October 31, 2007

Microsoft and Facebook

Microsoft’s investment in Facebook demonstrates that it has a great deal of faith in the profitability of the popular social networking site.

Indeed, Facebook is meeting with a slew of Madison Avenue agencies on November 6th to help them learn how to use Facebook profile information to sell targeted advertisements. Much in the way that Gmail scans the text of an email and includes ads that are relevant to key words in the message, Facebook apparently plans to use the information profile information to send its users advertisements relevant to their stated interests. Advertisers would, of course, pay for the privilege of using this functionality.

Facebook is on the record as being very concerned about privacy. In fact, its privacy settings are more comprehensive than almost any other major social network. Technically a person can have a profile on Facebook and not allow anyone in their network to see their picture, email address, friends, or any other profile information. However, with the use of targeted advertisements, all of these privacy functions do not apply to companies looking to advertise on Facebook.

My question: Do “digital natives” see advertisers as qualitatively different from random unknown people who contact them via social networking sites?

It could be that digital natives think that giving up or sharing a piece of their identity is the “cost of doing business” online. Or the biggest revenue stream may not be from the Facebook ads themselves, but from the people willing to pay to keep their information private.