Digital Sky Technologies, a Russian Internet company has invested $200 million into Facebook for 1.96% of the company. Facebook is a privately held company which claims that it is increasing revenue 70% year over year.

This deal interests me because I believe that Facebook will be at least as dominant a force as Google in the next few years due to two factors: Globalization and the rise of locally targeted marketing.

Becoming the de facto global connection between like-minded individuals

Facebook is growing much faster outside of the US than here and it is growing pretty fast here. Like Google it is borderless, a business state that never existed before the rise of the web. Nothing stops them from growing across the planet. Countries may chose to block them as Iran did recently (though it quickly removed the block after public outcry that it was politically motivated) but most users can find workarounds.

Facebook, unlike Twitter, takes the connection paradigm to a much higher level. We don’t tend to connect to just anyone who requests a connection because it devalues the experience. When we connect we are sharing a lot of information with each other, again unlike Twitter. It is possible to build meaningful relationships on Facebook regardless of location or cultural background- if there are shared friends or interests.

The significance of this is that Facebook is building its own network that could be equivalent to the Internet itself- but based on far stronger connections. We’re no longer six degrees apart, more like 2-3. This is not insignificant. The more we are connected on a personal basis the more difficult it gets to start wars, block international business and suppress human rights.

Building global ‘villages’ of like-minded individuals with trusted connections

The paradox of this is that it makes everything a lot more local and that’s where the revenue model gets interesting. First, when I define ‘local’ on Facebook I’m talking about virtual villages. Connected groups who are active effectively live near each other and share information on a very granular level. I know when my friends are traveling, how their businesses are doing, what they’re buying and much more. I see pictures of their kids, kids I may never meet. This implies a degree of trust that Twitter and Google can never acquire- their models are built on a much more anonymous connection.

Facebook’s revenue model will be based on its enormous scale, not marketing

Marketing to a like-minded village is very highly targeted marketing- and very risky marketing. The degree of quality, transperancy and honesty required is frankly not easily grasped by most marketing professionals. In fact I believe that an entirely new group of marketing people will emerge who don’t care a bit about branding, advertising or any other ‘broadcast’ model of promoting goods and services.

Facebook is raising money so it can bide its time

All of this is why, for good reason, Facebook is being glib about their revenue model. They’re raising money so they can continue to grow to the point where they can generate huge amounts of income from very incremental sources, simply because they are the planet’s marketplace.