Rethinking Last Week's Question: Will Social Media Save the Portal?

• by Catharine P. Taylor , August 12, 2010

To pick up where last week's column left off, here's one answer to the question "Has Social Media Killed the Portal?"

No, but to portals, it sure looks like an excellent life raft.

Seems that while I was writing last Wednesday about Facebook's rising advertising fortunes -- and AOL's sinking ones -- the two were actually in talks to create one of those storied strategic alliances. In this one, per Claire Atkinson of The New York Post, AOL, which also operates the Advertising.com ad network, would sell ads for Facebook. On the flip side, AOL might provide some content to Facebook. (Neither side is going on the record about an alleged deal.)

Why would this be a good idea for Facebook? As Atkinson points out, despite COO Sheryl Sandberg's assertion that many major advertisers are increasing their investments in Facebook tenfold, Facebook still has a bit of growing up to do on the advertising front. While I don't expect Facebook will ever go so far as to rival Google as an ad property, it's time for it to become more of a play-ah, on the scale of other major Internet properties. While there are predictions out there that Facebook will have $1.4 billion in revenue next year, when compared to the portals, it's still way behind. Yahoo, even in its lessened state, brought in close to that in the second quarter alone. AOL is shrinking, sure, but still managed about $560 million in revenue in the last quarter, almost $300 million of that in advertising.

But it's not just revenue that the portals have and Facebook, relatively speaking, lacks -- it's know-how. What AOL can add to the mix is deep advertising relationships, scads of data, a different take on appropriate ad models, and loads of impressions, which, especially when sold as a package, would make Facebook an even more compelling advertising property.

This is not to say that Facebook will start running home page takeovers and go overboard on the banner ads, or that it doesn't have ad relationships of its own, but it's too easy in the trendy Internet business (metaphor alert!) to throw out the baby with the bathwater. Just because portals aren't the powerhouses they used to be doesn't mean that they bring nothing to the table. For everything except search advertising, portals are still the straw that stirs the drink.

Besides, as Atkinson says, a potential AOL/Facebook alliance comes with a boatload of personal relationships. AOL CEO Tim Armstrong used to work with Sandberg and Facebook head of ad sales David Fischer at Google. Alliances have been forged out of flimsier material.

Obviously, this is a life raft AOL needs more than Facebook. But don't be surprised if other portals see if there's room for them on the life raft as well. There's nothing prohibiting Yahoo, for instance, from also approaching Facebook about an advertising deal; the two companies have deepening ties through Yahoo Pulse, which allows people to link their accounts from the two services together and cross-network.

As the year unfolds, expect more action between social nets and portals. Remember, these aren't mutually exclusive Internet categories, but ones where a lot of symbiosis could benefit both.

Editor's Note: Be sure to check out the agenda for the upcoming Social Media Insider Summit. We'll be featuring Heidi Browning, Seth Goldstein, Shiv Singh and more. See you in Tahoe!