Search volume for “Facebook” is 4x what it was a year ago. Media references to “Facebook” are 4x what they were four months ago, back to September 2006 feed-privacy-concern levels. Just yesterday:

• Henry Blodget propagated the rumor that Microsoft is offering $6 billion to buy Facebook.


• CNBC asked John Battelle to talk on TV about “Facebook Becoming the Next Google?”

Call it fascination or call it hype, but there’s a lot of it right now.

Technorati Tags: facebook, media, search, microsoft

There has been a bunch of buzz today about how Facebook advertising produces poor results. Valleywag has also confirmed that the average click through rate of Facebook ads is 0.04%. This is horrendous. A few years back I tested out a $15 flier to see how effective the ad would be and I experienced the same thing. Why is there such a horrible click through rate on Facebook? According to Luke of the Reach Students blog:

There is varied speculation as to why the clickthroughs are so shockingly poor on Facebook. Some have cited the fact the site is essentially messaging orientated – rather than content orientated - meaning that therefore users are in no frame of mind to slope off down trails.

While I can speculate about what the reason is, one thing is for sure: their ads currently suck. So how do they fix this? I have previously discussed a future of social networking in which users show off their favorite brands in turn generating brand recognition in addition to potential referrals. Additionally, Facebook could develop an ad network that provides demographic based targeting for their ads, something that not even Google currently offers. If you want to sell your new hip hop CD to guys that are 13 to 16 years old, you could login to the Facebook AD network and create a targeted advertising campaign focused on this specific demographic. You could even focus on certain states since the artist you are trying to promote will be visiting those states in the coming weeks.

This is just an example, but imagine advertising that is targeted by age, sex, location, and interests. That would create a revolution in marketing. If Facebook would develop an advertising network that functioned as I have described, their value would increase exponentially. Even if they made an announcement stating their intentions to create this type of advertising network, the intrinsic value of the company would go up drastically. As of now though, if they can only offer a 0.04% click through rate, the value of Facebook is not very big. Let’s come up with an estimated value of their company as of now (keep in mind, this is really rough). If 85% (which is really high) of their 30 million users signed in daily there would be 25.5 million users signing in daily. If each of those users view 25 pages, there are 637.5 million page views per day. Of those page views only 0.04% end up with a click. That results in 255,000 clicks. At a rate of $0.20 per click (also relatively high) this would amount to $51,000 per day or $18.6 million per year. Why would anyone want to pay $6 billion? That is over 322 times gross earnings. Pretty nuts huh?

If Facebook could get their click through rate up to 1% this would boost their earnings to $465 million. That would make a purchase of $6 billion result in a multiple of 13 times gross earnings which is pretty reasonable. I would be willing to bet that a targeted advertising network would be relatively effective at getting a click through rate close to 1% and would immediately boost Facebook’s value. You think Facebook will launch an ad network in the coming year? I would bet on it!

Update

I have read that Facebook’s estimated earnings is $30 million. That means somewhere in my calculation I am underestimating something. Regardless, if that is really the case, Facebook’s earnings would be boosted almost to $1 billion if they could up their click through rate to 1%. Even upping to 0.5% would be amazing. The bottom line is that Facebook needs to make a demographic targeted ad network if they hope to get the high flying valuations that have been tossed around the blogosphere.

A crazy new game has been released on Facebook that allows you pick a pet, put it on your profile and then battle your friend’s pets. While I’ve seen similar applications to this one, Pet Sabotage has pretty cool looking characters and seems to have a few additional features. You can pick from a baby chick, a wild monkey, a lizard/dinosaur look alike, a man-like chicken, a platypus, a fish, and a tiger. I went with the monkey but was not lucky enough to do battle. Apparently none of my friends have added this application to their profile. You can feed your pet for health and build your pet’s tolerance to attacks by winning battles. If you or the pet you are battling is killed, they will be added to the pet cemetary. The attacks done in this game are not your typical attacks. You can give other pets wedgies, judo chop them, feed them worms and a variety of other random attacks. While I don’t consider this a very useful application it may be worth a few minutes of entertainment. If you want to battle against your friends’ pets go grab Pet Sabotage.

Having just returned from a nice long weekend at the beach, it’s only appropriate that my first post back would be about a surf forecast application. Global Surfari - a site known primarily for their handy google mashup that helps visualize global surf conditions - has released a Facebook app that enables you to pull in similar surf conditions data into your profile.

The magic of the Global Surfari google mashup is that you can click anywhere on the globe and receive a forecast based on longitude and latitude. However, this convenient feature is absent from the facebook app, whereas you have a limited number of locations to chose from for forecasts. I live in DC and the closest beach is Ocean City, MD. However, in the Global Surfari facebook app, the closest geo provided is North Carolina. That being said, it’s a nice app with robust data. You can get the Global Surfari facebook app here.

Call it war by press release: MySpace will make an announcement on Thursday explaining that MySpace is ahead of Facebook on all fronts. The title: MYSPACE OUTPERFORMS ALL OTHER SOCIAL NETWORKING SITES. What they really mean: MySpace is bigger than Facebook, ok?

Here is the way the two sites stack up according to MySpace’s numbers. Note that this is a re-interpretation of the comScore numbers Kristen just mentioned, where she noted that MySpace may be losing ground to Facebook for the high school demographic. Funny how a story can be good or bad depending on the stats you choose. However you spin it, however, MySpace is still out in the lead:

1. MySpace users visit the site 20% more often than Facebook users visit Facebook




2. MySpace users spend about 10 minutes more each month on the site than Facebook users spend on Facebook




3. MySpace has 3 times more minutes on the site than Facebook




4. MySpace gets 3 times more visitors on the average day than Facebook




5. MySpace is America’s leading and most trafficked website, and just crossed the 70 million active monthly unique user mark in the U.S.




6. Almost 1/4 of Americans used MySpace last month (compared to Census data)

MySpace is, of course, reasserting itself as the leader amid the Facebook hype coming from the tech community. And it’s true that at current growth rates, Facebook is still no MySpace killer. The difference is that the older, more elitist commentators, investors and even journalists - plus the tech savvy college demographic - are all on Facebook, thus giving it more airtime with geeks than it deserves in the bigger picture.

The quickest way to reverse the hype: create a developer community similar to the Facebook Platform. Suddenly, you’ll have everyone talking about all the cool MySpace apps again (as they did with widgets), even if the geek elite continue to turn their noses up at MySpace itself.

Recommended: MySpace News - MySpace Launching News Site

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comScore’s latest Media Metrix report indicates that MySpace is losing ground to Facebook for the high school demographic. While MySpace still holds the lead overall, Facebook has increased its number of US visitors under the age of 18 (about 2.5 times), while MySpace has dropped about 30% for the same age group. Not entirely surprising, MySpace is seeing growth for every other age demographic, as is Facebook.

What’s this mean? It could mean that MySpace has reached its saturation point for the high school crowd, and every other age group is still playing catch up. With Facebook opening its doors beyond college students and alum, and the applications offering more personalized features, better inherent tools for connecting to each other, Facebook could be the new MySpace. Facebook has, after all, just reached the 30 million member mark.

This also goes against what some have speculated to be a key differentiating factor between MySpace and Facebook, tagging MySpace as a place for high schoolers and Facebook being the place for college students. How this will tie into studies such as Boyd’s which have noted case studies for the socioeconomic differences between the two networks is also yet to be determined, given the current shift in user demographics.

See also: comScore Reports 89% Increase for Facebook Users

[via]

Recommended: MySpace News - MySpace Launching News Site

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For Facebook application developers, not all VCs are created equal…at least when it comes to the support they can lend your company if they also happen to, say, sit on the board of Facebook itself.

That’s the position Jim Breyer, David Sze, and Paul Madera find themselves in as they size up pitches from application developers for Accel, Greylock, and Meritech Capital, respectively. Not only do they have the inside track on spotting up and coming applications, but they also have the power to make life for an application developer considerably smoother.

As for Accel, Jim Breyer tells us that his fund is “actively evaluating important application developers” in the “video, utility, gaming, and entertainment” categories, but is not yet announcing any deals. Depending on how you look at it, that’s either great or terrible news to all the other video, gaming, and entertainment apps out there

However, it’s unlikely that Accel will launch a SNAP (Social Network APplication) fund like AppFactory at Bay Partners. Accel will just invest in Facebook app developers from their existing funds.

Cultivating the Facebook application economy is in nobody’s better interest than Accel, Greylock, and Meritech. Owning successful applications is twice is sweet when you own the platform too.

Technorati Tags: facebook, vc, accel, greylock, meritech

We really shouldn’t fan the flames on these never-ending rumors, but analyst Henry Blodget is claiming, without a source, that Microsoft may be considering the purchase of Facebook for $6 billion: “No, of course we can’t confirm it. But it makes sense, don’t you think?…$6 billion’s a nice fat number, but it’s only 1/25th of Google’s valuation, and the Facebook folks clearly think they’re worth more than that. So maybe Steve will have to throw in another $5 or $10. Or $20.”

Even if Microsoft was interested, there’s near zero probability that Facebook would accept. Google is a better match, but frankly the much-discussed Facebook IPO seems far more plausible.

Recommended: MySpace News - MySpace Launching News Site

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