Facebook (NASDAQ:FB) isn't banking on corporate monoliths to buy up ad inventory. Instead, the social media company has its sites set on raking in dollars from companies of all sizes.
That's the secret to the company's success: It can take big bucks from major players, but it can also add up the nickels and dimes from the little guys. This has worked both for Facebook and for the small players which can use the social media site to directly target customers in a cost-effective way.
Facebook has found the solution for small business and has 45 million pages on Facebook.com in that category. The social media site brings in companies by offering free pages, but then sells them ad space to help bring in customers. It's a mutually beneficial business that Facebook has grown impressively, which tech analysts Dylan Lewis and Sean O'Reilly discuss in the following video.
Listen to the full podcast by clicking here. A transcript follows the video.
Dylan Lewis: If you read the conference call you saw that they made a lot of references to small businesses -- SMBs. I think this is such a valuable market for them because it's really easy for them to find a mutually beneficial solution.
One of the things they talked about quite a bit is that it's a struggle to get a very good web presence as a small company, right? It's costly to setup a website, especially if you want to venture into the mobile app type thing. I believe Sheryl Sandberg said that 35% of small businesses have no web presence whatsoever. That's insane.
Sean O'Reilly: This is 2015, right? We haven't gone back in time?
Lewis: Right. It's kind of crazy. You would expect that number to be much smaller. The metrics they pointed to is, there are 45 million SMB pages on Facebook.
O'Reilly: That's where you go if you've got a little shop around the corner.
Lewis: Right. It's a free way to get setup and have a Web presence without really investing all that much up front and you can start to build up a following, maybe you have some nice engagement with customers and you start to see the value proposition there. I think two numbers we'll continue to see them highlight in future earnings calls is this number of active advertisers and the number of small businesses that have pages.
One of the main reasons for that is, they said that 80% of the 2.5 million advertisers started with SMB pages, which are free. Then they saw the value, worked their way into some of the simplified ad products, and are now more robustly involved in that.
O'Reilly: So it's a partnership?
Lewis: Yeah. It's something that I think scales incredibly well because the intro level is free. You can start to see the value that's being added and it's a huge addressable market when you think of the number of small businesses that are out there.
Dylan Lewis has no position in any stocks mentioned. Sean O'Reilly owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.