Good insight into both Facebook’s business model and especially their aspirations … how high they think they can go.
Over dinner at her favorite restaurant, a few blocks from her home in Atherton, California, her strategy for making money sounds simple. She takes my pen and notebook and starts drawing the classic marketing funnel, which starts broadly, with brand awareness, and grows progressively narrower, ending with point of sale. Google, she explains, does most of its business at the narrow end of the funnel, leading buyers straight to places where they can buy what they want. But Facebook, she says, operates at the wide-open end, creating positive brand affiliation and generating demand for products. Google makes money because it commands 50 percent of online advertising dollars spent on that final stage, the one that gets people to make a purchase. But that stage represents only 10 percent of all “ad spend”— here she writes “$690 billion,” then draws an arrow to her “online ad spend” column. Facebook can dominate the other 90 percent devoted to “demand generation” ($621 billion a year!). It’s not unreasonable, she thinks, that Facebook could wind up getting a substantial part of that, every year.
Of course, typically the narrow end of the funnel is easiest to measure, closest to cash, and higher value. Perhaps Facebook will help to change that.