What Will Facebook Connect Mean for Online Advertising?

facebook-and-washington-post Connect

As sites continue to utilize Facebook Connect to drive viral traffic and increase registration rates, many might wonder: How will Connect generate revenues for Facebook itself?

For now, it doesn’t.

However, Facebook remains committed to growing the platform to allow publishers to more easily connect with its 250 million+ users. Facebook has enabled thousands of sites to add Facebook Connect for free, and the content people share on those sites is streamed into the Facebook News Feed, where friends can comment on it, or open it to visit the partner site.

The results have been staggering for many of Connect’s early partners so far. Take these examples from the Facebook Connect Page:

  • Since implementing Facebook Connect, CitySearch, a user-generated site for reviewing restaurants and other local establishments, saw its daily registrations triple. A whopping 94 percent of users who write reviews choose to share those with their friends on Facebook, and 70 percent of those reviews who see it click on it.
  • Since adding Connect, the Huffington Post says more than one-third of its new comment sign-ups come from Facebook.
  • Joost, the online video site, says its users who connect using Facebook watch 30 percent more videos than ones that don’t. On average, they commented on videos 15 percent more of the time than non Connect users. “What’s more,” the site wrote, “Joost Facebook Connect users have invited 38% more friends than Joost users who have not participated, suggesting that Facebook’s audience may be an especially rich source of Joost.com user growth.”

The examples show how Connect increases traffic, engagement and user retention on these third-party sites, but what’s in it for Facebook?

First, Facebook receives increased traffic to its site, where it can serve up relevant advertising to users. Furthermore, however, as users utilize Connect across multiple sites, Facebook becomes the place where people manage their identity on the Web, and the platform over which many websites get a large chunk of their traffic.

But it’s hard not to wonder if Facebook might not want Connect to play a larger role in the growth of its advertising revenues in the future. Earlier this year, Facebook’s CEO, Mark Zuckerberg, said he expected to see “70 percent growth in revenue year over year” in 2009 and that Facebook will be “cash flow positive in 2010.” Entrepreneur Marc Andreessen, who sits on Facebook’s board of directors, said Facebook will see $500 million in revenues in 2009.

As Facebook sends millions of page views to third-party sites, would it be reasonable to ask those sites to serve ads from a Facebook ad network that combines the power of profile targeting found in Facebook Ads with contextual targeting offered by many traditional web ad networks?

And as the third-party sites seek to have as much content as possible pumped into users’ News Feeds — could Facebook ask for compensation based on the amount of posts published into the feed, or give more prominence to feed items from advertisers?

Either of these strategies certainly seem feasible.

Facebook could also eventually want more information from third-party sites, especially as it relates to search.  If Facebook could have access to this data, it could help them serve up more relevant advertising on Facebook to those users.

All of these scenarios remain “what ifs” at best. In the winter, Facebook said it “does not have access to information or activities that occur on the third party site, but Facebook is generally aware that a Connect user is interacting with one of the partner sites, and it does reserve the right to examine the information about those sites that pass through Facebook itself.”

Conclusion

Facebook Connect offers many opportunities for additional advertising-related revenue streams for Facebook, many of which leverage Facebook’s proprietary data. Facebook Connect could allow Facebook to build the groundwork to become increasingly competitive with contextual ad networks in the next 2-3 years.