What does Goldman Sachs’ $450 million investment in Facebook mean for marketers? Put bluntly, it’s a wake-up call. If companies are not already marketing on Facebook, they’d better start.
The obvious reason that Facebook is so attractive to investors like Goldman (and DST, which invested $50 million) is the social network’s growth. Facebook had 620 million unique visitors worldwide in October 2010, according to comScore. In spite of the much-ballyhooed value of one-to-one marketing, what marketers want is mass reach, and Facebook offers that in spades.
More important than reach is targeting. With Facebook, marketers also get micro-level targeting. With Facebook’s self-service tool, a marketer can reach a million people—or even 10 people. I’ve heard of cases where a marketer has designed such finely crafted ads that they reach just a handful of people at a particular company.
Facebook has a traditional sales team that visits the big ad agencies and sells the ads that appear on the right side of a user’s home page. But ads on other internal pages are from the self-serve system, and this is where Facebook is concentrating its attention for future ad-revenue growth.
This targeting tool is already responsible for about half of Facebook’s advertising revenues, which eMarketer last August estimated would be $1.3 billion in 2010. (Our next social network ad spending report—with an updated Facebook forecast—will be out soon.)
Facebook’s self-serve tool and intelligent database are perfect reasons for Goldman’s investment. No other company has the amount of information on consumers that is willingly provided by Facebook users.
Anytime you click the “Like” button, that information is added to Facebook’s database.
Like Coke? Facebook would be happy to target soft drink and junk food ads to you. Like the Seattle Seahawks? Here’s some team gear you might want to buy. And ads are also apparently being targeted to what people post. Last week I posted a set of pictures from my Christmas vacation to Kauai and today, Facebook showed me an ad for a vacation rental on the island.
While this incredibly smart targeting tool only exists within Facebook right now, Mark Zuckerberg and company are putting all the pieces in place to push this ad system across the internet and create the web-wide ad network that’s been talked about for years. And that’s where the big money will be. As David Pakman, partner at VC firm Venrock in New York, wrote in a recent Ad Age column, the two things that will fuel quick growth at Facebook are “payments and off-site targeting.”
Facebook has not admitted to building an ad network, but it is already spreading its functionality in as many places as it can across the web. With features like Facebook Login, for example, publishers can add a little bit of code and enable users to sign on to their websites using their Facebook credentials. If I am on CNN, I can comment on or like an article and notify my friends through my Facebook newsfeed. Or, I can purchase a pair of jeans and show my friends how cool they look.
Facebook has conducted limited tests of banner ads carrying a Facebook “like” button; while the company has told me this isn’t a precursor to an ad network, it’s easy to see how such functionality might be tweaked to make it more ad network-like.
The bottom line: Imagine that rich database available to any advertiser anywhere on the web. This may well be the year that friendly, ever-present Facebook logo will be consumers’ constant companion and social conduit wherever they go online. And wherever they go, marketers will follow.
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