Bentley College Marketing- Honors

This blog is for MK 402-H01 and the greater Bentley College population.

Tuesday, April 04, 2006

$750 Million Not Enough for FaceBook Founder

According to a post on Marketing Shift made by Evan Roberts, Google might be ready to purchase FaceBook. The college (and now high school) centered website was started only two years ago by a Harvard sophomore dropout named Mark Zuckerburg. The current offer on the table is $750 Million but Zuckerburg and the venture capitalists that initially backed his operation claim that they are holding out for $2 billion. Media conglomerate Viacom has apparently entered the bidding for FaceBook as well, to counter News Corp.’s acquisition of MySpace for a reported $580 Million.

FaceBook is a website where users can post their picture and a profile and expand their social network on their own campus and to friends across the country. People can send messages, store photos and ‘poke’ each other on the site. Is this another case of a classically overvalued website or the perfect medium with which to target the elusive college student demographic? There are arguments for both points.

I’ll start with the positive argument. FaceBook is already the seventh most trafficked website on the internet with 5.5 billion page views in the month on February alone, more than Amazon.com, according to Business Week. TechCrunch.com has recently indicated that 85% of college students have a profile on FaceBook. MySpace is the second most viewed website on the entire internet with 23.5 billion page views this February and FaceBook hopes to follow in those footsteps. Like MySpace, FaceBook is a hotbed of trends for the younger demographics. On both of these sites, people post or blog about their interests, favorite products, movies and books.

There are three types of advertising that are common on FaceBook. An article from the Roanoke Times names sponsored groups, which allow people to discuss products they are interested in, banner ads and text announcements. Prices range from as low as $9 per day for a text announcement to the high four or five figures for a comprehensive campaign for banner ads and sponsor groups. "[Advertisers] come to us because we have become the site or the conduit to reach the college audience," contends Chris Hughes, a FaceBook spokesman.

Those who doubt the value of FaceBook point to several factors. One contention is how appealing the college student demographic actually is. John Gartner of Marketing Shift said in an earlier post, “Can you imagine walking into a VC and saying, ‘I have an audience that is largely unemployed or making minimum wage, switches loyalties from month to month, can't legally drink, and will leave us in five years or less.’”

Another downside is that the college and high school student demographic is increasingly adept at putting up perceptual screens and blocking marketing communications. The success of marketing on these sites is hard to quantify which is the same problem that has always existed with mass media. How many people actually see the advertisements on the page they are viewing? How many people process the information? I am on FaceBook and I am not a member of a sponsored group, can’t recall a single brand that I have seen advertised on a banner ad, nor have I ever responded to a text announcement.

According to Brent Brandow, another author on Marketing Shift, six advertising executives were brought together for a panel hosted by the Advertising Research Foundation and the topic of advertising on MySpace was brought up. The reaction was less than enthusiastic. "I wouldn't be caught dead in that kind of environment. You only have to look around for five or ten minutes to find something offensive" explained David Cohen, executive vice president for Universal McCann Interactive. Dawn Hudson, the President and CEO of Pepsi North America added, "We're being cautious because there's a blurring between advertising and content, and the content does rub off on your brand." Granted, these are the leaders of massive business entities that have much to risk in terms of public relations and do not represent all companies. The jury is still out, but reports have it that Google has recently sold off approximately $2 billion dollars in shares.

In my opinion, the concept of FaceBook as a $2 Billion dollar entity does not sit well with me. From a somewhat traditional marketing standpoint of exposure and reach it makes sense. However, without any concrete evidence to support my theory, I think that people my age just don't respond that well to internet advertising. With television and radio broadcasts, the images and/or sounds are forced upon you, while on the internet it is much easier to block those communications via perceptual screens. My prediction is that it is only a matter of time before advertisers realize this and no longer support FaceBook's need for revenue generation. FaceBook is not the panacea for contemporary youth marketing. They need to supplant ad income with an membership fee or find new ways to link companies with members of the sites without impinging on people's online comfort zones.

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