Could Facebook Change Web Advertising?

The social-networking Web site Facebook.com is set to announce a new partnership that could rake in millions in ad revenue. To advertisers, the social networking sites are giant databases about potential customers offering information advertisers normally pay big bucks for.

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RENEE MONTAGNE, host:

On Mondays, we talk about technology - today, how Facebook could change the business of Internet advertising. The social networking Web site is worth $15 billion - on paper, at least. Microsoft bought a small stake in the company last month, and even that cost $240 million. This week, Facebook is set to announce a new partnership that could help the company rake in millions in advertising revenue.

Cyrus Farivar reports from Berkeley, California.

CYRUS FARIVAR: Many students at the University of California-Berkeley use Facebook daily - okay, sometimes multiple times a day - to check their Facebook profile page. So what's on these pages?

Ms. JAYMIN GAVELO(ph) (Student, University of California-Berkeley): My favorite bands. I like The Beatles and the Beach Boys, and then hobbies like hiking and…

Mr. ARVIN CHARRY(ph) (Student, University of California-Berkeley): I have my movies. I have interests, like what sports I'm interested in. I have, like, what I do with my free time a lot - maybe like reading and, like…

Ms. MARGO ROSENSHINE(ph) (Student, University of California-Berkeley): Partying, reading, running - stuff of that nature. But for political, I put moderate.

FARIVAR: Without even realizing it, Jaymin Gavelo, Arvin Charry and Margo Rosenshine are volunteering information that advertisers dream about, especially because they're in the highly sought after 18 to 34-year-old demographic. These people tend to be better educated, have more disposable income, and have fewer financial responsibilities.

David Blum is with the ad agency Butler, Shine, Stern & Partners. He explains that by telling advertisers what you like without their having to do expensive market research is industry gold.

Mr. DAVID BLUM (Executive Director, Butler, Shine, Stern & Partners): So if you raised your hand on your Facebook profile and said that I'm engaged, I like pizza and, you know, I like the B-52s, well, that's information, you know, that marketers can use and advertisers can use to get to you at a very different level - at a point in which the time is right for the message.

FARIVAR: Today, the most successful online advertising model belongs to Google. The company has made billions of dollars by serving ads alongside search queries. Each time you search for something in Google, a small ad appears alongside your results based on what you searched for. The idea is that if you're searching for a coffee machine, you'll get ads for a coffee machine. But searching for one coffee machine doesn't say much about you as a person.

Forrester analyst, Jeremiah Owyang.

Mr. JEREMIAH OWYANG (Analyst, Forrester Research): Google typically serves ads based on keywords. Facebook now has the opportunity to serve ads by people and the preferences and the networks which they're connected to. And that's the big change.

FARIVAR: Another advantage that advertising may have on Facebook is the fact that usually, your online friends are people that you know in real life -people you go to school with, work with, or who live near you. In other words, people that you respect. Forrester analyst Jeremiah Owyang adds that this element may also be a game changer for companies trying to sell their products.

Mr. OWYANG: One of the biggest opportunities I see for Facebook is if your friends or your network is able to recommend really interesting things to you. The trust level goes up significantly when there's somebody that you know that knows what your preferences are and say, hey, this is a product that you may be interested in.

FARIVAR: At U.C.-Berkeley, many Facebook users say that they tend not to pay attention to the ads that are currently there. But they also say that they might respond more to ads that were relevant to them, just so long as the ad don't make it more difficult or annoying to use the site.

Cyrus Farivar, NPR News, Berkeley, California.

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