American Consequences - January 2018

an advertiser’s greatest fear: Wanamaker’s Dilemma. John Wanamaker was a 19th-century businessman who built a group of popular department stores in Philadelphia. Frustrated with competing against Sears, Roebuck and Co.’s store-to-farm catalog, Wanamaker famously complained in 1886: “ Half my advertising is wasted. But I don’t know which half! ” The problem, in a nutshell, is figuring out where to target your ads to get the highest rate of response. And a few simple pictures on Facebook from a few million people is not going to solve that. Except, Facebook isn’t a few million people. It’s a few BILLION people. And it’s still growing at close to a million new users every day... In 2012, Facebook spent $1 billion to buy rival social media site Instagram. Instagram has a simple, effective, person-to-person picture-sharing service built for smartphones. At the time, it only had 30 million users – compared with Facebook’s 900 million. But it was growing like mad. It expanded to 100 million active users by 2014. Today, it boasts 500 million, making it the eighth-largest social networking site in the world. An “active user” is anyone who logs into the account at least once a month. Of those users, 300 million log in every day... That’s a bit less than the U.S. adult population. And it’s nothing compared with the WhatsApp instant-messaging platform. Facebook paid roughly $22 billion for WhatsApp in 2014...

When the time was right, Zuckerberg chose an advertising model to generate the revenues that would pay for all those servers. Facebook charged firms for the right to access its free users. This user base is extremely valuable because Facebook knows a lot about them. It knows who they are, where they are, and what they like. Plus, Facebook added a simple one-directional opt-in feature for businesses: a “Like” button. You’d think this would be useless, but it’s hugely popular... and important.

Facebook is a living, breathing book. And it’s all about you, the user. That makes it endlessly fascinating for virtually everyone.

See, if Facebook can figure out you are 45 years old and that you “like” BMWs, Gerber baby bottles, and Giant-brand bicycles... then it knows you are a perfect match for a targeted advertisement for a coupon for a premium child’s car seat. It’s not a gaudy ad. Just a simple message in the corner of your screen: “The Safest Car Seats Around.” An ad doesn’t mean you will buy it. But you are much more likely to if you are 45, and you like cars and baby bottles. Google does the same thing with targeted advertising, but it only gets your search history as data. Meanwhile, Facebook has everything: all your friends, all your captions, all their captions, and everyone’s photos. This makes Facebook a powerful tool to conquer

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