Nate Hallowell’s

Social Networks February 24, 2010

I don’t think social networks are quite similar to ad networks, maybe closer to exchanges but still not right on.  Facebook and MySpace have continually struggled with monetizing their huge user bases, among other social networks, and it seems as though they’re starting to adapt ad network like ideas into their own business.

First, I think it’s important for any marketer to constantly remind her/himself that nobodys for free. You don’t get someones attention and build a brand relationship for free – even if it’s not money you bought it with. I’ve heard so much negativity (especially from adults) regarding personalized advertising. I don’t think this is a problem with social networks who generally have a smaller audience. Advertising networks are just tapping into behavioral targeting technology that layer multiple measurements on CTR and ‘action’ or ‘purchase’ rate. The technology combines all of these variables and serves ads to the ‘most likely customer and continuously alters itself to find the most profitable customers. Facebook lacks in that it has limited info on customers outside of it’s network but it’s got lots of info on those within it – much more than ad networks. It could use this information for behavioral targeting more advanced than it already is.

This could not only be a very effective operational tool but also a great sales tool. Facebook also has an advantage over other networks in that its members are very willing to supply personal information – I don’t think they’d be stepping over the line in asking a small ‘test group’ if they’d like to opt in to a study. Facebook could ask for more detailed information on these users like how much they make and what their spending habits are. This information would add to the predictive behavioral targeting they would already be using. Facebook could even try pioneering a ‘show my friends what I’m buying’ model for these opt-in Facebookers. Because Facebook users are often interested in their friends buying habits and other trends, this might motivate them to buy simmilar things.