Facebook presented its master plan for boosting its advertising revenue now that it has the challenge of living up to its stratospheric $15 billion valuation.
On Tuesday at an event in New York for its advertisers, it announced Facebook Ads, an ad system designed to let advertisers more precisely target users of the social network.
With its revenue expected to hit a reported $150 million this year, Facebook needs to do a better job of targeting and distributing ads in its social-networking site, the world's second most popular behind MySpace. Expectations are high that Facebook's ad revenue can skyrocket, since it has a fast-growing base of about 50 million active users who voluntarily disclose a lot of information about themselves in their profiles and through their activities on the site.
First, businesses can create profiles on Facebook, like individuals do. Second, SocialAds will make it possible for people to share advertising information they find compelling. Finally, Facebook will provide information about people's actions via an interface to marketers.
At launch, over 100,000 business profiles, called Facebook Pages, were on the site. Each business can design its page as it sees fit, posting information, photos, videos, music and applications that Facebook users can interact with.
People's activities on a business Facebook Page can then be shared with their Facebook "friends," which, as Facebook sees it, will enhance the advertising information because it will come referred by a known acquaintance.
In other words, an advertisers' message isn't necessarily delivered directly by the business, but rather distributed among their network of friends.
A business could, for example, let Facebook users engage in a variety of activities on its page, such as posting reviews and photos or making purchases, and people in turn could inform their friends about their actions via Facebook's automated notification systems.
Finally, with Facebook Insights, the company will give advertisers access to data about actions, demographics, ad performance and trends on their pages. It won't, however, divulge information that could be used to identify and single out individuals.
The company also announced a program to let its users share on the social network what they do on sites outside of Facebook. There are 44 Web sites participating on Facebook Beacon, as the program is called.
The Web sites decide which actions visitors can automatically report back to their Facebook friends, such as listing a product for sale, buying an item or viewing a video clip.
Facebook, founded in 2004 and led by 23-year old CEO Mark Zuckerberg, recently sold a $240 million minority stake to Microsoft, which provides ads for the site. Facebook expects to have about 700 employees a year from now, up from about 300 today.
Meanwhile, it's adding about 250,000 new users every day. It currently has about 50 million active users, up from 12 million in December. Over half of its active members return to the site daily and some 59 percent of its users are outside the U.S.
A key driver of Facebook's user growth is its decision to open up its platform to third-party developers in May, which has allowed it to offer its users over 7,000 applications currently.
However, Google last week made a power move that could significantly neutralize the attractiveness of Facebook's applications. Google launched its OpenSocial program, whose set of common APIs (application programming interfaces) will let developers create an application once and have it run in multiple social networks, including, eventually, MySpace.
While it's generally acknowledged that the deep information Facebook has on its users can be a gold mine for its advertising efforts, social-networking sites also make marketers uneasy.
For example, the content on social networks is largely unregulated and created by millions of people, a situation that can lead to ads appearing alongside vulgar or objectionable material.
Social-networking sites have also gotten a bad rap for what some in law enforcement consider lax controls that lead to sexual predators stalking and victimizing minors.