Social-networking Web site Facebook Inc. is quietly working on a new advertising system that would let marketers target users with ads based on the significant amounts of information people reveal on the site about themselves.
Eventually, it hopes to refine the system to allow it to predict what products and services users might be interested in even before they have specifically mentioned an area.
As the industry watches the Palo Alto, Calif., start-up to see if it can translate its popularity into bigger profits, Facebook has made the new ad plan its top priority, say people familiar with the matter. The plan is at an early stage and could change, but the aim is to unveil a basic version of the service late this fall.
People familiar with the plan say Facebook wants to accomplish what Google Inc. did with AdWords, which lets anyone place ads next to search results by buying “keywords” online. It brought in the majority of the search engine’s $10.6 billion in revenue last year. A Facebook spokeswoman acknowledged the company is working on an ad system, but declined to provide details.
Most users of Facebook treat it as a sort of online scrapbook for their lives posting everything from basic information about themselves to photos to calendars of events they plan to attend. They create a social network by linking their own Web pages with the pages of other users they consider online “friends.” Facebook already uses some information from users’ pages in a rudimentary system that allows advertisers to go online, and starting at $10, buy simple “flyers” that run as boxed ads on the left-hand border of Facebook pages. But for targeting, advertisers are limited to age, gender and location of the user.
The new service would let advertisers visit a Web site to choose a much wider array of characteristics for the users who should see their ads based not only on age, gender and location, but also on details such as favorite activities and preferred music, people familiar with the matter say. Facebook would use its technology to point the ads to the selected groups of people without exposing their personal information to the advertisers.
These ads would show up differently than the banner ads and boxed flyers that appear on the borders of Facebook pages, say people familiar with the plan. Instead, they would be interspersed with items on the “news feed,” which is a running list of short updates on the activities of a user’s Facebook friends. In addition, the ads would show up on Facebook pages that feature services provided by other companies, one person says.
Facebook has already had some success in getting users to notice similar ads created in a separate initiative. Under that program, launched last year, advertisers say they typically spend about $150,000 for a three-month campaign that gives them a special page on Facebook, as well as the news-feed ads. But customizing these campaigns can be a costly process for Facebook, which has to dedicate staffers to the efforts.
Facebook hopes allowing advertisers to buy customized ads online will be a less labor-intensive way to take advantage of the personal data people reveal on the site. A key part of this new plan is that Facebook would use an automated system to process transactions instead of requiring advertisers to work with a Facebook representative, people familiar with the plan say.
Next year, Facebook hopes to expand on the service, one person says, using algorithms to learn how receptive a person might be to an ad based on readily available information about activities and interests of not just a user but also his friends even if the user hasn’t explicitly expressed interest in a given topic. Facebook could then target ads accordingly.
Getting this right is important for Facebook, which was founded in 2004 by then-Harvard student Mark Zuckerberg and which has become Silicon Valley’s latest darling.
While the Web site had roughly 30.6 million visitors in July, the company says it needs to do a better job profiting from its huge user base.
That’s because unlike other hot Web start-ups such as MySpace and YouTube, which were acquired by large Web and media concerns, Facebook wants to stay independent and potentially go public.