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Facebook’s financial challenges aren’t unique. Popular free e-mail services like Hotmail from Microsoft and Gmail from Google have little in the way of profits to show for their vast audiences, aside from a few text ads that people rarely click on. Instant messaging networks like Microsoft Messenger and AIM from American Online are similarly popular but have never been hyperprofitable, for the simple reason that people do not want intrusive ads inserted into personal conversations.
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Facebook’s approach is to invite advertisers to join in the conversation. New “engagement” ads ask users to become fans of products and companies — sometimes with the promise of discounts. If a person gives in, that commercial allegiance is then broadcast to all of the person’s friends on the site.
A new kind of engagement ad, now being tested, will invite people to vote — “what’s your favorite color M&M?” for example — and brands will pay every time a Facebook member participates.
“We are trying to provide the antidote for the consumer rebellion against interruptive advertising,” says Sheryl Sandberg, Facebook’s chief operating officer and Mr. Zuckerberg’s business consigliere.
Ms. Sandberg, who ran Google’s highly successful advertising initiatives before leaving the search giant to join Facebook, said her company’s revenue was growing despite a brutal downturn that is hurting other kinds of online advertising. She also puts one rumor to rest, saying the company is not considering charging members for any aspect of its service.
“We’re pretty pleased with the overall trajectory,” she says. “Our conversations with big advertisers have broadened in scope and we also have more people asking about how they can work with us.”
Facebook recently introduced advertising tools to let companies focus on users based on the language they use on the site and their geographic location. So, for example, an advertiser can now tailor a message to the Latino community in Los Angeles or French speakers in Montreal.
Despite the gloom permeating much of the advertising world, and the formidable challenges facing the site, some advertisers say they glimpse the future in Facebook’s brand of interactive advertising.
“Our clients all want to see if they can make this work,” says Al Cadena, the interactive account director at Threshold Interactive in Los Angeles, which represents companies like Nestlé, Honda and Sony. “Advertising used to be a one-way communication from advertiser to consumer, but now people want to have a dialogue. And Facebook is becoming the default way to do that, not only in the States but really for the whole world.”
Internet evangelists say that when a technology diffuses into society, as Facebook appears to be doing, it has achieved “critical mass.” The sheer presence of all their friends, family and colleagues on Facebook creates potent ties between users and the site — ties that are hard to break even when people want to break them.
Many who have tried to free themselves of their daily Facebook habit and leave the site, like Kerry Docherty, a student at Pepperdine University’s law school, speak of a powerful gravitational pull and an undercurrent of peer pressure that eventually brings them back.
“People gave me a hard time for leaving Facebook,” says Ms. Docherty, who quit at the end of 2007 but then rejoined six months later. “Everyone has a love-hate relationship with it. They wanted me to be wasting my time on it just like they were wasting their time on it.”
