Facebook Evolves Network Connections

Social Networking Sites - Faced with Revenue Generating Challenges

Facebook and Other social networking sites like MySpace face a continual reality of the need to generate revenue. As they continue to open up their communities to advertizing, they risk alienating their loyal customer bases. People visit the sites to socialize with friends, vs being offered a coupon from Pizza Pizza.

The user base is a major asset of Facebook, and the markets have valued this intellectual capital asset. However, tapping into this reservoir for revenue and shareholder value returns remains illusive. In 2008 Facebook had an estimated $210 million in ad revenue, compared with MySpace's $585 Million (according to eMarketer).

Ad spending on social networking sites totaled an estimated $1.2B in 2008, less than the $1.4B that online research eMarketer had preciously predicted. The shortfall is due to the current financial dip in the economy.With over 160 million users on Facebook, perhaps Facebook with their recent announcement of Facebook Connect have sorted out how.

Value of Facebook Connect

"Facebook Connect is a feature that lets people take their friends with them as they surf the web. But there is an added benefit to marketrs. By allowing users to log in to other websites with their Facebook ID and then funnel back what they do on those sites., Connect provides an opportunity for marketers to interact wiht the Facebook community in a casual way. Higher value user generated content

With a one-click login to Facebook Connect, websites have access to an unprecedented amount of user data. Using this data, sites now have the ability to redefine the way they display user generated content. Gone are the days where all you will see is content from random avatars. Now sites can surface UGC from actual friends. If your friends haven’t made any actions on the site, then we can surface UGC from people like you – maybe fellow alumni or co-workers. Say I’m shopping for a TV on Amazon, the 400+ reviews from people I don’t know have limited value to me compared to a review from my friend or even someone I don’t know who is similar to me.

Get brand content in Facebook without advertising

The strategy of fishing where the fish are is timeless. When time spent online was dominated by the big portals, our media dollars went to buying up ads and unique sponsorships on Yahoo and the like. Although Facebook Connect isn’t an advertising buy, it can accomplish the same goals as one (and in an unintrusive manner). Brands can get their content into Facebook’s viral channels by letting visitors post news feed stories, status messages, photos, events, and more without leaving the website.

Smart brands and agencies will learn that the key to getting content into Facebook is about providing a meaningful value exchange for each Facebook Connect interaction, not prompting their user to post to Facebook at every turn. If a site is successful at giving users a good reason to post content to Facebook, it can make a world of difference to reach and visibility. The strong impact is only partly due to Facebook’s traffic. When brands appear in Facebook via Connect, the impressions interpreted as an individual’s endorsement of a particular product and are not subject to ad tune-out, making the impression far more valuable." (Source: Mashable).

If you are a PowerPoint freak, here is a slideshow created by social media marketing agency bigMETHOD, laying down the FBC basics.

All Facebook has a good listing of the diverse Facebook connect sites.

NOTE:

When Microsoft bought a 1.6 percent stake in Facebook back in October 2007, it paid $240 million dollars for the preferred stock, which meant that the company was valued at roughly 15 billion dollars. A big discussion broke out over whether Facebook was really worth that much, or $15 billion was an unrealistic number.

It turns out that it was, since Facebook values itself at somewhere around $3.7 billion dollars. Facebook’s own assessment of its worth: $8.88 per share, which gives the company a market value of around $3.7 billion - this is clearly well below the $15B unrealistic valuation put on Facebook in October 2007.