SOCIAL: Monetizing the Social Graph

The blogosphere is loaded up with all flavors of Facebook Advertising analysis, and much handwringing over the notion of users expressing their enthusiasm for Diet Coke or “American Gangster” on their Facebook page and Coca-Cola or Universal Pictures placing ads in the newsfeed as the items are spooled to their social graph. (Beyond Facebook, it’s not hard to imagine a contextual ad showing up every time you Twitter something. Twitter “I am drinking beer with friends” and a Budweiser ad shows up. Now imagine the Twitter revolt.)

Cutting through the hype, Facebook Ads (description here) are the latest twist on viral marketing, taking advantage of the social graph, creating what Nick Carr cleverly calls “social graft.”

Nick wrote:
Marketing is conversational, says Zuckerberg, and advertising is social. There is no intimacy that is not a branding opportunity, no friendship that can’t be monetized, no kiss that doesn’t carry an exchange of value. The cluetrain has reached its last stop, its terminus, the end of the line. From the Facebook press release: “Facebook’s ad system serves Social Ads that combine social actions from your friends – such as a purchase of a product or review of a restaurant – with an advertiser’s message.” The social graph, it turns out, is a platform for social graft.

We’ll find out soon whether Facebookers will embrace the concept, accepting the blurring of their content and ad content and helping to fulfill Facebook’s business goals.

Brands will try to become intimate with Facebookers, enticing them to associate themselves with a product or service. If you love your Prius, become Toyota’s friend…and you’ll be able to stay up-to-date on the latest Prius news and games, meet other Prius fans, make ads for Toyota and maybe even get a free tuneup. I prefer just to drive my Prius.

Facebook founder Mark Zuckerberg is right. “Nothing influences a person more than the recommendation of a trusted friend,” he said during the rollout of social ads yesterday. But giving brands/advertisers somewhat equal (Facebook members have some controls) access to the social graph could be viewed as an intrusion into the relationships people establish with each other. On the other hand, Facebookers may just view it as another application on the service.

When I buy a movie ticket via Fandango, the transaction can be turned into a newsfeed item spooled to my social graph. Can I get a discount on the Fandango fee for messaging my social graph about my Fandango ticket? Maybe users get a cut of the action, for colluding with advertisers? But then, they might start gaming the system to increase their bounty.

Facebook Ads is a logical next step, but also an experiment. Google has mastered the art of monetizing search to market cap of $231 billion. MySpace is innovating with its HyperTargeting. With the taint of social graft, Facebook has come up with a way to monetize people in the form of its rapidly growing membership, profile data and social graph. Perhaps it will grow into its $15 billion valuation.

Now we can sit back or lean forward to see how Facebook responds to OpenSocial and how Google responds to Facebook’s people-based targeted advertising.