Facebook & Advertising

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DBI : Synopsis.

In the last couple of years, Facebook, founded in 2004 by Mark Zuckerberg, has gone from a college photo-sharing site to a burgeoning business- networking platform for self-promotion, advertising and multimedia interaction. With new apps and add-ons, Facebook users can send each other a virtual drink, create and host events, advertise their businesses through social ads, and more. When Charlie Gibson hosted the debate for the 2008 presidential candidates along with Facebook, the little networking site became a powerhouse in the online-marketing community.

But will Facebook ever drive the Business of advertising ? How can Facebook Ads compete with Google Adwords  and become the leader in the Business of Advertising ?

First, we should ask why do advertisers go online?

Going online allows better ad targeting and only targeting intended audience. It is possible to customize ads for each user.

The advertisers only pay when users click on the ad and track, which clicks translated to sales. That leads to better measures of ROI thanks to closer connection to buyers. Advertisers pay more for views by targeted individuals because of increased likelihood to “convert” into a sale.

The new online advertising inventory comes from social media like Facebook. This is a real success in the business of advertising but payment rates per Cost-Per-Click still low for social media compared to search engine and online display advertising (~5 cents) like Adwords.

What does Facebook offer advertisers?

The main advantage on Facebook for them is to reach the target customers. They are connected with more than 500 million potential customers. According to Social Media Today in 2010, it is estimated that 41,6% of the US population has a Facebook account and today more people are visiting Facebook than Google.

Moreover the advertisers can choose the audience by location, age and interests and test simple image and text-based ads and use what works. So they can make modifications to maximize the results and track the progress with real-time reporting.

Advertising on Facebook allows also to deepen the relationships between the potential customers and the advertisers because they can promote their Facebook Page or website, use a "Like" button to increase their ad's influence, and finally build a community around their business.

The last but not least advantage is the control of their budget. They can adjust the budget at anytime and choose to pay only when people click (CPC) or see the ad (CPM).

Why has Facebook become the go-to networking site for marketers?

Today, the most successful online advertising model belongs to Google. The company has made billions of dollars by serving ads alongside search queries. Each time you search for something in Google, a small ad appears alongside your results based on what you searched for. The idea is that if you're searching for a coffee machine, you'll get ads for a coffee machine. But searching for one coffee machine doesn't say much about you as a person.

Concerning Facebook, many people use it daily, multiple times a day in order to check their Facebook profile pages. For instance, their favorite hobbies, interests, like what sports they are interested in, what they do with their free time a lot…

Thus, to advertisers, the social networking sites are giant databases about potential customers offering information advertisers normally pay big bucks for.

Google typically serves ads based on keywords. Facebook now has the opportunity to serve ads by people and the preferences and the networks which they're connected to. And that's the big change.

Another advantage that advertising may have on Facebook is the fact that usually, your online friends are people that you know in real life -people you go to school with, work with, or who live near you. In other words, people that you respect. I would like to add that this element may also be a game changer...
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