Facebook Advertising is Fool's Gold(behindcompanies.com)
behindcompanies.com
Facebook Advertising is Fool's Gold
http://behindcompanies.com/2012/05/facebook-fools-gold/
74 comments
I'm confused over the significance of the P/E ratio. It seemed like a big deal when I was reading these stories about the FB IPO, but then I got to look at other ratios in tech. Amazon's is much higher than FB's 93.72 at 175.23 [0]
[0]: http://www.google.com/finance?q=NASDAQ:AMZN&authuser=0
[0]: http://www.google.com/finance?q=NASDAQ:AMZN&authuser=0
Some interesting observations about Amazon's P/E ratio here http://www.mondaynote.com/2012/05/27/decoding-share-prices-a... on Jean-Louis Gassée's "Monday Note".
Basically, Amazon forgoes profit to get market share, will push out all competitors, build a huge barrier to entry with excellent execution and logistics, and then raise prices to increase profit. Traders are buying now and holding until that happens.
Basically, Amazon forgoes profit to get market share, will push out all competitors, build a huge barrier to entry with excellent execution and logistics, and then raise prices to increase profit. Traders are buying now and holding until that happens.
Supposedly. Everyone has been waiting for the big payoff since the 90s, but Amazon remains a stubbornly low-margin retailer. Eventually people are going to be forced to face the fact that there is no sinister Phase 2. Amazon is just happy being a low-margin, high-volume Walmart-of-the-Internet with little interest in its investors.
Oh, don't worry, the bears consider it out of whack and a good short as well.
I'm not exactly sure what the deal is with Amazon, but their p/e was much more realistic in the not-so-distant past:
http://ycharts.com/companies/AMZN/pe_ratio
I'm not exactly sure what the deal is with Amazon, but their p/e was much more realistic in the not-so-distant past:
http://ycharts.com/companies/AMZN/pe_ratio
P/E ratio is a terrible, meaningless way to evaluate the price of a share. It sounds remotely technical, and hey, there are numbers there so I guess people talk about it like it's important. P/E ratio is the ratio between profits to price per share. If the company had shares trading at $100 and their profits were $10/share, their P/E ratio would be 10. The thing is, P/E ratio doesn't capture expenditures very well, or long term corporate plans. So if a company is spending a ton of money trying to expand their business, they will have a really high P/E ratio. That doesn't make it a bad thing, just a measure of how much they're spending. AMZN is spending a ton of money lately, so they are not as profitable as they could be (and hence, high P/E ratio), but it is presumably to secure their future success.
> I'm confused over the significance of the P/E ratio.
Ratios have to be considered in context of expected future growth and expected future profit margin (revenue grows a little but profit grows a lot). Even considering that, some ratios seem extreme.
FB Forward P/E: 44.85
FB PEG Ratio: 1.67
AMZN Forward P/E: 85.52
AMZN PEG Ratio: 5.92
CRM Forward P/E: 69.06
CRM PEG Ratio: 3.29
Ratios have to be considered in context of expected future growth and expected future profit margin (revenue grows a little but profit grows a lot). Even considering that, some ratios seem extreme.
FB Forward P/E: 44.85
FB PEG Ratio: 1.67
AMZN Forward P/E: 85.52
AMZN PEG Ratio: 5.92
CRM Forward P/E: 69.06
CRM PEG Ratio: 3.29
One thing that is said about Amazon a lot is it sinks its profits into growing the business. That makes it more attractive as a growth stock since they are actively expanding their business into new areas, but affects their current bottom line with all the R&D overhead.
1 - fb has the potential to be the first serious adsense competitor: slightly poorer context data (though they certainly can repeat much of the work google has done, and I bet bing would love to do a data deal with them) but much better data about the user. Adsense earns roughly $10B/ year; ex my quick guess at tac (23% from 2009q4) and adsense makes $7.7B/year net. FB stands to take a bunch of that if they wish. They still are trying to invent new types of social advertising, and it would certainly be weird if facebook.com was just a giant data honeypot, but they have the data and the technical ability. And the demand from pubs is certainly there: pubs love anyone who pays them.
2 - anybody citing GM pulling $10M in annual spend is an idiot, unless you think GM is in the business of sending out press releases announcing all of their advertising budget changes. No? Then there's something else going on here; perhaps some bare-knuckled negotiation tactics.
3 - fb collects a tax on gaming. Plus Zynga and some others may be cleared to start doing online poker for real money [1]. fb taxes that at 30%.
4 - low ctr is fine for direct response as long as you have proportionally low costs. What this does for the user experience is another question =P
5 - lots of people in adtech very much want Google not to win everything. See the rise of the ABG (anybody but google) exchange: appnexus + aol + microsoft [2]. I expect yahoo inventory to start showing up there once yahoo realizes they no longer have the technical ability to run an ad exchange. Scott talking about selling off rmx can't have helped retain technical talent, and at this point it's a fat question why anyone would want it. Yahoo will sell a bunch of guaranteed delivery, but I think a bunch of the rest will show up on appnexus eventually, if it isn't already there blind.
5a - contributing to the above, hopefully google will get investigated for antitrust. For starters, hiding search query terms in the referrer string should trigger an investigation. They use that data in adsense, and it's particularly valuable for targeting ads on low text pages. Now they're hiding that from other ad networks, I can't find any public statement guaranteeing they're not letting adsense see it. Google also uses search query results to juice display retargeting.
6 - ctr isn't particularly important for brand advertisers. There is a growing disparity of the ratios of ad spend / time spent in different media, with TV higher. Thus behind some of fb's valuation is the thesis that brand advertising dollars will be moving from tv to online, and fb is probably poised to take a big chunk of those. If/when this happens is unknown, but winning bets on those sorts of things is how investors get paid.
7 - fb may still be given a giant present from the EU depending on just how their anti cookie laws work in practice. The morons in GB rolled it all back 24h before the implementation deadline, but other member states may go all in and more or less ban 3rd party cookies. Then we'll be stuck in a tagless world, and I bet fb will get an enormous amount of spend.
[1] http://venturebeat.com/2012/01/20/the-deanbeat-should-zynga-...
[2] http://www.adweek.com/news/technology/aol-make-inventory-ava...
2 - anybody citing GM pulling $10M in annual spend is an idiot, unless you think GM is in the business of sending out press releases announcing all of their advertising budget changes. No? Then there's something else going on here; perhaps some bare-knuckled negotiation tactics.
3 - fb collects a tax on gaming. Plus Zynga and some others may be cleared to start doing online poker for real money [1]. fb taxes that at 30%.
4 - low ctr is fine for direct response as long as you have proportionally low costs. What this does for the user experience is another question =P
5 - lots of people in adtech very much want Google not to win everything. See the rise of the ABG (anybody but google) exchange: appnexus + aol + microsoft [2]. I expect yahoo inventory to start showing up there once yahoo realizes they no longer have the technical ability to run an ad exchange. Scott talking about selling off rmx can't have helped retain technical talent, and at this point it's a fat question why anyone would want it. Yahoo will sell a bunch of guaranteed delivery, but I think a bunch of the rest will show up on appnexus eventually, if it isn't already there blind.
5a - contributing to the above, hopefully google will get investigated for antitrust. For starters, hiding search query terms in the referrer string should trigger an investigation. They use that data in adsense, and it's particularly valuable for targeting ads on low text pages. Now they're hiding that from other ad networks, I can't find any public statement guaranteeing they're not letting adsense see it. Google also uses search query results to juice display retargeting.
6 - ctr isn't particularly important for brand advertisers. There is a growing disparity of the ratios of ad spend / time spent in different media, with TV higher. Thus behind some of fb's valuation is the thesis that brand advertising dollars will be moving from tv to online, and fb is probably poised to take a big chunk of those. If/when this happens is unknown, but winning bets on those sorts of things is how investors get paid.
7 - fb may still be given a giant present from the EU depending on just how their anti cookie laws work in practice. The morons in GB rolled it all back 24h before the implementation deadline, but other member states may go all in and more or less ban 3rd party cookies. Then we'll be stuck in a tagless world, and I bet fb will get an enormous amount of spend.
[1] http://venturebeat.com/2012/01/20/the-deanbeat-should-zynga-...
[2] http://www.adweek.com/news/technology/aol-make-inventory-ava...
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.
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.
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.
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.
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.
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.
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.
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.
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.
You don't need DSNP: niche social networks already exist. Ravelry and GoodReads, as examples, seem to be making a decent go of it. Would love to know how their advertising does.
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.
You don't need DSNP: niche social networks already exist. Ravelry and GoodReads, as examples, seem to be making a decent go of it. Would love to know how their advertising does.
I think DSNP is essential. Imagine if you could only email someone with a GMail account if you had a Gmail account.
Imagine if you could only check your Hotmail emails on the Hotmail website or through one of the official Hotmail Apps.
That's how Social networking works right now. API's won't cut the mustard. We need a DSNP.
Imagine if you could only check your Hotmail emails on the Hotmail website or through one of the official Hotmail Apps.
That's how Social networking works right now. API's won't cut the mustard. We need a DSNP.
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.
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.
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.
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.
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.
How do you promote events in your non-bubble view of the world? An event can be in person (imagine TechCrunch Disrupt for instance), or a new TV series launching...
I can imagine very well how I would target people who like the series 24 if I'm launching a new thriller. Or readers of Hacker News for a tech conference. Etc...
I can imagine very well how I would target people who like the series 24 if I'm launching a new thriller. Or readers of Hacker News for a tech conference. Etc...
If we have such a system, everybody can input his/her intentions. I would input my intentions of attending startup events, and set the expiration date of this intention to for example 10 years. Then whenever there is an event like TechCrunch Disrupt, I will receive a notice with a short list of such events. All users who have set up similar intentions will receive such notice. Meanwhile, TechCrunch Disrupt organizers will receive a list of all users who have such similar intentions. As a result, they can directly send mails, or emails, or even phone calls to these users for highly targeted marketing instead of blindly broadcast their event to the whole general public.
Your system doesn't sound realistic. Here's a version that works today: once several of your friends sign up for TechCrunch Disrupt, then I'll start showing you ads for the conference. No need to pre-enter any kind of vague intent into some omniscient system.
My system will be very realistic in 5 years. You're still talking about socialized and context-awared ads. It is actually based on very old Attention Economy, which is dominant probably in the past thousand years just because there is no Internet. Now with the help of the Internet, Intention Economy is coming to dominate, because it will optimize the world very much.
Do you seriously believe advertisers waste trillions of dollars? That not a single one has turned off ads in a geo-fenced area to see what happens? Or that adwords advertisers (and all direct response advertisers for that matter) don't fanatically track roas?
Also, empirically, users refuse to pay for stuff and want advertising so they're not out of pocket. For the 1e6 + 999th time: " If you are not paying for it, you're not the customer; you're the product being sold."
Also, empirically, users refuse to pay for stuff and want advertising so they're not out of pocket. For the 1e6 + 999th time: " If you are not paying for it, you're not the customer; you're the product being sold."
"Half the money I spend on advertising is wasted; the trouble is I don't know which half."
--- John Wanamaker (1838 - 1922)
This is why advertising has been such a profitable business. That's because targeting of traditional advertising system is not good. As a result, traditional marketing has to be attention-driven. You have no better choice other than throwing trillions of dollars to attract attentions, and hopefully several percent of the attracted attentions will be finally converted to your new customers so that your business can continuously run. As a matter of fact, a huge amount of your marketing costs are completely wasted, and it is necessary due to low efficiency of the advertising model. This well-known fact is clearly shown that the low efficient classical display advertising model need be disrupted and replaced.
Fortunately, with the help of Internet and advancement of information processing technology, targeting will be significantly improved, and it has to be improved. However, it could not be attention-based, because attention is intrinsically low efficient on targeting. It has to be intention-based, which is intrinsically well targeted and accurate. For instance, with prior knowledge of your intention on buying some orange juice in front of a Trader Joe's, I will recommend you some good juices. It will be interesting information to me instead of advertisements. On the contrary, it will be totally annoying to me if you shout out at me about some high-end computers just because you know I'm a computer science student or a software programmer, but you don't know I just bought a super cool Macbook last week and don't need a new computer in next few months or even years.
To solve the targeting issue, intention-based marketing systems will be an ideal alternative to current dominant attention-driven marketing systems. Attracting attention is surely helpful. But it has to be complementary, not the primary driving force. It will be intention-based and intention-driven systems that can significantly improve targeting accuracy and marketing efficiency. That is the future!
This is why advertising has been such a profitable business. That's because targeting of traditional advertising system is not good. As a result, traditional marketing has to be attention-driven. You have no better choice other than throwing trillions of dollars to attract attentions, and hopefully several percent of the attracted attentions will be finally converted to your new customers so that your business can continuously run. As a matter of fact, a huge amount of your marketing costs are completely wasted, and it is necessary due to low efficiency of the advertising model. This well-known fact is clearly shown that the low efficient classical display advertising model need be disrupted and replaced.
Fortunately, with the help of Internet and advancement of information processing technology, targeting will be significantly improved, and it has to be improved. However, it could not be attention-based, because attention is intrinsically low efficient on targeting. It has to be intention-based, which is intrinsically well targeted and accurate. For instance, with prior knowledge of your intention on buying some orange juice in front of a Trader Joe's, I will recommend you some good juices. It will be interesting information to me instead of advertisements. On the contrary, it will be totally annoying to me if you shout out at me about some high-end computers just because you know I'm a computer science student or a software programmer, but you don't know I just bought a super cool Macbook last week and don't need a new computer in next few months or even years.
To solve the targeting issue, intention-based marketing systems will be an ideal alternative to current dominant attention-driven marketing systems. Attracting attention is surely helpful. But it has to be complementary, not the primary driving force. It will be intention-based and intention-driven systems that can significantly improve targeting accuracy and marketing efficiency. That is the future!
Seriously, are you reading a press release? Also, you're 10-ish years behind, which is how long ad.com has been doing retargeting. Retargeting has widespread since the advent of a global cookie space with exchanges -- rmx in '08 or so. And yet we still have direct response and brand display ads.
Seriously, I am 10-ish years ahead, NOT behind. If you can read a little about Intention Economy, you will understand what I'm talking about.
Seems reasonable to me.
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).
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.
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).
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.
Or not.
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).
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.
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).
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.
Or not.
There are two primary types of ads
1) ones that give you what you want
2) ones that drive demand
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.
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.
Agree the $100B is too high, but certainly they're easily a profitable company, long-term.
1) ones that give you what you want
2) ones that drive demand
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.
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.
Agree the $100B is too high, but certainly they're easily a profitable company, long-term.
> 1) ones that give you what you want
> 2) ones that drive demand
A big part of Google's success is that #1 is much easier to prove than #2.
"People bought our product more because they had become familiar with it over the last month via newspaper/radio/Facebook ads" is a hard-to-prove claim.
"We got X clicks from Google ads leading directly to Y purchases" is much easier.
A big part of Google's success is that #1 is much easier to prove than #2.
"People bought our product more because they had become familiar with it over the last month via newspaper/radio/Facebook ads" is a hard-to-prove claim.
"We got X clicks from Google ads leading directly to Y purchases" is much easier.
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.
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.
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.
Wow. Its like you just read my mind! I was about to say the same thing.
Indeed, especially since there are a lots of apps out there implementing Facebook login, especially mobile apps, games and apps alike, could this be a solution to their mobile strategy? (this is not a rhetorical question.)
Whats stopping them from implementing this?
Adsense makes up a minority of Google's ad profits. The billion dollar business is in Adwords, not Adsense.
Indeed - I've no idea what the revenues would be - was just an idle thought.
Right now the problem is getting people to believe in Facebook's revenue to get some confidence back in the market.
Not saying it's is a silver bullet by any means.
Right now the problem is getting people to believe in Facebook's revenue to get some confidence back in the market.
Not saying it's is a silver bullet by any means.
Minority? It almost half of all Google ad profits.
It is more like Adwords: 70% Adsense: 30%
http://investor.google.com/earnings/2012/Q1_google_earnings....
sadly, no. Adsense is a $10B/year business. Even ex tac of 30%, that's still a big business.
From wikipedia [1]:
From wikipedia [1]:
In Q1 2011, Google earned US$2.43 billion ($9.71 billion annualized),
or 28% of total revenue, through Google AdSense
I used to think this as well, but there's a problem. What if FB ads are not as good a monetization solution for publishers as Google ads? This seems quite possible.
Facebook advertising is much much cheaper than Google advertising on a per-click and per-impression basis.
With Google ads, advertisers are used to paying as much as $20/click in some areas. I've never heard of a FB advertiser paying more than $2/click.
Likewise, CPMs on FB are in the single digit pennies quite often. On the web, banner ads are around $0.75 CPMs for decent sites.
Facebook might have looked at this and might believe that if they launched a network like this, the payouts just wouldn't be able to compete with what Google's able to give publishers.
Facebook advertising is much much cheaper than Google advertising on a per-click and per-impression basis.
With Google ads, advertisers are used to paying as much as $20/click in some areas. I've never heard of a FB advertiser paying more than $2/click.
Likewise, CPMs on FB are in the single digit pennies quite often. On the web, banner ads are around $0.75 CPMs for decent sites.
Facebook might have looked at this and might believe that if they launched a network like this, the payouts just wouldn't be able to compete with what Google's able to give publishers.
I wonder what would happen if Facebook ran a scheme like AdSense.
Maybe that is/was one of the aims behind the Like button? Facebook could use that connection to tailor the adverts displayed to the user (along with the site's content!), provided the user is logged into Facebook at the time.
Admittedly, I think doing so would kick up a bit of a stink ;)
Maybe that is/was one of the aims behind the Like button? Facebook could use that connection to tailor the adverts displayed to the user (along with the site's content!), provided the user is logged into Facebook at the time.
Admittedly, I think doing so would kick up a bit of a stink ;)
I've never had good results from ticking the box for Google's display network in AdWords campaigns. The culprit is poor implementation by webmasters, not the amount or detail of data available. I don't see why a Facebook display network would do any better.
They'll do it as soon as they are confident that they can pay websites more per click than AdSense. It's a winner-take-all market.
But AdSense is very vulnerable: intent (the search string), which is the one reason Google advertising works, is absent from AdSense.
As an example, I once wrote a blog post with a title like "startup financing: take the elevator, not the stairs". Google placed ads on that post for Thyssen elevators. It had just no clue that the topic was startups, not actual elevators. Not impressed.
But AdSense is very vulnerable: intent (the search string), which is the one reason Google advertising works, is absent from AdSense.
As an example, I once wrote a blog post with a title like "startup financing: take the elevator, not the stairs". Google placed ads on that post for Thyssen elevators. It had just no clue that the topic was startups, not actual elevators. Not impressed.
Google uses search activity from the past several hours to help match ads in adsense for content[1]. Hiding those from other ad networks is, imo, one of the best reasons they should be sued for antitrust.
We've recently started to expand the use of the query words in referral
URLs to a few hours so we can so we can continue to deliver more relevant
ads. The technical way that we're doing this is by associating the
relevant query words in the referral URL with the existing advertising
cookie on the user's browser. After a short period of time (a few hours)
the query words are no longer used for the purposes of matching ads.
That article doesn't discuss the details of the implementation, but it could very well be the Adsense js that is tagging the cookie with the referral data. Any ad network can implement that.
Perhaps I wasn't clear. Google is hiding referer data, particularly the query string, for a growing number of searchers. Today it's anyone logged into google, or about 60% of traffic to my blog. Tomorrow, they may well do it for anyone. Right now for the logged in users, and potentially in the future for anyone, the only ad network that can still see the search terms in the referer string is adsense, because Google search can pass them to adsense internally. No other ad network can see them. This is obviously incredibly valuable for adsense. And it should trigger an antitrust violation because they're using their monopoly / near monopoly in search to juice their offsite context and display ad networks.
No, you weren't particularly clear. Mostly because if Google is sharing data between search and adsense internally, it doesn't have anything to do with Adsense storing referrer data anymore.
Quoting me:
Google has recently started hiding search query strings by stripping them from the referrer for logged in users and has made noise that sounds like this will eventually happen for all users. This hurts ad networks because it removes some of the intent they use to help target ads, and crucially hurts the most when trying to target ads on low information pages. However, Google can certainly internally continue to give this information to adsense in order to target content. This is the sort of thing antitrust law is meant to prevent: using a monopoly in one area (search and sem) to juice your business elsewhere (display ad network).
Google uses search activity from the past several hours to help match
ads in adsense for content[1]. Hiding those from other ad networks is,
imo, one of the best reasons they should be sued for antitrust.
Google has recently started hiding search query strings by stripping them from the referrer for logged in users and has made noise that sounds like this will eventually happen for all users. This hurts ad networks because it removes some of the intent they use to help target ads, and crucially hurts the most when trying to target ads on low information pages. However, Google can certainly internally continue to give this information to adsense in order to target content. This is the sort of thing antitrust law is meant to prevent: using a monopoly in one area (search and sem) to juice your business elsewhere (display ad network).
I understand that you are complaining about https. I'm pointing out that the article you linked doesn't provide any insight into what data Google is sharing internally.
Google is known -- by their own blog! -- to use this data for ad targeting. Until they say they aren't, it's more than reasonable to assume they continue to use it for ad targeting. They are certainly aware of other ad networks using the search query string: employees have mentioned it in conference talks. If they were using no more information than any other ad network has access to, it would be trivial for them to publicly say so. Until then, I suggest writing the FTC.
I agree that Google can target alot better IF you have a product that solves a problem people search for. IF.
> 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.
How do you advertise for them on Google? If they search for "breakfast replacement for long, boring commute"?
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.
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.
> 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.
How do you advertise for them on Google? If they search for "breakfast replacement for long, boring commute"?
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.
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.
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?
More focus on the real issues please, do not get distracted by the 'anti-hype' of the week.
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?
More focus on the real issues please, do not get distracted by the 'anti-hype' of the week.
>"Why don't we focus on the real issue being people rights to privacy and the shady practices of FB?"
These things are all connected. The public is being sold the idea that this is a $100BB company, one of the biggest in the world. Yet when some of us look at it (yourself, even) we see a great tool that doesn't justify the price as a business: as cletus says at the top of the thread, Facebook may just be another ad network that depends on its massive, engaged user base. Yet FB has problems with how it actually treats those users, through privacy issues and shady practices..
These things are all connected. The public is being sold the idea that this is a $100BB company, one of the biggest in the world. Yet when some of us look at it (yourself, even) we see a great tool that doesn't justify the price as a business: as cletus says at the top of the thread, Facebook may just be another ad network that depends on its massive, engaged user base. Yet FB has problems with how it actually treats those users, through privacy issues and shady practices..
I don't think that anyone who did their homework would have bought FB stock as a 'sure thing for long time investment'. FB didn't fool anyone who wasn't too greedy for their own good. Obviously I'm not saying FB is not a hugely successful product with an immense user base, but obviously the fact that this IPO is not 'going as predicted' by it's underwriters was clear to me waaayyy before the stock hit the markets ...
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.
Yes, they're different things.
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).
Some products do great with intent-based advertising. Other products (that you didn't even know you needed) need other forms of advertising.
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.
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.
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.
I completely understand Google's strategy of "intent" based ads. I just think Facebook's user data is even stronger.
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.
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.
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.
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.
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).
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.
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....
Now think of the targeting you can get there.
Now think of the targeting you can get there.
All that sounds very nice, but that is what FB has all been about. This kind of non-quantitiave arguments won't validate a $100bn valuation.
The targeting goes all the way down. Gabriel Weinberg (who runs DuckDuckGo) targeted an ad to one person! http://www.gabrielweinberg.com/blog/2010/05/a-fb-ad-targeted...
You sell cars.
I listen to Donovan, The Beatles, The Stone Roses, Mozart, Au, REM, Dj Shadow, Handsome Boy Modelling School, Chopin, Ludovico Einaudi and Daft Punk (to name but a few).
I've liked pages for five star greek hotels, the burger place on the corner, the guy who sells awesome falafel's on Hoxton market. You know I saw this video of a talking dog that I thought was totally awesome.
Just this month, I read an article on the Greek debt crisis in the economist, an article on David Beckham in the Daily mail website, I shared a wikipedia page about Rommel, I liked an article about continuous integration with node.js and Jenkins.
Now sell me a car.
I actually like Volkswagens and Volvos, but you won't find that anywhere in my Facebook data.
I listen to Donovan, The Beatles, The Stone Roses, Mozart, Au, REM, Dj Shadow, Handsome Boy Modelling School, Chopin, Ludovico Einaudi and Daft Punk (to name but a few).
I've liked pages for five star greek hotels, the burger place on the corner, the guy who sells awesome falafel's on Hoxton market. You know I saw this video of a talking dog that I thought was totally awesome.
Just this month, I read an article on the Greek debt crisis in the economist, an article on David Beckham in the Daily mail website, I shared a wikipedia page about Rommel, I liked an article about continuous integration with node.js and Jenkins.
Now sell me a car.
I actually like Volkswagens and Volvos, but you won't find that anywhere in my Facebook data.
I actually like Volkswagens and Volvos, but you won't find that anywhere in my Facebook data.
I'd bet there's actually a pretty high correlation between many of the things you just listed and a preference for VWs and Volvos. It doesn't really take that many data points to start filling in the blanks.
But I think this kind of targeting is going to be more useful in selling you a product you don't yet know about but are likely to want than it is a car that you are almost certainly already aware of.
I'd bet there's actually a pretty high correlation between many of the things you just listed and a preference for VWs and Volvos. It doesn't really take that many data points to start filling in the blanks.
But I think this kind of targeting is going to be more useful in selling you a product you don't yet know about but are likely to want than it is a car that you are almost certainly already aware of.
Yeah, the preferences listed may not indicate a preference for Volvo over Audi, but they're certainly consistent with someone I'd target for near-luxury European cars rather than giant Chevy pickup trucks, Korean mini-vans or tiny econo-boxes.
Daft Punk? You're 30-ish. Mozart and Chopin? College graduate. Like a 5-star Greek hotel (but not that many other luxury items)? Shit, I've narrowed down your disposable income into a fairly narrow bucket. I can also tell that you don't have any children. I would target the shit out of you for Volvo, Volkswagen, Acura, Infiniti, Mercedes, BMW and Audi.
And that's just my own guesstimates. Backed up by proper data I'm sure I could do way better.
Daft Punk? You're 30-ish. Mozart and Chopin? College graduate. Like a 5-star Greek hotel (but not that many other luxury items)? Shit, I've narrowed down your disposable income into a fairly narrow bucket. I can also tell that you don't have any children. I would target the shit out of you for Volvo, Volkswagen, Acura, Infiniti, Mercedes, BMW and Audi.
And that's just my own guesstimates. Backed up by proper data I'm sure I could do way better.
>"I would target the shit out of you for Volvo, Volkswagen, Acura, Infiniti, Mercedes, BMW and Audi."
And why not Lincoln, Cadillac, Lexus, Saab and Jaguar? In fact, Volkswagen isn't a luxury brand (no more than Honda, Nissan, Toyota), and hardly fits among the brands you mentioned above. Yet it's a preference of the OP. So, I think you've proven his point; your targeting hardly tells us anything.
And why not Lincoln, Cadillac, Lexus, Saab and Jaguar? In fact, Volkswagen isn't a luxury brand (no more than Honda, Nissan, Toyota), and hardly fits among the brands you mentioned above. Yet it's a preference of the OP. So, I think you've proven his point; your targeting hardly tells us anything.
Sure, maybe those too. Except perhaps Saab, which last I heard was broke, and Jaguar, which I'd probably target at a slightly older crowd.
Lincoln and Cadillac maybe not, too -- perhaps Americans who holiday in Europe are much more likely to buy European cars. If I had more data I could draw up some correlations and tell you exactly how much more likely they are to buy European cars and whether it's still worth waving a shiny new MKZ in front of our Volvo fan.
There's always exceptions to any of these correlations between stuff we like and other stuff we might like. In fact we're all exceptions; we all like things which are anticorrelated with other things we like. But that's not a big problem -- your targeting algorithm doesn't have to be perfect, it just has to be significantly better than random scattershot... and ideally, better than Google.
In an ideal world, I'd only serve Acura ads to people who:
a) Are buying a new car soon
b) Are certain to buy an Acura if they see an ad for one, and
c) Are certain to not buy an Acura if they don't see an ad for one.
but failing that I'll settle for targeting people who are in vaguely the right age group and income bracket.
Actually, I think car sales are a bad example; if I wanted to sell cars I'd use google ads, because people buying a new car already know they're buying a new car, and are probably out there doing research on the subject of new cars. Whoever posted the milkshake example had the right idea for facebook ads.
Google ads can sell you stuff that you're looking for, Facebook ads (if implemented properly) can sell you stuff you don't yet know that you want.
Lincoln and Cadillac maybe not, too -- perhaps Americans who holiday in Europe are much more likely to buy European cars. If I had more data I could draw up some correlations and tell you exactly how much more likely they are to buy European cars and whether it's still worth waving a shiny new MKZ in front of our Volvo fan.
There's always exceptions to any of these correlations between stuff we like and other stuff we might like. In fact we're all exceptions; we all like things which are anticorrelated with other things we like. But that's not a big problem -- your targeting algorithm doesn't have to be perfect, it just has to be significantly better than random scattershot... and ideally, better than Google.
In an ideal world, I'd only serve Acura ads to people who:
a) Are buying a new car soon
b) Are certain to buy an Acura if they see an ad for one, and
c) Are certain to not buy an Acura if they don't see an ad for one.
but failing that I'll settle for targeting people who are in vaguely the right age group and income bracket.
Actually, I think car sales are a bad example; if I wanted to sell cars I'd use google ads, because people buying a new car already know they're buying a new car, and are probably out there doing research on the subject of new cars. Whoever posted the milkshake example had the right idea for facebook ads.
Google ads can sell you stuff that you're looking for, Facebook ads (if implemented properly) can sell you stuff you don't yet know that you want.
Yesterday I created a paste bin with the brand of footwear I prefer. Go!
Are you sure? Advertisers have been comfortable with finding correlations between unrelated consumer behaviors for decades. I can almost guarantee you that, on average, someone who likes five star Greek hotels is more likely than the average American car buyer to consider a Volvo.
I think a lot of Facebook's value depends on just how useful that personalized information is, and how difficult it will be for a competitor like Google to extract in other ways. My guess is that it will turn out to be pretty useful as advertising campaigns (and brands themselves) become more and more segmented, but also not so hard for traditional cookie-tracking methods to get 80%+ of the same useful information.
I think a lot of Facebook's value depends on just how useful that personalized information is, and how difficult it will be for a competitor like Google to extract in other ways. My guess is that it will turn out to be pretty useful as advertising campaigns (and brands themselves) become more and more segmented, but also not so hard for traditional cookie-tracking methods to get 80%+ of the same useful information.
Car salesmen aren't the only people that want to sell you things though. A music website, a holiday company, a food company or a bookshop now have loads of info that could help target ads at you.
Not that I'm defending Facebook advertising (there's other reasons that I think it's largely pointless, at least from a click-through perspective - the primary one being that if I'm going on a social media site, I'm usually going to be social, not to buy a new car or book a holiday), but the fact that one particular market can't necessarily target one particular user doesn't seem to be a great argument against it.
Not that I'm defending Facebook advertising (there's other reasons that I think it's largely pointless, at least from a click-through perspective - the primary one being that if I'm going on a social media site, I'm usually going to be social, not to buy a new car or book a holiday), but the fact that one particular market can't necessarily target one particular user doesn't seem to be a great argument against it.
You're looking at it from the wrong point of view. The car makers want to sell cars, they don't care who to. Someone who lists their favourite car will see car adverts, whereas you should see adverts for concerts in your region, watching economics documentaries on Netflix, and holidays to major falafal-eating countries.
Well, that is, if Facebook does it properly. And you don't block them.
Well, that is, if Facebook does it properly. And you don't block them.
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: http://tinyurl.com/c7ozldn
Thanks for this!
So basically this is saying that Facebook needs a search engine to be effective at advertising. Is DuckDuckGo up for sale?
Why would they buy DDG when they (FB) already have Bing? Oh...yeh. Is DDG for sale? :)
Was just reading the JTBD literature a few weeks ago. An obvious concept, but so oft ignored.
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.
Even dropping 20% since the IPO (currently trading at just over $30 as I write this; and bear in mind that even Groupon--at least initially--enjoyed a nice IPO bounce), the company is trading at a huge P/E ratio.
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.
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.
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).
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.
Disclaimer: I work for Google in display advertising.