How Facebook Offers Ramp Up the Network’s Monetization Efforts
DM CONFIDENTIAL – More than 10 years have passed since the first dot-com bubble burst. The companies of today are making much more money, raising much more money — yet, it doesn’t necessarily feel that way. The first dot-com bubble seemed characterized by the quantity of businesses that found ways to raise more than they should and spend it in spectacularly stupid and irresponsible ways. This one, even if a bubble, is almost defined by its not being a “dot-com” bubble but a broader internet technology one. Pandora, LinkedIn, Yelp, and Zynga have all gone public recently, and all represent this new breed of internet enabled businesses. None, though, embodies it more than Facebook. They won’t be the last tech company to go public, but it might be a long time before one matches this level of interest and enthusiasm.
When Google went public, it owned a category that showed quite a bit of upside. It had tons of advertisers, but there was still room to grow. Facebook owns its category. With almost 1 billion members, there is some doubt about just how many more it can really add. On the advertiser front, they have many, but the platform has a much smaller number than Google did when going public, and we could argue they will never have as many. They do have a platform business that Google did not and does not have. They have plugs that others can plug into and draw power from Facebook to run their business. Initially, Facebook the energy company didn’t charge a fee, but more recently, they have found a way to insert some meters. They don’t charge by bandwidth, but via a toll much like what Apple does, where if one of their app developers tries charging people, Facebook gets a cut.
Another group has been critical to Facebook’s monetary success so far — big brands. Facebook has benefited from a unique cultural and business phenomenon: The young media planners who help shape agency, and thus brands’, budgets all grew up using Facebook. In the working world, that put them in a unique position to advocate allocation of budgets to the platform. They were the product experts and those in control of the budgets. That has not happened before, and Facebook benefited beautifully. Similarly, instead of just embodying a user’s identity, Facebook has also become a brand’s identity. They aren’t circumventing search per se, but for a strong number of companies, Facebook Pages is their consumer facing site. It is also the page they promote on their advertising spend. Now that Facebook has allowed greater customization to these pages, they have also given a reason for these brands to invest more heavily and stay on the platform.
The chance to amplify the message, to reach friends and friends of friends, though, is the real reason that companies are still so keen on Facebook. Not wanting to waste their brand following, and recognizing that they need some ad product wins, we see an intriguing new launch called Facebook Offers. It sounds like something we’ve seen before; it looks a little bit like something we’ve seen before, but it is a new product that combines the best of the daily deal world and the best of Facebook — message amplification through the social graph (in this case, the news feed).
Here is an example of what you might have seen:
It’s an interesting offer. Most people found out about it in the news feed, but it was enabled from the brand’s page. Equally interesting, the coupon is for a limited time — only two days. Clicking on the “claim offer” button does something quite old-school, something only Facebook, with its brands and reach, could get away with.
Claiming an offer sends you an email that you have to print out and take into Old Navy (or another test brand). It’s among the least scalable solutions long-term, but once again, go Facebook for being able to convince a big brand to do it this way initially.
Offers and deals are not new. They aren’t new to Facebook, but as a model it could be a significant long-term play if the company gets it right. Facebook wants to be everyone’s identity, not just individuals. They already have the infrastructure for any small business to have their own site and the tools to communicate with their patrons. Via the news feed, they can hopefully influence friends of friends to come. If offers become available in a more widespread fashion, they now have a cost-per-engagement means for helping businesses both become more active and spend more money, more easily than they do today. It’s their latest play in this still not fully unlocked game of online to offline. If done right, it is not only self-service, but it increases their overall advertiser base and the amount spent by advertiser. Ultimately, they might be able to get away with this product not quite working, but they won’t get too many more chances.
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