Facebook’s Opportunities Go Beyond Advertising

Facebook’s debut of Timeline today means it is aiming to become even more central to people’s lives. That will mean more opportunities to show them ads, but it could also lead to bigger opportunities in commerce and other areas.

A new Facebook ad revenue forecast, published by eMarketer, provides a glimpse of those areas in which the company excels and where the company can create new revenue streams. Based on the forecast, a few predictions seem to make too much sense to ignore. Advertising as a percentage of total revenue for the company has declined for each of the past two years, as revenue from Facebook credits has increased. Although the company still makes the lion’s share of its money from advertising, the shift is significant, according to eMarketer principal analyst Debra Aho Williamson.

“When I look at Facebook credits as a revenue stream, they have been proven successful as a means of purchasing virtual goods,” said Williamson. “They have already tested credits for other things like access to movies. It makes sense that Facebook will want to support credits as a revenue stream.”

Williamson says that the shift makes it appear likely that Facebook will develop various forms of commerce on the site. Although she believes it’s unlikely that Facebook will become a content producer – Williamson says that the company has always held that it wants to be a platform on which other companies can build their businesses — Williamson said that it is very likely that the company will announce just those kinds of deals with content providers such as Spotify and Netflix.

Another widely circulated rumor that seems to indicate that the company is moving to beef up its roles in commerce and content is that Facebook will add several new buttons to users’ homepages, most notably a “want” button. “When a Facebook friend posts a picture of an iPhone 5, clicking ‘like’ means one thing. Clicking ‘want’ means something completely different,” said Williamson. Being able to offer advertisers that kind of information about Facebook members could be very valuable.

The company’s approach to mobile is another area in which Williamson expects new initiatives. She says that at a recent conference she attended, a Facebook executive said  the company is moving toward a world where mobile applications are developed first. “Facebook is recognizing that more and more people are using their mobile devices as their primary access to Facebook.”

Updated smartphone apps and a long-overdue dedicated iPad app, are expected to be a part of the announcement. Even more interesting is one news site’s  discovery of plans for a mobile photo-sharing app, important because photo sharing is among the most popular activities on Facebook. Instagram and other apps have already made significant headway in this area, and if and when Facebook does make such an announcement, it will find itself in the unfamiliar position of having to play catch up.

Williamson said that a slight downward adjustment in the forecast for Facebook’s 2011 ad revenue has its roots in three areas. First, Facebook ads have extremely low click rates. “Facebook needs to get this solved,” said Williamson. “If it’s not going to be click-through as a measure of success, then they have to come up with something else.”

Second, said Williamson, Facebook has been a victim of its own success. Some advertisers don’t feel that they need to buy ads on Facebook because their brand pages have been effective at reaching fans. And finally Facebook has been re-jiggering its ad placement and inventory, which has meant missing some short-term revenue opportunities.

 

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