Facebook Advertising is Fool's Gold

I agree with this and have posted numerous comments here to that effect, particularly on the value of intent (with respect to the effectiveness of online advertising).<p>Th attitude of "eyeballs not revenue" and finding that repeatable, scalable formula are almost a religion on HN and in startups. It's generally a strategy I approve of.<p>Even dropping 20% since the IPO (currently trading at just over $30 as I write this; and bear in mind that even <i>Groupon</i>--at least initially--enjoyed a nice IPO bounce), the company is trading at a huge P/E ratio.<p>I get why this is: it's speculative. FB is still viewed as a growth company and the speculators feel that there is huge unrealised monetization potential.<p>I remain a skeptic regarding the value of "social" in advertising. The OP is right: all this data just means--maybe--a slightly higher CTR, at which point Facebook is just another display ad network and that doesn't justify their valuation.<p>As an aside, IMHO Twitter is in this same "put up or shut up" boat. I don't believe Facebook is doomed (IMHO Twitter is). I just believe the value of the data silo they have is both overstated and transitory (at some point--one way or the other--Facebook won't be the gatekeeper to your profile and social graph).<p>Facebook has done a lot of things right as a business (the Like button being foremost among those IMHO). Personally I believe their biggest mistake was spurning Apple: Apple wanted to use Facebook for their Ping boondoggle.<p>Disclaimer: I work for Google in display advertising.

For me, this is the strongest case yet for niche social networks being the future of social media. FB is too broad and demographics tell you little about the people you are speaking too unless you can inject some sort of context.<p>If (via a Distributed Social Networking Protocol) people were subscribed to several social networks focused on their hobbies and interests, then I believe Social Media Advertising would be more viable, and more useful to the audience.<p>I also think that when you look past all the fanfare and hyperbole surrounding social networking, what you're left with is really sophisticated bulletin boards and forums.<p>I can see that from a marketing point of view, having one point of access to that many people might seem like a dream come true, but the numbers are suggesting that's not the case at all. Facebook is not the answer to an online advertisers dream. I don't think it ever will be.

Facebook's advertising model is a simple classical displaying advertising model. It need be disrupted seriously. Nowadays, the most popular marketing model is displaying advertising model, which is actually an attention-driven marketing model. However, no matter how good they are context-awared and personalized, they are always guesswork, which can hardly achieve high relevancy. It is extremely difficult to guess users’ actual intention for most cases, even you may have a lot of information of them. For example, it is super difficult to guess what an individual is exactly looking to buy when he walks into a Trader Joe’s, no matter how much information you obtained on him, like his income, profession, age, education and etc. Users’ intentions are always dynamically changing from time to time. There are no general equations that can perfectly predict people’s intentions. As a result, no matter how perfectly a system can attract attentions, attention-driven marketing can never achieve high efficiency and accuracy.<p>As a matter of fact, nowadays advertisement industry is the biggest bubble of the world. Every year, trillions of dollars completely wasted by irrelevant advertising unnecessarily. What is even worse is, the user experience is badly hurt by ads and spams. Such marketing system can be called as attention-driven marketing system. Everything is done to attract attentions. However, only a few attentions are really attracted, but majority of the attentions may not be finally turned into intentions. As a result, majority of the marketing costs are totally wasted.<p>The future marketing systems will be built on intentions. Intention-driven commerce systems need let every user to express his/her intentions freely and help him/her achieve his/her intentions in highly optimized way by socialization and crowd-sourcing. The future world needs to be a world without displaying ads, but only pure relevant information that matches users' intentions dynamically and real-timely. This is the very objective of my current startup project as well.

Seems reasonable to me.<p>Facebook is gathering what amounts to a static picture of each user then selling ads based on the pictures. There really isn't a time component in the data (though perhaps they can add one now that the service has existed for many years).<p>On the other hand, Google has more or less assembled a bunch of archetypes based on behavior (people who search for X later purchase Y, etc.). Then they match queries to these archetypes. The time component is front-and-center here because the archetype match was prompted by a user action.<p>A purchase is really a time-related event that transforms the user in some sense. By purchasing something you're changing "who" you are from the perspective of an advertiser (e.g. a Chevy driver could become an Audi driver).<p>So Facebook has a great picture of "who" each user is at a the moment, but no real way of knowing "who" each user would like to become or when. Hence, perhaps, some of their difficulty in selling ads.<p>Or not.

There are two primary types of ads<p>1) ones that give you what you want<p>2) ones that drive demand<p>Google dominates (1) and I assume Facebook is trying to dominate (2) which includes a lot more display advertising (and TV, and billboards). Facebook probably thinks a lot of demand-driving advertising can be accomplished through viral online marketing through FB platforms and they are likely trying to exploit these channels with services for paying customers.<p>Imagine paying Facebook to simulate something being trendy among people's trend-setting friends. It'll be a fine line but this must be what they hope to do.<p>Agree the $100B is too high, but certainly they're easily a profitable company, long-term.

Not trying to defend the viability of FB ads here, but this analysis seems a little shallow. Falling within a certain demographic may not "make" you click an ad, but the same could be said of performing a search on Google. If circumstance Y makes one want to buy a product, then as long as falling within demographic X is correlated with being in Y, targeting X could be a good idea. It is (obviously) the reason why toy commercials air during children's shows and not during basketball games.

I wonder what would happen if Facebook ran a scheme like AdSense.<p>Advertising on the Facebook site itself seems not to be working, but I could foresee a situation where website owners allow Facebook to display ads on their site for a fee per click just like AdSense. Facebook already has a javascript presence on many, many websites already.

I agree that Google can target alot better IF you have a product that solves a problem people search for. IF.<p>&#62; What researchers discovered was that people bought milkshakes as a breakfast replacement because it was entertaining during a long, boring commute, and would keep them full until lunch.<p>How do you advertise for them on Google? If they search for "breakfast replacement for long, boring commute"?<p>For anyone who can match their product to search queries, Google is the way to go, agreed. But not all products can, because people are not actively looking for solving a problem/need that your product solves.<p>If I look at my current facebook ads, these are not things I actively search for, e.g. drinks, shavers, parties, facebook games, ... If I had to spend marketing $ on these, I'd probably choose facebook ads over AdWords as well.

Ever since FB has gone public, I've noticed so much 'negative' stories/comments, and I really wonder why these are only coming out now... FB has been around for a long time and nothing has changed in its marketing strategies since it seems.<p>Personally, I don't have a FB account, or own any stock but this targeted 'bashing' seems useless and has the smell of targeted anti-FB propaganda. Why don't we focus on the real issue being people rights to privacy and the shady practices of FB?<p>More focus on the real issues please, do not get distracted by the 'anti-hype' of the week.

I am so glad that email didn't depend on advertising to eventually support itself "sometime in the future." Email is useful to me as email, and useful to my providers as a billed service.<p>Yes, they're different things.

I call survivor bias. Historically, the only player in online advertising is Google, which is 100%-focused on intent-based advertising. So the article, logically concludes that intent is the only way to advertise (despite decades of TV and radio ads).<p>Some products do great with intent-based advertising. Other products (that you didn't even know you needed) need other forms of advertising.

Google's ads are better because you have intention when you are searching. That's not true when you are checking into Facebook to see what other people are doing. Are there other times when people use Facebook and they have some intent? Planning an event, or asking a question, those come to mind.

This argument continues to come up, but I don't buy it- At least not without some data.<p>My personal anecdote: Facebook ads are the only online Ads I click with any regularity. They are targeted to my interests, such as programming. They also hit me at a time when I am mostly bored and clicking around on anything that interests me.<p>When I find myself on Google, I am on a mission for very specific information. Even if I am shopping, I do a research phase and a purchasing phase. Ads in the research phase don't woo me. I google straight to trusted sources. Once I'm in the purchase phase (shopping for best price), I am not wooed either because the ads are too broad. E.G, I want the D3100, not just any camera in general.<p>I completely understand Google's strategy of "intent" based ads. I just think Facebook's user data is even stronger.

You are mistaken to think that the search-engine show-people-what-they-were-searching-for-anyway kind of advertisement is the only kind of advertisement that can work on the internet.<p>I used to work for Hyves, which was until a year ago or something the biggest social network in the Netherlands. Hyves lost to Facebook in terms of number of users, but something that they did do right was modernization. Hyves had an in-house sales team and studio, which sold custom viral campaigns to cooperate advertisers. These campaigns could usually go together with a TV campaign and/or other media.<p>For some products search engine advertisement is the right kind of advertisement (parrot secrets, maybe cars, I don't know), for others not such much (food stuffs for example).

But consider Facebook's "friction-less sharing". Facebook now knows you just listened to a song, read and article, took a trip, had a baby, got married....<p>Now think of the targeting you can get there.

It does seem obvious. There is just a wall of hype hanging. And factor in the fact that it was reported that approximately 40 % of all social network accounts are created by spammers.

Cached version for those getting the 509: <a href="http://tinyurl.com/c7ozldn" rel="nofollow">http://tinyurl.com/c7ozldn</a>

So basically this is saying that Facebook needs a search engine to be effective at advertising. Is DuckDuckGo up for sale?

Was just reading the JTBD literature a few weeks ago. An obvious concept, but so oft ignored.