Facebook’s Audience Expanding Rapidly; Revenue Growth Trailing By Nearly 2:1 Margin

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Facebook now claims a quarter of a billion users, including an astounding 50 million new users since April 8. But the company’s challenge has never been so much to build up its ranks as to make money from them. If the social network continues to add visitors at the rate of roughly 50 million every three months, it should have nearly 350 million members by year’s end — a 133 percent jump from the 150 million it heralded at the start of January. What about revenue? Facebook says it expects sales to increase 70 percent this year.

So how’s Facebook trying to make up the difference? One way is by introducing increasingly sophisticated targeting tools for advertisers. Inside Facebook reports that Facebook added several new ways for advertisers to target members this week. Advertisers will now be able to specifically reach users who are already connected with them in some way (For instance, if they are fans of their pages or a user of their apps). Other new features: Advertisers will now be able to target people on their birthdays and, in a nod to the site’s international growth, reach people in multiple countries with one campaign.

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Shane Lundy

Social media is in need of finding a sustainable business model. When user growth is disproportionate to revenue growth, profitability is not possible. Though providing profile based targeting is helpful for the advertiser it does not ultimately move the needle. Social media will forever be free to the consumer, thus making the advertiser the most important constituent in the ecosystem. The question that the social media giants should be asking is, why can’t we be profitable with an ad supported model? The answer is simple, however quite painful to hear. The current advertising model for social media does not work well enough for the advertiser, therefore it does not warrant high enough CPM’s to achieve profitability.

You must address the root cause of the issue. Consumers simply ignore display advertising that is alongside content. Additionally and more importantly, the higher the engagement the site is, the worse the ads perform. TV ads work better because they occupy the entire screen at tolerable intervals. With that said, there is still too much media waste because of poor targeting. We know that much is being done around behavioral targeting however the privacy concerns have not yet been resolved.

Ok…this is self serving, but I am really talking about disrupting this flawed model and my company, SponsorSelect has a solution. We know that a self targeted advertising will ultimately be a significant percentage of the advertising dollars spent online and via TV and as the pioneer in this space we hope to maintain our position as the category leader. We call it On-Demand advertising.

SponsorSelect is a premium ad network that is reinventing behavioral targeting. Built atop a robust ad server that has already been deployed with numerous publishers, SponsorSelect allows Internet users to choose the advertising they wish to see. By allowing users to self-select advertising, SponsorSelect delivers performance without privacy concerns. When advertising is more relevant and performs better for advertisers, publishers make more money and can provide better content and services to users for free. SponsorSelect targets nine verticals: casual games, multimedia, social networking, ISP, humor, news, music, email and lifestyles.

We would love to add another revenue stream for Facebook and all the social media giants. Progress is being made and I hope this helps push the bolder further up the hill.

Regards,
Shane Lundy
President & CEO
SponsorSelect Inc.

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