How does Facebook Timeline increase Facebooks Revenue?

A brief video on what the New Facebook Timeline actually means for its users

Revised by Stephen Foreman - 12th May 2012 - 10.57am

The Future of Facebook Marketing

So in addition to what you have seen in the video (right), what does the new Timeline Profile really bring to the social network experience and what does Facebook have up its sleeve? Watching the F8 Keynote speech from last year, Mark Zuckerberg made the following things clear:

1) Facebook is all about creating an online space which represents the real you.

2) Facebook is building an archive, a wealth of information that's constructive and co-ordinated.

3) Facebook is creating links between everything you do.

But what does this all boil down to? Well from a marketing perspective, any marketer is aware that the one thing which gives Facebook a valuation in the billions of dollars is the enormous active user base - where active is the keyword. Users mean revenue generation, and whilst the revenue generation per user at the moment might not be massive, my guess is that Facebook is looking how to create a better cashflow so they can place themselves in an even stronger position to develop the company moving forward. And I am not talking about them charging for Facebook, because having the punchline "It's free and always will be" and then asking users to pay for a subscription would certainly kill off Facebook. If I had a pound for every time someone I know posts 'Facebook are going to start charging' on their wall then I would be an extremely rich person. But they won't, because it contradicts Mr Zuckerbergs entire ethos. So how can they generate a cash flow that reflects, or is even proportionally relative to the enormous user base?

The Facebook Ground Rules

Well Facebook has to stay cool, right? If you start spamming ads all over the place left right and centre then people will begin to think Facebook isn't as cool a place to hang out anymore. The display adverts at the moment to be honest aren't that bad, they are over to one side and don't really distract you too much from the main feel of Facebook. But then on the same note, they probably aren't that effective, because they tend to offer things which are not that interesting or personal. This is because the way Facebook works at the moment with advertising doesn't seem to have strong relationships between what users are doing and what adverts are displayed.

Of course this is because they know certain things about you - but only what you tell them. Facebook know if your single, they know how old you are and where you live. So with this information, they can target you with adverts for singles and make sure the person in the pictures roughly matches your age and location. It makes sense, but it's not rocket science and the scope is limited. You might see an advert for the latest Xbox 360 or PS3 game on Facebook, but they are only likely to be targeting your sex and age as a factor in displaying the advert - maybe some of your friends also liked the same advert.

They don't actually know if you own a particular games console and play the genre of game being advertised. And that's the important bit - relative advertising is worth its weight in gold whereas advertising to the wrong demographic is worth almost nothing. Advertising to the wrong demographic is damaging for everyone. The user gets frustrated because they are being shown adverts that are of no interest, the advertiser either isn't getting any click through's (or is getting very poor quality ones) and then because of this they decide not to advertise through this medium anymore. Ok, so this is the worse case scenario, but you get the idea. Everyone is a loser in this scenario in the long run. Facebook do currently allow users to review adverts and say if they are not of interest, but this in itself is annoying as why should you waste your time telling them the adverts aren't interesting?

So what's the solution? Facebook need to know more about their users, but they know that people are unlikely to type all their interest and life story into a form, because time is valuable and filling in data sheets is of no benefit to the user, only Facebook. Not to mention that data sheets are only relevant for a fixed period of time and not always filled in correctly in the first place. So we have two issues here: 1) The current information they have is not very dynamic and 2) It's a bit limited.

So instead of trying to get users to give them this data directly, Facebook instead launch an update which allows users to log their every move, to share what they are doing - where they are going, where they have been, what music they are listening to, what food they are eating and what books they are reading. And of course as per my example, what video games they are playing. Well this is exactly what Facebook are doing with OpenGraph tools in a more complex way than ever before. Automatic logging of everything their users do, but in a way that is beneficial to the user. It's like an extension of blogging, but with even less effort required by the user. Facebook clearly see this is a win win situation.

The Practice behind the Theory

Let's say you are logged into Spotify through the New Facebook Timeline interface and you are listening to a song you love. On your Timeline it now shows your friends what your listening to. They are curious, so they click on that song. Two things have happend here - firstly they have seen you are listening to a song on Spotify so they sign up for that, secondly they are listening to an artist they might not have heard of before, because effectively you have recommended it to them in an indirect way. Before long, several people who you don't even know are listening to the song you clicked on because a friend of a friend of a friend listened to it and it was logged on their timeline. It's like viral advertising only it's happening for thousands of different variables at once, with thousands of brands and through an enormous network of people. But it's different to viral marketing because it's being shared automatically, with no major thought process required from the user. They just click on something and then it's there in their timeline.

From a marketing perspective, the implications are immense. When Facebook first launched the 'like' feature back in late 2009 I was unsure of it's real long term potential. I ran a social experiment testing some of it's features and I found that the majority of people don't want to 'like' something - myself included. The reason is that as soon as you like a Facebook page, you are effectively opening the floodgate to your real time feed for that company. For the advertising company it's priceless - information straight to the individual who has already expressed interest in your product, but for the consumer if the company they have liked starts posting frequently, even if it's relevant it can become annoying. So what's the solution - Timeline? Well it's not going as far as subliminal advertising, but it's not that far off it.

Subliminal Brand Integration

The new timeline allows brand integration directly into your profile like never before. You as a user will just use it like any other good tool. To a varying degree you will upload photos, check in at locations both locally and globally. Then over time, people will start to use the real revolutionary features of the new Timeline - for no other reason than they will be great tools. If for example you are a prolific blogger and you document your life, you can now do this in a way that allows everyone to see all of your content with the minimal required build time - because everything you do can be logged. And I haven't mentioned the subscribe feature yet.

Whether it was intended to be a direct offering to Twitter, or another feature to counter Google Plus's offering, Facebook now allows people to subscribe to other people that you don't necessarily know. However, it does it in a way which gives you more interaction options than, for example Twitter. You can like someone's posts, or share their content with your friends. It means you can have people following you and filter what they see without having to accept them as a friend and then limit their ability to view your profile. It's solving social awkwardness and allowing you to keep up to date with the people you are interested in (but don't personally know) at the same time. Only the person still knows they are only a subscriber not a friend! (awkward!?). Of course, it has the added feature of brand endorsement - if someone has millions of followers then they only have to post something publically before you see a wave of likes and shares almost instantly from their followers.

So let's take a step back to my example. You have seen a friend listening to a song on Spotify, so you then download Spotify - increasing the software's user base and at the same time listening to an artist you might not have heard of before. There are studies which illustrate people are more likely to pay for an album when they have initially heard a single song that they like. So assuming the above occurs and you like the song, then hypothetically you may have joined Spotify and somewhere down the line purchased an album that you would have previously never considered buying. Two things occurring only because of the new Timeline feature - almost like an online form of word of mouth advertising but without the personal endorsement. The next piece in the puzzle is how this then ties in with intelligent advertising through Facebook, as all that I have just mentioned is not advertising per se.

Taking the previous example and multiplying it over millions of users, Facebook will be able to build up trend data. They will be able to work out what genre of music you like by comparing what you do and don't click on. They can build up a complex profile about you as an individual just by analysing your habits, importantly with no input requirement from you as a user other than doing what you normally do. And then of course they can show you adverts they know will be of interest based on your habits. This will allow Facebook to increase revenue generation from adverts as the click through rates will improve by more focused advertising, users get more relevant content (and a better way to express themselves and interact online) and the advertisers get more relevant and targeted exposure to their potential customers.

Of course, I am sure that it will not stop there. I wouldn't be surprised that if in a few years time Facebook develops intelligent image recognition software, so that if for example you post on your timeline 'Brought a new car' and a photo of it, then they will have developed the software to be clever enough to correlate those two things. It will then work out what car is in the photo without any text based input and then display adverts for car insurance for your specific manufacturer. It sounds a bit like the film Minority Report, but I am sure we are not very far from it even now.

It's an exciting time to be in the Marketing industry and social networks are really changing the way we can engage customers. The possibilities are only limited by the complexity of the system that's analyzing the data and every day we get a little bit smarter and a little bit slicker at understanding our customers.

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