What Facebook’s Revenue Goals Mean to a Social Media Analyst

On Wednesday, Facebook filed it’s initial public offering for $5 billion dollars in initial funding. Working for a social media agency means being well-read on the latest social news, so I knew it was happen. I knew what it meant to Facebook’s business, to the ad industry, and to its users. The story itself didn’t interest me.  That was until I came across an article by Josh Constine of Techcrunch. In it, he spoke of Facebook’s revenue growth strategy – specifically, the rollout of using behaviors through Facebook’s open graph apps – and that’s what really got me excited.

Facebook open graph apps are any applications, either on smartphones or online, that you connect to Facebook to access your basic information. The apps then share any action that you perform in them to your network on Facebook. What’s key in these apps are the actions that people take in them, which advertisers would be able to use to better target consumers.

Here’s how it works: If you were to use Spotify, an online music player that connects to Facebook, and play Jay-Z’s Watch the Throne, this would post on your Facebook profile. This action would also be recorded by Facebook, and available to advertisers. If this were one of your most played albums, advertisers could then reach out to you with better targeted ads, like an offer to buy tickets for a Jay-Z concert in your area.

The reason why I care about this is because the behavioral data offered through the ads used in these apps provide a wealth of insight for what fans want on owned brand social channels. Using the example previously stated, assume 80 out of 100 people who bought tickets through Facebook’s new open graph ad system, an 80% conversion rate. Since this is better targeting using behaviors rather than social interests on a Facebook profile (incorporated into the old ad model), it’s also assumed that this would perform better. We in the social media world could then sync this into our owned channels for creating more relevant content (such as in the Jay-Z album) to drive higher conversions in our page’s transactions.

However, the problem lies in Facebook’s system of splitting the paid media of targeted ads from owned media of branded pages, there’s no exception for data here as well. It’s highly likely that data for advertisers will only be shared with advertisers. As the digital landscape matures, marketers are beginning to see how owned and paid social can feed into one another. Overall, it’s my hope that once the stock is offered, and the new ad targeting systems roll into effect, all digital professionals will have access to this data in a way to create truly relevant social channels.

Image used via guardian.co.uk

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  2. 02/9 2012

    Great article, Aston!

    I must admit, the more I’ve heard about the Open Graph and where it’s going, the more I became interested in it’s potential. It’s much more insightful data that marketers will be able to use.

    But here’s what I’m worried about.

    Many people who use Facebook are transitioning to the mobile space in which ads (be it PPC or Display) are much less prevalent, let alone effective. Combine that with the fact that ~85% of Facebooks revenue comes from advertising, makes me raise an eyebrow about it’s sustainability plan.

    Obviously, they’ll keep getting more eyeballs, and FB isn’t going away any time soon, but will the Open Graph attract enough advertisers and marketers that are interested that extra data? Or will they be more concerned (still) with the immediate return they’re see on their advertising conversions?

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