Search can broadly be broken up into at least two categories:
1. Navigational eg typing "b and h" into the browser; and
2. Informational eg "cheap flights to jamaica".
I don't know what the make up is of (1) vs (2) but I expect for normal users (1) is pretty huge. I would guess that ads are have lower clickthroughs for (1) than (2).
(2) is where you have the intent. The user obviously wants something. They may find it with an ad. They may find it with organic search results. Either way, the goal with search is to get the user the best result.
With Facebook you tend to be just looking at friends' updates, posting your own updates, posting photos and the like. You don't go to Facebook to find things. So it doesn't really matter how much targeting information Facebook has if you don't have that intent.
Many will say "but what if you do start going to Facebook to find things". That's a massive "what if". What if the Sun expands tomorrow and swallows the Earth?
Facebook has (IMHO) a number of strategic problems:
1. It has no control over mobile. Both Google and Apple have mobile OSs;
2. It has no search engine (which is how it could monetize its user information); and
3. Users of community-driven sites are notoriously fickle. There is nothing preventing Facebook from being the next Myspace when something newer, cooler and hipper comes along and the users move on.
Early founders, employees and investors have obviously done spectacularly well and there's a lot that Facebook has done right (all the more surprising considering the length of time and the age of Zuckerberg). It's also created an engineering environment that attracts and maintains top talent (although we'll see if that last once the stock plateaus, which is simply a matter of time). But would I be buying in the IPO? Not a chance in hell.
This isn't about predicting imminent doom. Facebook will be around for years to come. It's about the upside reward vs the downside risk. Facebook somehow is still considered a "growth" company and values as such (with extraordinary P/Es). This will at some point change (as it did for Google some ~5 years ago).
It's obvious that a Google employee would believe this, and believe me, I think Google ads are amazingly effective when used with Google search. I've just started using Adwords and it's great.
But Facebook is entirely different from Google search, and there is no reason why their monetization techniques need to be the same way that Google monetizes their users.
Facebook is more akin to TV in that people use it to browse content based on what their friends are doing. They aren't searching for things, they are browsing, which is different. So Google search and the techniques you use to monetize your users are completely orthogonal to how Facebook should monetize their users.
Facebook is more akin to a TV station, and if I had to make a choice, I would go for things like "sponsoring" of ads or items in the newsfeed. And the way Facebook could analyze the users is completely different. You could probably do an analysis on the types of articles or links that a user it clicking on, and then sponsoring items in the user's newsfeed that they might be interested in. "This news article was brought to you by the Ford Fusion" or "Your friend Janet went to Jamaica, there's a flight leaving for Mexico next Friday for $500 for 4 days, all inclusive, brought to you by Travelocity".
Right now, they are making something like $4/user/year in revenues, based on really terribly performing ads. I know this personally because I tried using it and it was terrible, even worse than Bing ad CTRs. In order to get to GOOG's revenues, they'll need to bring that up to $40/user/year. Depending on the growth rate, that would make FB worth even more than GOOG, so I don't think it's necessarily a bad investment at all. It all depends on how effectively and how quickly they can ramp up the monetization of their users.
2) Google Adwords-style advertising is the absolute shortest line between a person who has a need and someone willing to fulfil that. To be worth more, Facebook has to either make "brand awareness" advertising bigger than "need fulfilment", or somehow figure out a way to beat Google at need fulfilment before Google heads them off. The thing about need fulfilment is that the user is already motivated to solve their problem, at this exact point in time that they're searching. You just have to fulfil that. That's worth pure gold for a marketer. Currently on Facebook the "need" is to get more cows, or whatever. To be "worth more" than Google, you need to use the social graphy thing to figure out how to get someone to spend money. But see #4.
3) I haven't spent one cent on Facebook, so either find a way to get me to spend one cent, or increase the value of the "whales" somehow.
4) Google knows a lot more about me than FB does. I spend every day telling Google what I'm thinking about, via the searches I do. Facebook, I might click a "like", or post a status. You can be sure that the things I'll "like" are a tiny subset of the things I search about. Google therefore has to hold back in which information they use about me, so they don't look creepy. Zuck would be happy looking creepy, but he's not able to get enough info to even begin to look creepy. [edit: so really, Google could make more by flicking a few "add creepy" switches. If FB desensitises us to that first, Google is still more likely to be able to leverage it.]
So, what would make Facebook worth more? Maybe if they leveraged the asset of having-everyone-on-board in a way to make the specific applications (e.g. search) irrelevant. They've done a reasonable job already, what with integrating it into websites, but that still isn't making them money in any direct way. Indirect ways are not going to beat the direct way.
So, Facebook is still a bit like Google pre-Adwords. We have a great lock, still looking for the key.
[edit: please tell me why I'm wrong. Really - I'd love to hear a way Facebook could win, would be an awesome lesson!]
So Facebook has the following positive attributes; huge number of impressions or minutes spent, good demographic targeting. And finally yes, if they launched a search engine that made sense, they may increase their value to advertizers. But I don't know how.
But you're absolutely right - it's basically TV-type advertising.
I finally got annoyed with those flash adverts everywhere and hogging up my bandwidth so use AdBlock... but even before, just cos it's served in front of a person does not mean they have taken any notice of it.
My point is that their current methods are terrible and they still bring in $4B per year. If they can actually increase the quality of their user monetization, then they certainly could bring in a lot of revenues.
Also, no one is saying that Google's current way of advertising isn't superior to Facebook. It's very effective, but Facebook doesn't need to be better. It just needs to make more money. Given the fact that it is has 1 billion users and the metrics indicate that they are more engaged for longer periods of time, it has plenty of opportunity for better monetization.
My point is that the OP was projecting Google's way of monetization thru search onto Facebook, and that's not the right. You don't go to Facebook to search, you go to browse your friends' lives, which is a different experience. It's like channel surfing as opposed to going to the library to work on a research project. If you try to buy ads from Facebook you can see right off the bat that it's not the same as Google. You don't select users based on keyword searches. You can select your users based on their interests, their age, etc. And this information is likely to be much more accurate than the information that Google distills from the sites you click on, etc.
If they can come up with a better way of monetizing their users through some better ad platform, or through better products and services, then they could make a lot of money, and they wouldn't be the risky investment that some people think they are. That is what you're betting on as an investor, that Facebook can actually improve their monetization. If they can't, then they are dead meat.
Full disclosure: I have no association whatsoever with Google or Facebook besides using their ad platforms, and my hope is that Facebook gets down to about a $50B market cap shortly after the IPO before I buy.
Ok, but that's like saying if they can make more money per user they'll make more money. It feels like that's just restating the problem. So what things would happen for them to "increase the quality of their user monetization"? I'm looking for a lever they could pull or push to get more cash out of, say, me or you.
It's like channel surfing as opposed to going to the library to work on a research project.
Channel surfing is a very un-motivated state of mind for the user to be in, so you're less likely to be able to get them to do something you want. The best at this seem to be Zynga et al, but they only work on a subset of the population. Increasing the quality of user monetization will require that either you are able to leverage their dis-interested state of mind, or change it.
You don't select users based on keyword searches. You can select your users based on their interests, their age, etc. And this information is likely to be much more accurate than the information that Google distills from the sites you click on, etc.
I'm absolutely sure my daily searches give Google more info than what I feed Facebook. Today, Google knows which tech stack I'm working in and what problem I want solved this very minute. It knows which stocks I want news about, which types of mountain bike I'm reading about, images I'm searching for, etc. Compared to that, Facebook is trying to get me to search for more friends from my school, because it's figured out that I went to X schools. It might know I have said I "like" something, but that's usually a friend who asked me to like their business.
I think Facebook have an incredible strong position for maintaining the best social graph. It'll take infinity to get my older relatives on anything else. It's just not going to happen. But as to making serious money, I can't see it. Still, I'd like to see how they would do it.
Just because you don't put useful information on Facebook doesn't mean that hundreds of millions don't as well. There are literally hundreds of millions of people that likely put very relevant information on their profile, which means that targeted ads might work for them. The inverse of you is that I use incognito mode on Chrome, so Google likely knows nothing about me, since I don't store any cookies. It might be able to divine something from my IP address, or maybe there's a backdoor in Chrome that overcomes incognito mode for the purposes of Google ads, so who knows.
We are in agreement that Facebook's current state of advertising is terrible. They, however, made $4B last year, and will likely make more this fiscal year.
The only thing we're arguing over is that I believe there is this vague "untapped potential" and you don't believe it exists. Maybe they'll figure out a more engaging advertising mechanism than their current ad platform. Maybe they'll use Google Ads instead of their own ad platform. Maybe they'll buy Netflix and they'll have their own tv channels with traditional tv ads. Maybe companies will be able to pay to get their particular event promoted on people's newsfeeds, in more indirect methods, such as if the new Avengers movie just came out, they could spend money and then Facebook would consolidate and highlight every time your friend went to see Avengers and posted it on their status.
There are a lot of "maybes" paths that lead to much higher revenues and higher rates of user monetization. This is why people are willing to pay 25x revenues, and a $100B market cap at IPO for Facebook. The entire premise of their market cap is based on their ability to increase their user monetization. If they can't, then I agree, they will certainly fail as a stock.
On the other hand, I would assume that people performing any sort of search to are likely to be more focused and less open to extraneous ads--so I think things like issue/political/awareness ads probably are better suited to facebook. I'm just very skeptical that the amount of revenue facebook could extract routinely from these could top what someone sitting at a search engine can extract (it's easier to skim off an impending financial transaction). Another thing depressing the value of issue/political ads on social networks is the "viral" vector for spreading a message where people freely share things they believe with their communities. I'm more likely to attend to things actually shared with me by my friends than ads thrown in the mix.
So, in the end I'm not startled that GM finds paid ads on facebook aren't too cost effective--cars aren't impulse buys (ad viewers will hit a search engine before they actually make a decision) and there are cheaper (i.e. nearly free) ways to raise brand awareness.
Maybe? Personally, I spend all my advertising dollars/effort (and good brand building requires far more effort than dollars.) on brand building, and as little as possible on per-customer sales (except as it relates to the 'brand building' - support is part of that.)
I mean, it's like commission. For co-location, it's traditional to give the referring party 10% of what the customer pays you for the life of their contract. (sometimes it's for the life of the customer, and through any upgrades, too.) - every customer pays a different price for the same product, and you are expected to spend hours selling to the customer.
My approach is to put the price and information on the website, and then advertise that. Spend little effort on each individual sale.
The advantage of per-customer effort is that you can specially craft your offering to charge as much as that particular customer can pay.
The disadvantage, of course, is that is a lot of work, and it doesn't help your reputation any. This is a big reason why IAAS is crushing co-location; It literally takes months to get the real price out of a co-location provider, while amazon has the prices right there on the website. (I mean, the off the bat price is about twice as high as the "real price" after negotiating and looking around in co-location. Cogent quoted me $3/Mbps six months ago. I signed papers at $0.65/Mbps. There isn't as much room when it comes to power? but my highest quote is easily twice the price of the lowest quote.)
I don't know about you, but as a customer? I will pay more to know the price up front (and to be reasonably sure that I will pay a similar price if I need more later) - I mean, I won't pay 400% more, but I would pay 30% more, that negotiation isn't free on either side.
So yeah, I think brand building is the better advertising value in the long term. It is more effort, though; writing articles probably has a better return than buying ads for brand building. (buying ads has a place, too.)
No, it's just the be-all end-all reason for people using the internet to find information. You know, the very situation where an ad is more effective.
>Facebook is more akin to a TV station
Yes, and ads on these do not work that good, especially if you can ignore them far more easily than switching channels in a tv program when the ads come in.
As a Google employee, what do you think of Google as an investment? If you look forward 5+ years, everyone is doing much of their internetting via their phone (certainly some or all of that will be web vs. apps-- who knows?). Google gains some extra data with searches, like location. So "pizza" searches get a LOT more targeted. But many searches do not.
The rub is that Google has near-zero ad inventory on mobile. You can't show 6 adwords ads, you can show 1. Additionally, consumer's bar for tapping an ad is MUCH higher (given the relative speeds of mobile browsing). As searching moves mobile, how does Google's revenue shake out?
What I think is interesting about Google is how much voting power the founders retain. Things like a campus of solar panels, space elevators, and self driving cars (not to mention Chrome and Android) make a lot more sense when you realize it's not "the shareholders" that want those, it's the founders that want those. Google is a company where two successful guys and several thousand of their closest friends (we like to think) can do whatever they want. Is that a good investment? I'll let you decide.
(Disclaimer: Google employee. And if anyone takes that quote at the top out of context... well, let's just say laywercat suggests that I don't put it in writing.)
I don't know of anything in particular that would prevent an employee of a company from posting a comment here or in a blog reply anywhere simply saying they thought it was a good idea to buy the stock that would warrant any action.
But lets say (since I don't have time to fully research this I'm basing my answer on many years in business and dealing with the Federal Government, lawyers etc.) that there is some law that makes this "illegal". The chance of the federal government, SEC or anybody caring about a comment like this is nil.
Employees at Google (and many other tech companies) are often privy to what would be considered "inside information" about the company's future plans and performance. Making statements about the stock price's relative valuation can be seen as a form of making tips based on that material non-public information. It's not a good idea to go around making statements (positive or negative) about the current valuation.
So is there a specific policy in writing regarding what you can and can't say? The issue certainly isn't revealing non-public information of a specific nature which is fairly obvious to keep under wraps.
I believe what matters is the amount of specificity. For example you can't say "Our earnings will be up this quarter so buy the stock". But you could say "I think we are doing well so I am buying the stock". Salesman, selling a product for a company, say, airplanes for Boeing are definitely able to make general sales like statements that could or could not be interpreted as a stock buying signal.
Generally, the employee handbook of any public company will explicitly forbid employees from making statements that connect to either future performance or other major non-public info such as products or hiring. (If for no other reason than to protect the company itself from accusations that it's letting its people "pump" it's stock.)
LaYWercats are actually werecats (->lycanthropy) who also happen to be laymen. They give terrible legal advice which is unfortunate as they are often confused with lawyercats.
This makes no sense. Do you truly believe that in 5 years mobile phones browsing speeds won't be much more comparable to desktops? LTE phones already have faster connections than many people's broadband.
Thinking about Google's ad revenue in 5 years time, based on the idea that people's only encounters with internet connected devices will be their phones and PC's is a horribly myopic view of future tech trends. In 5 years time, there will be cars sold with Heads Up Displays featuring Google Navigation. Facebook will certainly be integrated in here too, but at the moment I don't see Facebook preparing themselves for this.
Sure, but a nontrivial portion of that internetting will be with your phone in either a laptop or desktop dock station. Laptops and desktops are dying... laptop and desktop form-factor interaction with computer isn't.
One of the larger of the several reasons I'm grumpy about the way that cell phones has evolved with all their heavy vendor lockdown is that I should be able to use a cell phone as a full netbook with only a bit of effort. It's a f'ing computer, stop pretending it's not, let me in! Instead, hacky half-assed bullshit is barely in hardware beta from a select group of off-brand manufacturers, even as "a Linux desktop" is a solved problem. If I didn't have to invest in both a laptop and a cell phone I could justify a much nicer cell phone to myself.
Not true. People spend a significant amount of time in front of a computer "at work". Those people are still going to be sitting in front of a "desktop" in 5 years and still have the same behavior. There will be more mobile, but there will always (especially in only 5 years) be people "at the office" doing their job looking for information.
Yes, it's nice to be able to drag my computing environment around.
It's also damned useful to be able to park it, and get some serious shit done.
A lot more time is being spent on mobile, but it isn't at the cost of desktop computing. Rather, the entire pie of how much time is spent online and how many people are online is growing as a whole.
This is why the online ad market is going ganbusters with growth (see my comment above) at the cost of the traditional ad markets (print, radio, etc.)
I would argue that things like the massive photo collections people have made provide a large level of lock-in. I also suspect that Timeline is the first play in a "all your history, here" move that would make moving to another service very difficult.
But I don't use YouTube any more. The level of advertising got to beyond tolerable.
And that is the problem these sites have. I might spend four hours on the weekend with music videos on, but I just could not increase that, there is not enough hours in the day. To grow, the site has to increase the proportion of ads, and then it starts to lose users based on their level of tolerance for crappy, repetitive advertising.
So anyone buying Facebook and suchlike for growth potential should also consider that there really is a practical upper limit to the revenue it can pull in before it becomes annoying and starts losing users. IMHO, YouTube is beyond that limit now, Google is pretty close, Facebook has a little room, but not that much.
This can be excessive ads, but this could be as well things like excessive features which make the service more bloated and unsuitable for the original audience.
Zuck could do shit, because that downloadable app would use client local IP, so they would have to block _everyone_ in order to stop the app. Further, it would use built-in IE frame, so all request would look like coming from legitimate Internet Explorer user. You could also implement "wait(rand [sec 1-5])" between downloading requests, so it looks more messy, more like a human that is clicking, rather then robot pulling requests in miliseconds.
Zuck once had hacked into school system. Who knows -- would be crazy to see an App that so easily ported out all your data out of Facebook, and see Zuck trying to stop it :)
If you think you could download people's entire photo collections in a "couple of minutes" then you underestimate the insane number of photos uploaded to Facebook every day.
What I said is that the App would download all _your_ photos that you owe on your account. Given that it takes couple seconds max until I see a full photo from the moment I clicked it, it would take tens of minutes to download hundreds of photos: 5 sec per photo x 200 photos == 16 minutes of robot's work while you enjoy your drink.
edit: so this "I would argue that things like the massive photo collections people have made provide a large level of lock-in" becomes an irrelevant problem.
is it really that hard to imagine??
The US online ad market today is $32B. Growing at 8-12% per year (some estimate 25%) this year.
What is happening is old display advertising dollars are moving online, and it is happening a lot quicker than anybody thought it would. Online will overtake print this year (print will continue to shrink 8-10% p.a). TV is worth about $60B per year. Local ad spending is being hurt the most and is also the largest, bringing in around $140-160B per year.
So the trends are old advertising money moving into online. Online making up 20% of all ad spending last year to forecast ~35% next year. Print and local shrinking, and within online advertising display advertising is now larger and growing quicker than search advertising.
Knowing these trends, adapt this back to working out the companies that stand to gain. Facebook currently has the most time spent online for any website. It will be the largest display advertising inventory pool. People are no longer reading magazines, or newspapers or flicking through the Yellow Pages but rather they are spending a lot more time on the web. Spending a lot more time on the web for most average people, at the moment, means spending time on Facebook.
Being bullish on Facebook, i'd much rather that they be in the position of dominating user time and having a shitty ad product, than having a great ad product and losing user time.
Search advertising may be a lot more efficient and profitable, but display advertising is still king. It is a lot easier to create display advertising inventory than it is for search. Google moving into display advertising is all you need to know.
Facebook can fix the ad product and experiment with it over time, finding a way to best adapt those offline dollars to online display advertising. Building a site with a bilion users and a pretty good moat is a lot more difficult.
A user searches within Facebook and the platform can display the results, apply highly targeted adverts and offer links to comments / endorsements (likes) by friends, Facebook exclusive material from advertisers. From within that platform Facebook could also leverage some commerce / shopping too?
Google can get into action when the intention finally surfaces in form of a search. Facebook can help you to create the association between a brand and that intent in the stage before that manifestation. For example, when you are thinking of buying a smart phone, you will search for the "cheap smart phone" and restrict yourself to 4-5 top brands in your head. Or how when looking for "cheap flights", I have preference for certain airlines. Brand Advertising can help you get into that top group in people's head.
If that pie of the advertising is big enough, I have no idea.
Some people are just in a kind of Facebook daze.
"Hey, they had income for 3 years in a row. One billion last year. This is a sure winner."
They refuse to look at what Facebook actually does.
People will probably read your post and think you're biased because you work for Google. But there's a huge difference in what Google Plus can accomplish. You guys have the search engine data (intent) to combine with the social data.
So why doesn't Microsoft let Facebook combine with Bing? Then they would have a search engine. Or are they planning to do that already?
There were rumours Facebook were sitting on very powerful search capabilities they were looking to release post IPO.
Given the personal data held and time users spend on their platform, the potential is quite high.
They may not have much control on mobile but their apps hold your contacts and messaging functionality.
You could make a similar argument about Google becoming the next Yahoo! when someone devises a better search algorithm/interface.
Most technology stocks are high risk propositions, with the exceptions of huge multinationals like IBM (their size and government contracts make them harder to challenge).
You're right. Intent is seriously important. People use Google search as a means to get to another source of information regardless of whether their intent is navigational or informational. People on Facebook simply stay on Facebook until they're ready to either get offline or go search google.
1. Google do very well with search advertising because it has intent
2. Facebook advertising is not based on intent
3. Ergo, Facebook advertising sucks
Display advertising is a very, very large part of overall advertising. Display advertising is larger than search advertising online. Further, intent or search based advertising relies on display advertising to generate interest.
95% of every dollar spent on advertising around the world each year is spent on display advertising. It works. It works so well that Google are getting into it to maintain growth (Doubleclick acquisition).
It also scales a lot better since intent inventory can not be easily generated (and funnily depends on display advertising).
It will just take a while for Facebook to figure it out, but i'm sure they will. Too many people spend too much time on Facebook for display advertising there to be ignored. It doesn't have to even be super efficient with the numbers they are hitting.
With Facebook there is zero helpful intent. The only intent when you're on Facebook is to use Facebook. And if you do click an ad, you're less likely to become a conversion because your intent is still to get back to Facebook as soon as possible and see the rest of Dave's party photos or whatever.
She wanted to watch an episode of The Good Wife that she had missed so she searched in the Safari omnibar for "watch The Good Wife" and the first div under the search bar is an ad to some site that was not CBS that had the Good Wife available to watch via streaming video. To you and I, it's obvious that this "first result" is ad and we would skip over it to the first result. But to my mom, she thinks it's a search result and clicks on it. When she arrives on the site she thinks she's on the CBS site because they naively assumes like many consumers that the site showing the content would be CBS. She doesn't even think twice about the identity. When you are used to TV, you blindly trust that the site/channel showing the content is the correct one.
The only reason I discovered this was because she asked me to pull up The Good Wife to watch on CBS. I, being a savvier internet user, just navigated straight to cbs.com to search there. I got to their Good Wife site and lo and behold, there is no streaming video available on CBS, only teasers and behind the scenes content. I told my mom that "No, CBS doesn't have it on their site" and she was like "Yeah they do. I watch it all the time". I then asked her to show me exactly how she found it on CBS and that was when she showed me that she in fact was clicking on the ad in Google Search between the search box and the search results thinking it was in fact the first result. That's the power of intent and Facebook doesn't have that.
You're right that that's totally different from intent. But it's valuable for brands which spend billions  per year on exposure-focused ads, like product placement.
That's a big assumption to make. The bar is low for search results because they have no personality.
For friends -- we know our friends. They have a distinct personality. Ads disguised as messages from friends could have a negative effect because of this dissonance.
I'm inclined to agree with davvid on his point about how personality isn't a distinguishing factor between Google Ads and Google Search Results.
On top of that, intent is was drives the conversion. Even if my mom were to inadvertently click on an ad in her newsfeed thinking it was from a family member, the content of the page she was redirected to would definitely let her know she had made a mistake and that the status update definitely wasn't from a friend or family member.
Sure they do...
Status Update from malandrew's mom: "OMG I can't wait to watch the new episode of The Good Wife tonight!"
Facebook ads: "Click here to watch The latest Episode of the Good Wife"
Facebook could has something better than Google intent in that they should be able to predict what you intend to search for before you go looking for it.
When you want to search something, do you first go to your facebook account and tell your friends "hey, I want to learn more about x!" and then go to your favorite search engine, and actually do your search?
I bet you don't.
In your example, if the mom is saying "tonight", it probably means that she wants to see it "tonight" (maybe she doesn't have the time right now). so, they should try to make the ad really visible that very night, so the user (this mum) will see it before she even goes to look for it anywhere else.
But that would feel very creepy. She would think "how did they knew I wanted that?". It would feel like if someone is spying her. I think the average people is ok to have ads displayed while searching (maybe they will not even notice that some "results" are ads). But when the ads start having a very direct relation to what people posts, they start to worry about their privacy.
What I mean is... sure, facebook could infer the user intention, but in comparison, a search engine has it almost served.
My mom (again) is subjected to retargeting, but she doesn't identify it as tied to her identity so much as tied to the current search. She uses gmail for work and her personal account (because i set up a google apps account for her), but I doubt she knows that just because she's logged into gmail that google search is tying that information back to her identity.
This is a far cry from Facebook where people know that things in Facebook are tied back to their identity, and not only that is tied back to their identity in a way that may be visible to friends and family.
Both Google and Facebook track you, but Facebook is personal, and people are aware of that fact.
Yes, it's annoying if you're in the 95% of customers who won't actually convert. But it only has to be effective about 1 out of 20 times to be a huge improvement (and that 1 might even be you, but you're mostly annoyed by the other 19 times.)
If FB decides to infer intent from posts right away (when the post's content could be relevant to intent) and adopt a role of 'online assistant' with automatic instant suggestions, that will be creepy and, considering the amount of colorful emotions often present in FB posts, is sure going to cause a few interesting situations. But that's a hugely different product from the Facebook and the ad industry as we know it.
Maybe the user will watch on TV. You can't tell if the user is actually looking for a way to watch the show.
If it's on Google though, the intent is much clearer.
You could say that Google responds to your demand while Facebook (at least in potential) creates new demands.
There's no reason for an advertiser to pay to serve an ad for that. The ad was just given away for free. Unless you want to watch the show right at that moment, you wouldn't click it anyway.
So, I'm missing the part where Facebook can monetize the "new demands."
Example: Subject is a coffee-drinking, Vespa-riding, snappy-dressing, backyard chicken-farming, photo-snapping, game-playing father of two small children. He's not looking for bluetooth cuff links, but we know that once he sees them, he'll be likely to buy because that's what other people in his micro-niche tend to buy.
I know illegitimate streaming sites exist out there, but I kind of assume they are ad riddled and provide a poorer experience than torrents.
I guess you could say it's one spin on the curse of knowledge.
It isn't about intent - it is about interest.
> And if you do click an ad, you're less likely to become a conversion because your intent is still to get back to Facebook as soon as possible and see the rest of Dave's party photos or whatever.
Not necessarily. I'm working with a customer right now where I have a 24% conversion rate on movie tickets. They routinely shell out $7-$21 a pop with this conversion rate; the catch is, I have to be very careful about who I target.
This kind of trend goes across the entire industry of FB ads - target well, optimize and approach based on interest and the money will follow.
But still, the intent model of google adwords seems so much more stronger, whereas facebook's interest model just look like a centralized and refined adsense. Google has long given emphasis to the long tail, the specialized interest that bring as much revenue as the mainstream one.
The intent model is clearly stronger here, as searches have an explicitly parameterized specific content, whereas the interest model can only bring up revenue on frequent and common patterns (such as you say, movie tickets), since you cannot anticipate rarely occurring interests.
Go watching a movie are such an ingrained part of life for many people and thus we are always "on the look" for a good movie to go watch.
But try and do that with a car brand or any other non-commodity and intent suddently becomes the most important factor.
Generally speaking, the majority of online advertising is geared toward interest in the first place because interest leads to intent. Facebook is earlier in the customer acquisition lifecycle as you can grab their interest before the intent, and then they'll go directly to you instead of searching.
This is why Google in general has been so scared of Facebook (not that I think they should be). What is happening is that people are figuring out ways to cut search out of the loop.
Take a look at all those online games you see on FB ads now. I can tell you that most of the MMO ad budget now goes to Facebook as you can easily get people to download the game and start playing, whereas trying to pick people off search for MMO's is obscenely expensive. As search saturates, marketers tend to move towards the point of greatest ROI, which happens to be in the interest phase.
Cars are a tough sell, no matter where you try. I'm not saying that every single type of product works on FB, just that we really should not compare FB to AdWords in the first place.
The difference being that facebook doesn't make you watch a 10 second ad between each one of Dave's party photos.
That said, however, a very large group of users are there to play social games. With social game companies competing for ad space (for these often highly-profitable users), they're driving up the price of ads and making it less economical for other industries to advertise on Facebook.
This might be the case right now, but what about in the future? I think that's what Google et al. are scared about. If users spend 90% of their internet time on Facebook, and Facebook figures out how to serve users with "What they are looking for" 5 years down the road, then users will have a very low barrier to trying out the Facebook "look-up" service.
Right now, my use of the internet is (1) sites I already know exist, or (2) Google, in order to find things.
What if this becomes (1.1) Facebook, to look at things served from other sites that I like, and (1.2) Facebook, to find things that I don't know about?
That's scary for companies counting on the status quo. Sites' share of user time is important not for how they are now, but how things might become in the future. It's a huge about of leverage.
This is very true. I only go to Facebook to use Facebook.
Two of my friends run a wedding planning business. They gave up on targeted Facebook ads because they got MUCH better results using Adwords.
The ads were targeted to a nice big radius that included Lincoln, NE (a college town) and Omaha, NE (a big city, for NE). They targeted women in a specific age range, and if I remember correctly only women with a status of Engaged or In A Relationship. I think they may have aimed for relevant keywords as well. (I personally don't know the exact details of their ads, so I'm sticking to what I know for sure.)
I can't think of a more ideal targeted advertising scenario, and they got less traction on Facebook than they did via AdWords. That's either a REALLY bad reflection on Facebook's ad platform, or a really good one for AdWords, or both.
(Their business is doing really well, for the record.)
This doesn't work because they have to approach the people differently; for wedding planning, I would instead do something along the lines of "read these 10 tips to keep your wedding amazing" or "use our free wedding plan tracker"
With an approach based on interest, your friends can educate people and get them thinking in order to follow up for more information. Instead of a hard sell, hit them with a soft one that helps them feel like your friends know what they need.
And this is where all the young consumers are spending hours per day. And lot of car ads are just about brand awareness; they don't depend on intent, or even clickthroughs. Seems fishy to me.
Not that that precludes the possibility that Facebook ads don't work.
It would certainly be better for Facebook if this were a conspiracy, but I don't believe that's what's happening here.
Lower price? Oh hey maybe we will try again!
There is no way for GM to pull this kind of maneuver at this time without looking suspicious.
I work at a online advertising firm in DC specializing in political and non-profit work - mostly email list building, soliciting volunteers, awareness, etc campaign activities. We work with AOL, Yahoo, Google and Facebook, among many others.
I'm not a fan of FB's policies in general, but... We've found FB to be very effective - on a cost per acquisition basis, much more so than search advertising and on par with other vehicles.
Obviously, test to see what's effective for your needs, but I wouldn't rule out Facebook based on GM's experience. Cars are an unusually high involvement purchase, unlike most things people would be advertising.
Meanwhile, I imagine that people don't really share things like "I really like the new model of the Cadillac XYZ!". Maybe they think that their friends will view it as shallow gloating; maybe you don't want to reveal the fact that you bought a new car.
Facebook revolves around "Sharing of information". Brands that have values that users want to share with their friends will do well. Those that can make users think twice about sharing (even if they really do like the brand) may fare worse.
I guess it's because of the demographics (as someone said, facebook moms with free time - and a soft heart).
Anecdotal evidence, but I've heard it's very good for small shops targeted for women, and my girlfriend did buy from a facebook ad.
The best marketing on Facebook doesn't make Facebook any money.
> GM spends about $40 million on its Facebook presence. About $10 million of that is paid to Facebook for advertising, the rest covers content created for the site, agencies that manage the content and daily maintenance of GM's pages, people familiar with the figures said.
I admit I've never worked at GM, so if someone can tell me why I'm wrong, please do.
If they were using that additional $10mm to get the 300k followers to begin with, that's an even worse indictment of FB advertising for traditional brands.
That's a factor of 10 more than you were estimating; and that's just based on a quick poll of brands that I took a look at.
Also GM sells a few dozens models of cars, I could easily see the salaries for the staff who do daily updates for all these models and the advertising agencies who manage it costing 30 million or more.
Also GM has annual revenue of almost 160 BILLION, 30 million is a drop in the bucket in their marketing budget.
You'd think so, but apparently not, if they're making a big stink over pulling a $10mil marketing campaign. Apparently, $10mil matters to them.
It could very well include the cost of creation of video content, contest giveaways, promotional prizes and such.
Once you add all that all up, $30 million doesn't seem as far fetched .....
Advertising agency doesn't sell you a great campaign, idea or pretty pictures.
they sell you media. with a HUGE markup.
10mil media can cost way more than 30mil if bought from an agency creating the 'creatives' (in the case of car ads, a picture of the car, or a movie of it cruising on a road where the art director likes to take vacations)
30mil for 10mil of media, GM had a good deal.
The agencies don't get the markup the media buying companies do. They are to the advertising industry what realtors are to the housing market.
Most of the houses have no idea what they are doing, which only works because their clients are even more clueless.
It will change within the next 5 years and the media buying houses will be mostly gone with a few exceptions.
I'm curious what your thoughts are from there? Who does the purchasing?
Don't tell me it's all going RTB or something like that; premium advertising is still how the publishers are going to make money and you really can't automate that.
You are going to need high touch sales presence, bespoke custom executions, etc.
I'm definitely not going to miss the buyers.
And the big agency would go nowhere if it actually had to do the creative work.
and yes, when the client is clueless, there's lot of people in the way making money.
I don't think Facebook has the data yet to detect that you are about to buy a car. If you start liking car reviews, maybe, but that's not a typical behavior.
For other products (especially the ones you didn't know you needed), Facebook beats Google hands down. So don't pass judgment one way or another too quickly.
It is not necessary to have an image of a brand planted in your mind before a purchase. It only matters that you're guided towards the brand when you are ready to buy. Advertisers were happy with a "brand image" before because it was the best they could do. But these days, it seems almost worthless.
Cars are, for most people anyway, the kind of really large purchase that requires a lot more effort and deliberation, not to mention financing, than makes sense to do in one click.
Then, I can choose where and how I buy the car later. The manufacturer would benefit from this no matter how I buy the car. Keeping these "shark-free-showrooms" stocked with demo cars, coffee, pastries, and branded swag would just be a general marketing expense.
I think they have the data, but maybe not the means to mine it. I'm guessing that people are interested in buying a new car at important life milestones and when replacing an older vehicle. It's pretty easy to find those milestones ("here's pictures of our new baby", "Grad 2015, whooooo", "Just started at my new job"). Signals for replacing an older vehicle could be looking up vehicle review pages on facebook (does edmunds.com have a facebook page?), like you mentioned.
So I don't think it's impossible (but definitely non-trivial). I have no idea if it's possible to target ads against the sorts of things people post to their wall/photo albums.
edit: for that reason, I think Facebook advertising does not work. Or at least, does not work for the _most_ of advertisers. Its just that Facebook is still new and here and there I hear my friends being exciting about "advertising to millions of customers" and they do give it a shoot with a poor results at the end. The point is you have so many people that havent tried that yet that they still bringing cash to FB. But unless FB does something for the ads to work (change its core product?), the $ numbers will only fall.
http://blog.foundrs.com/2011/04/01/sell-your-google-stock-li... (the blog post shows early numbers, the real numbers, after longer experimentation, show the exact same results)
I think that to measure the efficacy of a GM ad based on the same measurable activity that you'd measure an ad for (say) a T shirt company is probably a bit misinformed. No one is checking to see if anyone clicked on GM and subsequently bought a Cadillac.
A lot of the comments on the original article seem similarly misguided. ("I NEVER CLICK ON THE ADS I HARDLY EVER NOTICE THEM.") The McDonalds logo on the back fence of a baseball field isn't to convince you to walk over to it and do something. It's so that later when you drive by McDonalds you "decide" to stop.
My guess is that they have an expectation of having more user feedback and involvement from this form of branding (people clicking the ad, filling out some bullshit form so they can bombard them with marketing material, etc), however the nature of the product may preclude itself from this sort of consumer behavior because people don't buy cars very often they may not feel compelled to engage with the brand, however seeing the ads on facebook could potentially have the same "branding" effectiveness as TV ads yet they really have no way of measuring this.
If anyone is going to get any sort of value out of the wealth of information I've given away about myself, it's going to be the person who opens my eyes to something new and awesome that speaks to my... unique tastes.
GM can't really be new or awesome anymore, and that's OK.
I'm not likely to see an ad for a GM product and immediately run out and buy one (and I'm guessing this is true for 99% of Facebook users). But I have seen ads, and posts by friends, for random products in the $10-$500 range related to things I didn't necessarily need (or know existed), that HAVE influenced my purchasing decisions.
Facebook is a new and different advertising channel, much like Google and Internet ads were before it, and companies and agencies need to adapt accordingly to this.
If you've been around long enough, you might remember stories from the late 90's from companies that both swore by, and swore off, Internet advertising...
You can go nuts with FB ads, you just simply have to get past the notion that it works the same way as every other medium. Unlike AdWords, where you bid on someone searching for "Cadillac SRX" in San Jose, FB is all about inception of interest.
The goal is to create intent in people through innovative ways; the people that spend the millions and keep doing so are the ones who actually, you know, come up with something new.
This is the same story as Google AdWords back in the day.
Not really, adwords pretty much worked from day one, bid for placement was inspired by the goto.com paid search engine model which was minting money back in the 00s if I remember correctly.
Early on he quickly became one of Google's biggest customers, even working alone. He was invited to the first Google Zeitgest. These days he spends in the multiple tens of millions per year on Google.
Or their customer is difficult to target on FB.
We (a quickly growing clothing company) see an amazing ROI from FB ads. We also have around 350k Likes. We advertise to friends of friends, and target similar companies, fashion companies etc.
I am betting they simply haven't found the best tactic.
Because the auto industry was one of the earliest and remains one of the heaviest users on online advertising.
If any industry knows a thing or two about online advertising, and has been willing to experiment, it's the auto industry.
Facebook is in big trouble, as a "business".
You also shouldn't use the number of followers as the addressable audience for the brand, the whole point of social is that messages are amplified through the network effect out towards a much larger reach of users. One user who likes one of your posts or comments on it may mean hundreds of friends seeing it show up in their subsequent feeds like "YCombinator reader just liked GM's Blah Blah".
Everyone's right below that if you're using it as a direct marketing channel, you'll most likely see failure because people want to stay on Facebook. Think of it as a way to stay engaged with your audience and as a one time investment for the ability to message to them again and again in the future. Facebook ads also work much better when you tie them to your Facebook presence vs. trying to send someone off Facebook to your site. GM should have thought of more creative ways to leverage the Facebook app platform to promote on-Facebook activities that drive brand value and help promote their new cars/trucks. For example, how about a contest on Facebook using an interactive car designer to design a GM that also allows you to upload custom patterns for the paint job. If it's two things people like on Facebook it's self-expression and contests.
Google excels at advertising things people do search for.
You can place the ad into everyone's photo albums so that when they are flipping through photos they will see your ad.
Or you can place your ad in everyone's telephone book so when they are looking up the contact information for some source of some product, they will see your ad.
Which one would you choose?
Of course, in the real world, advertisers can choose both. They will advertise both on Google and Facebook.
And sure, it matters what the product is.
But overall which do you think is more valuable?
That's not true, you can do either CPC or CPM for any kind of facebook ad; what they did do is replace the CPM functionality (which btw, is still available if you use a third party ad tool with facebook) with an "optimized CPM" which auto-bids for you according to what results you want to get.
You can still set a manual max bid though :)
But then again perhaps their problem is intense scaling. With 800M users even the simplest idea becomes cumbersome in developing.
My suspicion is that either the GM advertisers are complete muppets, or Facebook's offering in self-service targeted advertising simply isn't sufficiently good at catering to this specific market's needs.
It's been a while, but last I checked the clients for these devices don't even have ads in them. If this is the case, I would wager that no one is seeing these advertisements even if it is one of the largest most visited sites in the world.
Anecdotal, but that seems to be what we're doing in this thread.
Because who cares if ads don't work? GM just endorsed sponsored content (to the tune of $30M, no less), a form of advertisement facebook can easily serve to their ever growing mobile user base.
Sure, it's easy to advertise on FB (or Google Ads). It's a whole different story to make it effective.
Take Google AdWords. If you don't optimize your strategy you'll have a high CPC (cost per click), will probably pay for ineffective words. Also, there are changes you can do to your content (being advertised) that affect your CPC.
They may keep an old agency just for the sake of it, who may not be specialized in modern medias
And they can hire the best people for internet marketing just to end with their campaigns not approved by GMs marketing department, having to get something conservative (hence, ineffective)
I know plenty of people that will never buy a GM, regardless of their advertising. However, advertising is crucially important to GM success.
Theres a huge risk that would fail.
Is there something particularly unique about Facebook users? Is it some niche group?
Of course not. It's a cross-section of demographics.
And among normal people, yeah most do choose to buy a GM car. I have a nice GM SUV -- fantastic vehicle. I see a lot of people are cludging out the dated "durr GM bad" nonsense from the 90s.
Same could have been said of Yahoo and other search engines before Google.
- Facebook: CPM - bill boards : consumer in the position to buy, but not given it much thought
- Google: CPC - yellow pages : consumer in the position to buy and is actively looking
- Groupon: CPA - re-seller : consumer has decided what to buy and is purchasing
But whilst Groupon can provide more value, the pool of potential consumers it can reach is smaller. Same with Google (informational queries only). Facebook reaches the consumer in the very early stages of the purchase-funnel, before there is clear "intent". Same as bill-boards, display ads will always have value - after all advertising is about making us want something we haven't already planned to buy, otherwise its wasted cash (think groupon vouchers sold to existing customers). And whilst the conversation rate (clicks) on Facebook ads will naturally be lower, there are many more customers at the pre-intent stage (everyone in the world).
Sure a display ad for a Ford may not have great immediate conversion rate (clicks). What about a bill-board or a magazine ad? Yet do they have no value? If I would be considering purchasing a car within the next year, but not actively searching for one, then an image of some appealing product would actually get stuck in my head, and when I come to search for a car on some price comparison site - it just might be a Ford I saw a few weeks ago.
Each of these models have issues though:
- Groupon - a large number of buyers are already existing customers. GroupOn is only necessary because there isn't a platform for merchants to issue their own vouchers. If there was, they could advertise those vouchers on Facebook/Google and not pay groupon their brokering fee.
- Google - provide a free yellow-pages service. Instead of an alphabetical listing they aim to provide the "best" results first, so the only way to make money is to display ads next to those results for companies that haven't made it to the top. Why would anyone select those companies? The only reason I can think of is if these companies offer temporary aggressive discounts like on Groupon. If G displayed "sponsored ads" as banner ads so people wouldn't get fooled into thinking it's a result - would anyone still click on them?
- Facebook - unlike a magazine which has associated readership with a particular set of interests (eg car enthusiasts) - everyone is on Facebook. A niche social network for car enthusiasts would get a better ROI for GM then blasting their cars at everyone in the world. Need more single girls from NYC in the age group of 20-25 to join your dating site? Facebook will probably deliver great ROI there cause it can target ads by all these attributes.
Facebook has to expand its targeting capabilities, and that means gathering more data: my interests, my income, estimated net worth, what car I drive, where I live, who I have my mobile contract with, etc. If FB knows that I just graduated and got a job that pays enough to lease a Ford, and my commute time to work is over an hour - GM would probably get a decent ROI. If I visit enough car-related websites with the "Like" button on there, Facebook should know I'm interested in cars.
As Facebook builds a more detailed profile of me - it will deliver ads that predict my purchase intent, and in theory, that's a great position to be in.
In practice, I think people prefer to "pull" ads rather than having them pushed at us. The old broadcasting model of advertising was necessary when people couldn't poll the world for "whats the best car in my price range". As more information becomes available, people won't need companies telling them which products to buy. Think of Amazon - you don't purchase based on ads, but based on reviews and ratings from other people. Humans have become much more connected and knowledgable when making purchasing decisions, so ads matter less and less. I don't remember the last time I bought anything because of an ad, instead I read reviews left by other people. The advertising-intermediary is no longer necessary, businesses simply need to create great products. And Facebook is a great product - for sharing photos, keeping track of friends and killing some time. I wish they'd concentrate on making that product better, and I'd happily pay $1 per month to use it. Even at $1 per year - they would make as much as they currently do from 1 billion people. What will make me leave Facebook is the ads in my newsfeed, not the 1 buck a month I'd have to pay. My time is more valuable than $1 / hour, so if I decide to waste several hours on Facebook a week - then I can certainly afford to pay $1 / month.
In any case a lot of people here, as another poster said, are confusing direct advertising with branding. I'm not in the market for a new car, but if I'm on Facebook, it's more than likely because I'm bored. If a car ad that looks good is on the page I'm on, I'm likely to click on it and look at the car. A year or two from now when I might be in the market, that make of car I keep seeing on FB is likely to be on my mind as a possible candidate.
And now that I think of it, I keep seeing brand new GM Yukons on the road and I like the way they look and they look like they are good tow vehicles. If I saw a Yukon ad on facebook, odds are I will click through.