Facebook opens the door to advertisers

As Facebook finally rolls out its new advertising system, some of the world’s biggest companies are rubbing their hands with glee at the thought of tapping into its vast database. But its users are likely to be less enthusiastic – and rivals are already joining forces to try and steal its thunder. Is this the beginning of a new era for Facebook, or the beginning of the end?

Last Updated: 31 Aug 2010

Facebook’s new system allows companies to target its users on a number of levels. From this week companies can build their own Page, to which they can add content and applications that will help them connect to their customers. Various behemoths like Coke, Sony and Blockbuster are already up and running (though their content seems to largely consist of complete strangers expressing their mutual love for fizzy drinks).

Companies can also use Social Ads, whereby their adverts are spread virally through friend networks – a bit like the ‘user recommendations’ Amazon has used for a while. But the most controversial aspect of the system is that advertisers also get access to fairly detailed information about users’ habits and inclinations. Not surprisingly, this has not gone down well with privacy campaigners.

When Microsoft bought a minority stake in Facebook recently, it valued the site at $15bn. Since it currently makes hardly any money, it needs to find some way of monetising its massive user base if it’s going to start justifying this kind of exorbitant valuation.

Still, opening the doors like this is a gamble. Its 50m users signed up because they wanted to interact with their friends, not because they wanted to give more information about themselves to advertisers. The danger is that if Facebook starts deluging people with ads – however nicely it might dress this up – people might start deserting it for another site where they’re left to their devices.

Two of its biggest rivals are already positioning themselves to take advantage. This week Google signed up MySpace to its OpenSocial project, which will allow developers to create applications that will work across a number of different social networking sites – but not Facebook, presumably.

Employers may be hoping the end is in sight for Britain’s Facebook obsession – it would probably double office productivity overnight. But we suspect that even if Facebook does fall by the wayside, another site is likely to spring up and take its place.

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