Wrote a post for Mashable today:
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).
YOUR FOCUS IS FLAWED
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.
SO WHAT SHOULD YOU DO?
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!).
CREATE A VALUE EXCHANGE!
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?