How To Monetize Social Networks like Facebook

Social Networks are hot right now. This summer, I can’t imagine any one company or brand getting more free PR than Facebook. Reporters are falling all over themselves to find Facebook related stories, and I’m sure I’m not the only one who grins every time I hear “Are you on Facebook?”

Social Networks have gone from popular to pop culture, and Facebook, youTube, and mySpace have all entered the general lexicon. With all their success and millions of monthly visitors, the one problem all social networks seem to share is how do we make money? And the answer everyone seems to be coming up with is targeted advertising. Most marketers (myself included) seem to believe that if you present consumers with advertising that is relevant to them in some way, they will be less likely to ignore it, and less likely to abandon the web pages serving those ads.

Social Networks like Facebook and MySpace have access to a massive amount of personal information posted by their users. All that information is very valuable to advertisers wanting to reach a specific audience with their latest product or offer.

So far Facebook has limited it’s targeted advertising to “flyers” where advertisers are limited to targeting age, gender and location. As part of its new advertising strategy Facebook plan to give advertisers access to a wider of array of characteristics without exposing an individual’s personal information. Facebook also plans to employ algorithms that would let advertisers know how receptive a particular audience would be to their message. These algorithms would also take into account not just the interest’s of an individual, but the interests of their entire peer network.

While Facebook gets all the attention, MySpace has already launched a similar targeted ad platform across its site. MySpace has had lots of negative press in regards to its banner based advertising, and unsolicited Spam, but targeted advertsing may be just what MySpace needs to clean up its act and improve the image of the world’s largest social network.

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It’s about time that community financing moves beyond Google ads. But, at the same time, it’s truly a question of a delicate balancing act, both conceptually and from a presentation standpoint.

On the other hand, if the benefit the social network brings it’s members is big enough, hopefully the members are more prone to accepting in-context advertising.

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I too have wondered about this. I had a friend who runs a tax business mention that ‘he got most of his new business this year from facebook’; his own personal contacts and such. I wonder if direct marketing is a good option as well on social networks, in a non-aggressive manner?