[LINK] Networking site cashes in on friends

Bernard Robertson-Dunn brd at iimetro.com.au
Mon Feb 2 10:27:38 AEDT 2009


Networking site cashes in on friends
Facebook founder finally finds a way to profit from its 150m members' 
private data
By Rupert Neate and Rowena Mason
Last Updated: 9:45PM GMT 31 Jan 2009
http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/4413483/Networking-site-cashes-in-on-friends.html

Mark Zuckerberg finds ways to create revenue from Facebook's 150m members

Facebook is planning to exploit the vast amount of personal information 
it holds on its 150m members by creating one of the world's largest 
market research databases.

In an attempt to finally monetise the social networking site, once 
valued at $15bn (£10.4bn), it will soon allow multinational companies to 
selectively target its members in order to research the appeal of new 
products. Companies will be able to pose questions to specially selected 
members based on such intimate details as whether they are single or 
married and even whether they are gay or straight.

The company, which has struggled to make money from advertising, has 
been demonstrating the benefits of its new instant polling tool to some 
of the most influential business leaders at the World Economic Forum in 
Davos.

In an interview with The Sunday Telegraph, Randi Zuckerberg, Facebook's 
global markets director and sister of founder Mark Zuckerberg, 24, said 
multinational companies had been bowled over by the ability to receive 
real-time feedback from the site's millions of users.

"I had tonnes of people saying 'this could be so incredible for our 
business'. It takes a very long time to do a focus group, and businesses 
often don't have the luxury of time. I think they liked the instant 
responses," she said.

At the conference, Facebook asked a range of questions to its users 
around the world, before feeding the answers back to delegates within 
minutes. It selectively-targeted users in Palestine and then Israel with 
the same question about global peace, before debating the results at a 
discussion forum. It also asked 120,000 US members whether US President 
Barack Obama's economic stimulus package would be enough to save the US 
economy. Almost 60pc said it would not.

"Davos is really a key place to launch an instant tool like this," Ms 
Zuckerberg said. "It's beneficial for everyone to see us as a global 
community of 150m users. The vast majority are not just college students 
in the US talking about things in their bedrooms. We are showing how we 
are a serious and insightful community."

Facebook's presence at the economic and business summit is a radical 
image change for the social network, which is stereotyped as a website 
used by students or schoolchildren. It now promotes Facebook users as 
"serious and insightful" adults in an attempt to advertise its members 
as a useful demographic for marketers.

Marketing experts have said the vast amount of personal information 
Facebook holds, together with the loyalty of its users, could be worth 
"untold millions" to companies engaged in market research.

The power of Facebook, and its members, in driving corporate decisions 
was illustrated last year, when a campaign on the site led to Cadbury 
reversing its decision to withdraw the popular Wispa chocolate bar. 
Cadbury has sold 70m Wispas since it reintroduced the bar in October 
after the Facebook campaign attracted 40,000 signatories.

Facebook has already sold the new polling system, called engagement ads, 
to CareerBuilder, a global graduate recruitment company, and AT&T, the 
US telecoms giant, is trialling the system. A Facebook spokesman said 
the company's advertising department is marketing the new service to 
thousands of companies worldwide and it hopes the polls will go live 
this spring.

All the company's previous attempts to monetise the site have failed 
after members railed against the site's invasion of their privacy. Mr 
Zuckerberg pulled Beacon, a service that notified users of their 
friends' purchases on external sites such as Amazon, after members 
launched a campaign in December 2007.

Mr Zuckerberg said the coming year will be "intense" for Facebook as 
advertising revenue dries up.

Facebook was valued at £10.4bn in 2007 when Microsoft paid £175m for a 
1.6pc stake, but analysts have dismissed the valuation as "ridiculous" 
as the site has failed to find ways of exploiting its vast membership 
for commercial gain. Madan Sheina, at technology consultancy Ovum, said: 
"With the economy spiralling into a downturn, that figure might seem to 
be exaggerated right now."

The company has denied reports that it is so strapped for cash that it 
has been forced to approach Middle Eastern sovereign wealth funds for 
emergency funding. It has also cancelled plans to allow employees to 
sell off their shares early because of the economic climate.

Market research company eMarketer recently cut its estimate of 
advertising spending on the social networking sites, including Facebook, 
MySpace and Bebo, this year by £351m to £912m. It said US advertising 
spending on Facebook will fall by 20pc to £147m.

Rival research company IDC said advertisers are turning their backs on 
social networking sites because they have a lower "click-through rate" 
than traditional online ads. Only 57pc of social network site users 
clicked on an advertisement and made a purchase last year, compared to 
79pc on the internet at large.

Experts at Deloitte said Facebook is suffering from the double-whammy of 
collapsing advertising revenue and the soaring cost of electronic data 
storage. Deloitte estimates that the cost of storing photos and videos 
on sites like Facebook has increased by more than £70m a year.

"The book value of some social networks may be written down and some 
companies may fail altogether if funding dries up,'' said Paul Lee, 
Deloitte director of research for technology and telecommunications. 
"Average revenue per user for some of the largest new media sites is 
measured in just pennies per month, not pounds.

"This compares with a typical average revenue per user of tens of 
dollars for a cable subscriber, a regular newspaper reader or a movie fan.''

-- 
 
Regards
brd

Bernard Robertson-Dunn
Canberra Australia
brd at iimetro.com.au





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