Facebook Connect: The Money is in the Feeds

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As Facebook steps up the press around Facebook Connect this week, much of the discussion in the media trades around the business model for Facebook Connect is focusing on its potential to enhance contextual advertising on Connect-enabled websites.

But while supplemental demographic data and social endorsements will inevitably improve website ad performance in the long run, the real business behind Facebook Connect lies in its potential to make Facebook a communication platform for the whole web. If successful, Facebook Connect could increase webmasters’ reliance on Facebook to distribute and deliver messages between their own website users – and their friends.

In the Facebook Platform world that began in May 2007, Facebook provided application developers with several communication channels that users could employ to send invitations to or notifications about the application to their friends. Because messages sent across these communication channels consistently converted into so much quality application traffic, developers have been willing to pay the “tax” of modifying their applications to meet Facebook’s changing user experience guidelines to maximize their exposure in Facebook’s “viral” channels. If message distribution through Facebook’s communication channels wasn’t so critical to application developers’ livelihoods, developers would have much less concern for maximizing their presence within Facebook’s notification systems.

Now, imagine a world in which Facebook Connect powers communication for websites like Facebook powers communication for Platform applications today. In a Facebook Connect-enabled web, a large portion of message volume that is presently delivered through traditional channels like email or public bookmarks (or is never sent at all) is delivered over Facebook distribution channels like notifications or feeds. For some websites, Facebook invitations or feed stories may become a primary source of both new and returning traffic, supplementing or in some cases even replacing Google. At that point, Facebook becomes a vital partner for many webmasters who are then dependent upon Facebook for user authentication, communication, and marketing.

If Facebook is able to drive a significant volume of traffic to a large number of websites, it will then be able to start generating significant revenue by selling increased distribution through its communication channels. Not a paying customer? Your feed stories may get shown to a few users per day. Want 100% of your feed stories to get published to all your users’ friends’ News Feeds? Facebook will be happy to sell you increased distribution. Its only constraint will be preserving the overall quality of the user experience – but most users won’t notice if stories from friends about certain websites never show up.

At that point, Facebook starts to look like a much more powerful player on the web. Google AdWords sit between queries and results, but Facebook sits between people and their friends. That’s where the money in Facebook Connect is.

What kind of websites do you think have the most to gain or lose in such a world?

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16 Responses to “Facebook Connect: The Money is in the Feeds”

  1. jon says:

    news sites have a lot to gain.

  2. lawrence says:

    Justin, you nailed out. The Facebook invented feed format has won. However, Facebook feeds are too often dominated by relatively trivial Facebook app activity. Facebook needs to find a way to fill out their feeds with all of the good stuff that is happening on other sites, and apparently, they are willing to trade traffic to do so.

    I agree with you entirely that it’s about becoming a “communication platform for the whole web” with the Facebook newsfeed as the centerpiece.

  3. PanosJee says:

    I think eshops or generally sites selling smth or providing a profitable service will gain a lot, actually i am planning on using it on one of my commercial websites and integrate it for a sports organiser client

  4. Hellonline (Eran’s blog) » Blog Archive » On News Feeds says:

    [...] Smith on Inside Facebook lays the business case for Facebook connect: Selling increased visibility in news feeds as a way to generate traffic to your Connect-ed [...]

  5. Nick O'Neill says:

    Definitely an interesting article. I agree with you for the most part. The only thing that I wonder about is if social discovery can ever come close to trumping search. Obviously if social discovery ended up eating into the search market this could be huge but I still go to Google when I want to find something, not Facebook unfortunately.

    For passive discovery, Facebook could rapidly become a dominant force.

  6. Noah Brier says:

    I agree with you that the data thing is a funny angle, but something still isn’t sitting quite right with me. As you wrote, “Google AdWords sit between queries and results, but Facebook sits between people and their friends. That’s where the money in Facebook Connect is.” That spot Google sits in is valuable because it allows advertisers to target based on consumer mindset/step in the purchase process. But why is sitting between people and their friends valuable?

    As the New York Times reported — http://www.nytimes.com/2008/12/01/technology/internet/01facebook.html?src=tp — “just 57 percent of all users of social networks clicked on an ad in the last year, and only 11 percent of those clicks led to a purchase, IDC said. And it turns out that marketers are not so interested in advertising on pages filled with personal trivia and relationship updates.” How does this make that situation any better/different? I totally buy that it’s a power play, but I don’t necessarily think Facebook knows to what end.

  7. Jenn says:

    I think you’re on to something, Justin. While tens of thousands of users were complaining about whether their profile photo would be right or left-aligned in the new design, the most major change to FB — the news feed contents — was tough to calculate in advance.

    Facebook is well on its way to developing special relationships with certain app developers through its Great Apps Program, App Verification Program and companies funded through the fb Fund. These relationships are already driving what most users see in their news feeds to a huge extent.

    The biggest question is, does Connect level the playing field for developers outside this clique, or should we expect Connect’s publishing power to be hamstrung by the filters on the feed currently imposed by FB?

  8. Maria Reyes-McDavis says:

    I agree with Nick O’Neill, I still only see it becoming relevant in the ‘passive discovery’ area of the Web.

  9. greencard says:

    Is there any information about this subject in other languages?

  10. Why Facebook Opted for Platform Growth Over Platform Monetization in 2008 says:

    [...] broader strategy to extend the Platform off Facebook.com (see our previous thoughts on Facebook Connect monetization). Unlike previous off-Facebook product launches, with Connect, Facebook took a much more deliberate [...]

  11. Facebook hirdetések (és egy kis iWiW) - 2. rész at Rabbit | online media blog says:

    [...] később még lesz szó, az appok történetének egy új fejezetét nyitja meg, amelytől számottevő bevételt is remélhet a [...]

  12. v pills says:

    How does this make that situation any better/different? I totally buy that it’s a power play, but I don’t necessarily think Facebook knows to what end.

  13. v pills says:

    That’s where the money in Facebook Connect is.” That spot Google sits in is valuable because it allows advertisers to target based on consumer mindset/step in the purchase process.

  14. tercüme says:

    is well on its way to developing special relationships with certain app developers through its Great Apps Program, App Verification Program and companies funded through the fb Fund.

  15. tütüne son says:

    Thank you, very nice. However, some files can not be displayed on your website, be aware of.

  16. cupcake says:

    seems delicious like my cupcakes

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