   The entire revenue model always comes in play after the traffic and is never considered when building the application.  Why?  Can’t anyone build a great application and have a real revenue model included in the planning process besides, ‘put some banner ads up somewhere at some point.’   If you integrate the advertising right from the start, users will more naturally accept them as time progresses.
Facebook may be generating some revenues, but considering the massive amounts of traffic, the revenue numbers are most likely pathetic.  If you look at any of the advertisers actually purchasing ads on Facebook they tend to be the bulk buyers like Dell or the super bulk buyers and famously crappy ad producers like Zwinky.    Considering the huge volumes of impressions that could potentially run in a day, it puts the ad buys out of most buyers reach even with the most discounted CPM’s.   Say you had $10,000 to spend for a one month campaign which is a pretty average size buy.  All your banner impressions would run out in a few minutes!   Wow, big impact.  “Did you see my ad campaign on Facebook yesterday?  It ran from midnight to 12:04.  It was only 4 minutes, but I got 10 million impressions.  Oh and no one really clicked on my ads, since they were too busy power pro-poking.”
Even though I sell online advertising for a living, it is not the only way to generate revenue online and may in fact not be the best strategy for some companies.  I think Facebook can and should generate some of its revenue from advertising, but what they are currently doing is horrible and there are other options.
-          Go with what is already working.  The $1 per gift generates millions already.  Build on it, expand on it.  Make the virtual gifts worth something virtually.  Create an eBay type exchange where users can buy, sell and trade gifts.  (And cut out the free gift apps that are cannibalizing your own revenue stream)
-          Create a Facebook size ad unit.  Heck with the IAB.  You Are Facebook.  Make up whatever size ad unit you want, integrate it better into your site and sell it.   Clients will just have to make the banners.
-          Charge fees for the apps.  Why does everything Web 2.0ish have to be free?  Companies will gladly shell out big cash to have their apps in there.
-          Facebook PRO memberships.   Charge to have more photo space, extra features, a built in email feature showing full conversations without logging in, etc.  Even if you only got a little button image that said, ‘pro member’ a million people would join by default.
-          Develop better Behavioural targeting algorithms, Yahoo can do it, mainly because they have semi-detailed profiles on all of their registered user, Facebook has the ultimate user profile.  Favourite movies, bands, books, TV shows etc.  Don’t go down the lets copy AdSense route.  Innovate.  Deliver the ultimate targeted Ad to the user.   “Hey Chad, your favourite band has just released their new album, click here to hear the free track, click here to purchase”
-          Share the wealth.  Give users the power to choose from a menu of banner ads for their own profile including the type or even the actual advertiser and even the creative, and then give them a percentage of the advertising.   But give them a real cut, 50%, 75%.  And not an affiliate CPA type transaction, give them money just for showing the ad.   Imagine the adoption rate if a user could embed a small banner for a product you personally love an endorse, say the iphone,  If you already own one and tell all your friends about it, then you already are in fact marketing for the company, so why not get paid for it?
-          So let’s hear from you.  Any other ideas on how to better monetize all that juicy traffic?

Related links:

Facebook has just launched CPC advertising, read about it here at Facebook Observer

Inside Facebook talks about the Advanced Flyer program