Friday, October 26, 2007

Why is Facebook worth $15B?

...because of the valuable marketing data it contains. From 26econ.com:

Facebook is collecting loads of data about people, their preferences, their friends’ preferences, and so on. This is valuable stuff for marketers. As a tiny example, you can put in your Facebook profile a list of your favourite movies. So can your friends. Facebook knows your favourite movies, your friends’ favourite movies, and who your friends are. Assuming that you and your friends have similar tastes, they can use this data to target ads to you for movies that you might like but may not have seen.

... If you can use some information to target those ads to people who are interested (’surgical strikes’, to continue the military analogy), then you’ll achieve a similar result by spending less money (less ‘collateral damage’ …). In economic terms, it’s a more efficient production process for advertising.

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