Has Facebook found its Adwords model?

Google began its billion dollar journey when it converted the dictionary and searches into a stock exchange with real-time bids. The Adwords model has proved to be a money-spinner that is the envy of every other media organisation on earth. The mantra in the dot-com mania was eyeballs till Google stumbled upon the way to change those search terms into real money. The question really was, what would the Facebook’s model be? The tried and trusted display advertising alongside the status updates, or was there a more social alternative? To answer that question, we will need to take a small detour into the origins of endorsements as the most believable form of advertising.

Endorsements are the boring but reliable weapon in the marketing manager’s arsenal – where satisfied customers waxed eloquent about a product or service. When John Caples, one of the earliest copywriting gurus used an endorsement to sell piano lessons with the headline “They laughed when I sat down to play the piano. But when I started to play…”, he started a trend that continues to this day. In the early years, it was fine to use unknown customers. But as the field got crowded, celebrities emerged as potent attention grabbers. Leading to a whole industry of creating and licensing celebrities that grew into a multi-billion dollar business. In an era of media fragmentation, the celebrity with mass appeal across geographies, cultures and market segments is proving elusive. And the few who have that appeal have converted it into their personal mint.

So what does this have to do with the new money model for Facebook? It evolved, like most of these models do, by accident and had two components. Initially, Facebook gave brands the freedom to start their own page where they could interact with fans and build their base. Then they created the ‘Like’ button that faithfully records all the events where people ‘like’ everything from status updates to posts and yes, brands. No money here so far. The cash register starts ringing when Facebook connected the two and converted them into ‘Sponsored Stories’. It captures actions performed by Facebook users and turns that into an ad seen only by the user’s friends – amplifying word of mouth. The genius here is that it sends me endorsements by my friends – not the universe – making it far more likely to build much higher credibility for the brand – as opposed to normal advertising. Expand this to an audience base of 750 million people that Facebook just clocked and getting to those huge billion dollar numbers seem within easy reach. The social money spinner juggernaut just started rolling.