How Much Are You Worth to Facebook? | Fast Company
How Much Are You Worth to Facebook?
By: Adam L. PenenbergFacebook and others have tapped into the power of viral loops to build massive audiences in record time. Now they're using these growth engines to create the future of online advertising.Related Content
Some of the most iconic companies of our time -- Facebook, MySpace, YouTube, Twitter -- attracted millions of users practically overnight, by unleashing what's known as a "viral-expansion loop." In plain English, they grew because each new user led to more users. The trick is that each of these businesses created something people really want and then made it easy for customers to happily spread their products for them to friends, family, and colleagues.
I started exploring the phenomenon 18 months ago, in a cover story for Fast Company about Ning and viral loops, and my research grew into a book, out this month, about how viral loops are at the core of fast-growing social-media phenomena. In addition to the compelling genesis stories of how these startups became media darlings, what intrigued me was this question: What does size matter if you can't figure out a way to make money off a massive audience? Simply layering in banner ads (or ads of other stripes) can alienate your user base and often doesn't even work -- a problem that continues to plague MySpace and YouTube despite any claims to the contrary. And if you start charging, your customers are but a click away from someone who doesn't. Of course, this marketing conundrum afflicts more than just viral-loop companies. It has been the undoing of online news and entertainment, neither of which has been able to conceive of a way to ratchet up revenue through advertising to a point of sustainability.
The culprit: the oft-tried-but-not-true clickable banner ad, whose click-through rates now hover around 1%. It's even worse on social networks, where the rate is a measly 0.02%, a far cry from when the Web was so new that 50% of users clicked simply because they'd never encountered banners before. (Hey, what does this button do?) Banner ads are victims of the modern cat-and-mouse game between marketers and consumers. (They barrage us with TV ads; we get DVRs. They create pop-up ads; we get pop-up blockers.) The more time people spend online, the more likely they are to become inoculated against the latest marketing technique.
Definitely worth reading the full article...
