When it comes to display advertising on its own site, Facebook is taking full control of its inventory away from Microsoft. Even prior to Microsoft’s initial $240 million investment in Facebook in 2007, the two companies had an advertising partnership giving Microsoft the ability to serve display ads on the social network. That was a three-year deal which was up for renewal. The two companies just finished renegotiating it, and Microsoft will no longer be serving up display ads on Facebook.
However, Bing will still power Web search on Facebook and will serve up search ads. The relationship with Bing will actually be expanded to be global (before it was just U.S.) and to include smart answers and other guided search features within Facebook. Expect Facebook’s Web search to start looking a lot more like Bing. As far as social search goes, however, Facebook continues to develop its own search technologies which return realtime results from your personal stream.
Handing over a large chunk of its display advertising to Microsoft made sense three years ago, but now that Facebook generates more pageviews than Yahoo or Microsoft it doesn’t need to split ad revenues on its own site with anyone. Facebook is still trying to figure out what kind of advertising will work on a social site, but it has so much inventory that its revenues are believed to be growing quickly.
Traditional display ads, especially the remnant ads Microsoft was serving up, never really paid off on Facebook or any other social network. (Google also famously had trouble making its ad deal on MySpace work financially). The failure of social ads has caused social startups to embrace virtual currency as their next salvation. So far social ads have only worked for Facebook because it operates at such a massive scale that all those pennies add up. In theory, Facebook should be able to target ads to your specific interests and demographic because it knows so much about its 400 million members. The problem is that people don’t want to see ads when they are hanging out with their friends online. But it is not hard to imagine Facebook turning Facebook Connect (which reaches 60 million people and growing) into a highly targeted ad network that puts ads on other sites.
I’m really happy to here about the new facebook changes. Only wish I could try them out! I haven’t been able to log into my account since thursday night,2/4/10 ! WTH!! It says it’s down for system maintenance, but it shouldn’t it be working by now?? Someone please help!!!!!
Whenever I hear about bing, the thoughts of its creepy jing-a-ling contest lingers in my mind,
that makes don’t want to use it. Details: http://bit.ly/bing-goes-the-internet
there is no chance in hell Facebook will make profit and stay cash flow positive for some solid period of time that you can call the company “successful business venture”
“no chance” ?
Erick is right those pennies really do add up. Add the monetization of Brand and Fan Pages and they’re going to be doing just fine.
it’s gonna hurt ballmer
there is no chance in hell Facebook will make profit and stay cash flow positive for some solid period of time that you can call the company “successful business”
In heaven perhaps?
Looks good for Facebook, it will have a proper exclusive revenue model now.
It’s a smart move by Facebook. I wonder if they’ll build an API allowing buying platforms like DSPs, and automate some of its ad trading.
Facebook has that much inventroy it could conceiveable build out an exchange platform.
And with all the verification companies, like AdSafe and Mpire, offering technology to classify inventory against strong brand safety criteria this inventory could be of interest to agencies and advertisers as they shift media spend to audience-buying.
It was only a matter of time, hopefully it means that Facebook will expand and improve its Ad management system to offer more options for advertisers.
It makes sense to use the same ad platform for all advertising…
It was a matter of time.
they might as well go global and localize their ads…
I’ve been running ads on Facebook for months and the prices just keep going up and up. I am not surprised at all by this move.
“In theory, Facebook should be able to target ads to your specific interests and demographic because it knows so much about its 400 million members. The problem is that people don’t want to see ads when they are hanging out with their friends online.”
What a useless analysis, when do people ever want to see ads (except maybe during the Superbowl)? Social ads failing has nothing to do with people not wanting to see ads and everything to do with the ads sucking.
It’s too late. You have a certain window to make or break a super company like Yahoo, Google, or Microsoft.
Facebook clearly missed it’s window.
I don’t think Microsoft bartered too hard at the bargaining table.
The 250M double investment from Microsoft and a NYC hedge fund against the 15B valuation that was being floated on blogs and never actually verified by a respectable investment firm was clearly not a good choice in my opinion.
When you make a big investment like that, you want a REAL valuation from a senior banker. Not Robert Scoble and friends pimping what they think is a good number down the blogging ladder.
I think Microsoft’s investors should be furious at them. Not only for this, but for the 100M Powerset acquisition.
What happened with that?
It’s blatantly obvious that it didn’t turn into Bing, because it’s nothing like the tech they purchased.
As far as FB investors, I think they know it’s do or die for an IPO. MySpace has pretty much hit it’s half life, and FB isn’t going to be far behind it.
Can you elaborate why you call this is too late and “You have a certain window to make or break a super company like Yahoo, Google, or Microsoft”?
I have a feeling that FB is either a GREAT successful story — everyone will be happy, or a PONZI scheme– use the high valuation to make early employee to cash out and lure new employees. For Microsoft, it loses little (it got preferred stock)
Before the MS deal, when Facebook was restricted to selected colleges, it had the best advertising on the ‘Net. It was the only site where the ads were interesting and relevant to me – I actually clicked quite a few of them.
Since Microsoft took over, the ads have all been pretty shady. Usually, I’ll be offered either a Free-iPods-esque pyramid scheme or a “college girl.” Make any mention of a Nintendo, and the ads all change to pirated games.
Here’s hoping Facebook’s homebrew ads are as good as they used to be, or at least less skeezy than they’ve been lately.
Does that mean I will no longer get to see the guy with the full beard, who looks like he is straight from the homeless shelter, ask for money. Good call Facebook – the ads from Microsoft were rather amateurish, to say the least.
I just took the Reader Survey. I don’t read other tech blogs, but the tech blog question was marked mandatory, even though it was all checkboxes.
uhm….with this modifications….and the other news around facebook and its new features….can facebook be an antagonist of google?? it: http://bit.ly/9GsE72
People want to see my ads on Facebook, thank God.
They’ve been clicking on them!
Folks just might not want to be sold stuff — but then again, I take that back. I just read about a guy who sold out his inventory using FB targeted ads.
No big surprise here. In order for FB to develop relationships with national advertisers, they’ll need to do so with their own sales force.
Something that seems to have slipped under the noses of everyone out there, is the relationship between Fox and Facebook on the ad side. The network ad sales team at MySpace, became the network and performance ad sales team at Fox Interactive. When they perfected that (or did a good job with it), they spun out as Fox Audience Network. FAN as it’s known, is an ad network that runs across Fox’s own internal sites, but also across lots of publisher sites as well.
One of their biggest publishers? Facebook. That’s right, FAN/MySpace, syndicates its ads to Facebook on a rev share.
Strange bedfellows, eh?
It is one of the major step taken by facebook by adding bing search in place of google.