7 ms·

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,

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.
- lsc 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. 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.)
richardw 14y ago
1) GM is exactly the right type of advertiser for Facebook. They don't want you to buy a car right now, they want to get the brand in front of you. They, with all their resources, can't get it to work. 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!]
- steve8918 14y ago
  No one is saying that Facebook, as it currently is, is better or more effective than Google in terms of user monetization. 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.
batista 14y ago
>You make it sound like search is the be all and end all reason why people use the Internet. It's not. 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.

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.

lsc 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. 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.)

richardw 14y ago

1) GM is exactly the right type of advertiser for Facebook. They don't want you to buy a car right now, they want to get the brand in front of you. They, with all their resources, can't get it to work. 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!]

steve8918 14y ago
No one is saying that Facebook, as it currently is, is better or more effective than Google in terms of user monetization. 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.

batista 14y ago

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