In 1876, a fantastic new invention was set to change the world forever: the telephone. Eighty-nine years later, the telephone hit 150 million users. Quite an accomplishment for something that is connected to a wire.

In 2004, a fantastic “social utility” was set to change the world forever: Facebook. Four years later, Facebook hit 150 million users, growing at about five million users a week. Quiet an accomplishment for a digital company started in a Harvard dorm room.

If you are a marketer, and you aren’t salivating by now, then you need to go get another cup of coffee. Or consider this: 24 year CEO Mark Zuckerberg’s goal for the company is for Facebook to connect the entire world by becoming the main tool people use to communicate with one another.

How it connects users:
The basic concept behind Facebook is generally well known by now. Users can set up a home page, search for their friends, and invite them to become a “friend.” As users post comments, tag each other, discuss things on each others’ walls – and become fans of businesses and products – you and your friends receive these bits of information as “feeds.” The potential for reaching a targeted audience becomes mind-boggling as the realization sets in that as you become a fan of a business, or comment on products, your friends know about it, and can choose to comment back. Then their friends get that comment as a feed.

How it uses ads now:
Facebook tracks users behavior, and can send you ads tailored to your interests. Unlike search engines, however, Facebook lets you manage your feeds through use of privacy settings and feedback to Facebook, so it’s not as intrusive. Also, the ads on Facebook aren’t as obnoxious as they are on other sites. Ads contain a small thumb symbol, so users can rate an ad with a thumbs up or a thumbs down. The thumbs down ads, typically irrelevant or obnoxious to the user, go away. So users end up with tailored ads.

Ideas for the future:
With this large community so close at hand, advertisers as well as Facebook are trying to figure out how to slide into this and make some money. One new approach is called Facebook Connects, which lets users log on to company websites using their Facebook logins, which in turn would then go to their friends’ feeds, and lets everyone know what companies you are doing business with. Some companies are finding they can make it easy for users to call up their list of Facebook friends and invite them to the business’s site or discussion groups. Translation: Free marketing.

Challenges:
The challenge comes in with the current status of decreasing online advertising funds, as well as the competition, which are the traditional (read “not-so-experimental”) websites. Banner ads on Facebook can sell for as little as15 cents per 1,000 clicks, a real bargain for marketers. But then, they know users usually ignore the banners. So how to improve its advertising abilities? There’s a pervasive feeling around Facebook that with user expansion will come advertising expansion. And expansion is the company’s focus right now. As a reminder, AOL’s Instant Messaging looms out there yet – popular, but not making lots of advertising money. At this writing, Facebook has 175 million users, and Microsoft as a competitor, an investor, and a partner. And Facebook has lots of potential. We’ll wait and see.

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