How Facebook could make money by letting users sell their friends

I originally wrote the entry as an online article and it ended up being quite long. So I decided to start with an extra summary to present the core idea briefly. Well, it made the whole thing that much longer.

Summary

Advertising connects demand with supply: it connects people who have money to spend to fill a need (or to splurge out on a luxury) with businesses which want to reach customers. It is in the buyers’ interest that they are only exposed to advertisements that help them in their purchasing decisions. It is in the sellers’ interest that their adverts mainly target consumers who are potential buyers of their goods or services.

In online advertising, buyers need information about products and sellers, while sellers need help to target their ads at potential buyers. Help might come from a dedicated provider (either by people employed for this task or in an automated way from some remote server), while the alternative is that it might be provided by some online community. These are independent aspects, as the table shows with some examples.

Recommending… seller to buyer buyer to seller
Centrally/algorithmically independent product reviews; Google AdWords, Amazon, eBay browsing history (Google, Amazon)
In a distributed fashion/socially Amazon, eBay; Pinterest ?

My observation is that I do not know any participant in the field with ? but Facebook is in a position to enter that space. Continue reading

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