Category Archives: Facebook

How Facebook Will Become The Biggest Ad Network

Facebook’s stock has been taking a beating since their IPO. I’m not an expert on stock trading and I don’t own any Facebook stock, but I think the media and investing world are thinking too much about the short term and what Facebook is today opposed to what it likely is to become in the future.

Primary Revenue Concerns

One of the primary concerns is how Facebook will monetize it’s growing mobile audience. Everyone seems to be really freaked out about the fact that mobile is growing and Facebook hasn’t monetized it well yet. On one hand, people have a point even though Facebook made $180M in revenue from mobile sponsored stories on their first try. On the other hand, isn’t it a pretty good situation that Facebook is the most downloaded application on EVERY mobile platform and is far and away the leader in mobile time spent? That’s a pretty good starting place to figure out how to be a dominant player in mobile.

Another big question on everyone’s mind is if Facebook will be able to build any significant businesses beyond advertising. Since their payments revenue has been primarily gaming-related and that growth has slowed, people are wondering where the growth comes from. Payments could be a solution in areas beyond gaming, and some people are also pointing to their acquisition of Karma as a way to get into mobile/social commerce. Techcrunch also has a run down of revenue-generating ideas, but I wanted to go deeper in an area that I think people are underestimating: A Facebook Ad Network.

The Birth of an Ad Network

The concept of a Facebook Ad Network is not a new one. People have been bringing up that idea since they launched their developer platform in 2008, and they’ve even recently started testing running ads purchased through Facebook’s ad interface on Zynga.com.

Running socially-powered rectangle ads on the right rail of Zynga.com is just scratching the surface, and is only part of what Facebook could do as an ad network.

First, Facebook can offer what they are doing on Zynga.com to every other web publisher easily since almost every quality publisher uses Facebook’s platform already for authentication. Since that user data is already there, Facebook can do the same targeting they do on Facebook itself.

Why would publishers take their ads you ask? They are visually more pleasing than Google’s Adsense text ads, since they are not standard IAB shapes they probably get better click-through rates, and as social ad targeting continues to improve it’s possible that the CPM they can earn would be higher than other alternatives.

Taking it to Mobile

Even though launching the full web ad network of Facebook’s standard ads would be huge by itself, Facebook also has the majority of quality mobile applications using Facebook for authentication as well. Additionally, Facebook’s new mobile sponsored stories ad unit is showing great results so far in Facebook’s mobile app.

Since most quality mobile apps contain some kind of newsfeed similar to Facebook’s, Facebook could extend their mobile sponsored stories to the feeds of other mobile applications. They also have a new non-social ad unit that allows for “appvertising” where other application developers can offer their app for download. It makes perfect sense for Facebook to extend this to the other mobile applications using Facebook’s authentication.

Mobile is exploding, and as it continues to grow Facebook can easily become the largest mobile ad network very quickly.

Bigger Than Adsense?

Facebook is still a young company. They’ve also only been serious about monetization for a couple of years. Many people have pointed to the fact that Google at the same age was ahead of Facebook in these efforts. That’s fine, and it really doesn’t have any impact on how big Facebook’s ad network can become. Google needed to acquire Applied Semantics to create Adsense, and it’s possible that Facebook could make an acquisition that also jumpstart their ad network efforts in powerful ways.

Even if they don’t acquire anyone and do it on their own, the combination of Facebook’s massive web ad network potential with the possibility of a huge mobile ad network even without a ton of innovation leads me to believe they could challenge Adsense for the largest ad network.

The one thing they have working against them is that Adsense really benefits from having advertisers who are really primarily interested in advertising on Google search results also extending their ads into the Adsense network. Is advertising on Facebook’s owned and operated site itself going to bring in the same type of demand?

Probably not. However, Adsense is not a very effective form of advertising on mobile devices. If Facebook is the one to crack mobile feed advertising and bring other innovations to advertising on mobile, they’ve got a shot at overtaking Google’s network.

What’s your take? Can Facebook become the biggest ad network on the web and mobile?

25 Things Facebook Could Have Bought Instead of Instagram

Instagram LogoWhen the news hit that Facebook had purchased Instagram for $1 billion I was eating lunch with my Fantuition cofounder Joe Garstka.

Joe’s immediate reaction was “Would you rather have 200 $5 million dollar houses, or Instagram?”

A great question. For the record, I think Facebook paying $1 billion to take out their most threatening future competitor was worth it no matter what happens to Instagram within Facebook’s control. Just think about how better positioned Yahoo! would be today had it acquired Facebook for $1 billion back when they almost did a few years ago. Yahoo! could have either leveraged Facebook to massive success, or killed Facebook off and they’d still own more of the consumer and advertising market they’ve lost to Facebook.

Whether you agree or not, that’s still a lot of money. What could Facebook have bought instead of Instagram? Let’s explore…

  1. 200 $5 million houses in Palo Alto
  2. 1,000 $1 million houses
  3. A used B-2 Bomber
  4. The New York Times Company (valued at $967 Million)
  5. All 66 of the most recent YCombinator Startups (gotta be a breakout startup in there right?)
  6. Yahoo!’s Core US Business
  7. AOL’s Patent Portfolio
  8. All the Facebook Mafia Companies: Path, Quora, Asana, Causes, GoodRx
  9. Yelp (when the stock drops a little)
  10. Every other mobile photo or video sharing application
  11. Pinterest (maybe)
  12. Foursquare
  13. AppNexus
  14. Spotify
  15. Rovio (Angry Birds)
  16. Gilt Groupe
  17. Tumblr
  18. 2 million of the New iPads
  19. Myspace, Friendster, Orkut, Bebo, and you’d still have about $990M in cash leftover
  20. The San Francisco 49ers (change name to San Francisco Likes)
  21. A small country (How about the Maldives?)
  22. A $20,000 hotel room every night for 137 years
  23. Ten $100M yachts (one for each of Zuckerberg’s direct reports!)
  24. Pay for 48 hours of the military activity against Afghanistan and Iraq
  25. Send a $20 bill to all 50 million Instagram user bribing them to use Facebook’s mobile app for photo sharing

If you were Facebook, would you buy any of those things instead of Instagram?

Google Plus Rapid Growth: Will It Last?

Google Plus growth screenshotThe above graph was created by Leon Haland and featured on Techcrunch Europe.

The tech media has been all over the rapid growth of Google’s social network Google Plus. Many have assumed that this rapid rise means that Google Plus is on it’s way to be a serious competitor Facebook and Twitter.

After my usage of Google Plus so far both sharing and reading, it’s definitely a solid product that does some things better and some things worse than other social tools.

However, I’ve yet to feel like it’s on it’s way to truly competing with Facebook or Twitter.

I think the graph above has been caused by the following:

  • Familiarity with Social Networking - A larger number of people are now familiar with social networking than when Facebook and Twitter launched. They also have more friends and are more connected making it easier to hear about a new social network and decide to go try it out.
  • A Desire For An Alternative - While Facebook and Twitter are massively used, there are a large number of users who don’t love them as products themselves and have the desire for an alternative. Google Plus is really the first serious alternative to launch.
  • Google “Install” Base - So many people already have Google accounts and use Gmail, that it made it super easy to explose Google Plus to users as well as make it easy to intelligently recommend Gmail contacts to invite.

Will Google Plus Keep Growing?

Google Plus was reviewed well by the tech media, and it feels pretty good as a product. However, after a few weeks now I’ve got over a 100 people in my “circles” but the only activity I’m seeing is from about 5-10 people who all have jobs as part of the tech media.

There is literally NO activity from most of my normal friends, many of whom are on the cutting edge of technology and are heavy social network users.

Why is this? I’ve asked a few of them, and the answers tend to be that they don’t know why they should use Google Plus instead of Facebook or Twitter. Their friends aren’t fully there yet, they don’t really feel the need to organize them into circles, and Facebook and Twitter just do a good enough job.

Google’s going to need to do something to differentiate Google Plus even more from those competitors and do something SIGNIFICANTLY better than the competition in order to get people to spend more time there.

It’s definitely possible, but it’s a tough task that won’t be as easy as the initial spike of growth in the graph above.

Will Facebook’s Climb Up The Display Advertising Charts Last?

Facebook Rockerts up the Display Charts

From Silicon Alley Insider Chart of the Day

As seen in the image, Facebook is growing like mad in the display advertising space with a trajectory that is vastly different than any of the other major players in the space. That growth is borderline shocking, but shouldn’t be that surprising for anyone who’s been following their user growth as well.
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When Play Valuations Become Real or What is Facebook Really Worth?

Mark Zuckerberg and Facebook valuationIn what is a very generous gift, Facebook founder Mark Zuckerberg is giving a “$100 Million” donation to the Newark School system to help improve it. However, I put that “$100 Million” in quotes because the donation is in stock so that number is based on Facebook’s current valuation.
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