Sunday, October 17, 2010

Watch this space: Or has Google come to our rescue... finally?

Zuckerberg: Poor little rich boy
Watching The Social Network yesterday got me curious about how Facebook makes money. After all, the site hasn’t made a public-offer yet, it hasn’t been bought out, so how has it made Zuckerberg the youngest billionaire in the world?

The answer left me reeling. It made $500 million dollars last year primarily through advertising. Ever noticed those four small boxes that pop-up on the side of your profile page? I hadn’t. I would have, if I had known that they were making nearly $450 million dollars for Zuckerberg & Co annually. And what made me nearly burst into tears was that the rest of the $50 million dollars were being made through sale of virtual goods – those silly $1 ducks, mugs, hugs and batches we keep sending to each other.

How is it that Facebook can get people to collectively spend $50 million dollars on silly goods that are not even real but newspaper and magazine websites can’t get a penny out of people for bringing critical information to their desktops every day? What is it that media companies providing information content don't seem to understand about their audience? Or is it that they are just lazy, uncreative and incapable of thinking of innovative ways to squeeze money out their audience? The best great minds such as Rupert Murdoch’s have been able to come up with is a militant, view-on-subscription-only paywall approach. But if I haven’t felt motivated enough to get an online subscription to his Sunday Times then fat chance Mr Murdoch has with ADD-infected teenagers? 

But help may be on its way if Google’s Watch This Space campaign is even half as effective as it sounds.

Now we might as well accept that information content is all going to go digital. It is also mostly going to be free. So the only saviour content creators can possibly find is advertisors. And yet, online advertising has always been particularly dull. Those tacky banner ads have a tendency to pop-up at the wrong time and wrong place. Besides, conventional wisdom suggests that the medium is too fragmented and fractured for any campaign to make any measurable impact. However, Google has put its geek-might behind making online advertisements easy, smarter, attractive, measurable, customised and better-targeted than ever before.

Algorithm-by-algorithm, Google is trying to streamline the online digital space to make it easier for advertisers to find the right audience, place smart and attractive advertising campaign swiftly and smartly, and be able to measure its success more accurately.

For example, Google representatives Barry Salzman and Neil Mohan at the Interactive Advertising Bureau’s Mixx conference last month (see video above) predicted that almost half of all online display ads will move from static text banners to real media ads, that is, videos which are interactive and expandable. Google claims to have the necessary technology called the double click studio to help the conversion. The ads will be customised in real time depending on the audience and their location. They are also working on more metrics to examine the success of the campaign, which hitherto has been dependent on the actual number of clicks on display ads. But clicks didn’t take into account people who made related searches or visited the product’s website instead of clicking on the display ad. Google claims it can make that possible in the future, apart from coming up with other solutions to measure a campaign’s success.

If Google can, and if online media becomes genuinely profitable for the first time, perhaps there will be some hope for me.

And yes, The Social Network was a fabulous film! Zuckerberg was a sneaky little bastard but what a rich sneaky little bastard he was.


Girish Shahane said...

The piece you link to doesn't mention how much Facebook earns by selling details from its database. But all those personal details must be worth a substantial amount:

globalbabble said...

I guess, that money goes into Zuckerberg's Swiss bank account, because it doesn't seem to appear in its accounts.

But then again, as an almost-chartered-accountant, I know there are many a slip between P&L and balance sheet ;-)

mumbai paused said...

It's the time we spend on Facebook doing things. And time is money, and Internet/facebook has found a way to monetise it.