January 07, 2009, 12:49 PM — Facebook reached the 150 million-member mark on Wednesday, a milestone the company's CEO Mark Zuckerberg heralds as significant: now he needs to deliver ads that they find engaging.
In an official blog posting on Wednesday, Zuckerberg also said that almost half of those active members use the site every day.
That Facebook's popularity continues to increase is no surprise, given the rising adoption of social networks as effective vehicles to stay in touch with friends, family members and professional contacts.
Still, a major challenge for Facebook and similar sites remains discovering ways of generating revenue at levels that are on par with their massive usage. It has become clear that conventional online advertising formats, like banners and pay-per-click text ads, aren't as effective within social networking sites as they are in search engines and Web portals.
So, Facebook, MySpace and other big social networks are trying to develop online ad vehicles that their users will find engaging and useful. Their attempts have failed to yield the desired results and in some cases, as in Facebook's Beacon program, backfired by creating privacy concerns.
In a study published in November, IDC found that while the popularity of social networks climbs in the U.S., many users tune out these sites' ads. More than half of U.S. residents with Internet access use social-networking sites, a trend expected to continue growing, IDC found. Among users of social-networking sites, more than 75 percent visit them at least once a week and 57 percent do so at least once a day. Sixty-one percent of these people spend at least 30 minutes on a social-networking site every time they visit, or stay logged in permanently.
Unfortunately for Facebook and MySpace, people are significantly less interested in online ads when they are in a social-networking site. Social-network ads generate fewer clicks than the average ad on the Web at large -- 57 percent versus 79 percent -- and they lead to fewer purchases, at a rate of 11 percent versus 23 percent.
The idea of "social" ads, in which marketers try to leverage people's network of friends and family to promote products, is "stillborn," according to IDC, which found that of all U.S. Internet users, only 3 percent would be amenable to letting Web publishers use their contacts for advertising.
So as Zuckerberg marks the 150 million-plus member milestone as "a great start to 2009," Facebook's advertisers will surely be expecting the company to finally deliver effective tools for them to get the attention of those users.
