It Won’t Just Be Facebook Getting Personal With Ad Targeting

So, the Wall Street Journal screams out this morning, on top of page B1, that ad targeting is coming to social networking site Facebook. See the article here (may require subscription). It seems, in order to justify the $10 billion valuation some of its investors are touting, they’re realizing that — oh, yes — we need to monetize this baby! Yeah, that’s right, before we go IPO…. 🙂 So, let’s start giving advertisers the ability to pinpoint their ads at just the specific individuals on Facebook, within certain very narrow demographics, that will most be interested in the product or service they’re advertising. Such, after all, is the Holy Grail of marketers everywhere. And, by golly, Facebook sure does seem to be a place where a glorious experiment like this could be carried out.

But, if Facebook needs more monetization of its service, think how much all the other, lesser social networks must, too. There are literally hundreds of thousands of these networks already set up, and more coming online every day. A typical site may only have a few thousand members. Ning alone will soon have 100,000 sites using their social networking platform. And an increasing number of firms offer such platforms for anyone to set up a social network, with basic levels of service that are free. See this recent TechCrunch post, which reviews several of them, and this accompanying chart that compares these offerings in great detail.

Sure, Facebook and MySpace, and a handful of other second-tier sites most people couldn’t name, account for a huge percentage of social networking web traffic today. But the long-tail of social networking sites promises to have traffic at least that big, collectively, ongoing. Have you ever stopped to think how these small players are supposed to monetize their sites? Meaning, get advertiser revenue that can support the cost of running a social network, paying for bandwidth, adding new features and original content, and so forth. The way things stand, there is little they can do now to pay for their sites. Some may be charging members for subscriptions, but that model is surely not one that can gain much traction.

Thus, I say longtail monetization via targeted advertising is the bigger story in social networking, with advertisers getting their ads (or sponsored editorial content) only to the specific demographics they want to reach, out in the long tail. Say, only males 20-30 interested in water sports, living in urban areas in the southest U.S. Perhaps a given ad would appear on hundreds or even thousands of sites, as opposed to a media buy that’s a huge swath of readers on just a single large site. So, for example, instead of buying exposure to 2 million people, the ad may only be seen by 200,000. But the idea is that ad performance will be much better because the audience is more interested in the ad, and more likely to act on it.

I think this latest news of Facebook starting the ball rolling with targeted social networking advertising is great. A large, innovative site like this should rightfully lead the way. But, with specialized ad targeting technology becoming available from new startups, I think it marks the beginning of what could be a much larger trend toward monetization of the entire social networking landscape. And I will surely be following this space very closely.

UPDATE (8/23): To add these links to the latest Hitwise social network rankings….for the U.S. and for the rest of the world.

2nd UPDATE (8/24): Online Media Daily posted a story this morning, by Gavin O’Malley, that attributes quite a statement to Forrester analyst Josh Bernoff — that Facebook’s ad targeting plan “could represent the most significant move in the world of online advertising since the advent of AdSense.”