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According to comScore, Facebook has overtaken MySpace as the world's most visited social network.

While MySpace maintains a significant lead over Facebook in terms of US audience (73.7m unique visitors in May to Facebook's 35.6m), Facebook attracted 123.9m total unique visitors, solidly ahead of MySpace's total of 114.6m.

But this triumph over MySpace might be a hollow victory.

For better or worse, the majority of the Madison Avenue advertisers that upstarts like Facebook hope to court spend most of their dollars trying to reach consumers in the US.

Some international traffic is notoriously difficult to monetize and as many online businesses know, traffic from certain countries is virtually impossible to transform into revenue.

Although many brands serve international markets, as anyone who has sold online advertising will probably attest, international traffic is often a turn-off.

This means that Facebook will probably have to look beyond Madison Avenue in an attempt to monetize its international traffic.

This poses some challenges.

Facebook's popularity outside of the United States appears to be more the result of viral popularity than a concerted effort to go global.

The company's localization efforts are dependent on volunteers and its only office outside of the United States is in London.

Compare that to MySpace, which has set up 20 offices outside of the United States and focuses on customizing its international versions.

As noted by News.com's Caroline McCarthy:

"MySpace representatives have explained in the past that their aim is to build communities centered on regional culture, not to simply expand the same networking tool worldwide."

That said, Facebook has managed to become an international player whether it meant to or not.

But it still lacks the local experience, cultural expertise and relationships in most of the countries where it has become popular.

Given that major brands' regional ad spending is typically controlled by local subsidiaries or local agencies that make decisions with some level of autonomy, Facebook will need to develop closer ties with brands locally.

This is no small task and even then, there's no guarantee that Facebook will find much money. After all, with Madison Avenue still showing reluctance to write big checks for advertising on social networks, the chances that Facebook will find more willing ad buyers outside of the United States is quite unlikely.

In some sense, I believe Facebook may wind up facing a problem similar in nature to YouTube (and interestingly, YouTube also faces the issue of monetizing a significant amount of international traffic).

In my post on Monday, it was noted that under YouTube's current model, it is possible for the company to lose money the more popular it gets.

In Facebook's case, it has to bear the burden of serving nearly 124m unique visitors each month, only 35.6m of whom are the American consumers that a significant number of brand advertisers covet most.

The costs of serving each visitor is the same for Facebook regardless of each visitor's location, yet approximately 88m of those visitors are realistically more difficult to monetize.

Unfortunately for Facebook, its costs aren't insignificant. The $100m it recently raised in debt is reportedly allocated exclusively for servers and infrastructure, demonstrating that building a profitable social networking business isn't quite as inexpensive as Web 2.0 myths would have us believe.

Thus, Facebook is in the unenviable position of not only trying to figure out how to turn a profit on the second largest social networking audience in the US, but in the far more unenviable position of trying to figure out how to turn a profit on the largest international social networking audience.

As I noted yesterday, contrary to what Facebook VP Chamath Palihapitiya states, social networks like Facebook don't have "five to 10 years" to figure it out.

The timing of Facebook's launch in 2004 was ideal. But with rising costs, significant monetization challenges becoming more recognized and a global economy teetering on the brink, the timing for Facebook's triumph over MySpace may not be so good.

The currency of pageviews goes through volatile cycles of devaluation and revaluation. Those who don't exchange pageviews for greenbacks before the devaluation occurs are in for some hurt.

Somehow, I suspect that Facebook risks becoming the greatest example of this since Bubble 1.0.

Drama 2.0

Published 25 June, 2008 by Drama 2.0

237 more posts from this author

Comments (3)

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Muzaffer Bhat

Social bookmarking sites especially onlywire is extraordinary in getting traffic in less than 24 hours. I will try to post some srticles on facebook. Thanks anyway.

about 8 years ago

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Earn money from net

In my opinion high PR social bookmarking sites are useful in getting a brand new site indexed within 3-4 days for enlisting in google database which otherwise takes 6-9 months. This is the most important and highest benefit from high PR social sites. Thanks.

about 8 years ago

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Leon

I dont believe people will want to be segmented into their own personal cutures and regions, like myspace is aiming to do. The Internet has joined us as a global community and by segmenting us would mean a smaller community as a whole.

Facebook is on the right path, once they have a complete global community it will be a lot easier to sell products and services globally.

they just have to wait a little longer.

almost 8 years ago

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