A source familiar with Facebook’s long-term strategy tells us the startup “definitely” plans to eventually build an ad network on the back of Facebook Connect, the service that allows users to sign-in to participating third-party sites using their Facebook accounts. The idea is that Facebook would be able to sell ads for third-party sites, targeting them using all the anonymous demographic and behavioural information it keeps on its users.
This source says there aren’t any immediate plans to launch the ad network because internal tests have shown Facebook isn’t yet capable of paying publishers higher ad rates than they can get with ad networks already on the market, despite Facebook’s wealth of demographic data. Because of that, Facebook executives aren’t yet prepared to promise publishers the large guaruntees it would take to win their business.
Facebook platform manager Josh Elman told us the current strategy for Facebook Connect “is to be a great platform to help users engage more actively with the site, with their friends and share what they’re doing through Facebook.” He said sites that are implementing Facebook Connect see a 20% to 30% increase in daily registrations.
But Josh also said “I can’t say we haven’t had conversations about what we may do two years down the line or in the future.”
He seemed to think we’d seen an internal document on the plans, telling us: “If you wrote about every single document that ever got floated around Facebook, you’d have an awesome set of stories.”
Truth is, we think Facebook is wise to wait on rolling out an ad network. During the current recession, the kinds of ad networks that are thriving cater to direct marketing and performance marketing focused clients. The kind of data Facebook would be able to use to target ads — behavoiral and demographic information — would be more helpful to brand advertisters, who make up a small portion of ad network clients.
The ad networks that are doing well are “demand fullfillment” networks. Facebook’s network would best serve clients interested in “demand generation.”
For us outsiders, it can sometimes be difficult watching a Facebook revenue strategy that looks a lot like someone with a dead car battery waiting for lightning to strike. But because we believe sources who tell us the company is in no danger of running out of funds, it’s hard to argue with a strategy that emphasises growth when it seems to be working so well. Afterall, the now five-year-old Facebook did go from 100 million to 200 million between August 2008 and April 2009. That’s incredible.
Photo: Spencer E Holtaway
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