Why a College Drop Out Turned Down $1 Billion for Facebook

Facebook is a social networking website started in 2003 by Mark Zuckerberg, a 19 year old Harvard college drop out. Facebook users post information about themselves on the site, such as photos and events they plan to attend. They link their web pages with the web pages of other users that are “friends” and thereby create a social network.
Facebook has 35 million active users, it has added 100,000 new registrations per day in 2007, it has an incredible 3% weekly growth rate, it has 6 million active user groups and close to 31 million visitors in July. Facebook is on track to reach $30 million in profit this year, according to the Wall Street Journal 8/23/07. The founder was supposedly offered $1 billion for the site and turned it down, according to an article in NEWSWEEK on 8/27/07. Investors in the site hope to take the site public at a valuation of $10 billion. In order to achieve this type of valuation, people familiar with Facebook say they are looking to do something similar to what Google did with AdWords, which generated $10.6 billion in revenue last year, according to the WSJ.
Facebook is not just for college students any more. More than half of Facebook’s 35 million users aren’t in college. In 2005, it added high schools and in 2006 it added, “work networks.” Facebook is also expanding internationally and already is the top Web site in Canada and London is the geographic network with the most Facebookers. Facebook has also been encouraging developers to create applications that allow them to make money by running ads or selling products on Facebook. Facebook could use these applications to grab a share of eBay’s or iTunes’ businesses with a Facebook version of those sites. (NEWSWEEK).
So how can marketers take advantage of the social phenomenon Facebook has created? Currently, advertisers can target people on the site by age, gender and location of the user. Facebook is now developing a new, automated advertising system that will allow marketers to target users based on a much more extensive database of personal information that users report on the site. In 2008, Facebook will attempt to determine how receptive a person might be to an ad based on the activities and interests of a user and its friends and target ads based on that information, according to the WSJ.
It remains to be seen whether the addition of targeted advertising and an older universe of users will affect the appeal of Facebook or whether Facebook will be able to grow to the size of Google. However, based on the rapid growth of social networking sites such as Facebook and MySpace and the promise of being able to target offers more precisely to consumers, marketers should consider testing out advertising on these sites to tap into the potentially immense purchasing power of their members.
Peter Koeppel is Founder and President of Koeppel Direct, a leader in DRTV direct response television, online, print and radio media buying, marketing and campaign management. With a Wharton MBA and over 25 years of marketing and advertising experience, Peter has helped Fortune 500 companies, small businesses and entrepreneurs develop direct marketing campaigns to increase profits.

Peter started Koeppel Direct in 1995 and has built it into one of the leading direct response infomercial media buying firms in the U.S.

The influence of TV on online purchase behavior is growing

A iProspect study noted that all ranges of age, income and online tenure reported that conducting search engine queries has become more important to their use of the Internet over the last year. Since users report that the activity of searching is growing more important to them, then businesses need to make sure that their website is found by searchers. Exposing your target audience to your ads and url in multiple mediums will enhance their ability to find your website.
Not surprisingly, television drove the highest percentage (37%) of online users to perform searches, according to the iProspect study. Even in today’s more fragmented media environment, the power of TV remains strong and the influence of TV on online purchase behavior is growing. We have found that anywhere from between 30% to over 90%+ of customers make their purchase via the web, when they’re offered both an 800 number and a website in a direct response television ad. Why is this happening? Many consumers feel more comfortable making a purchase via the web than through an in-bound telemarketing service. Also, over 50% of people are simultaneously surfing the web while watching TV, so it’s easy for them to log onto your site when they see your TV ad.
The bottom line is that if you’re not using a combination of DRTV, print and radio and online ads to reach customers, you’re missing a huge share of potential revenue. Companies that rely solely on one advertising medium are missing the mark. It takes a combination offline and online advertising to make a true impact on today’s consumers. So leverage your marketing dollars by using the synergy of DRTV and online ads to maximize the impact of your campaign. When you do, you will see your company’s bottom line results improve.