Facebook outsources ad sales to Microsoft: Why can't it make money on its own?

Facebook outsources ad sales to Microsoft: Why can't it make money on its own?

Summary: Why do Web 2.0 properties have such little self confidence in their own abilities to make money?

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TOPICS: Enterprise 2.0
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Microsoft will be the exclusive seller and provider of banner advertising and sponsored links for Facebook through 2009, according to New York Times reports.

Steve Berkowitz, senior vice president of the online services group for Microsoft, said ads would be made for Facebook, but they could also be aimed at any of MSN’s various Internet properties, which have a total of 400 million users worldwide. At the same time, ads running on MSN properties may also appear on Facebook, depending on what audience the advertiser wants to reach.

Why do Web 2.0 properties have such little self confidence in their own abilities to make money?

Why has Facebook capitulated to Microsoft, why must MySpace rely on Google (see Google: MySpace savior?), why does Digg outsource to Federated Media…

Web 2.0 properties fear placing ads on their Web sites that might interfere with their non-paying users enjoyment of the free-to-use services and they apparently fear selling their ad inventory to advertisers as well.

In "Web 2.0 non-paying users: fickle, or spoiled?" I note:

The legions of young, non-paying users of free-to-the-consumer Web 2.0 properties such as MySpace, YouTube, Digg…seem to be catered to almost more than paying audiences are catered to, these days.

MySpace 'friends,' Digg 'diggers' and You Tube 'broadcasters' not only receive free Internet services such as Web page and video hosting, but the owners of the services, which are provided free-of-charge to the public, are bending over backwards to prevent very non Web 2.0 advertising from 'interfering' with the non-paying users' Web 2.0 experiences.

As I have often put forth at this Digital Micro-Markets Blog:

By sharing the advertising pie with Google, Web 2.0 leaders are not reaping the full financial benefits from the traffic they are generating.

While Google is getting a bit of competition via Microsoft, Federated Media…the implications for the Web 2.0 properties remain the same.

Why do Web 2.0 stars insist on splitting hundreds of millions of dollars of advertising revenues with third parties?

Web sites participating in John Battelle’s Federated Media advertising network, for example, give back 40% of ad revenues generated off of their content.

Michael Arrington, for one, is reconsidering the value proposition:

I consider the 40% I pay FM Publishing, my agent, way too high. But they are still a young service and I’m sticking with them. Eventually, though, they will have to fall to more sustainable levels or risk losing their bigger properties. As blogs get larger, hiring an in-house sales person becomes much more reasonable that paying ad networks 40-50% of total revenue.

In “Web 2.0 monetization by Google AdSense, Where is the business model?” I posit that Web 2.0 start-ups are employing Google AdSense at the expense of their long-term viability:

‘Ads by Goooooogle’ are almost ubiquitous online and Google has succeeded in making AdSense the go-to monetization strategy for Web 2.0 properties of all sizes and styles, in lieu of solid business models…

Many Web 2.0 start-ups that make Web applications and services available to the public for free, first stake their claim to a piece of the Social Web real estate, and then, sometimes as an afterthought, look to Google to ‘show them the money’ through AdSense…

Monetization by Google AdSense may provide cash inflows, but it does not represent a business model…

While advertising-supported content delivery represents an established media business model, Google’s plug-in 'Just copy and paste a block of HTML and targeted ads start showing up on your website' formula is an ephemeral monetary crutch…

Rather than rely on Google’s algorithms to grasp the meaning of Web publishers' content, and receive an undisclosed share of revenue from Google for the ads it serves against that content, Web properties undoubtedly would be better served, for the long-term, by directly controlling advertiser access to their own content and not sharing their advertising revenues with third-parties.

UPDATE: Is Web 2.0 starting to see green?

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Topic: Enterprise 2.0

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  • Adsense Only Business Model

    ...is digital sharecropping.
    Cohn
  • RE: Facebook outsources ad sales to Microsoft: Why can't it make money on its own?

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