A Treatise on the Facebook-MS Deal

Note: This was written 11/6/07 when the Facebook deal was announced rather. Since then some of these details have changed.

Today Facebook CEO Mark Zuckerberg is announcing Facebook’s new advertising platform. (Microsoft’s Jeff Raikes was actually on a panel at the event).

At the core of what Facebook launched today is 3 concepts:

·         Social Ads

o   when I’m on facebook I’m publishing massive amounts of personal information (i.e. like marital status, age, gender, company, interests, hobbies, movies, music, books, work history, education level, and much much more). Facebook can learn from this information, make inferences, and target an ad perfectly.

o   So that an ad for Batman Forever on HD DVD reaches just people who

§  list Batman among favorite movies

§  who are also recent college grads

§  and who are also U2 fans who will buy the DVD simply because it includes “Hold Me Thrill Me Kill Me Kiss Me” Behind the Scenes footage

o   Namely, Me J. They’ve targeted me. And they can target me with a better ROI than today’s banner ads or perhaps even better than Google’s keyword ads

·         Beacon

o   This is similar to Digg, and enables me to “endorse” a product or brand on any partner-page.

§  eBay is a partner, so for example, I’m on eBay and see the Batman Forever DVD.

§  I hit the “I’m a Fan” button on eBay, which publishes something back on my Facebook profile saying “Prasid is a fan of ‘Batman Forever’ on DVD at eBay for only $24.95.”

§  But “viral” is built right into the DNA of facebook, so when I take any action within Facebook, that action is also published to the Newsfeeds of all my friends.

§  So now the next time any of my 1100 friends log-in, they see a news item on their homepage saying “Prasid is a fan of ‘Batman Forever’ on DVD at eBay for only $24.95.”

o   Essentially now eBay is getting referrals from its users who are also Facebook users

·         Analytics

o   So now Facebook knows who is endorsing which product/brand, it knows a tremendous amount of data on the types of people who are endorsing each brand, and it can provide all those Analytics back to advertisers.

Where does MS come in? Sadly, we’re not the one driving this new Facebook Ad engine – our big $250M deal with Facebook last week only covers traditional banner ads, not these new social ads. However, as long as Facebook continues to grow, it diverts the time users spend online away from Google’s ad platform and onto Microsoft’s. Making us a better contender to right Google’s monopoly of this winner-takes-all market.  

And there’s huge potential for what we could do by combining Facebook’s Social Ads with aQuantive in the future:

aQuantive allows us to serve up ads on someone else’s page. So a movie-review-blog needs revenue, they come to us and give us their open ad inventory, and we bring that together with people who want to advertise. Now imagine we know everything that Facebook knows about each user, and when they arrive on the movie-review-blog page, aQuantive can recognize them, and serve up a perfectly targeted ad for the Batman HD DVD. That makes the ROI on the ads our theoretical aQuantive-Facebook alliance could serve-up one order of magnitude better than anything Google-Doubleclick could provide.

Bottom line:  In the long term, Facebook represents Microsoft’s most strategic partner in effectively competing with Google. And Microsoft, thanks to the aQuantive & Facebook deals, represents the favored underdog to take on Google’s near-monopoly. Ironic, I know. =)

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