02 Dec 10

How Facebook could beat Google to win the web

by Elaine Gilmour, Digital Media Manager

Following on from Laura Fenton’s recent article on the increase in display inventory in the US, we are taking a look at a web war that is brewing between the internet’s biggest players for the lion’s share of display ad revenues and Facebook may be the unlikely winner.

The social networking site could be planning to use member’s data to place targeted adverts across the net, pulling the carpet from under the feet of Google, Yahoo and Microsoft.

Google in particular, are scared of 2 things as possibly undermining its stature as the webs top tech company.
One, there’s so much interaction and information being shared inside Facebook that it has become a decent-sized replica of the Web inside the Web. And Google can’t crawl and analyse much of what happens in there. That’s a problem when your goal is to organise the world’s information.

Two, Facebook knows who you are and has the right to use that information because you explicitly gave it to them. Google has different kinds of data that reveal a lot about who you are and what you are interested in. But very little of that data is information you explicitly told the company to share, and they’ve assiduously promised not to use your search history and e-mail data to profile you.

For years, that’s not been a problem for Google. They made the majority of their $7.29 billion in revenue in the third quarter from Adwords. Those ads are all keyed off the words you type into that search engine. There’s no targeting involved. It doesn’t matter to Google’s AdWords system who you are, what you’ve searched for before, or what you do in other Google services (the only real targeting available in AdWords now is by location).

Google now run an extensive Adsense program across 3rd party sites with text and display ads. According to a Wall Street Journal story from this summer, Google is soul searching over ways to turn what you do while logged into Google into data that can be used for targeting ads. That’s agonising for Google since it’s always promised that it would keep that usage data separate from its ads. But Facebook has never made that promise, and its users don’t seem turned off by the targeted ads.

Now, Facebook advertisers don’t actually know anything about you — at least not until you click on an ad, visit their site and handover your e-mail address. Instead, they use a simple panel in Facebook that lets them choose what categories to target, including age, location, education and gender. They can further target ads based on the things you have liked or added to your profile. Facebook runs the ads on a company’s behalf but never turns over a list of who fits the targeting criteria to the advertisers.

Facebook says it’s not working on any third-party ad system, and right now, it doesn’t need to. It’s flush with cash from investors, who’ve poured hundreds of millions into the company, without founder Zuckerberg losing control. It can bide its time, making Facebook even more central to the internet and building more relationships with top advertisers. But with the potential to draw huge profits from outside Facebook walls, giving it a giant slice of the online display ad market, surely they won’t hold out forever.

Sources – Metro & Wired.com