
The Facebook Fallacy - nreece
http://www.technologyreview.com/news/427972/the-facebook-fallacy/
======
malandrew
It's not that internet advertising isn't effective. It's that all the content
it's wrapped around is too engaging.

The reason ads in real-life are effective is that they traditionally haven't
had to compete for your attention. Examples:

(1) Standing on a subway platform you are looking straight at a piece of
advertising for minutes until your train arrives. (2) Driving down the road,
you're staring at a billboard for 1/4 of a mile (15 seconds at 50mph). (3) On
TV and on the radio, inertia to change the channel means you often listen to
ads.

The problem for those media is that we are now reaching the point where
content is portable enough that we now never have to be subject to ads in
those public spaces because we can direct our attention to our mobile devices.
Over the next for years you're going to see a massive drop in the
effectiveness and reach of ads in real life because people will no longer be
directing their surroundings.

The only one of the above examples that will survive a while are billboards
and even they will only last until we have self-driving cars. Once we have
self-driving cars, why even bother looking at the road instead of our iOS and
Android devices?

~~~
Wilya
I find it fascinating that, with all the talk about new and creative ways to
do ad business, the only ads that I find myself interested in are Youtube ads,
which are, in some way, a very old school and tv-like technique.

I tune out ads on Google search, on websites, and ads on Facebook are about as
relevant to me as the spam I get in my inbox ([0]). But, on Youtube, I'm stuck
with them, so I might as well try to enjoy them. The fact that they are
somehow relevant also helps.

[0] Facebook (or advertisers) seems to infer that if I'm in Sweden, I'm
interested in ads in swedish. That's kind of unfortunate. Plus, even ignoring
that, just like spam, half of them are just referrals to AdultFriendFinder or
the likes.

~~~
snapdata
You don't have AdBlock? I haven't seen an ad (youtube or otherwise) in as long
as I can remember.

~~~
Wilya
Honestly, I don't feel a need for AdBlock. I don't consciously see most ads
(with the exception of Youtube ones, like I said). They don't even reach my
mind. I instinctively know where they are, and my gaze just routes around
them.

And in that, I think I'm not the only one. I would guess quite a lot of people
have been "trained" the same way.

------
tokenadult
Good of you to submit this with the canonical URL. All four of the previous
submissions (none with any comments, per HN Search) were of noncanonical URLs
with appended referrer strings or format-preference strings.

After edit: So the article's essential claim, which I guess we haven't
discussed here on HN before (unless I missed a link) in relation to this exact
article is that the Web is a fundamentally unfavorable environment, long-term,
for advertising-supported sites. That's an interesting idea. I usually run ad-
blocking software, so maybe I believe this already. I've never tried to
monetize my personal website with advertisements--they just seem too schlocky.

------
codex
My hope is that advertising, as an industry, dies (or morphs) sooner rather
than later.

At best, it is visual pollution, and at worst employs subtle forms of mind
control to encourage people to do what the advertiser wants. No thank you!

However, it is useful: it helps disemenate information. Didn't know about the
all new BMW i3 electric car? Thanks to some ad, now you do. Most of the time
you don't care, but when you do care, it can be useful.

The Internet is much better at dissemanting relevant information than
advertising, however. Why should I watch an ad for a movie if
rottentomatoes.com has all the info I need? Why look at car ads when websites
will happily tell me the pros and cons of various cars? My hope is that
eventually the best products and services for me will be peer identified an
given to me when I need them. Ads will no longer be necessary. The peer review
process must be paid for somehow; manufacturers may end up footing the bill,
or perhaps ads from unpopular products will; either way I cannot wait for this
garbage/propaganda called advertising to vanish from the earth.

~~~
intellegacy
What happens to all the newspapers/ news sites that run on ads? Advertising
money has allowed the public access to non-subscription news on the web for
some time now.

If you take all that money away, doesn't the free content mostly dry up?

~~~
redwood
That's where we NEED to move toward some easier way of frictionless micro-
transactions that are secure, safe, and ubiquitous... how to do it is unclear,
but perhaps a mega-site like Facebook could create such a thing.

~~~
intellegacy
If you are referring to micro-transactions whereby readers pay content
authors, tipjoy and others have already tried the "e-tip" model and failed.

Also, paypal's donate feature has existed for some time now but it doesn't
seem to be able to replace ads. If anybody could implement the safe, seamless
microtransaction model I'd think it'd be paypal as they have the existing
infrastructure already. Either they have overlooked it or they've decided that
the model wouldn't work.

~~~
snapdata
Paypal? No. I just signed up for an account using my debit card. Instantly, my
account is suspicious. They then demand access to my bank accounts and scans
of my social security card, birth certificate, photo ID, etc. No thank you.

------
jacques_chester
The key problems for online advertising are:

1\. Advertisers can see if it worked. In traditional advertising you accept
that a lot of your money will be "wasted" on people who will never buy your
product or service. In online advertising you can track a customer from first
viewing an ad to purchase. This gives advertisers a _lot_ of leverage in price
negotiations -- "your site only has a 0.05% conversion rate, why should I pay
that much?"

2\. Inventory is growing faster than demand for inventory. In advertising
terms "Inventory" means "I have a place to show your ad". Well every new web
page can contain inventory. Given how fast the supply of webpages is growing,
compared to the total pool of customers and businesses ... well let's just say
that the supply-demand curve on this does not favour the sellers of inventory.

I am of course fascinated by this problem and my startup (currently in stupid
unfunded single-founder mode) aims to resolve this exact economic problem with
a different model.

------
InclinedPlane
Here's the core problem as I see it: the old (advertising) math no longer
works, and that's getting people into trouble. For traditional advertising in
print, radio, or television the math is simple and it's been refined over
decades. Generally speaking you take the number of eyeballs or ears, you
multiply by a certain factor which takes into account things like demographics
and whatnot and then you're done. In large part it doesn't matter whether
someone is watching murder she wrote or magnum PI or reading the paper, for
each format there's a degree of effectiveness of advertising and a degree of
lucrativeness for the target demographic. There are of course complications,
but in broad strokes this is the way things worked.

Those assumptions completely fall apart on the web. Because the web is not
just passive. It's interactive. And that changes the equation tremendously
because it means that the effectiveness of ads can vary by an enormous degree
depending on activity. When people are searching, for example, _relevant_ ads
(not just random eyeball hijacking brand promotions) are actually useful, and
thus highly effective. When people are trying to communicate with their
friends there probably isn't a good advertising context at all most of the
time and almost all ads will be seen as useless interruptions and thus vastly
less effective (they won't be relevant and can't as easily be made relevant).
And there is a huge variety of other activities on the web that don't fit into
convenient molds.

Now, does that necessarily mean that advertising revenue is a thing of the
past? Obviously not, as in some cases there are circumstances where the
potential for effective advertising is even greater than with traditional
media. But it does mean that the math is far more complex. And it might mean
that just because you have a direct line into a huge amount of eyeballs you
may not be able to monetize that traffic to the same degree (by orders of
magnitude) as an equivalent amount of traffic of people engaged in a different
activity.

Additionally, we've seen the writing on the wall in terms of "eyeball
hijacking" highly interruptive advertising in the modern age, it's just out of
date and out of touch. Monetizing web traffic effectively requires a much
smarter approach. In the ideal case advertising is so well targeted and so
effective that it is welcomed and often not even seen as an ad.

------
paulsutter
Advertising is a $600B a year business, and the Internet still has yet to
catch up with other media in terms of share of total budget versus time spent
on the medium.

Google just reported revenues up 35%. It's all advertising, driven by high
quality algorithms and lots of data. Internet advertising is more effective
than other media and we're still just scratching the surface.

I'd like to comment on all the specific ad startups and their revenue and
growth rates but I'm not able - you'll just have to wait and see it.

Happy to make a $1 bet on the subject with any naysayer here or with the
author of this shoddy article.

~~~
einhverfr
But internet advertising is a relatively lousy form of advertising. Compare to
print and radio ads.

I hear a radio ad. It is interesting. I write down the number and call the
person. Not ideal, but I am reminded by the medium that I must act now or else
I lose the info of the ad. Same with tv ads. But even to ensure people _can_
follow up you have to have the ad repeated over and over.

With print ads, I can cut them out and save them. Less urgency, and a lot of
durability.

Online advertising, with the possible exception of advertising on search
engines, provides the illusion of durability without delivering it. So it's an
inferior medium.

I am not saying that online advertisements are doomed. I think we haven't
figured out how to do it, and borrowing print analogies isn't sufficient. Or
perhaps, if we are going to borrow print analogies we ought to take them all
the way (selling ad space on specific pages on a non-rotating basis for
example).

~~~
paulsutter
I agree that there are a lot of advancements to be made. However, my
experience is that Internet ads are already more effective.

But forget all that, are you ready to bet me $1 over the future of online ads?
Go ahead and formulate the terms. I'll take the optimistic side and you can
have the pessimistic side of whatever you come up with.

~~~
einhverfr
I will say that in my experience, depending on audience, I have found radio
ads and general PR efforts to both be more effective at reaching consumers
than I have found internet ads. Speaking strictly of ROI.

I am willing to say that the following forms of advertising are doomed:

* rotating banners

* rotating in-content image ads

* pop-up ads (whether div- or window-based)

* side-bar ads in content

The real challenge I think is to replicate the success at search engine
advertisement (which seems to be good) elsewhere. For this reason I think that
whatever ends up working will be very different than what we have now.

Yeah, I'd bet a dollar on that proposition.

~~~
paulsutter
I'm asking for a bet on the future of Internet advertising generally. Not to
take a collection of the shittiest known implementations of advertising and
bet on them.

I'll interpret your response to mean you think Internet advertising
(considered broadly) will be successful, and I agree with you. In contrast
with the technology review post which predicts some sort of bizarre general
"collapse" of the Internet (presumably of advertising as a business model).

If not please reform your bet accordingly.

ps, love to engage in an email discusion to hear more about the radio and
pr(?) campaigns you have run that have worked better than Internet media.

~~~
einhverfr
paulsuttder, sure email me.

In general I found when I was starting out, radio ads delivered the best ROI,
and internet ads were down there with yellow pages ads.

------
dave1619
I don't like ads (typically). But as ads get more and more targeted (ie., when
i haven't gone to the dentist in 2 years and the ad says, "great dentist with
promo offer just 2 miles from you", that's kind of enticing). I think it will
migrate to where ads need to be helpful (ie., google ads). Search was easier
because Google could target on the search term. But it's harder when the user
isn't proactively searching for something.

But I think it can be done. The ads just need to be super-targetted and
helpful.

~~~
zalew
ad networks targeting you with details about your health is not helpful, it's
creepy and invading a very private aspect of life.

btw it's already done [http://www.forbes.com/sites/kashmirhill/2012/02/16/how-
targe...](http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-
figured-out-a-teen-girl-was-pregnant-before-her-father-did/)

~~~
dave1619
it's not just health. look at Google Now on android 4.1. they're going to know
everywhere you went and a lot more info. sooner or later, this will likely
lead to targeted ads if they can deliver high-value ads the user actually
wants. ie., [you're driving past your favorite pizza shop] Pizza Boy is
offering $5 off today your normal order. Should i place the order for you?"
the reason most everyone will opt in is because of the high value-add it
provides. my wife quickly opted in to Google Now on her android phone cause
she wants the extra features.

~~~
spaghetti
I'm skeptical of the "driving by the pizza place" examples. Physical proximity
to the pizza place usually doesn't imply any intention to consume pizza. There
has to be a stronger signal. I'm physically close to a pizza parlor and I just
searched for "dinner and beer" would be enough to assume I have some intention
of consuming pizza hence advertising the pizza parlor at that moment is
valuable to both myself and the business.

Advertising based entirely on physical proximity could be almost useless.
Imagine driving through downtown at 11 PM on a Friday night. As you pass the
dentist you're prompted with "50% off your next teeth cleaning!". As you pass
the park you're prompted with "Sunday Parade at the Park!". As you pass the
liquor store you're prompted with "Beer sale!". Finally something useful.
However by this point I would probably be ignoring the ads.

~~~
dave1619
The pizza example would be more like you're driving home from work at 5:30pm
on Wednesday on your typical route which passes by the pizza shop. Google Now
knows that it's dinner time and that you've purchased from that pizza place
before on a Wednesday for dinner. Thus, it "alerts" you of a special deal if
there is one.

~~~
spaghetti
Yes that would probably work. I think the pieces of the signal in decreasing
importance are: you purchase from a business frequently, the current time is
close to the average time at which you purchase from that business, you're
physically close to the business.

I wonder if physical proximity really matters relative to the other two
pieces? Pizza places can deliver so even if you're across town the ad could
still have value. Corner case is when you're on travel and physical distance
is very large.

------
mindstab
I don't understand why people are so focused on Facebook's ad revenue and it's
supposed unsustainability, since Google has been around longer, are way
bigger, and you know what? The overwhelming majority of their income is also
from online ads.

And you know what? Before that we had TV, Radio, and newspaper ads. Those
industries didn't implode (or start to) until better ad delivery systems (the
web) showed up?

So you know what's going to kill Facebook (and google)? Not some realization
ads "aren't working". A newer and even better ad delivery system. (also unlike
old media, there doesn't yet seem to be a reason to say FB or google won't be
behind this new system either).

This is tired old bollocks.

------
DanielBMarkham
Here's the thing: I hate ads. All forms of ads.

The reason I hate ads is that 99% of the time are interrupting me and telling
me about things I do not want to know about. If I am chatting with a friend on
Facebook, there's no way any kind of ad is going to do anything but get in my
way. If, however, I am actually looking to solve a problem, I go to a search
engine and start bringing up web pages. In this scenario I am actively seeking
something -- perhaps something an ad might be able to help with.

So content ads on informative sites and as part of search seems to me like a
lesser evil of all ads. I have a few sites and ideally I'd like to remove all
Adsense from my site and replace it with links to stuff people want. The
problem is that there's such a long-tail phenomenon going on when people go
looking for stuff. For instance, if I have a informative site on dinosaurs I
know people coming there via a search engine want to know more about
dinosaurs. But would they like a book? A museum trip? Tickets to a dinosaur
movie? A college education in paleontology? The answer is yes: some of them
would like all of that stuff. And even more. The _only_ way that I know how to
assist these people is somehow rotating ads that solve a large variety of
problems. Ideally you'd use some kind of machine learning to gather what you
can and continue to optimize. Google does this for me, so while I hate ads,
providing people with a _little_ bit of randomized assistance from a large
catalog of options in a location where they are already looking for stuff
seems like a pretty good deal for both the reader and me.

In social media you are no longer trying to respond to a searching reader.
Instead you have readers that are doing other things that you are trying to
interrupt. Perhaps using their friends as interruptions might work. Perhaps if
you only interrupt by providing material related to what they are already
doing. But no matter how you hack it, as a social media advertiser your game
is to take a reader that is doing one thing and get them doing something else.
We've gone from ad-supported radio and television, where listening to the ads
were a form of saying "thank you" to the advertiser for providing the
material, to a place where advertisers are using technology to try to pry into
and control every part of our lives. And yes, it's because of everybody
wanting things for free. This is not a happy symbiotic relationship anymore.

ADD: In fact, it's mind-boggling if you think about it. Facebook is trying to
take a billion people and make them do things they would not normally do. Yes,
people waste their time anyway, but not everybody, not all the time. Wonder
how much lost productivity are they creating? How many man-years? How many
people making purchases for things they never wanted? How many people playing
games with imaginary farms and such for hundreds or thousands of hours? People
said the television had an on-off switch, and so does the net. But people are
social animals, and the net is the way we communicate. If all of your friends
and family are on Facebook, you're going to want to know what they are doing.
Facebook uses your friendships against you in order to purposely divert you
from things you'd normally do so that you'll spend all of your time on their
site playing, gossiping, and purchasing. Ouch. Doesn't sound like an imminent
failure. Sounds like a new form of crack. If that much social damage were done
by a drug, it would have easily been outlawed by now.

~~~
andrewflnr
I have an idea: how about a "this is interesting, save it for later" button on
ads? So if something comes up that's useful, you can minimize the distraction
for now. Maybe it would wait a while to put another ad up. Advertisers still
pay per click in the "looking at it later" phase.

Of course you would need a natural way to put them back in front of the user.
Some of my app ideas already have a natural "deal with it later" mode. I'm
sure Facebook could come up with something.

Thoughts?

~~~
lmm
I mostly hate ads. But I go out of my way to look at my amazon
recommendations, which are basically ads, and work the way you describe
(wishlist). I can see a future where they or something like them (I guess
pinterest is kind of similar?) displace most advertising - as long as people
who want your product (whether they know it or not) can find it, you don't
need ads.

------
jcfrei
I believe I already read this article a while back on HN:
<http://news.ycombinator.com/item?id=4007047>

Anyway, it raises a very important point, not just for the advertising web but
for IT in general.

it seems part of the catalytic nature of IT, that it does both increase
efficency and reduce effectiveness of ads. because the increased exposure
reduces the effectiveness in our minds, the omnipresence of ads online will
cause their prices to fall, causing the need for more ads. it's like a death
spiral. however I'm wondering then how could print and tv ads survive for so
long? maybe one solution might be to actually decrease the number of ads on
the web - to maybe one prominent, shortly displayed ad per page (could there
be a study measuring the average screen/page share for ads in print and online
media?).

or if that fails: IT costs have also been decreasing every year, hence even if
facebooks revenues might stall, ever lower server costs might allow them to
keep a profit. nowadays a one man show can in many instances run a small
business on the web with thousands of clients.

------
aswanson
I think facebook should try a groupon style model. They have locations and
intentions of users. They should just have a deal feed, or some type of email
listing with possible low prices they could get if they join in a deal. To
filter it better, maybe ask each user for a list of things they want cheap.

~~~
pmboyd
Facebook has tried copying Groupon. This is their Groupon Now! clone
announcement (<http://www.facebook.com/blog/blog.php?post=446183422130>).
www.facebook.com/deals appears dead so not sure if they've abandoned the
project entirely.

------
jlarocco
It makes me sad that so many people see the internet as just a tool for
advertising.

At least there's ad-block, I guess.

------
ixacto
1\. Install Trueblock plus + cookie monster and disable third-party cookies.
2\. You just broke google/facebooks business model. Haha.

goog/fb are relying on peoples stupidity and not going to tools>adons and
installing ad-blockers.

------
gersh
Why can't Facebook start charging for its API, and for business pages? Banner
ads were big in the 90s before people realized they were that effective. I
don't see why Facebook would need to rely on them forever.

------
7952
Facebook should look at doing financial services. Price credit based on who
your friends are. If you don't keep up with repayments you get a permanent
blot in your profile. It is a sector in need of disruption, and Facebook have
the worlds best dataset for assessing risk. You could start out with small
transfers between individuals. Then move on to group based credit card rates.

~~~
astrodust
It'll get cluttered up with ads for denture cream and adult diapers once they
realize what their true market is.

