Tuesday, May 29, 2012

GM pulls out of Facebook: What next for FB?

This is part-2 of my post about GM pulling out of Facebook and the implications from that. As I mentioned in Part-1, it is probably an indication that all businesses are not suited for Facebook advertising. Facebook will do well to understand this fact as well and work with the categories that are suitable for Facebook advertising to enhance its revenue streams. In the short run, there might be more exits like GM but in the long run, Facebook should have a more solid advertising business with tangible returns for its partners, and in turn, itself. So, here are a few suggestions on how Facebook could display advertisements.

Brands use FB pages to reach out to their customers - currently for free

Ads in Newsfeed but how many?

I have a slightly different take than FB's current strategy on how it should use advertisements. Rather than the small spaces on the already busy (if not cluttered) page, the best place where all users definitely focus is on their wall posts. An item in my news feed is probably the best place for placing an advertisement if you want maximum attention from me. Putting an ad in my newsfeed does have challenges about the number of ads you can put in the news feed but if FB can keep it to a small percentage of my daily news feeds or base it on the amount of time I am active on FB, I may not really mind it. For instance, if I stay online for 15 minutes going through 20 news feeds, I may be fine with a couple of ads spaced out evenly. If I stay on for another half hour chatting with friends on the FB messenger, I may be ok with another ad every 15 minutes. That kind of analysis should take care of the number of ads you can send me. As for what ads to send me, FB already knows so much about me. They know when I was born, when is my wedding anniversary, which schools did I go and when, where I work, what I did last month, what I read yesterday etc etc - the list is long. So, without getting into the wrong side of privacy laws, if FB can share information at an aggregate level with advertisers, they may be able to provide targeted advertisements in the news feed. They can also use the feed for running some small surveys with a few questions which can be used for market research by companies.

Brand Pages: The free ride must come to an end!

Another big change it should do is on the brand pages. Currently brand pages are free. Anyone can create their brand page and promote their products, reach out to potential and current customers for free. Since FB works as a medium for companies to reach out to their customers, it should charge for this access, especially given the kind of recent changes it has announced to enhance the exchange between company and customers. Brand pages can probably continue to be free for really small companies or entrepreneurs, at least for a limited period. After the limited period or after a company becomes big (may be bigger than some amount of revenue etc), brand pages should be charged. Such companies who pay for brand pages should get some data from FB at an aggregate level to help them take decisions and send targeted communications to those identified. Apart from the standard brand page fees, FB can charge companies for pushing out advertisements into users' news feed. May be they can put out plans such as "send email to top 100 customers" based on some attribute or random 1000 people etc. FB knows so much about people - so it should allow brands to send emails to consumers without sharing their email ids etc. Only when you "like" or share their post or reply to them should they be able to see limited customer details. Till that point, customer should only be an aggregate data. I must mention at this point that I am not particularly conversant with privacy laws and therefore some of what I am suggesting here may not exactly be on the right side of the law. But the point of this post is to suggest the general idea which can (hopefully) be expanded on within the limitations of the privacy laws.

Collect more ad-relevant data (within the privacy laws!)

Apart from the umpteen ways in which FB gets information about us, they can also ask people to tag photographs that they upload with categories like personal, birthdays, general party, anniversary, vacation etc to allow FB to target ads towards such people based on the category that the photograph is put under. I remember Picassa does ask for such optional information when I upload photographs there. Once they have this information, for instance, a person who likes photographs of a friend under the vacation category may like it if he sees an ad for some nice vacation plan. The ads will, of course, need to be from a company in the "suitable" category as discussed in Part-1 of this post.

For all we know, GM's pullout might be the best thing that's ever happened to Facebook if it can be turned into an opportunity to better understand the capabilities of the FB platform!

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