The article Yahoo Keeps Its Eyes on Facebook by Catherine Holohan was published September 22, 2006 in the Technology section of the online version of BusinessWeek. The article talks about the possible acquisition of the social networking site Facebook by the online portal Yahoo and the effects of this action on Yahoo’s online ad marketing. Yahoo expects from this acquisition an opportunity to increase its ability to provide better targeted advertising to its customers. Targeted online advertising is advertising on the internet which can directly approach a specific segment of the market. This form of online marketing is becoming more and more popular and is expected to grow from $1.2 billion in 2006 to $2 billion in 2007. While online ad marketers have difficulties reaching a certain demographic section of the market through regular advertising efforts, such as paid searches and sponsored links, social networking sites provide exactly this kind of information for marketers. These sites are a marketers dream, they do not only provide specific and exact information about its users, but are also highly frequented by millions of potential customers. The audience of Facebook consists mainly of young college students, with whom, according to the text advertisers want to develop lasting relationships. This site would allow Yahoo to offer better opportunities for its customers to target specific demographic groups with their ads and to prevent its main competitor Google to gain more market share in this lucrative market. To reach this goal Yahoo was willing to pay over $1 billion for Facebook, before talks broke down between Yahoo and Facebook. Google on the other hand expanded its ability to place targeted ads massively after acquiring the exclusive right to serve search ads on MySpace, Facebook’s biggest rival. While Facebook is targeted mainly at college students and a younger audience, MySpace is used by more mature users, like former students, who migrated to MySpace from Facebook after graduation. It will be important for any future owner of Facebook to prevent its users from migrating to other sites to exploit the full potential of this network as a successful advertising medium. From a marketing and strategic point of view it would make sense for Yahoo to enter the social network market and expand its offers for highly targeted ads to remain competitive with rival Google. After experiencing delays in launching its new targeted audience advertising technology, failing in establishing its own social network yahoo 360 and loosing out on the bid for MySpace, Yahoo needs to act if it does not want to loose more market share in the extremely profitable online advertising industry.
1 Comments:
Social networking sites are becoming the newest attraction to marketers. Websites such as MySpace and Facebook are gaining international exposure due to the amount of individuals that are joining in worldwide. These websites, who aim to reach a specific target market, are also causing many privacy and ethical issues.
Large advertisers, such as Yahoo, are trying to get their hands on such websites for marketing purposes. Personally, I think it would save Yahoo a lot of tedious work trying to find a specific market, when they can easily use social networking as their strategy. The owner of Facebook, who at this point quit school, is playing smart and trying to get the best deal possible for his site. He knows how important his site would be to marketers and how much revenue it could potentially provide. Although one billion is a huge amount of money, rumors circulated that he is waiting for two billion dollars to win him over. I believe that soon we will see a war between marketing companies trying to bid each other out. Companies such as Google and Microsoft are other potential buyers. If bought and marketed effectively Facebook could ultimately bring in a huge amount of profit.
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