The Facebook Effect Author David Kirkpatrick Talks Facebook’s Ad Network Potential, Future Acquisition Targets

This afternoon at TechCrunch Disrupt NY 2012, our own Josh Constine sat down with David Kirkpatrick, author of “The Facebook Effect,” to discuss what they thought about the future of the newly IPO’ed social network. Specifically, the two focused on the potential for Facebook’s advertising platform, its competitive advantages over incumbents and competitors, and its potential acquisition targets which could help its platform expand.

What’s Facebook’s Post-IPO Strategy?

Josh started off by asking Kirkpatrick what he thought was the most important thing Facebook should do going forward. David responded that Facebook shouldn’t do anything differently, even going so far as to say that doing so would be the “most perilous mistake they could make.” However, in terms of how the IPO could potentially affect the company’s focus, and specifically CEO Mark Zuckerberg’s focus on product, was the fact that Zuckerberg now has to “sell a lot of ads.”

As a public company, analysts will be making quarterly earnings projections, and Zuckerberg will have to waste a lot of time thinking about that, said Kirkpatrick. Whether Zuckerberg likes it or not, he will have to think about money now, Kirkpatrick lamented, a role that the CEO had historically dedicated to COO Sheryl Sandberg. However, Josh pointed out that shift may not be a bad thing — Zuckerberg hasn’t “applied his big brain to monetization yet,” he noted.

Facebook’s Uber-Precise Ad Targeting

The two then moved onto sharing their thoughts about the Facebook advertising platform, which had Josh asking what Kirkpatrick thought Facebook had done that was really special in ads. Responded the author, “to create an environment which can be so accurately targeted for advertising is an innovation in itself.”

He added that it’s also effectively an unmonetized innovation at this time, and he’s confident that there’s a lot of revenue opportunity there in the future, too. Kirkpatrick said that he felt that even something as simple as putting an ad in your News Feed was an innovation.

How Facebook Will Get To Be Worth More Than $100B

In discussing new monetization streams for the network, the potential for an offsite ad network that could one day rival Google’s AdSense was huge. There are already 9 million businesses and advertisers on the Facebook ad platform today, said Kirkpatrick. But highly targeted ads – the kind you would see on Facebook itself – could potentially freak people out when they showed up on the wider Internet, Josh pointed out.

Kirkpatrick agreed to a point, but said that most people, including the average Facebook user, don’t seem to really care. There’s a tidal wave of “anti-targeting mindset,” especially in Europe, said Kirkpatrick, but it seemed to be mostly among the press, the government, and the “influentials” (which he dubbed the “punditocracy”). “A lot don’t understand Facebook or advertising that well,” he said of this group, painting them with a rather large brush. Kirkpatrick also said that not only does the average Facebook user not care about ads, in some of Facebook’s largest markets, it’s not a concern at all. Indonesia, for example – Facebook’s fourth largest country –  has no issue with Facebook’s advertising.

Who Should Facebook Buy

Finally, in terms of what companies Facebook should acquire next, both agreed that moving into physical payments would make sense for the company.

As for the recent Instagram and Karma acquisitions, Kirkpatrick called them “unexpected and surprising,” saying that they’re really app related, which he thought was odd. “What’s really important for Facebook is being a platform,” he said. He thought the biggest investments would be to “augment their platform capabilities, not their app capabilities.” But he concluded that some things, like photos, may be so important to the platform that they felt they needed to spend a billion dollars on it.

“Tumblr is an interesting company for Facebook to think about,” Kirkpatrick stated. He also thought that Facebook couldn’t help but be obsessing over Pinterest right now, but Josh vehemently disagreed. Instead, Josh’s picks were some sort of peer-to-peer payments company like Venmo, and an offsite ad network technology that would give Facebook the ability to scrape data from websites outside its walled garden to let Facebook serve relevant ads to visitors who aren’t logged in.