9 ms·

I've said this repeatedly: Facebook is a high-risk proposition, particularly as an investment (disclaimer: I work for Google). "Intent" as other commenters have

by cletus 14y ago

I've said this repeatedly: Facebook is a high-risk proposition, particularly as an investment (disclaimer: I work for Google). "Intent" as other commenters have noted is a big part of the story but it's not the only story. 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).

untog 14y ago
"There is nothing preventing Facebook from being the next Myspace when something newer, cooler and hipper comes along and the users move on." 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.
- BrandonBT 14y ago
  If something new comes along that is worthy of competing with Facebook, I would imagine that it would be fairly trivial for them to have an "Import Your Photos from Facebook!" button that you'd click to simply move all of that data over.
- slipperyp 14y ago
  Facebook also has tremendously greater adoption, especially among the non-tech savvy, than MySpace ever had. Don't get me wrong, I don't think there is unalterable inertia here, but at its peak MySpace was constantly broken, had far less adoption, and had far less interesting and integrated ways to collaborate than Facebook has established today. Anyone could have looked at MySpace and said "a smart, driven undergrad could build a system that could beat this on one power-weekend with a bunch of redbull"
- joering2 14y ago
  I don't see a problem here. Most of folks here, including myself, over the span of one weekend could write a downloadable version of a Visual Basic application with a built-in Internet Explorer Window where you login to your facebook and then the app scrap (download) all data you ever had, all messages, photos, etc, everything within a couple of minutes, elegantly packet into zip, xml or whatever format you wish to have it! 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 :)
  - untog 14y ago
    then the app scrap (download) all data you ever had, all messages, photos, etc, everything within a couple of minutes 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.
webwright 14y ago
"I've said this repeatedly: Facebook is a high-risk proposition, particularly as an investment (disclaimer: I work for Google). "Intent" as other commenters have noted is a big part of the story but it's not the only story." 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?
- jrockway 14y ago
  I don't think that any Google employee is going to reply to your comment with advice. "As a Google employee, I say invest!" is not going to get you on the good side of the lawyercats. 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.)
  - larrys 14y ago
    "is not going to get you on the good side of the lawyercats." 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.
jusben1369 14y ago
Is the problem with GM's ads or FB's platform? Ie - What's Ford, Toyota or Hyundai doing with their ad spend on FB? We might be jumping to conclusions a little too quickly here.
- pork 14y ago
  Forbes just reported that Ford and Chrysler are keeping their ad spend on facebook and are very happy with the ads.
  - joering2 14y ago
    what it means: "very happy"?. maybe they like losing money, are careless, or losing $10MM to them is still "being happy". Without conversion rates, or % of awareness arisen, its hard to say whether FB is valuable place to pay for ads.
    - fallous 14y ago
      Ford at least has the recent history of not making monumentally bad decisions that end in bankruptcy. The fact that they find value gives me more to chew on than the fact that GM decides it's wrong, which may say more about GM than the platform.
  - m0nastic 14y ago
    Ford just publicly made a statement approving of their results from Facebook ads: https://twitter.com/Ford/statuses/202574566613200896 https://twitter.com/Ford/statuses/202574566613200896
nextparadigms 14y ago
I agree with that you've said, which is why I think Google should stop listening to "expert bloggers" that Facebook and social will kill their business, and have a more thoughtful approach about social in their search engine - if they even have to use it at all.
adventureful 14y ago
The terrible misfortune of web / mobile based display advertising is that you can actually track it. If you could intimately track the performance of television ads, it'd be a disaster for that segment (ditto radio).
randomStuff 14y ago
that is why Orkut and Google+ have changed the world and have movies about them. There were social media sites before Facebook and so far they have found an effective formula, this could easily change.
abhaga 14y ago
I think you have left out the brand advertising, advertising that needs to hit the customer much before he is looking for something and do so repeatedly. That is the segment where Facebook seems to have a clear edge. 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.
steve8918 14y ago
You make it sound like search is the be all and end all reason why people use the Internet. It's not. 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.
- fluidcruft 14y ago
  I'm not sure general brand awareness efforts are as financially valuable as interactions with customers that are in "I'm about to buy something" mode. When someone intends to move money, getting a piece of the action is more valuable and I think search engines are where people go to find reviews, prices etc (this also includes commerce sites that rely on a search interface--Amazon, Ebay, Craigslist). 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.
throwaway63-90 14y ago
Finally a sensible analysis. 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?
- drstrangevibes 14y ago
  what facebook does: monitor your shit and send it to the government. They arent going anywhere
billpatrianakos 14y ago
Not exactly your main point but I have to agree that there's nothing stopping Facebook from being the next MySpace. Seriously. Not a thing. I think at this point the massive user base and their investment (their friends, photos, life in general) is about the only thing keeping them from switching. But even that can be overcome by others simply by making the switch easier by importing that information (think using Facebook's downloadable data on you as a means to do that). I can see ads getting lots of Likes because others friends like Movie or Brand X but beyond those kinds of ads people on Facebook aren't likely to leave the site. In fact the whole site is designed to keep you there do ads are kind of useless. Likes are meaningless. They don't generate dollars. Brand awareness is about the best thing you can get from Facebook. 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.
- nikcub 14y ago
  There seems to be a line of argument in this thread that goes something like this: 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.
  - hansef 14y ago
    Display and and media placement are all about demographic targeting. My take is that Facebook's revenue breakthrough occurs when they figure out how to get all that money going to media buys to flow through them based on their ability to microtarget viewer demographics as this content moves online. I think that Facebook's take on the Adsense model doesn't necessarily mean advertising on third-party websites. See also: Facebook should buy Netflix.
Bikepump 14y ago
Facebook "could" go the way of Myspace, but I'm guessing that their talent is significantly better than what Myspace had. By all accounts their engineering talent is on a similar level to Google. They're almost certainly not as good a buy as the Google IPO in 2004, where the search advertising market was still in its infancy, but look at Apple. All it takes is one amazing product that helps to spawn a brand new market and they can double their market cap. I'd guess that Facebook has as good a chance at doing that as Apple, Google, or anyone else. That said, I agree that until they actually are able to pull that off their stock is overpriced. It will probably also stay overpriced for a few years no matter what happens.
eblackburn 14y ago
Of course Facebook could acquire / lease Bing (or build perhaps?) and plumb that into Facebook. 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?
nikcub 14y ago
Display advertising has actually overtaken search advertising in revenue, and it is continuing to grow at a faster rate. This is why Google bought Doubleclick. 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.
pwaring 14y ago
"There is nothing preventing Facebook from being the next Myspace" 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).
sparknlaunch12 14y ago
> It has no search engine (which is how it could monetise its user information) 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.

by cletus 14y ago

untog 14y ago

"There is nothing preventing Facebook from being the next Myspace when something newer, cooler and hipper comes along and the users move on." 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.

BrandonBT 14y ago
If something new comes along that is worthy of competing with Facebook, I would imagine that it would be fairly trivial for them to have an "Import Your Photos from Facebook!" button that you'd click to simply move all of that data over.
slipperyp 14y ago
Facebook also has tremendously greater adoption, especially among the non-tech savvy, than MySpace ever had. Don't get me wrong, I don't think there is unalterable inertia here, but at its peak MySpace was constantly broken, had far less adoption, and had far less interesting and integrated ways to collaborate than Facebook has established today. Anyone could have looked at MySpace and said "a smart, driven undergrad could build a system that could beat this on one power-weekend with a bunch of redbull"
joering2 14y ago
I don't see a problem here. Most of folks here, including myself, over the span of one weekend could write a downloadable version of a Visual Basic application with a built-in Internet Explorer Window where you login to your facebook and then the app scrap (download) all data you ever had, all messages, photos, etc, everything within a couple of minutes, elegantly packet into zip, xml or whatever format you wish to have it! 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 :)
- untog 14y ago
  then the app scrap (download) all data you ever had, all messages, photos, etc, everything within a couple of minutes 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.

webwright 14y ago

"I've said this repeatedly: Facebook is a high-risk proposition, particularly as an investment (disclaimer: I work for Google). "Intent" as other commenters have noted is a big part of the story but it's not the only story." 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?

jrockway 14y ago
I don't think that any Google employee is going to reply to your comment with advice. "As a Google employee, I say invest!" is not going to get you on the good side of the lawyercats. 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.)
- larrys 14y ago
  "is not going to get you on the good side of the lawyercats." 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.

jusben1369 14y ago

Is the problem with GM's ads or FB's platform? Ie - What's Ford, Toyota or Hyundai doing with their ad spend on FB? We might be jumping to conclusions a little too quickly here.

pork 14y ago
Forbes just reported that Ford and Chrysler are keeping their ad spend on facebook and are very happy with the ads.
- joering2 14y ago
  what it means: "very happy"?. maybe they like losing money, are careless, or losing $10MM to them is still "being happy". Without conversion rates, or % of awareness arisen, its hard to say whether FB is valuable place to pay for ads.
  - fallous 14y ago
    Ford at least has the recent history of not making monumentally bad decisions that end in bankruptcy. The fact that they find value gives me more to chew on than the fact that GM decides it's wrong, which may say more about GM than the platform.
- m0nastic 14y ago
  Ford just publicly made a statement approving of their results from Facebook ads: https://twitter.com/Ford/statuses/202574566613200896 https://twitter.com/Ford/statuses/202574566613200896

nextparadigms 14y ago

I agree with that you've said, which is why I think Google should stop listening to "expert bloggers" that Facebook and social will kill their business, and have a more thoughtful approach about social in their search engine - if they even have to use it at all.

adventureful 14y ago

The terrible misfortune of web / mobile based display advertising is that you can actually track it. If you could intimately track the performance of television ads, it'd be a disaster for that segment (ditto radio).

randomStuff 14y ago

that is why Orkut and Google+ have changed the world and have movies about them. There were social media sites before Facebook and so far they have found an effective formula, this could easily change.

abhaga 14y ago

I think you have left out the brand advertising, advertising that needs to hit the customer much before he is looking for something and do so repeatedly. That is the segment where Facebook seems to have a clear edge. 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.

steve8918 14y ago

You make it sound like search is the be all and end all reason why people use the Internet. It's not. 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.

fluidcruft 14y ago
I'm not sure general brand awareness efforts are as financially valuable as interactions with customers that are in "I'm about to buy something" mode. When someone intends to move money, getting a piece of the action is more valuable and I think search engines are where people go to find reviews, prices etc (this also includes commerce sites that rely on a search interface--Amazon, Ebay, Craigslist). 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.

throwaway63-90 14y ago

Finally a sensible analysis. 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?

drstrangevibes 14y ago
what facebook does: monitor your shit and send it to the government. They arent going anywhere

billpatrianakos 14y ago

Not exactly your main point but I have to agree that there's nothing stopping Facebook from being the next MySpace. Seriously. Not a thing. I think at this point the massive user base and their investment (their friends, photos, life in general) is about the only thing keeping them from switching. But even that can be overcome by others simply by making the switch easier by importing that information (think using Facebook's downloadable data on you as a means to do that). I can see ads getting lots of Likes because others friends like Movie or Brand X but beyond those kinds of ads people on Facebook aren't likely to leave the site. In fact the whole site is designed to keep you there do ads are kind of useless. Likes are meaningless. They don't generate dollars. Brand awareness is about the best thing you can get from Facebook. 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.

nikcub 14y ago
There seems to be a line of argument in this thread that goes something like this: 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.
- hansef 14y ago
  Display and and media placement are all about demographic targeting. My take is that Facebook's revenue breakthrough occurs when they figure out how to get all that money going to media buys to flow through them based on their ability to microtarget viewer demographics as this content moves online. I think that Facebook's take on the Adsense model doesn't necessarily mean advertising on third-party websites. See also: Facebook should buy Netflix.

Bikepump 14y ago

Facebook "could" go the way of Myspace, but I'm guessing that their talent is significantly better than what Myspace had. By all accounts their engineering talent is on a similar level to Google. They're almost certainly not as good a buy as the Google IPO in 2004, where the search advertising market was still in its infancy, but look at Apple. All it takes is one amazing product that helps to spawn a brand new market and they can double their market cap. I'd guess that Facebook has as good a chance at doing that as Apple, Google, or anyone else. That said, I agree that until they actually are able to pull that off their stock is overpriced. It will probably also stay overpriced for a few years no matter what happens.

eblackburn 14y ago

Of course Facebook could acquire / lease Bing (or build perhaps?) and plumb that into Facebook. 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?

nikcub 14y ago

Display advertising has actually overtaken search advertising in revenue, and it is continuing to grow at a faster rate. This is why Google bought Doubleclick. 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.

pwaring 14y ago

"There is nothing preventing Facebook from being the next Myspace" 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).

sparknlaunch12 14y ago

> It has no search engine (which is how it could monetise its user information) 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.