Facebook started back in 2004 as a way to connect, share updates and photos with friends and family. Zuckerberg’s current cash-cow originated from the failed concept of Facemash. A kind of “hot or not” idea that featured photos from unwilling Harvard students and encouraged other students to rate them based on levels of attractiveness. Thankfully, Zuckerberg realized, (or rather Harvard realized) what a horrendous idea this was so he invented the concept of Facebook. While the network is obviously insanely popular with over 142 million daily active users, the most apparent issue with Facebook thus far is how it would monetize and start reaping rewards of its massive user base.
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As soon as Mark Zuckerberg brought Sheryl Sandburg on the Facebook team we knew the social network had its sights seriously set on advertising. As a previous executive at Google (AKA the master of online advertising), Sandburg now serves as the Chief of Operations for Facebook seeking to transform the network that already attracts millions of users into an advertising platform.
Facebook’s original advertising model was successful because it was different by focusing on generating demand. The network not only changed the face of ecommerce by making social commerce strategies a necessity for success, but it differed from Google’s direction because it wasn’t based on an immediate purchase. Rather than take users directly to a brand or company website like Google’s advertisements, Facebook suggested things you might be interested in through “engagement” advertisements. This gave marketers the opportunity to actively engage with users and build a brand following on the network.
Facebook now gives companies the opportunity to target specific users with advertisements based on the Facebook Exchange, developed through the relationship and ugly breakup with Zynga. As an ad market based on cookies, the Exchange allows advertisers to track users that have been on their site and micro-target them effectively through social advertisement campaigns on the network.
Facebook has the potential to trump Google and Yahoo advertising based on its high levels of engagement of active users. The entire appeal of advertising on the social network is the fact that users spend such an extended period of time interacting. According to Nielsen, users spend just under 7 hours a month on Facebook. On top of that, because Facebook was able to successfully structure mobile adds into the app equation it seems as though the network is the most attractive opportunity for successful ecommerce marketing on the online advertising market today.
Facebook’s Q2 report shows that daily active users in the United States have grown from 117 million in 2011 to 142 million in 2013.
- Europe: 127 million to 182 million daily active users in 2013. European ad revenue almost doubled from $245 million in 2011 to $451 million today.
- Asia: 85 million to 181 million daily active users. Ad revenue went up $74 million to $225 million in 2013.
- Rest of the world: 87 million to 195 million daily active users and ad revenue skyrocketing from $61 million to a staggering $202 million today.
I would love to hear your thoughts. What do you think the future holds for Facebook?