Believe it or not, Google and Facebook are very similar. Both give away their products for free. Both make the majority of their money from advertising. Both focus specifically on targeted advertising based on user data. However, the way they gather that data is as different as can be.
Think about the information Google and Facebook knows about us. When we search for something on Google, we’re giving them some information on what we want right at that moment. They use our search terms to customize the ad messages displayed along with our search results.
On the other hand, the data we give to Facebook is that which we’ve entered on our profile, such as our demographics, the status updates we post and our interests. In addition, with their ubiquitous “Like” button now all over the web, they’re able to get an amazing idea of what we like off their site as well. Basically, they know who we are and what we want even before we do.
In my opinion, Facebook has a much broader idea of who we are in real life, since they have convinced us to create an online life that mimics our real life. Just ten years ago the idea of using your real name online was creepy and now look how far we’ve come. We’re posting very personal information for all the world to see and tying it to our true identity. So while Google can still make boatloads of cash by showing us the right ads at the right times, based on our impulsive search patterns, Facebook is slowly forming a much more comprehensive picture of its users.
Ultimately the way these companies collect data will determine the future of advertising. Google was innovative back in the day for doing targeted ads better than anyone else, because they got people to click and buy. Now, the game has shifted. Advertisers want to create more long term relationships with consumers and the best way to do that is to cultivate social data rather than search data.
Google knows the power of this type of user data. In fact, a few months ago Google CEO Eric Schmidt summed it up perfectly:
If you think about it, it’s obvious. With your permission, knowing more about who your friends are, we can provide more tailored recommendations. Search quality can get better.
He may have said “search quality” but “advertisement quality” is probably the more accurate term. In any case, when Google is hot on the trail of something new, we all better take notice. They have a keen eye for taking business to the most unlikely places. Do you honestly think they’re just going to sit around and let Facebook steal their thunder in the realm of targeted advertising? I doubt it.
Expect big plays from the Googleplex in the realm of social networking. It is the one key area of the web they don’t have their hand in and its significantly hurting them.