Inside Facebook

Because CPMs are so low in the social networking business, companies like Facebook and MySpace are hoping to garner premium advertising dollars by enabling promotions that create brand-centered community among members. For example, 100,000 MySpace members recently became friends with the Wendy’s Square. Brand Managers love opportunities like this because it’s so hard to create “authentic” community around a product–many will pay out the nose to try something new they can tell their bosses about.

The sponsored group program at Facebook lets companies buy a link from the Facebook sign-in landing page to a “group page” that contains ad copy and a message board. Here is a complete list of all sponsored groups that have been purchased on Facebook. (Thanks Avery!) In summary, the following companies have Facebook sponsored groups:

• Apple
• CinemaNow
• Contiki
• EA (EA Games)
• Fox News/News Corp (interesting screenshots)
• Geffen
• Macy’s
• Maxim
• Microsoft
• Panasonic
• Sony (Playstation 2 accessories)
• Toyota

Also: CollegePoker.com, Spreadshirt, STS Travel, Al Gore’s “An Inconvenient Truth,” and the Dave Matthews Band

I predict that brand advertising products (like sponsored groups) will become a significant component of social networking revenue. While Facebook and MySpace will always have trouble getting a high click-through rate on standard ads (because kids come to hang out, not to buy), what they can offer Madison Avenue is the opportunity to have a presence where all the kids are — A, in a way that looks at least somewhat cool, and B, in a way that allows and measures various ways of interacting with the brand.

As always the tension for Facebook will be not to oversell these high-dollar placements and devalue them in the eyes of its members…

Facebook continues to explode on the work networking scene. After launching company directories 3 weeks ago, the number of new company Facebooks created this week has doubled to 2,000, bringing the total number close to 4,000. Those numbers are parabolic, which is a good sign for the health of any viral feature.

Facebook has changed college culture from Palo Alto to Topeka. But how far into corporate middle America can the company go?

This week’s New Yorker magazine has a lengthy piece by John Cassidy on Facebook, including an interview with Mark Zuckerberg. The most interesting part of the article touches on how the access controls that Facebook gives users yield more monetizable content:

Eighteen months ago, the going rate for a banner ad on social-networking sites was pennies per thousand page viewings. Today, the rate on MySpace is about ten cents, and Facebook, with its upscale demographic and unobjectionable content, can charge more–as much as four dollars per thousand page views.

In a world where revenue is as simple as page views * CPM, would you rather have 10x the page views or 10x the CPM of your competition? Make your bets accordingly.

More at attentiontrust.org…

“Republican members of the U.S. House of Representatives have proposed legislation that would require schools and libraries to prohibit access to social networking sites.

The bill, introduced Tuesday by Rep. Michael G. Fitzpatrick (R-Pennsylvania) and supported by members of a coalition of Republicans calling itself the Suburban Caucus, would oblige schools and libraries that receive federal support to implement systems that prevent minors from viewing obscene and objectionable material online.”

Source: Red Herring

I don’t think that legislating prohibition at school will produce significant changes in how sites like Facebook and MySpace are used. If anything, it will only increase the digital divide, as students who only have computer access at school or libaries would no longer be able to access any website deemed “social networking.” danah boyd agrees.

But hey, it’s an election year.

In its quest to steal a piece of the internet ad pie from Google and Yahoo, Microsoft is doubtless trying to figure out how it can better crack the youth social networking market.

“I’ve spent a lot of time studying Facebook. I think there is a lot we can learn from the Facebook concept.”

- Steve Ballmer, Microsoft CEO, at the Churchill Club
(Source: News.com)

Always late to the party Steve. Always late to the party. (Except in Asia.)

P.S. A word of advice: Let the guys over at Fox figure out how to monetize this stuff and go build things with a cleaner model like Shopping and Expo. No one’s figured out how to make a lot of money here yet.

According to a Madison TV station, students at the University of Wisconsin - Whitewater were arrested when a fellow student emailed a photograph found on a fellow student’s Facebook profile to local police. The problem? A stolen sign was hanging on the wall in the background.

It will be interesting to see how Facebook balances privacy concerns as it works with local law enforcement officials. In this case, a classmate notified police; they didn’t request Facebook access or records. If students are afraid they’ll get busted for being in a picture with a red cup, that could seriously hurt Facebook’s reputation as a safe place to share photos with friends.

Taking a look at the corporate network listings on Facebook this morning I noticed that the number of registered companies has increased from 878 to 1,855 since Facebook started taking requests for new corporate networks last week. That’s a weekly growth rate of 111%–not bad.

The real question here is whether Facebook can gain enough traction in corporate cultures to have staying power with new members that were not previously on Facebook. It’s unknown how many of these work networks were started by previously existing vs. new Facebook members.

Following in the footsteps of the University of New Mexico, which banned Facebook access from campus computers last fall, Grambling State University (Grambling, LA) yesterday announced that it has banned access to Facebook and Myspace from campus computers effective immediately.

Losing access to certain websites from university-owned computers wouldn’t be a big deal for most students who have their own computers at home. However, those who rely on campus computers for communication with peers now find themselves left out in the cold:

“Not having access to Facebook and Myspace is like not being able to check your email,” Alonzo Blalock said.

“I am upset that I pay to use the computers in the lab and the library and I can’t even visit the websites I want to visit,” Subaya Blount said.

- The Gramblinite (GSU newspaper)

Will more administrations see Facebook as a silly form of entertainment and drain on campus resources? I wouldn’t be surprised–while Facebook certainly is a widely used communication platform, it’s hard to make the case for it as an academic tool.

It was just last week that Facebook opened its doors outside university and high school walls for the first time to employees at a select 10 companies. Today, Facebook significantly expanded corporate availability to anyone with an email address at one of hundreds of top companies, including the likes of Google, Yahoo, Oracle and Wachovia.

(Update: Full list of 878 companies)

“We’ve expanded to include work networks to meet the needs of Facebook’s growing alumni user base,” said Melanie Dietch, Facebook’s Director of Marketing, when asked to explain the company’s corporate-network strategy. “We know that two-thirds of users return every day to Facebook, and 45% of alumni come back every day. So to meet the needs of alumni who want to continue to use Facebook after school, we’ve enabled them to invite friends from work to join.”

The blogosphere was abuzz last week after Facebook’s initial foray in the corporate market. However, the company says it does not intend to compete with existing professional networking and recruiting services like LinkedIn. Dietch says Facebook has “no plans” to launch any special features for mining work networks on the site.

LinkedIn upgrades classmate search

Just recently, LinkedIn launched a new feature allowing members to easily search by class year in order to find and re-connect with old classmates. But LinkedIn Co-founder and VP of Marketing Konstantin Guericke says his company intends to continue focusing on serving the professional functions of job-seekers, recruiters, and analysts.

“There clearly is some socializing going on at companies, and Facebook is the natural solution for that,” Guericke said in an interview. “[But] my guess is that 99% of the people you’d want to get in touch with on LinkedIn never had a Facebook account.”

“Fun is good! … [But] I’m not sure how many people will feel their Facebook profile is ready to be used for job search or business deals,” he added.

“Is my boss checking out my party pictures?”

The presence of professionals inside Facebook raises some new privacy questions. Students regularly post photos to their profile pages and write comments on each other’s walls–not exactly the things they’d put on a resume. “Many students don’t relish the thought that future employers might check out their Facebook profile,” said LinkedIn’s Guericke.

To address these concerns, Dietch says Facebook’s strict privacy rules will apply to corporate members just as they have to high schoolers. Professionals who join the service “will only see the profile information for their network and their friends. And of course people can tightly control their privacy settings to restrict their information if they choose.”

Clearly the addition of work friends to a historically personal social venue introduces new possibilities for social awkwardness on Facebook. Do you want everyone at your company to be able to see photos from your weekend vacation? Do you want that sketchy character in the cubicle around the corner monitoring your relationship status? Until Facebook provides members with different and easy to use privacy settings for work and personal networks, many current Facebook members may shun joining work networks (thereby potentially giving coworkers a clear window into their personal lives).

That being said, Facebook will surely cost employers thousands of hours of lost productivity I wouldn’t be surprised to hear of Fortune 500 companies blocking Facebook access within the next 6 months.

Alumni networking getting crowded

Facebook’s entry into the broader professional networking market raises eyebrows for makers of alumni networking software like Mountain View startup Affinity Engines’ inCircle and LinkedIn’s LinkedIn for Groups. Both LinkedIn and Affinity Engines sell packages that are integrated with university alumni association websites to allow former students to hunt for jobs and find old friends. While it is unlikely that Facebook would enter this business directly, its growing popularity makes the need for proprietary alumni networking software obsolete for many.

“We provide users with trusted social networks by partnering with large organizations to verify the user’s identity and membership in that organization,” said Steve Loughlin, President and CEO of Affinity Engines. “The big question [for sites like Facebook is] sustainability because switching costs are low.”

“If Facebook attempted to sell mini-Facebooks to alumni associations or to get job listings from employers, there would be some competition,” said Guericke, whose company’s products are used by universities like UC Berkeley, Duke, and UCLA. “But I think competition is healthy.”