I have always wondered how social networks such as Facebook make money, so when I read an article about how we are used for marketing purposes, I thought I would pass it on. It seems that the company 1-800-Flowers started a marketing trend about three years ago, when it first created its own Facebook fan page. Since that time 1-800-Flowers has generated a fan base of some 125,000 who are doing the advertising for the company using their own family and friends.

So how does this work? When a member decides to click on the “like” button, a very simple advertisement appears on their friends page[s]. As an example, you may see a simple “John Doe likes 1-800-Flowers” message. Those who click on the “like’ button for that ad passes the message on to their family and friends. So while not selling anything, the key is brand name recognition. Each person who sees the 1-800-Flowers ad becomes familiar with the brand name.

Other companies such as Starbucks, Ford, and Coca-Cola are now running multi-million dollar advertisements on Facebook. If predictions hold true, Facebook could take in over $4 billion in advertising revenues this year alone. But what is really going to get Facebook rolling in advertising dollars are the hundreds of thousands of small businesses that are also heading to Facebook with ad money burning a hole in their pockets. What Facebook is going to be pushing is something that is similar to the best form of advertising: word of mouth. But with the ads being generated by your friends and family, what better recommendations could one have?

Now that Facebook has about 600 million users, each with an average of 130 friends, the numbers can be staggering. Facebook will be running small advertisements to the right side of your Facebook page with small images backed up by 160 characters of text. This is going to be the new way of advertising and will take word of mouth to new heights. Now you have to picture this. When we ‘like’ an ad and it is sent to our friends, we become the advertisement. The ads can be targeted directly to specific groups and locations across the globe.┬áThat is a nice touch. We will have ads directed to us that we want to see.

This is an interesting concept that I am sure will not only bring in massive revenues for Facebook, but will also increase the value of the company. We can also see why Google wants to get into the social networking business. Google can see how Facebook will be challenging the advertising model that has made Google rich. It should be interesting to see how this plays out for both companies.

This is another reason that more people will be using ad blocking software and keep this from being broadcast by their browser.

Comments welcome.

Source – Technology Review