Have you taken the time to check your Facebook page today? Who are we kidding – Facebook users can’t resist checking that homepage at least twice per day (if not a lot more). When checking your page, did you notice a small note from Facebook at the top of your screen? The note reads: “ever wonder how Facebook makes money?” and then asks users to click on a link. If you click on that link, you’ll be brought to a video created by Facebook that explains the Facebook advertising angle.
Essentially, Facebook sells ad space to marketers. In return, these marketers market to, well, you. No big surprise there, right? So, why is Facebook letting the world know now how the company makes money? In my opinion, there are two reasons why Facebook is letting the word out. One of those reasons has to do with your very own Facebook news stream. The other reason is strictly financial in nature.
Your New News Stream
Take a good look at the advertisements on the side of your homepage. Why am I asking you to take a good look? Soon, those ads won’t be there. Instead, all of those ads will be inserted right into your news stream. That’s right, you won’t have any way to avoid those pesky ads starting in January. The only thing you can really do to skip over advertisements is to close the ad box (you can’t opt out).
There’s no doubt that ads are annoying (and that we, as a population in general, are sincerely tired of being hit from every angle by marketers), but Facebook promises the ads that you’ll see have been selected (marketers, read: targeted) just for you, based on your interests.
If you happen to like yoga, you will see a lot of LuLu Lemon ads popping up in your news stream, for example. In some ways, these ads might be helpful if you are in the market for particular item. Facebook has chosen to tell users about the Facebook ad campaign for the simple reason that springing news stream ads on users would simply annoying those who use the network, and that would be a very bad thing. But, there’s another possible reason why Facebook has made this ad announcement.
The Investment Angle
Facebook is set to go public this spring. As such, the company wants to gain lots of investors, and, perhaps more importantly, generate a good buzz about the new IPO prior to that first opening bell. In order to do this, Facebook must show investors that the social network makes money – and has future plans to make money. Otherwise, investors will simply skip over this public offering and add Facebook to previous websites gone bust (Pets.com comes to mind).
If you plan on investing in Facebook, you now clearly know how the company makes money. Of course, potential investors will now have to wait and see whether or not the new Facebook news stream angle succeeds. If not, the “expose all” tactic that Facebook has come up with may work against the company.