With Facebook stock continuing to underwhelm ($31 at the time of this writing), one of the key worries among investors is whether the social media giant has a viable advertising revenue model to make it a longstanding company. According to its S-1 filing, ads made up 85 percent of its revenue in 2011.
Here are a few ways Facebook is pivoting (or could) to get more revenue their way.
- Moving to a single stream. Whereas the desktop browser version of Facebook gives you a news feed and a sidebar with ads, a better approach would be to consolidate these into a single feed. This is already happening with “Sponsored Stories.” That has proved effective, and it’s likely that more ads will be offered in this way. Done in a gradual way with a focus on the user experience will ensure most users don’t jump ship. Twitter users are already getting accustomed to “Promoted Tweets.” Adopting a “single stream” from a design standpoint could also eliminate a lot of the clutter that has overtaken the desktop version of the Facebook site.
- Monetize business pages. According to Mark Zuckerberg’s letter in the S-1 filing, Facebook hosts pages for more than 4 million businesses. And yet not a single one of them is monetized (unless they buy ads to promote them). While offering free business pages is a smart open-door strategy, there is an opportunity to add on premium services. This could mean more location-based services, such as push notifications to people within the vicinity of a store, especially if you can get users to accept this kind of intrusion. Perhaps the Gowalla acquisition will help here.
- Create an ecosystem of services. While Zynga has definitely helped Facebook become the #1 provider of distractions, other application services could be deployed to make it a more helpful platform. Say Facebook partners with Evernote, putting all of your notes and collections in a single spot and allowing you to scrape Facebook posts into a virtual, private scrapbook. There’s also a huge opportunity for collaborative tools to compete with Google Docs. These could be developed by third parties but tightly integrated into the FB experience.
- Create an advertising network. Take Facebook ads out of Facebook. With revenue sharing, Facebook could compete with AdSense and leverage its existing network of sites that already use FB integration for in-page “Likes,” comments and recommendations. Instead of contextual ads, data-driven ads could follow you as you browse the web. The same demographic targeting features that allow marketers to pinpoint Facebook users could be deployed on the network, provided that users are persistently logged-in (or some other cookie mechanism is used).
I’m sure I’m not the first person to suggest or imagine these things. It just seems that now that Facebook has to make revenue to keep investors happy, you’re going to see them get more aggressive about doing just that.