
How Advertising Works, and Why It Won’t For Facebook - breily
http://mattmaroon.com/?p=365
======
paul
You could make the same argument for why advertising won't work for TV,
newspapers, and magazines.

Google's model is nearly optimal in many cases, but I believe many advertisers
still spend the majority of their money outside of Google. The reason is that
there are two kinds of advertising, roughly: meeting demand, and creating
demand. Google is good for the former ("I'm looking for X"), and TV has been
great for the latter ("want to be important? You need this expensive car").

~~~
josefresco
Right on about Need vs. Awareness .... Think of Coca-Cola or McDonald's, or
even Budweiser. There are many large companies that use TV/Internet to keep
their brand strong. Everyone knows about these brands, there is no direct
"need" for any of their products (one could argue against this but I digress),
but they need to keep advertising so when you are hungry, or thirsty, or sober
you turn to them first.

~~~
joseakle
That´s right, I think there´s also a hybrid, probably like banner advertising,
google adwords, amazon recommendations and gmail, which is showing you ads for
things you might be interested in but not necessarily actively seeking.

When you see an ad for coke on the street there is just some probability you
are thirsty or will remember coke when you become thirsty, with adwords and
other kinds of contextual advertising there is also a probability you might be
interested in what the advertiser is presenting you, so they might just hit a
need or making you aware of it, and not really creating it as in creating
demand.

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JacobAldridge
I have to agree with the point Matt makes, that advertising will continue to
work better on Google than on Facebook. We mustn't forget, however, that
advertising is a construct of the last two centuries and especially the period
1950-1990, and may already have passed its prime as a way of generating
customers.

Moving forward, the value of communities may overtake the value of marketing
and of brand - and think here of baby boomer 'retirement' villages as much as
MySpace or Facebook. Advertising will continue to work better on Google; but
advertising as a means to generate business may be superceded.

For more information, albeit from a functional business perspective rather
than directly on topic, see perhaps
<http://en.wikipedia.org/wiki/Distribution_>(business)
[http://www.shirlawsonline.com/downloads/sme-report-
summary.z...](http://www.shirlawsonline.com/downloads/sme-report-summary.zip)
(Download a research document) or
[http://360degreeview.blogspot.com/2007/09/signs-of-new-
distr...](http://360degreeview.blogspot.com/2007/09/signs-of-new-distribution-
era-emerging.html)

Don't rule out social networks just yet.

~~~
mattmaroon
Interesting point. I think it's wrong, but it's definitely interesting.

~~~
JacobAldridge
I'll admit it's certainly based on a little conjecture. The post-WWII 'Product
Era' supported by marketing evolved into the Brand or 'Positioning Era'; one
of business frameworks I use for work (I'm a Shirlaws Business Coach) tracks
revenue through a business, starting with Product, then Positioning, then
Distribution (ie, of product to market).

But this does fit into emerging trends, both online (Facebook) and off ('baby
boomer community' returns 5.3 million pages in Google, but no ads...)

------
unimanz
> "But they’ll never know what you want right now, and Google always does."

Matt, this appears to be your killer point, that search allows advertisers to
know what you want right now. The limitation with search however is that there
are things I am very likely to want that I don't search for.

Let me use an example. Often when people are about to go on holiday they
announce it in Facebook by writing on someone's wall or updating status etc.
Now if I said I was going to Cancun for example would't it be great for
advertisers of tshirts, shorts and holiday insurance to advertise to me? Only
Facebook can do this, Google cannot (I would have to do three separate
searches, with FB I do nothing).

I think this goes beyond a friend recommendation because it links exactly to
my plans. Its not only targeted but it shows what I want tomorrow. I think
overall this is more targeted than google thanks to the demographic targeting
placed on top which Google does not have. In Facebook, I could use the persons
place of employment and age to work out their salary and offer two different
holiday insurance schemes to the wealthy and the less fortunate. If I type in
Holiday insurance in Google, advertisers cannot filter like that. And would
think this likely to return a better ROI than Google search (as long as people
pay attention to the ads! - the assumption being when ads are relevant people
actually do).

So what I am saying is that there is a whole lot of data for Facebook to play
with, don't rule them out yet. It will be very hard for them to pull this off
but someone has to challenge the google monopoly and who are better placed
than them.

~~~
mattmaroon
I don't understand your logic. You type Cancun into Facebook and it hits you
with "tshirts, shorts and holiday insurance". Why couldn't Google just do the
same when you Googled for Cancun? That's not what Google does hit you with,
but that's only because the market has decided that those ad slots should
belong to travel agencies, etc. If ads ever took off on Facebook, it would
presumably decide the same exact thing there.

I don't know about you, but like 99.9% of the population, when I travel to a
new place I type it in Google first. I might type it into Facebook if I want
to see if any of my friends will be there or have been there. But generally
I'm Googling for what to do. It's gotten me through many new cities.

Also, you're giving Facebook too much credit for being able to parse natural
language if you think this can scale for them. They might be able to target
ads around specific keywords, but even that is going to be tough.

~~~
unimanz
> "You type Cancun into Facebook and it hits you with "tshirts, shorts and
> holiday insurance". Why couldn't Google just do the same when you Googled
> for Cancun?"

That's the thing...with Facebook you don't have to search in order to be
presented with relevent advertising. FB could parse natural language from the
communications you are having with friends to display ads relevent to what you
want now. Using my example above if i posted on my friends wall saying I am
going to cancun then I would see the ads described above. However, that
doesn't mean I woulnd't search in Google.

I agree, natural language parsing is very difficult but if Facebook could do
that they may be on to a winner.

~~~
dhs
Even if the problem of generalized natural language understanding were
solvable - which I doubt -, my bet would be on Peter Norvig and the Google
team solving it way before the Facebook guys.

~~~
robg
The fundamental problem is that natural language processing (NLP) isn't one
problem to be solved. There will be many solutions to many particular problems
of NLP. Many, many years later we're still waiting for one solution to energy
(steam, or coal, or nuclear...?) or one solution to flight (gliders, or jets,
or rockets...?). Human intelligence is a swiss army knife where the tools
developed millions of years ago (opposable thumbs) or evolved withing ten
years (keyword-based search). Why should there be a general solution?

Google has taken a sizeable chunk. But what's interesting to me is search has
become all-consuming for them. Many solutions are perfectly fine for search,
but that perspective (aggregating large noisy datasets) won't help much in
other areas (e.g., individual voice recognition). If anything it will be a big
waste of time trying to shoehorn every NLP problem into that search-based
rubric. That leaves a lot of room for little guys cranking through data to
produce new, and unique, NLP tools (e.g., Dragon Naturally Speaking). More to
your point: I have yet to see a scientific hire by Facebook away from Google.
It's been all business and marketing from what I've seen in the popular press.

~~~
dhs
"Why should there be a general solution?"

Why indeed. However, finding one was very much on the agenda for GOFAI, and
remains on the agenda for various AGI efforts, e.g. by people like Pei Wang,
Ben Goertzel, and Eliezer Yudkowsky (who comments here, as I've observed).

------
sanj
Where search wins is with intent.

Search implies intent. Better than anything else.

All of the LBS (Location Based Services) haven't figured this out yet, but
Location does NOT imply intent. Walking past a pizza store does not mean I'm
hungry for pizza.

The question for Facebook is whether any data that they possess does a
reasonable job of implying intent. It doesn't have to do as well as search,
but it has to do well enough.

The question boils down to "what do you do on facebook that implies intent".
The status may be one of the only things.

~~~
yariv
Knowing someone's intent is a sufficient, but not necessary condition for
effective advertising. I may have no intention to attend a concert this
weekend, but if I saw an ad for a nearby concert by an artist I like I would
be likely to click on it. For this kind of advertising, Facebook can be much
more effective than Google.

~~~
mattmaroon
How? Everyone says this, but it just isn't happening because it isn't true. I
mean, how does Facebook know that concert ads are better for you than t-shirt
ads? They just magically parse your wall comments and this occurs?

My argument wasn't that knowing someone's intent is necessary. It's just that
it focuses the advertising much better and as such demands far higher CPMs.
Facebook can guess all they want, and if they do a perfect job (far better
than technology allows currently) they'll guess as accurately as Google does
now.

~~~
yariv
Facebook doesn't "know" that concert ads are better for me (although it can
tell from my profile what music I like, where I live, and maybe even what
concerts my friends attend, etc), but it can try different ads and see what
works because of the large number of page views in a typical user session. In
Google, you search, get the results, then leave the google.com. In Facebook,
you can easily navigate to dozens of pages before logging off. This gives
Facebook the opportunity to try different ads and see what works and what
doesn't.

I agree with your main point, but the bottom line is that even if Facebook's
CPMs are lower than Google, it doesn't mean that Facebook can't make a ton of
money from advertising or that advertisers can't get good ROI on Facebook. You
don't need to be Google to be a successful advertising platform. Also, don't
forget that Facebook is still young and I'm sure many advertisers haven't yet
adopted it. I have a friend who does internet marketing and he says that, at
least in his niche, Facebook CPMs have been increasing by 10% a week.

------
Mistone
I'm so tired of matts "facebook isn't google" rants, move on dude, we get it.

My Opinion is that facebook is one of the best valued ad networks for
advertisers right now and the flood of brands is a matter of when not if.

~~~
mattmaroon
Then don't read them. Complaining about what other people write is the height
of vanity.

I don't see how a top 10 traffic site could possibly be overlooked by
marketers. If it were a value, they'd shift there until it was not, and that
isn't happening at all. The data shows that you are incorrect.

~~~
Mistone
I didn't read it, just briefly skimmed, my comment is related to seeing the
reoccurring fb rants on YC.News.

In case you've missed it there is a lot of advertising happening on fb, some
major brands include Blockbuster/BMW/Virgin America.

Where I see the value on fb is search ads for smaller advertisers, the cost-
per-click on some prominent keywords are so much less than google, if the fb
demo is your target, this can be a very cost effective channel for reaching
them, plus this is where they are spending time.

------
josefresco
Facebook could succeed if they figure out the "word of mouth marketing
strategy online. Think about it; when you buy something offline, or even
online most people ask their friends and family what they bought, and from
whom ... and then make their decision based on recommendations.

When I pick up new web design work, the #1 vehicle is word of mouth from my
already serviced (and hopefully happy) clients recommending me to their
friends.

If Facebook can use the "Twitter" style of outsourcing questions to your
friends, they can tackle this problem of 'focus'. I could ask my FB friends
what type of music player they all use, and my responses could have targeted
ads based on what they say.

FB needs to be careful though becayse as you said, people login to FB to "hang
out" and don't think "buy buy buy" first like they do with Google.

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waleedka
1\. Facebook doesn't need to be bigger than Google to be successful. All they
need to be is "profitable". Why do you think they need to be an order of
magnitude bigger?

2\. You're missing the distinction between brand advertising and action
oriented advertising. When Budweiser advertises, their goal is to create an
association in your brain that links them to something cool you like so that
when you're in the bar you choose their product rather than another brand. How
many people do you know search for "beer" on Google to choose which brand to
buy?

3\. Facebook does have aspects that allows them to get that order of magnitude
of views you mentioned. For example, if I "fan" a Facebook Page, many of my
friends will see that in their news feed. Probably not all 250 of them, but
many.

~~~
mattmaroon
Brand advertising on the net is all about clickthroughs too, just like any
other ad. That's why you never see a banner with no link. The brand
advertising is Budweiser's website, not their tiny banner. Since clickthroughs
are whats relevant, the same laws apply.

~~~
pchristensen
Eh, the click is there so they can measure it and get more transparency than a
billboard. But even if you don't click on it, it's about as effective as a
billboard - not useful for a specific sale but one more incremental bit of
brand awareness.

~~~
mattmaroon
That's wrong because it isn't the tiny banner ad that is the billboard, it's
the website you get to when you click it. Budweiser doesn't sell beer on their
home page, they advertise it.

------
byrneseyeview
_But I think reality is slowly setting in. Because what we’re finding is that
when people want something specific, they go to Google. When they want to kill
time or just communicate with friends, they go to Facebook. And that isn’t
changing._

Let's say we split the market into two parts: Consumer A already knows he
wants a particular product -- advertising is just a way to get him to buy it
from you. Consumer B doesn't know what he wants -- he doesn't want anything
just now. Advertising is a way to change this.

Isn't a list of Consumer B's interests, hobbies, friends, their interests,
their hobbies, etc., a fantastic resource for targeting him? And isn't he an
incredibly valuable customer? Apple didn't succeed by telling existing Mac
users to buy more Macs (though they do!); it succeeded by getting people to
switch. If Apple could target people whose status is "SP3 crippled my
machine," or "Zune broken" or whatever, I'm sure they'll pay more for those
users than they will pay for "Buy new Macbook pro" to link to Apple ads for
Macbook pros as well as the Apple website selling Macbook pros.

~~~
mattmaroon
Google can do a much better job with consumer B than Facebook. Facebook has to
guess based on his wall posts, listed interests, etc. Given the sad state of
natural language parsing, how well do you think this will work? At best
they'll look at the bands I like and recommend similar ones. If they're lucky,
they'll end up as good at that as Pandora. Or Netflix for movies.

Google knows your interests based on what sites you visit. Perhaps you visit
an auto blog, which has Google Ads. Then you visit MySpace, which has Google
Ads. Google shows you auto ads on MySpace. This sort of thing is already
commonplace with ad networks.

Google has your entire search history. This is a far more effective way to
determine your interests than Facebook. Facebook can't get beyond what bands
and books and movies you like right now.

------
robg
Something helpful to remember is the shift from broadcast to cable TV as a
true innovation in advertising. Where the former meant huge audiences (this
year's Superbowl still trailed the 100 million that watched the final episode
of MASH in 1983), it also meant significantly fewer targeted ads, except for
some time periods (detergents begat soap operas) and events (beer begat Bud
Bowl). Cable allowed channels to become really geared to demographics and thus
ads. It's an example where the long tail of content is quite valuable. Take
Scripps Networks (Food, HGTV, DIY) - that's quite a sizable chunk of what
folks consume on a weekly basis.

To many, the internet advertising model takes the cable approach and amplifies
the number of channels. The difference with Google is they understood how
clicks were the next generation game changer (and well ahead of their time).
Yahoo had always focused on aggregating content. They were following a shotgun
path that had proven very valuable (cable TV) when clicks were finally used to
create a sniper's rifle for aiming ads.

------
alexfarran
What about trust as a factor in engagement? According to this survey
<http://tinyurl.com/3jcxjj> recommendations from friends are trusted more than
any other source of information. This is what people are looking to exploit
with the social graph. Facebook beacon was an early clumsy attempt. If you can
persuade people to pass on your message to friends you will significantly
increase the response rate.

An example of this in action is at the end of this article on Duncan Watts
<http://tinyurl.com/3pgps7>

" Typically, people ignore this "share with your friends" pitch. But Watts and
Peretti included technology called ForwardTrack, which displays the route the
ad travels once you've forwarded it. This turned ad forwarding into a piece of
social cartography. People would pass the ad specifically to those friends
most likely to keep it moving. It became a Facebook-like contest to sign up
the most friends. "

------
rsmith
Perhaps the key to making social network ads work is knowing where people are.
AdWords has made marketing many, many internet only niche businesses possible.
Privacy issues aside, Facebook could allow local bricks and mortar businesses
to reach people geographically nearby via the internet.

While Facebook is a great way to keep in touch with friends who don't live
nearby, I'm also friends with people that live in the same town and I see all
the time - to see photos, arrange events, etc. You can join a group for the
city you live in.

So, Facebook knows where people are and that some proportion of their friends
live there too. Now there is new market for offline businesses - garages,
restaurants, bars, shops - to reach local people on the web.

There are even Facebook groups for people that work in the same company. I'm
sure the pizza place across the road from one of their buildings would like to
advertise their promotion to everyone in that group.

------
byrneseyeview
_Focus is the reason that search advertising is so wildly successful. If
you’re looking to sell Budweiser, what better way is there to reach customers
than to show your ads to the guy who goes to Google and types in “beer”? You
know every single one of them wants to know something about beer._

<http://reddit.com/info/verc/comments/>

[http://www.google.com/search?hl=en&q=beer+&btnG=Goog...](http://www.google.com/search?hl=en&q=beer+&btnG=Google+Search)

Great examples! Could be worse:

<http://www.flickr.com/photos/merlin/sets/1207345/>

------
maxklein
This is why I dislike Matt Maroon. I never met anyone who was so successful in
coming across as completely arrogant using only text.

Advertising has traditionally been very unfocused. Anything that focuses it
will work better than unfocused advertisment. Facebook has the data to focus
advertisments. So neccesarily, Facebook works better in delivering
advertisments to users. QED.

If or not they are actually executing this optimally is not relevant, the fact
is that they have the capability.

Microsoft and a bunch of very smart business people are willing to bet
billions on this. I think I'll stick with their opinions, rather than that of
Matt Maroon, a very mediocre smalltime poker player.

------
lyime
I think Matt has brought up a very good point. He is right for the most part.
Facebook is trying to create some new web 2.0 type of advertising model. It is
trying to be different in the ad space and it is not working.

Although, I do think advertising can work for Facebook. They need to start
small and focus advertising around features that people use on facebook. There
are certain applications that people use more then others on facebook. Mainly
photos, videos, events, news feeds AND SEARCH. People search on facebook, not
so much to find information as they use google for. I think facebook can
create a similar adwords model and build advertising around those core
services.

------
Herring
What are these "ads" everyone is talking about? :p

~~~
rms
I don't understand the downmodding, this is a serious problem. What if someone
started marketing an adblocker to the internet unsavvy?

------
jfarmer
He doesn't really explain how "advertising works," only how search
advertising, specifically works.

So the conclusion of his argument should not be that Facebook won't make money
off of ads but rather that Facebook won't be able to make money in the same
way Google does.

The reasons why advertising doesn't work on Facebook are more subtle than the
"there's no intent" line, which was trotted out by at least a dozen people
last year. Google "scoble Facebook stroller" to see.

------
nextmoveone
I think all they really need is something like facebook answers, I believe
that can be more focused than a search on google/yahoo/msn.

Cause then, they [facebook] are armed with Demographic info, and 50% of the
time, a deeper level of focus.

------
shawndrost
"It’s the theoretical limit."

What if you also know that the person who's googling for "Ford Focus" is of
driving age? Like, uh, Facebook does.

~~~
josefresco
This is a good point, Facebook has 1 part of the puzzle, Google has the other.
Facebook knows "who you are" better than Goog, Goog knows that you want "right
now" better than FB.

~~~
kschrader
I think that Google probably knows who you are pretty well. How often do you
log into Gmail and then forget to log out and do searches on Google? Even
without doing that, it's still tracking you via cookies.

You're fooling yourself if you don't think that Google has been tracking you
and your searches for the last ten years.

In fact, I would guess that it knows a fair amount of things about you that
you would never post on Facebook.

------
volida
who cares

~~~
volida
i guess at least 5 people do care enough * 10 (if thats the percentage you
expect to engage in vote) = 50 people do care

so, i was wrong!

