So Facebook, which has been letting people know it's on track for $150m in revenues in 2007, must be an awesome advertising platform. Well, sorry to rain on the parade, but no. Media buyers — the agency people who book campaigns — report that the college social network is a truly terrible target. They're mainly students, with low disposable income, of course; but, beyond that, the users appear to be too busy leaving messages for eachother to show much interest in advertising. Facebook's members appear indifferent even to movie advertising aimed at their demographic. Clickthrough rates, the percentage of time users click on an ad, average 0.04% — just 400 clicks in every 1m views — according to one report seen by Valleywag.
Isn't that what one would expect on a highly social site, on which people interact rather than absorb? Well, even News Corporation's rival social network, Myspace, is a better medium for marketers: for a similar set of advertising campaigns, its click rate, a measure of the audience's engagement, was 0.10%, more than twice Facebook's. Complains one media buyer who spent heavily on a range of blog and social properties: "Facebook was consistently the worst performing site on just about every campaign we ever ran with them."
Mark Zuckerberg is, by all accounts, one of the smartest young entrepreneurs in tech. Facebook is Silicon Valley's standout private company. It has good prospects as an independent company. The deal with Microsoft, by which the Redmond software giant has guaranteed revenues in order to get its text ad system on Facebook, will underpin revenues until 2009. It preserves the illusion, at least, of Facebook as an advertising business. But, at the rate at which Microsoft must be losing money on the Facebook deal, one can't imagine that deal will be renewed. Facebook will have to find other ways to tap its users for revenue. More on that, later.