Facing the Music

November 26th, 2008 | Sources: Wall Street Journal

Subjects: ,

Facebook chief executive Mark Zuckerberg wants his company to focus on growing user base rather than revenues, but former Twitter CEO Jack Dorsey will attest that strategy doesn’t always work even in good times and these aren’t good times.

And no matter what the 24 year-old may say publicly, Zuckerberg and his COO and new BFF Sheryl Sandberg know the time has come to focus on revenue and prove once and for all their business deserves its astronomical valuation.

If they can, that is.

It’s not like Facebook hasn’t tried already. The Palo Alto-based company claims for example that in the last 2 years, 70 of the top 100 US advertisers have run ads on its site. But according to comScore, that has translated into a modest 1.1% share of US online display ad views.

By contrast, News Corp.’s Fox Interactive Media Unit, which owns MySpace, captured 15.9% of display-ad views in the same period.

So now Facebook is introducing a new revenue scheme called “engagement ads.” These things appear on the main log-on screen and encourage users to do something on the ad, like commenting on a TV show trailer or adding movies to a favorites list.

Completed actions are then shared with friends along with the implied recommendation.

The scheme may or may not work, but when Nashville resident Heather Watson came across an engagement ad for Bravo TV’s “Project Runway,” she clicked “not attending” which erased the ad from view. These ads “detract from the [Facebook] experience,” she scoffed to the Wall Street Journal.

And the Great Economic Crisis of 2008 isn’t going to help Facebook any. eMarketer predicts in fact that ad growth on the Internet will drop from 17% this year to 14.5% on 2009, and social-networking site ads are likely to be hit hardest because there’s no good way to assess effectiveness of these ads.


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