Facebook vs Google
By David Dorf on Jan 28, 2011
Facebook gets is revenue from advertising just like Google does, but at a much smaller scale. For 2010 it's estimated that Facebook earned just under $2B in ad revenue, but Google earns that much every month. Both sites are extremely popular in terms of visits and usage, and since each offers different capabilities, people will probably continue to use both. So how will Facebook ever exceed Google's ad revenue?The key to target-advertising is to match the right ads to the right people. Google uses the data they collect from searches and users traversing sites to increase the likelihood of a good match, which is confirmed by a click-through. Said another way, Google has figured out how to show people the ads that interest them most. Much of this success was led by Sheryl Sandberg, the former VP of Global Online Sales and Operations at Google.
In 2008 Sheryl Sandberg moved to Facebook to work for Mark Zuckerberg as COO with the same goal in mind. However, this time there's much more information to leverage to match ads to people. Using people's social graph, or the connections like-minded people keep, there's a huge opportunity to better focus ads and increase click-through rates. But how?
Two other cash-generating juggernauts of the decade both have their roots in social media. Groupon enables group buying at a discount. After a predetermined number of people agree to the terms of a coupon, the coupon is activated. Deals are shared among friends to ensure activation. Zynga produces popular Facebook games like Farmville and Mafia Wars, where people rely on friends to help them achieve in-game goals.
If we take some of the concepts from Groupon and Zynga and use them for advertising on Facebook, there might just be a killer-app. Facebook's forthcoming "buy with friends" program seems to be on the right track. According to Forbes, users can unlock deals then share their purchase with friends via their newsfeed. Then friends can also take advantage and push the offer along their social graph.
I can envision deals that require X number of Likes (e.g. Walmart's Crowd Savers), or are available only to the first 100 people (e.g. The Gap's free jeans). Perhaps a coupon's value increases 1% for every unique 1000 wall postings, encouraging people to share. These goals can add excitement to the shopping experience and garner greater attention from shoppers.
In the battle between Google and Facebook both will be winners, but because Facebook has access to more information about individuals, it will eventually take the lead in the online advertising space. Buy with Friends is one more step in the right direction.