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Last week I went to the official opening of the Facebook offices in Hanover quay. As usual I couldn’t find the office. I was glad to bump into a journalist from the Irish Independent who also had a similar problem so at least I wasn’t on my own. Despite having the latest iPhone with mapping technology, what got me there was a simple phone call to the security guard!
After the official presentation a group of us were invited to have a round table discussion with some representatives from facebook that head up the direct advertisement and monetization division. As well as making significant changes within facebook to improve user experience and engagement levels they are also making ongoing changes to their advertising model. It’s an area that has huge potential but they need to approach it carefully. If advertisements are too obtrusive they become annoying to users, if they are not obtrusive you don’t get a high click through rate.
Facebook now have over 300 million users and what’s interesting is the level of engagement amongst these users. On typical social networks you may only have less than 10% of active users contributing to the content whereas with facebook this is significantly higher. Facebook are constantly monitoring and improving this as they realise that higher engagement means higher profit. If you think that facebook are not going to make a lot of money on the future think again. Their attitude regarding user engagement is spot on and having a longer term vision is key to their success. It would be easy for them to generate much higher revenue in the short term but that’s not going to do them good for the long term.
When you advertise in Google you get a space over on the right hand side of the page. On typical advertising platforms if you don’t click on this space within the first 5 times of seeing the advertisement then you are not likely to click on this in the future. With Facebook this is different, they have found that the advertisement can be displayed for longer and still can get some traction at a later stage. I guess this is related to the fact that the advertisements are not intrusive and also that people are not actively going in to Facebook to shop.
In a report from Borrell Associates it states that Facebook will get 74% of their advertising revenue from local advertisements. With the ability to target your advertisements to specific areas this is very appealing to local advertises. The total estimated revenue for facebook this year is $500 million with over $425 million directly related to advertisements ($75 from virtual goods). Unfortunately in Ireland you cannot target advertisements based on county but we’ll see this early next year.
What forms of advertisements are available?
Inside facebook have a good article on the types of advertisement available in facebook. Check it out.
How do you select when to show the ads?
This is where it gets really interesting. Within Facebook you know a lot of details about the people that are online. You know if they are male/female, engaged/single/married, you know where they are from (taken from a combination of IP address, your address and your education) and much more. You even know what they are interested in based on their profile, pages and the groups they subscribe to.
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So when you are setting up your advertising campaign you select under what circumstances you want your ad to appear and you pay on a cost per click basis. If somebody doesn’t click your ad then you don’t pay.
Examples of how it could be used
- I’m a photographer and I’m interested in wedding photography. I’ll put an advertisement in Facebook that will target engaged men and women because the majority will want a photographer for their wedding.
- I’m running a sports event in London, I will target people that are interested in sport and are based in London or within a 20 mile radius of London.
-I want to build up awareness of a new product, I’ll build a video ad that will allow social interaction so you can comment on the ad and this will encourage sharing and viral distribution of the content.
With the attitude, goals and focus of the Facebook team they will go from strength to strength. They are only really at the beginning of their revenue generation phase. When this train really gets moving it will be the TGV (Fast train in France!) of social networking!!
p.s. Facebook are also hiring at the moment!