The Future of Facebook Revenues

Recently, at the World Economic Forum in Davos, Switzerland Facebook announced a new monetization strategy. Like Facebook Ads, the new Engagement Ads aims to capitalize the networks extensive user-database by letting marketers hyper target users. In doing so, however, this new strategy might be missing the point of what’s makes the platform so popular. If Engagement Ads fails to meet expectations as Facebook Ads has, the network might want to consider becoming a super-affiliate, and instead of letting marketers target users, allow users to target marketers.

Engagement Ads

The new strategy being pursued by Facebook will focus on market research instead of sales. But rather than simply sell the data they already have, Facebook will allow third-parties to target very specific demographics with market surveys. As the Telegraph reports:

“In an attempt to finally monetize the social networking site [...] will soon allow multinational companies to selectively target its members in order to research the appeal of new products. Companies will be able to pose questions to specially selected members based on such intimate details as whether they are single or married and even whether they are gay or straight”.

The problem is that being optional makes these polls vulnerable to the same flaw that Facebook Ads faces: Facebook is such an optimal platform for interacting with other members, users are loath to do anything else other than comment on photos their friends are tagged in, leave wall posts, and add the apps that are popular in their circle. This is why Facebook Ads experience such low CTRs. Indeed, the Telegraph article goes onto note that:

“advertisers are turning their backs on social networking sites because they have a lower “click-through rate” than traditional online ads”.

Last year only 57 % of social network site users clicked on an advertisement to make a purchase, compared to 79 % on the internet at large.

If users have been unlikely to click on Facebook ads, it seems similarly unlikely they’ll be willing to fill out a survey. Even though a survey is slightly more interactive than a banner ad, the novelty will likely wear off after the first few times, and users will be just as blind to these survey invites as they currently are to ads on Facebook. In short, Engagement Ads seems more like a short-term, cash injection strategy than a whole new revenue model.

An Ultra Affiliate?

If Facebook continues to have trouble monetizing their database through third parties, they should consider monetizing it themselves through affiliate marketing. Essentially, instead of letting third parties target Facebook users that they  are interested in, Facebook should use the data they have to show users offers they are actually interested in.

For instance, in addition to the profile information that user provide, Facebook has extensive data on its users, including online behavior patterns, and exactly how each user knows the  and on precisely what terms. Such information would be invaluable in identifying the specific kinds of product offers of interest to users.

Imagine if Facebook leveraged the eBay and Amazon APIs to show users offers they were actually interested in. Users would respond better to the ads and CTRs and conversion would likely rise. Facebook could become the greatest super-affiliate ever seen.

Facebook Forward

The challenge with monetizing Facebook is that it’s so efficient at what it is supposed to do (let people interact with other people); users are loath to do anything else. Of course, they could always just sell the raw data they have, but that would not likely roll over well its user-base. Although Engagement Ads offers third parties the opportunity to build on some of that data themselves by hyper targeting certain demographics with surveys, it seems an unlikely long-term solution.

By bringing the monetization of their database in-house, however, and hyper targeting users with affiliate offers that users are actually interested in, Facebook would not only be showing ads that were relevant , but ones their users are more likely to act on. In fact, users may even develop a habit of paying attention to the ads because they’ll be of interest to them  and not just targeted at them.

About CT Moore

A Staff Editor here at Revenews.com, CT Moore has over 5 years experience leveraging search and social media to help brands meet their business goals online. By day, he provides SEO and social content strategy to both SMBs and enterprise level companies. CT is also an accomplished blogger, podcaster, and conference speaker who educates groups and companies about how they can leverage digital media. You can find CT on Twitter @gypsybandito.

Website: http://www.gypsybandito.com

Twitter: gypsybandito