Dear Facebook, Make Money

Wrote a post for Mashable today:

Dear Facebook,

With speculation around how you should monetize mostly a topic of conversation within the tech community, it always surprises me that a marketing perspective isn’t thrown into the mix. After all, it’s marketing dollars that you (and just about every other online entity) are relying on. So, taking a digital marketing perspective, I thought I’d throw a few thoughts into the discussion.

Note: this is not intended to be a “how to use Facebook to develop a social marketing strategy” discussion, but rather the intent is to explore how you could build a business model around your rich user data given what marketers desire in terms of effective marketing and what they’ll pay for (effective marketing= happy marketers who spend more $ on what works).

So, you have one thing right: marketers pay to reach consumers, and the more targeting a platform can offer, the more marketers are willing to spend because of the promise of greater ROI. There is one flaw in your approach, however: you have been entirely focused on monetizing Facebook.com itself.

Now, while it may seem counter-intuitive, you ought to focus on monetizing your rich user data, and not necessarily the site itself. Wait–isn’t that the same thing? What is she saying? Just hear me out: You are not a content platform. You’re a communications utility, and while you’re a platform for UGC, you don’t provide a rich content experience. Users aren’t on your network to experience any kind of particular content–they are there to connect with friends and to essentially store personal data (whether they consciously know this or not).

Although some could argue that explicit and implicit user outputs (all that stuff you see in your newsfeed) IS the new “content,” we still have yet to see that this kind of UGC can be successfully monetized through advertising (translation, ROI for ad spend around UGC tends to be low).

Now, marketers have deployed lots of successful marketing initiatives within Facebook, but a majority of these involve leveraging your free Business Pages to drive conversation and engagement (read: free marketing). You’ve had it in your heads that if you let marketers set up free Business Pages, and draw in communities of brand enthusiasts who “Fan” these Pages, you can then upsell these brands into media buys. But the problem is that while great for engagement initiatives and fostering conversation around a brand (great for marketers!), Facebook is still not an optimal place for ad-spend, no matter how much attention is aggregated there. ROI from your ad spends tend to be relatively low for marketers. Again, it goes back to user intent and behavior.

Essentially, Facebook is this giant data storage silo. It contains consumer data nearly as valuable as the credit card companies have (the kind of data marketers would pay nearly through the nose to have). It’s user data, not the dot com itself that you should consider your golden ticket.

Now, before anyone starts jumping up and down about the notion of “monetizing user data”– I’m not advocating that private user data be mass-harvested and sold ad hoc to marketers. Rather, what I am suggesting is that with the dawn of Facebook Connect, there may be a viable, ethical way to leverage this user data.

With Facebook Connect, you can essentially create a content network (and note the launch partners, major media companies) that could also support an ad-network. So now, with a Facebook Connect-enabled content/ad network, you have the holy grail of targeted advertising: contextually relevant content experience AND the kind of granular targetability based on user graph data that made the initial promise of social networks so huge for marketers. Basically, participating FBC sites could not only sell targeted ad inventory based on their content, but based on Facebook’s (opt-in) user data as well. This would not only give marketers what they want in terms of targeting, but you would get a cut of the ad revenue for being the arbiters of that valuable graph data.

Of course, even without a potential FBC ad-network, Facebook Connect helps brands and publishers provide a socially enhanced experience for their customers with a lower barrier to adoption than current one-off branded social networks. Not to mention, FBC enables the potential to drive a lot of new traffic to their site as a result of opt-in user actions (including purchases) being broadcast through the Facebook network.

There is also the opportunity for e-tailers to capitalize on social graph data as part of their merchandising model. The benefit of graph data to the e-tailer includes the implicit endorsement of products by your users whose purchases are broadcast to their Facebook friends (again, only if the user opts-in to have their actions published), driving significant traffic, tapping into the power of consumer advocacy, and providing a more socially enhanced and user-friendly experience. Given the significant value this kind of data offers, you could leverage some kind of rev-share program for supplying this graph data to e-tailers (but again, users would have to opt-in!).

Now, this brings me to one last point that my dear friend and brilliant colleague Ben Bose has suggested be baked into all of this– a value exchange for the end user. If it’s consumers’ graph data that is benefiting both supplier/marketer and Facebook, then it should also work for the benefit of the consumer. Perhaps users may be assigned “influence” scores based on their network, and the degree of influence they have over that network. These influence scores could earn them rewards– not unlike our credit card rewards. Of course, some services already have types of user rewards, including ThisNext and imeem, but this is something that could be propagated to a much larger degree with initiatives like Facebook Connect.

Yes, there are many counterpoints to these ideas, including the argument that open Web enthusiasts (myself included) would pose around the idea of Facebook (or MySpace) being proprietors of graph data versus users themselves. But rather than examining the differences between FBC and true data portability, this was a look at possibilities for Facebook Connect as a means to increase Facebook revenue. Everyone's weigh-in?




Matt said...

Hi Alisa,
This is your first post that I have ever read. Congrats, you've got me hooked, and I am excited for the opportunity to tune in to more (at least I truly hope you have more:) of your grandiose ideas.

I think this idea is a very good one and I have an plan on how to implement it right now. I will contact you in a more formal matter to discuss this. But back to your idea about facebook, I agree:

The company needs to start leveraging its data in a way that will be more compelling for marketers/other companies to take part beyond what is currently available with applications (and the ads that come with them). There is great opportunity on the horizon for facebook and facebook connect could very well be the vessel that takes it into the next phase of its existence.

-Matt Monday

Paul. said...

hi Alisa, just found your blog through your article. I'm adding to my rss feeds.


Jordan Chark said...

Interesting perspective. It's pretty clear that the time has come for Facebook to reach some amount of their advertising potential, and end-user merchandising via FBC is probably the best way to do it.

However, the nature of such a model infers the resources and scalibility are readily available. Eventually, they will be. I've just had this feeling the optimism surrounding social media is so great, most don't realize the significant deficits. Why is monetization even a problem for them?

The counter-arguments, especially the "social media fascist" ideology of graphs vs. users simply aren't valid. By and large, the web itself is a a structure of analytics having undergone an evolutionary process. Facebook just hasn't been able to map out where they fit, whereas Google (and the like) have it down to an exact science.

The issue being, time is running out. Who knows for how much longer Facebook can be a self-sustaining commodity? Value exchanges themselves are difficult to manage because they're present over much more of the experience than to just the end user. We've all inferred that the real answer to opening up the platform to marketers is an abundance of rich, social, user-actionable media. Say, a combination of Digg and Adsense.

Facebook has already shown the applications system to be wildly successful, and eventually, through FBC, success is on their fingertips. My worry lies in the subtlety of their actions- yet another thing Google's mastered. As long as it doesn't become some sort of oversaturated hype-machine.

Overall, realistically, if everything is up to spec I think it can actually work. Although, I'll try not to be too optimistic until I see it, to avoid encouraging counter-productivity.

Keep in mind, I'm no expert, and nor am I in any way qualified to offer my criticisms to professiomals. Nonetheless, user-feedback is key, no matter who's behind it. Even if it's me, an almost-15 year old barely-blogger- I'm still yet another user, and I'll stand up for social media democratization.