Facebook’s Secret Sauce: Curation Pays Off

Posted: January 18, 2011 in Content, Curation, Digital Media

The big news this morning comes from emarketer (via Ad Age) and gives us an emerging portrait of Facebook that suggests it has found a place in the digisphere that will allow it to compete favorable with Google (GOOG) as time goes on.

As Facebook continues to build its cash war chest through the Goldman Sachs private auction of shares, it has started to see Google-like growth coming to it from the very audience that helped propel Google into its dominant position over the past few years: the small business advertiser.

But even more important than the similarities between the two companies, are the differences. While Google has served the small business advertiser well over the past few years, it has recently concentrated even more on building the kind of tools that more sophisticated and larger advertisers can use to target large-scale advertising buys on its networks. And, Google offers a targeted advertising buy based on automated tracking of keywords.

From Advertising Age

While Facebook, like Google, has built out a sophisticated sales operations to serve larger clients and agencies, the social network seems to be concentrating more on the small advertiser and giving that advertiser extremely simple tools that allow it to mine the deeper knowledge of information it has on consumer behavior. Of the reported $1.86 billion in revenue Facebook is said to have generated in 2010 (86% more than the prior year), 60%, or $1.2 billion is said to have come from smaller companies more likely to be using Facebook’s self-service buying tools.

Debra Williamson, emarketer’s analyst, told AdAge that “These advertisers are really juicing Facebook’s growth. They buy advertising in bulk. They’ve done it for years on Google and now they’re taking that expertise to Facebook.”

What is very significant is that they may find an even more target-rich environment at Facebook, where more is known about each user. For one thing, Facebook is about content created AND curated by users themselves, whereas Google’s content has been curated by computers and algorithms. It stands to reason that a consumer may know more about himself than a computer can ever know. By tracking consumer behavior AND content creation, Facebook can paint an incredibly deep, informed portrait of that consumer and can use the interaction between consumers to create even more opportunity for advertisers.

While it is important to note that Google does as much business in a month as Facebook did in all of last year, what we are talking about here is momentum and early indications that Facebook could become the next Google. What is starting to emerge is the possibility that Facebook could really become Google on steroids!

Facebook is also attracting larger advertisers, to the tune of $740 million last year, but while both small and large categories are growing, the percentage of Facebook revenues coming from the small advertiser community is up from about 50% in recent years to 2010’s 60%.

One significant difference between Google and Facebook is the latter’s emphasis on the needs of its now nearly 650 million users above those of the marketing and agency partners. While Google has done a great job of building tools for the large players to manage complex buys on their networks, Facebook has allowed an entirely new industry to be created by outside companies that have built services to help advertisers manage larger campaigns on Facebook, something Google does itself.

Ad Age cites startups like Buddy Media and Context Optional which it said “have built a business helping both agencies and brand executives better manage its presences on Facebook by licensing its software to brand managers to more efficiently manage what sometimes amounts to thousands of Facebook pages.”

Ad Age further explained that a large brand advertiser like McDonalds “may have a Facebook page for every franchise with can be difficult to manage with just Facebook’s native features”

But those “native features” are really all a small business or individual needs to do very targeted and efficient message buying. In the long run, many of Facebook’s advertisers are also it’s content creators, which naturally gives the Social Network the potential for a much deeper relationship than a search engine, and could result in far more effective sales and marketing tools.

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