Microsoft couldn’t score what was easily the advertising deal of the decade with MySpace, but ever eager to make a splash, they have announced an ad partnership with Facebook.
Facebook, a social networking site like MySpace, is different in a critical area that have made it very popular with its users: It is a closed system, not only to registrations but to visitors and search engines. You can’t get in unless you are part of a domain accepted by the system, and you are associated with that domain, making it easier to find others at your school or workplace among the nine million other users.
Under the deal, Microsoft AdCenter will provide banner ads and sponsored links through mid-2009. Microsoft and Facebook say that talks only picked up in the last week, no doubt taking on an air of importance after the MySpace deal. In fact, Facebook’s entire business strategy seems to be to point to MySpace and say, “Hey, we deserve that, too!” After MySpace was bought for $500 million and started to look like a bargain, Facebook reportedly pointed to that and claimed it deserved no less than $2 billion. Of course, thanks to this ad deal, Facebook might not need to be bought by anyone anymore (and MySpace is looking mighty stupid for selling out as early as it did).
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Microsoft was one of the competitors for the deal with MySpace, which earlier this month registered its 100 millionth user, compared with Facebook’s 9 million registered users. “It’s basically a consolation prize,” Phil Leigh, president of Inside Digital Media, a market research firm specializing in digital media, said of the deal. “But Facebook is also a legitimate test bed, a place where Microsoft can test new technology in a commercial context,” he said.
Google is generally thought to generate more revenue per page than either Yahoo or Microsoft due to their method of choosing which ads go on top. While Yahoo places the highest bidding ad on top, Google also takes into account the click through rate on individual ads in deciding which go on top. This seemingly simple feature increases revenue substantially, and along with Google’s superior search product is the single biggest factor in Google’s financial success to date. Yahoo, it is worth noting, is developing a similar system, called Panama, which is rumored to be launching later this year.
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Nathan Weinberg writes the popular InsideGoogle blog, offering the latest news and insights about Google and search engines.
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