Thoughts on Facebook Monetization

I’ve been following the Facebook Monetization quest for a while now, and thought I’d throw up a couple of thoughts on that topic just to get them out there and see what people think.

First, let’s distinguish clearly between audience data and audience inventory (impressions). These two items often come bundled together and are thus often confused to be one and the same. That’s incorrect.

Facebook is a clear example where these two items are linked. They have a ton of both. The role of data is to provide insight into the user. This information is then used to decide a) whether you want to buy impressions on this person, and b) what creative you’re going to show them. Inventory is then in some ways just another opportunity to use data to accomplish some meaningful market objective.

Facebook’s data is great. They have a lot of data about me, and I’m guessing a lot of you as well. Unfortunately, their inventory just blows. In any advertising inventory that is embedded alongside content, one of the fundamental barriers that an ad needs to overcome is the drawing power of the content alongside which it’s presented. Because the content is so personalized and interesting to me, the effectiveness of traditional ads that are presented alongside can be very limited. (For the sake of simplicity, I’m going to cleave away all the ‘social advertising’ tactics that have become en vogue recently – that’s a totally separate post. Here, I’m just talking about what to do with the nuts and bolts impression inventory.)

All of this is really not a surprise. In many ways, we’ve seen this movie before with the various online email providers. Think about it. Lots of data (people logged in, registered, whatever) combined with oceans of impression inventory that just doesn’t seem to perform all that well, particularly if you’re using (admittedly shite) metrics like click through.

So then there are two tasks to accomplish.

1. Figure out how to best monetize the low-performing inventory that’s actually on facebook
2. Figure out how best to monetize all that beautiful data.

With regards to the second task, one potential method would be to buy oceans of crap inventory at, say, a $0.50 CPM, add data, and resell it at a $5.00 CPM or higher, keeping the spread, or value creation, or whatever you want to call it.

With that goal in mind, the strategy and tactics become very interesting. Look at this situation through the lens of the emerging trends in DSPs. Where does Facebook, as data provider, fit? Do they monetize by injecting their data into other DSPs directly? Do they aggregate other inventory, add their data, and sell the finished product to DSPs? Or perhaps, they form a DSP of their own with the Facebook data at the core?

I definitely have my own opinions here, but would love to hear what others think…

Have a good weekend everyone!

2 thoughts on “Thoughts on Facebook Monetization

  1. Great post – great walkthrough of both problem and solution. Seems like FB’s in a great position to add the value and keep that spread themselves – provided that doesn’t become a PR problem for them, though I’m hoping w/in a few years (hopefully less than a generation) people will stop getting creeped out by personalized ads – I’ll take personalized ads any day over generic fare – provided they’re not personalized “belly fat” or “yellow teeth” ads, of course. Scary.

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