Tech News and Opinions (by Paul Spain)

Facebook trials a dramatic change in revenue generation

, posted: 4-Oct-2012 11:35

Yesterday I noticed that Facebook have quietly begun testing a new revenue stream here in New Zealand that has the potential to make or break the company. This opens Facebook up to paid advertising in the form of posts to those who are not your fans or friends and have not 'liked' your page.

Facebook-Postvertising2You could call it 'postvertising' or simply paid posts - Facebook calls this new revenue stream promoted posts, the same name they use for paid posts targeting your existing fans. But by allowing posts to be seen in the news feed of non fans this could lead to a sea change in revenue generation for Facebook. Of particular note is these adverts will reach users' smartphones and tablets just as easily as present paid advertising reaches PC screens.

What is unknown at the moment is if Facebook will make postvertising broadly available. Initially these promoted posts can only go as far as friends of your Facebook fans, however that has the potential to be far enough to be generate billions of dollars in returns from this revenue stream.

The move of Facebook users to mobile devices has been a concern for Facebook shareholders as revenue from mobile users has been very small in the past. Today Facebook shares dropped 1.98% - however if postvertising takes off then I'd expect to see the share price rebound.

Facebook-PostvertisingOn the flip side - more of Facebook's user community could leave the service if the company founded by Mark Zuckerberg chooses to squeeze too much revenue from them. Fortunately for Facebook their scale affords them a chance to try new things on a targeted basis and quickly roll them back if there is an outcry.

How did I find out about this new service? Firstly I'm based in New Zealand which seems to be a common testing for new product testing and was recently used by Facebook to test the less dramatic initial wave of promoted posts. I actually stumbled upon the service yesterday when posting on my page for the NZ Tech Podcast. As testing new technology is a big part of what I do at Gorilla Technology I decided to try it out.

 

I've shown the results above about 18 hours after starting my initial postvertising trial. With just 10 total likes and 2 link clicks it seems like expensive means of advertising but would be easy for Facebook to adjust to meet the market. While Facebook are initially charging based on reach, it's not too much of a stretch to think that it could change in future to a style Pay-Per-Click (PPC) of advertising payment. No doubt pricing is part of what Facebook are testing.

I'd be interested to hear where you think might lead in the future - how much impact could it have on Facebook's future?

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(Update: It appears this new advertising capability has been in testing for a few weeks but it's only been exposed to a small number of advertisers)



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