7 ms·

Facebook is heavily (heavily!) reliant on display advertising, all of which is a) challenged by the switch of its userbase to mobile, and b) going to hit critic

• ig1 15y ago
  #2 doesn't require them to do anything special, Facebook ads are driven off user demographics and not page context.
  • mahmud 15y ago
    Facebook delivered us 200k uniques. Zero conversions. Google brings us a few hundred a day, consisten conversion. Apparel retail. FWIW. As far as I'm concerned FB traffic is junk. Comes handy for load-testing though.
    • pork 15y ago
      Zero conversions from 200k uniques? Are you sure your conversion tracking isn't broken?
    • robryan 15y ago
      Facebook is horrible for any kind of direct sale, the ads I see are rarely trying to sell anything directly. More people are trying to build page followings, give something free with an up sale, are attempting to sell something that can be seen as making the customer money or selling services with big margins (wedding based services comes to mind).
      • wwweston 15y ago
        Bingo. I'm actually a bit surprised more people don't understand why this is the case and anticipate it. Search is the optimal context for presenting an ad -- you have the chance to make an impression to a person who is looking for information about something right at that moment. If you can get the right ads correlated to the search terms, you're handing the user a URL to information they're already looking for. In most other situations, ads are noise -- they're a distraction from what the user really came there to pay attention to. In the case of Facebook, it's the user's friends and interests. Which means your real goal with a FB campaign is to get people liking/following you. Buying comes later.
        • richardw 15y ago
          100% agree. Even for interests, search is better. Google has a decade of my search history and much of my browsing history (via analytics). Even conversion history - what have I bought? FB has much less insight into my interests because there have been far fewer opportunities to learn about me.
    • Uhhrrr 15y ago
      Out of curiosity, do you think this is because Google users were searching for something like your products, and FB users weren't? Or do you think it was something else?
      • mahmud 15y ago
        Yes. No amount of demographic targeting will do you any good if there was no shopping intent. At least for apparel & other goods that don't offer immediate gratification.
        • phreanix 15y ago
          Also out of curiousity, did your 200k come from facebook ads or from your facebook community (fanpage)? I would think that in the apparel business future engagement would be relevant, ie seasonal lines, sales, etc.
          • mahmud 15y ago
            Ads. Our suppliers/vendors have exclussive right to brand management.
    • ig1 15y ago
      I've had pretty good conversion from Facebook traffic, you do need to spend more time optimizing Facebook ads to get high converting traffic though. You'd expect Google to convert better than FB because presumably the google keyword search were transactional as opposed to passive traffic, but not at that ratio. Were you doing multi-channel tracking ? - it's much more important when you're going after passive traffic sources in general.
    • ROFISH 15y ago
      I'm in apparel too, and I agree: FB ads are junk. I spent a ton of money and got 1 conversion.
    • ANH 15y ago
      My limited experience has been almost exactly the opposite of that. I think my conversion rate from FB has been significantly better because my software is niche and it's been easier for me to target on FB. But my Google Keyword-Fu could use some work, I'm sure. Still, by far the best conversion comes from direct interaction with my community of potential users.
    • mpeg 15y ago
      did you create the ads directly in the facebook interface? FB traffic is not very good if you don't optimize and tweak your campaigns to find what works best, but 200k uniques and no conversions is insane and I'm sure you could make that work much, much better; and I have data to prove it disclaimer: I work for one of the first fb ads API tool vendors, but I'm an engineer, not a salesperson :)
      • omarchowdhury 15y ago
        What tool is that?
        • mpeg 15y ago
          SAM ( http://www.brighteroption.com http://www.brighteroption.com ); we were in the closed API program and have been running for about a year and a half now. Don't let the marketing talk of the homepage fool you into thinking we are all social-mediay-businesslike, we run on smart code and awesome client servicing.
  • xxbondsxx 15y ago
    You forgot about fraud systems. Right now they only collect money -- once you start giving away money to websites who host Facebook ads, the incentive for fraud now exists. Google has done a lot of work in just securing the AdWords system from malicious gaming
    • ig1 15y ago
      Facebook actually has a big advantage there, in that it has a huge amount of personal data and verified phone numbers for it's users. It can use that data to prevent fraud.
• teej 15y ago
  I've been saying this for a while now (http://news.ycombinator.com/item?id=3041689 http://news.ycombinator.com/item?id=3041689). Facebook's engagement is shifting to mobile. Their entire business model relies on web. Their app ecosystem has been crashing as a result, and display advertising is likely to follow. Facebook is filled with smart people. They understand the trends better than we do. As you'll note, 4 of their top 5 Risk Factors relate to the web-to-mobile shift and the problems inherent with that. From the filing: #2 - "We generate a substantial majority of our revenue from advertising. The loss of advertisers, or reduction in spending by advertisers with Facebook, could seriously harm our business;" #3 - "Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;" #4 - "Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control;" #5 - "We may not be successful in our efforts to grow and further monetize the Facebook Platform;"
  • jpdoctor 15y ago
    > and display advertising is likely to follow. I think this is correct, and it explains why the IPO exit is happening now. Most of the insane growth (in profit as well as valuation) has already been squeezed out.
    • roc 15y ago
      > "Most of the insane growth (in profit as well as valuation) has already been squeezed out." I would amend that to say: most of the easy growth has been squeezed out. But there's still a huge opportunity for Facebook to grow revenue/profit if they switch to using personal data to make well-directed ads they can push to sites using Facebook Connect and/or if they can roll out a solid first-party Facebook-phone. [1] Those are both far trickier than "grow Facebook", so it does make sense to capture some returns now. But I think it would be short sighted to write their future prospects off entirely. [1] They could quite possibly fork Android and do to Google in the phone market what Amazon is doing to the tablet market. And they'd be crazy not to try.
• pessimist 15y ago
  Facebook will never grow revenue to 10x (matching Google) by continuing to sell display advertising on its own site. However, it knows so much about users and keeps them logged in, so it definitely has potential to serve highly targeted or viral campaigns everywhere else on the web and mobile apps, a much better version of adsense. Secondly, it is involving itself deeply in to user's habits and eventually may make a big play in to e-commerce, getting a cut out of every transaction made by the user (while frictionlessly sharing the information, of course). Credits is just in its infancy. Finally, its learning so much about user's habits on the web that it can do a better job than Google at search, and make a killing on search ads. If all this happens, $100B is a bargain.
  • startupfounder 15y ago
    To piggyback on this they can take a page out of Amazon's playbook and do one click purchase with facebook credits. Serving up ads on other websites is where the magic happens.
    • bazookaBen 15y ago
      one click purchase with fb credits is live!
    • jojopotato 15y ago
      Ads on other websites is definitely lucrative business, but if you want to make a parallel to Google, adsense only makes up 28% of total revenue [1]. This makes me kind of skeptical that a similar system for Facebook would double or triple their revenue. It's definitely possible that the parallel is wrong though. [1] http://en.wikipedia.org/wiki/AdSense http://en.wikipedia.org/wiki/AdSense
  • AJ007 15y ago
    $100b a bargain, I'm not so sure. I'd be more inclined to describe it as a fair valuation. This is the real reason Google is getting desperate about Google+, they are worried about FB launching its own hyper targeted ad network. Google has context and tons of advertisers, FB has context and deep demographics and quite a lot of advertisers.
• emp_ 15y ago
  Isn't HATEOAS (REST) a great case for #1? If all the APIs get their state from Facebook they could inject a 2-3 seconds ad between every XX requests or YY interval. I dislike ads just like the next guy, but this IMO is better than intrusive hooks inside the content, much like TV.
• ngsayjoe 15y ago
  The killer model would be Facebook implementing AdSense like product on websites across all the Internet ... 1) They have users logged in all the time ... they can serve targeted ads (e.g. gender based ads) 2) AdSense is monopolizing the market now
• ramanujan 15y ago
  Hmmm. I think the obvious transition would be to ship the Facebook Phone and heavily incorporate Facebook Credits. The four things people do on phones (call, email, text, and nowadays photo-share) are all inherently social things. Crucially, your iPhone contacts list likely has only the first/last name and phone number for each person, whereas the Facebook app is far richer in its implementation of the very same contacts list -- because the person on the other side has gone to the trouble of keeping their address, phone, picture, and the like all fresh and up to date[1]. So the FB Phone would be an enormous improvement in contacts management over what we currently have, and an FB Phone Directory would probably not be long in following[2]. Once people are using the FB Phone, you'd want to heavily push FB Credits as the payment solution for everything. I am sure that from a fraud protection standpoint, the identity signals that an FB account provides are highly desirable to Visa and Mastercard. FB could also just cut out the middleman and do payments directly with an FB Card, instantly accepted by 800+ million people worldwide and countless businesses. Sign up for FB.com and accept/receive payments. Use the social graph for authentication, where each node has an authenticity rank (based on its date of first signup, number of non-commercial posts, number of authentic friends, and the like). It's easy to set up a fake email address, but much harder to fake a realistic profile for years and get "real people" to friend you and interact with you. Thus, a Facebook purchase or clone of something like WePay or Square would seem like a logical move. Embrace the shift towards mobile and own mobile payments by owning identity. Owning identity means a lower risk profile and higher profit margin than any competitor in payments. [1] Not incidentally, the use of the FB Phone would ensure that people have even more of an incentive to keep their contact information up to date and searchable. [2] This directory would be a huge product in its own right and the core of a real social search product, something more along the lines of findpeopleonplus.com than anything that's called itself "social search" to this point. The purpose of social search is to find a person, not a web page.
• vm 15y ago
  Facebook already solved mobile with News Feed ads. Today, the most effective FB ads are the ones that show up in the News Feed after your friends "Like" or take action on an ad or brand page. The ROI on these ads crushes that of traditional display ads (including those on the FB right-side margin) AND the targeting is still in its nascency. The best part is that these ads transfer seamlessly to mobile or any future platform.
• cafebabe 15y ago
  I totally agree. And if #2 is implemented, they have to give a larger amount of that money away again, to pay the sites displaying their ads. That's the money which makes the current net income look like a good thing. Also the S-1 file does not propose new strategies to build a sustainable business. This IPO is to cash out, to pay the investors and employees.
• bojanbabic 15y ago
  mobile use can be leveraged out by call-to-action approach including deals. ROI for call-to-action s much greater then for display ads and also revenue from deals can be more significant then it is today