Tuesday, November 06, 2007

Facebook ads: More hype?

It's no secret we've been developing apps on Facebook for Jambool. And where the more involved apps have had a hard time taking off, the brain dead ones are rocketing up. In the last one week we added more than 50,000 users without spending a penny on advertising. Now there's got to be some value in that.

Facebook announced today that they are coming out with "Facebook Ads." Techrunch covered the announcement in New York. This stuff has been speculated for a long time. Facebook already has their ad network -- it's called Facebook Flyers. And going by the ads I see on them ocnsistently, my guess is that they are not doing that well. We even tried using them sometime ago, and ad clickthrough as well as conversion from these ads was abysmal. So are things set to change with the new release?

I don't think so.

I'm trying to understand what they are offering, and here's my understanding. Facebook does provide advertisers the ability to target ads for specific demographics and user attributes (age, location etc). But this is what they do with Facebook flyers -- and afaik it is not a successful program. I think the important factor in ads that helps convert users is not as much just the targeting but the context that the ad is displayed in as well. This is where Facebook seems to be missing out. They talk about beacons and insights -- that people can be walking billboards for brands they love, and spread the virus into their network. So you can publish your purchases etc to your friends, advertising the web site you bought it from. While useful, I would wait to get some numbers on this data to see if this is really worth anything. Because my friends bought "something" at Ebay doesn't make me jump on and go to ebay. It reeks of advertising, not a recommendation. Besides being a privacy concern, I am not convinced that users will want to have their purchases get published to their friends.

The talk about "Insights" seems to be wishful thinking. They "will be able" to track how much people are talking about the brands in forums, which forums and brand pages the user goes to, and target the ads better. I suspect that there is no data that they have to back up their claims -- What is the actual impact they can make for a brand? It isn't even anything new. Companies like doubleclick and Google have cookiess in just about every browse out there. They know which sites you go to, which brands you visit, etc etc. Or at least they are in the position to. They may not know the specific age and sex and favorite color and pet peeves of every user, but when you have enough data about the user through the kind of sites he/she visits, this data starts to become irrelevant -- especially if the end goal is to just target the ads for that user. Age and sex be damned, just show the ads to the user that he or she is most likely to click on. That's the best service you can do to your advertisers and publishers.

It also seems that Facebook is not really providing application developers a new avenue to make money. They seem to be intent on being the publisher for all ads, and attracting the advertisers to put ads -- including application developers. At least I did not read anywhere that they are providing a means for developers to monetize through Facebook ads. This, I think, is where they are missing out. There is more money to be made by sharing the pie with developers than with getting the developers to pay for getting traffic. This would mean, that developers will continue to stick with the existing ad networks to get ads for their pages, and as a result, advertisers will also continue to advertise on these networks.

So my reading of the Facebook ads is that it is more hype than substance. Life's going to go on just as it was.


Anonymous said...

yes, but were you a representative advertiser? was you ad of high quality and well targeted? what were you selling and why would people click on your ad anyway?

if you marry the right advertisers with the right ads and the right user data, you should get great targeting in theory. e.g., why aren't my flixster ratings being used to personalize ads for new dvds from amazon? microsoft's crap inventory is not helping things here.

what facebook is doing seems like a commercial version of friendfeed.com, which itself seems like a next iteration of del.icio.us. some people will like to do this. news feed also had the same initial backlash but now it's the golden goose of facebook.

/l. khan

ps: the point about useless apps propagating virally is not of much value methinks. lots of things, both good and bad, can propagate virally, doesn't mean the propagation mechanism is fundamentally useless.

Anonymous said...

moral of story: try to think bigger than balloons and fart bombs :)

Vikas said...

Was the ad of high quality?
Given the parameters allowed (one image, N characters, etc.) -- yes, better than the plain text ads we've used elsewhere that convert better.

Was it well targeted?
I believe so again -- we chose the demographics and user characteristics of our most common user set. Were these ads actually distributed well -- I don't know.

About Flixter ratings and DVDs from amazon -- this data isn't available to Facebook afaik. In any case, someone like Flixter, Netflix or Amazon is in much better position to do that for you, and not Facebook.

I am all for it if Facebook can do the social ads well -- but I am just skeptical of the hype they are building around it.