Facebook to open goldmine of data to advertisers

Tom Bawden
The Times
Aug. 25, 2007

Facebook is preparing an advertising model that would allow advertisers to target its users based on information that they reveal about themselves on the social networking website.

The group has soared in popularity to a record 30.6 million visitors last month, but is expected to make a profit of only $30 million (Ł15 million) this year on revenues of $150 million. Facebook’s new advertising system is central to the group’s efforts to “monetise” the social phenomenon that it has created, by which millions of people worldwide avidly log in to swap information about themselves.

The site is a potential goldmine to advertisers because it contains a host of data on its users, such as their birthdate, interests, events they plan to attend, holidays and musical tastes, as well as numerous photographs. The new model is at an early stage, but is to be piloted soon. It will enable advertisers to visit a dedicated website through which they could track down users more precisely than using traditional, blunter, targeting methods.

The advertisements are expected to appear differently from the banner ads and boxes that show up on the borders of Facebook pages at present. Instead, they would be mixed up with the “news feed”, which provides updates on the activities of each user’s friends.

Facebook’s attempt to boost advertising revenues by extending information about its members to advertisers echoes moves by Google to target ads based on the browsing activity of its users.

Roger Kay, the president of End-point Technologies, a US consultancy, said: “People get disconcerted about what appears to be the close monitoring of their behaviour. If you go to an XXX site and you get a condom ad popping up, it feels creepy.

“Google tried this kind of targeted approach and there were some complaints, and the group seems to have become more subtle about it. With Facebook, the new ad system may lead to some drop-off in users, but it’s a popular site so it shouldn’t hurt too much.”

Facebook does not have a wealthy parent company to prop it up, and so it is essential that the group record strong revenue growth, and an effective advertising system is by far the best way to do this, analysts say.