Wednesday, November 14, 2007

Facebook's bubble?

Facebook is working on monetizing their ever growing user base and page views, but one of the problems with a younger demographic is that they really don't respond to adverts on sites like Facebook.

Fred has a trial on Facebook, and has gotten a fair amount of impressions, but no click through action. Others talk about much larger impressions for their ads, but still the same (zero) response in terms of clicks. Is this really a Facebook failure, or is it just a terrible place to advertise a venture capital firm? If you look at the activities going on there, advertising something like Union Square Ventures doesn't make a whole lot of sense in terms of real ROI, but it IS generating some free PR for Fred and company.

For advertisers who are a prime candidate for Facebook users, I wonder how well its working out for them? I'm talking in terms of impressions, click thru, cost per click and % conversion for action. This metric is what I'd use as a real world value for putting a number on FaceBooks' valuation. Google had the same problem in terms of value as search, and then they monetized search with adwords and BAM! Solid revenues that continue to drive their stock price. Sure investors like Microsoft bought into Facebook at an agreed upon value, but to keep the bubble in check, you need to actually look at value in terms of its market value for operations (advertising) else you risk being a large part of another dot com bubble burst.

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