When looking at Facebook, I wonder how they will scale their advertising business without owning their display ads. Display ads are such a great way to:
- bridge the gap between how billions of dollars are being spent today and how they will have to be spent tomorrow
- create custom promotional opportunities without having to disrupt product development
- drive people to promotions (at MySpace check out their "Featured Profile" space that links to sponsored communities
- lowering effective CPM's so that premium inventory can balance the inability to sell through 100% of the network
- controlling the traffic distribution on the site (especially if you don't have the fancy analytics in place OR the team to execute against a more data driven approach)
- most importantly speed up the network effect that advertisers get in social media settings - as the ROI data visibility improves, advertisers will be able to target the tastemakers/hubs in order to increase their effectiveness
Facebook gave Microsoft their display inventory (albeit for a healthy $ amount.) I do wonder how much this crippled their ability to scale direct revenue. With the "sponsored" inserts on user's profile pages, how many of these can they distribute before they start pissing of the user experience.
Some of their programs are truly innovative, but require a much higher operational involvement that will be tough to support long term. (Think about trying to support $1B in revenue when the avg. buy is slightly over $60K...wow...that's a lot of custom ideas, production costs, QA, etc. to support their efforts.)
Some quick hits:
1. Create a home page product (for logged in or logged out users) - this could be a 400-600K product.
2. Develop analytics around the top influencers - adjust targeting prices to reflect "viral" metrics
3. Find a way to get the people to work for you (w/out invading their privacy) - what would a nationwide college marketing program be worth to Apple? H/P? Nike?
4. Become experts in the "network effect" that MySpace is taking a leadership position in (thanks to Judit Nagy, the media research goddess & David Rogal, the ROI king.
Will be fun to watch!