How Facebook Will Upend Advertising

The question isn't how advertising will work on Facebook but rather how Facebook and social networks like News Corp.'s MySpace are changing advertising. One of the biggest challenges facing advertisers is ad credibility. Consumers typically rate advertising as their least credible information channel. However, businesses have continued to invest in advertising because they could compensate for the lack of credibility through broad distribution and high-impact messaging. Today that trade-off is being turned on its head. Word of mouth—peer opinion—has consistently been rated the most credible source of information. But traditionally there's been a limit as to how widely you could distribute a friend's point of view. Credibility now has a channel for mass distribution. It's called the Web and it particularly thrives in social networks. Such distribution will have profound implications for advertising.