The New Ad Environment: Facebook And Google Plus

The advent of Google Plus will drive innovation in online advertising and its corresponding business models, including what Facebook does with its ads.

While Facebook hasn’t yet done enough with its ad model, Google hasn’t neglected advertising and has proven more than once that innovation applies to its business model and to the applications enjoyed by users.

And, while Facebook brings in approximately $4 per year from every user, according to JP Morgan, Google is generating $24 per user.

Given its success with ads, it’s reasonable to assume that Google will find a way to connect brands to social media. Google has already proven that it offers the world much more than an amazing product – it takes care of its business.

This is precisely what Google did with its search engine, which was launched with a matching advertising model that fit like a glove: AdWords – advertisements that are relevant to the subject of the search results, while charging payment according to the result.

Thanks to AdWords, Google didn’t draw its last breath, as did Alta Vista. On the contrary, Google transformed the business model of the entire advertising industry, one that bases the payment according to result.

Google bypassed the creative agencies and even gave the small business owners the tools for advertising themselves.

I have a sense that these two tech titans will bring the advertising world into a new era, based on each one’s relative advantages.

Facebook Is The Social Graph Ad Network

As it turns out, 28 percent of Google’s income is derived from its advertising network. Therefore, the next logical step for Facebook would be to launch its own advertising network based on the social graph.

Currently more than 40 million business websites use Facebook to connect to its customer base, meaning 700 million Facebook users are identified not only on their homepage, but also on social media sites, most notably Facebook.

And, for the first time, there is an option of presenting users with segmented ads based on social connection. Facebook can leverage its leadership in the market since its technology is already built to launch the world’s first advertising network based on social connections.

In my opinion, Facebook’s main value with respect to brands isn’t in word advertisements but rather in branded pages and that’s why Facebook’s brand pages have accumulated millions of fans in recent years.

Google Plus Reinvents Pages

The business pages solution is the greatest wasted opportunity in the history of the marketing world. Every day 50 million surfers indicate like on a Facebook page but only a few percent of these fans are active, which makes it clear that there is a huge potential waiting to be realized.

Google can launch premium pages by paying businesses and presenting added-value services such as analytics that will offer the possibility of creating ads that are segmented according to audience characteristics based on gender or location.

The company is in an excellent position for offering a similar solution yet with an application bank that is tailored to businesses.

Why? First, the fact that Google is second to market allows it to learn from Facebook’s mistakes and launch a product that avoids them. Second, and more importantly, Google’s platform is designed for business users. Google already has a complete selection of added value services for businesses, Google Zero, a platform intended to compete with Microsoft in the business sector. It began based on email but evolved into a set of comprehensive services for businesses based on cloud computing and using third party developers.

Google’s most logical next step would be to connect Google Zero to the pages service it is about to launch and allow business users to combine those applications. Google already charges thousands of businesses for Google Zero and those users would be a key target group. Among the services in immediate demand would be Google analytics for the pages, connecting a fans list to a customer list, and related capabilities.

It will be interesting to see how the competition unfolds. However that turns ouf, it seems that brands and advertising agencies will soon feel the excitement that we, as social network users, feel.

Agencies will be forced to refine their own business models and react quickly to new solutions; otherwise they just might lose just like they lost the AdWords market.

Guest writer Eran Gefen is the chief executive officer and founder of FanGager.

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