Saturday, 25 August 2007

Facebook to follow Google on ads

Facebook is preparing an advertising model that would allow advertisers to target its users based on information that they reveal about themselves on the social networking website. Facebook had a record of 30.6 million visitors last month, and it is expected to make profits of only $30 million (£15 million) this year on revenues of $150 million. The new advertising system proposed by Facebook is central to the group’s efforts to monetise the social phenomenon that it has created.

The advertisements are expected to appear from banner ads and boxes that show up on the borders of Facebook pages at present and they would be mixed up with the news feed, which provides updates on the activities of each user’s friends. Facebook’s attempt to boost advertising revenues by extending information about its members to advertiser’s echoes moves by Google to target ads based on the browsing activity of its users.

Google tried this kind of targeted approach and there were some complaints, and the group seems to have become more subtle about it. With Facebook, the new ad system may lead to some drop-off in users, but it’s a popular site so it shouldn’t hurt too much. Facebook does not have a wealthy parent company to prop it up so it is essential that the group record strong revenue growth, and an effective advertising system is by far the best way to do this, analysts say.

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