July 29, 2010

Facebook partners with Amazon: Measuring the value of social recommendations

NOTE: This post is old, and is probably on different subject matter than my current writing. It is possible the information is outdated or my opinions have changed. -- Josh Klein, May 28, 2012

Venturebeat reports on this week’s announcement of the partnership between Amazon and Facebook.

Amazon will begin offering a “a personalized page, where consumers can see product recommendations influenced by friends and their own tastes. They get notifications on when friend’s birthdays are coming up and suggestions on what to buy for them.”

Here’s Venturebeat’s critical analysis of the effect of this partnership on advertising:

The longstanding problem with brand advertising is that it is notoriously hard to measure effectiveness. A brand can run a TV campaign, a viral video, or make those innovative Old Spice ads on the fly, but how does a company really know whether these efforts actually boost sales? This is why, as angel investor Chris Dixon argues, ads that generate intent are undervalued relative to ads that harvest intent. Online advertising, as it exists today, rewards the last ad that a consumer clicks on before they buy a product (like Google’s search ads or Amazon’s affiliate links). But it doesn’t reward all the display or engagement ads that might influence a consumer for weeks or months beforehand on content sites or social networks.

Now if Facebook can build out a partnership with Amazon, where it can get key pieces of aggregated data back to study how product sales change in relation to social recommendations or ad campaigns, it can build models to show how financially valuable it is on average when a user “likes” a product or brand.

This will help answer the question I posed yesterday: “Is it a waste of time to market on Twitter or Facebook?

I suggested you be skeptical, but maybe soon you’ll be able to measure the actual dollar impact of social recommendations. That would be a pretty big deal.

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