There is a race going on that a lot of people don’t fully understand — but the outcome will change the way we see the Internet. It is a race to build the ultimate advertising network for online content. The weapon of choice: permission to use people’s personal and social data.
Many of you have heard of Facebook Connect, Google’s Friend Connect and MySpace ID. Put simply, each company is attempting to sign up Internet content owners so that members can, or are required to, log in with their MySpace, Google or Facebook ID. In exchange, MySpace, Facebook and Google each offer increased social functionality to online content owners today. But the real goal, and where the money is, will be the ability to serve better advertising than any other ad network, because if members actively log in, they are in effect giving Facebook, Google and/or MySpace permission to use their data for advertisements.
Now let me say something before I go any further: I think this is a good thing. It will be a good thing for advertisers, who will reach people they are looking to target. It will be a good thing for online content owners, both large and small, because they will be able to earn greater revenue. And, most importantly, it can be a good thing for subscribers, who should be able to see less, more-targeted advertising.
But the key to making this trend positive, and not a violation of privacy, is to make the exchange as transparent as possible. Facebook now offers members a better overall online experience, more social tools to accompany the content they love (including a portable social graph) and a home base for all their information, so they don’t have to register for new sites all the time. In exchange, members explicitly allow Facebook to target advertisements on any site they log in to with Facebook Connect.
The best part for the social networks is that members do not want their information shared with anyone else, so Facebook (or Google or MySpace) can honestly say “we will need to serve the ads ourselves, because we do not pass on people’s personal information.” This is not only the perfect out, it’s the truth.
A couple of major pitfalls exist, however. What are the implications of one social network’s winning out, and owning the ultimate online ad network? How will the content owners feel? There is no reason to think this would be a bad thing for content owners — or members. Google already owns the ultimate performance ad network, and has provided solid revenue to many online content producers.
The real problem is that even if one player could build a large network of online content owners using member logins, those owners still need to figure out how to tap brand and traditional advertising budgets to make the network work. There is simply not enough money in performance advertising to support such a large ad network without killing the quality of experience. People do not want to be hit with one ad after another asking them to “click here” or “buy this.”
Once networks know enough about members and have enough reach, they will have the job of bringing quality advertising experiences to their network of content publishers to maximize members’ experience and content owners’ revenue. If they do all of this, they will of course make plenty of revenue themselves.