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Facebook Advertising

Posted by Nick O'Neill on September 6th, 2007 1:41 PM

In reading through my daily dose of Facebook related blog posts I have been stumbling across a lot of posts related to Facebook advertising. Many are suggesting effective ways of targeting individuals, how Facebook should monetize their site more effectively and how the competing ad networks should be developed. My first conclusion: nobody has the right answer. It is going to be a game of trial and error but there are definitely some strategies available that are light years ahead of existing advertising solutions.

Chad Randall thinks that Facebook should have behavioral targeted ads. Chad said a good ad would be, “Hey Chad, your favourite band has just released their new album, click here to hear the free track, click here to purchase.” I have to agree completely. Now the question is how to integrate this advertising into the platform.

Currently, the application developers are focused on strictly building up their user base. According to Ajax Ninja, someone at the San Diego developer’s garage suggested that this model is worthless. His argument was that a large majority of the Facebook users don’t have much money to spend, including college students. I completely disagree with that assertion, unless of course you are talking about some of the applications that are targeting middle and high school students. Many of those applications are pretty worthless.

So what is the point of all my rambling? Well there are a few points that I would like to suggest for those aiming to conquer the Facebook advertising space:

  1. Develop targeted ads - The majority of ad networks that have launched on Facebook are still reverting to the good ‘ol days of CPM and CPC. That’s great but practically worthless. The entire value in Facebook is the ability to target people based on demographic. Get rid of CPM and CPC and start using CPDM and CPA. CPDM is my own made up phrase - Cost per demographically-targeted thousand. CPDM prices will be exponentially higher than CPM. The CPA approach will also work. Many of the ad networks (including RockYou) are now charging on a cost per install basis. Not a bad model either!
  2. Filter ads displayed - Many of these ad networks are providing unfiltered ads at this point. They are simply cross promoting other applications that I have no desire to use. While I think this is a good testing ground for a larger system, ad networks need to start getting more picky about driving traffic. Millions of dollars are being spent on driving traffic to spammy applications. While that still occurs on the general net, it should not be the majority of ads that I’m viewing.
  3. Develop behavioral-targeted ads - So this one is more theoretical than anything else since it requires significant resources. Imagine if after every ad you were displayed you could click “liked this ad” or “didn’t like this ad.” As the system evolves you will start receiving better ads that are targeted toward your own interests. I am honestly seeing so much junk that I want to turn it off. Some of the applications are worse than television. Make unique ads suited to my liking and you are going to end up with happier consumers which means happier advertisers.

My conclusion with all of this is that the majority of the existing ad networks are simply a way to generate quick cash flow. The value of their ads are going to diminish rapidly and turn into a commodity once a better ad network that provides targeted ads comes along. Money talks but the real winner is going to be the ad network that hasn’t launched yet. Do you think Facebook will be the one to develop a solution?

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This entry was posted on Thursday, September 6th, 2007 at 1:41 pm and is filed under Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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    The man who spoke and whom I happen to agree with wasn't trying to say per-say that college and high school students don't have any money to spend; what he meant was trying to grab up as much real estate (users who have installed your application) without any discretion as to whom your target audience should be is a waste of time in a lot of cases. High school and college students were his example simply because they do, in fact, constitute the largest portion of users and they do not have as much buying power as many other demographics present on Facebook.

    So do you disagree with him then in which regard? That high school and college students don't spend as much money as self-sufficient people who use Facebook? That buying up as much real estate as possible without any idea on how to use it is a bad idea?
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    I *absolutely* agree with your conclusion except for one part: "the real winner is going to be the ad network that hasn’t launched yet." appfuel, where I'm a co-founder, is currently serving targeted ads that are so relevant that users are happy to see/interface with them . Implementing your suggestions is not an easy task, but we've been working on it for nearly two years, and since launch a couple weeks ago have already had over 30 publishers sign up.
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    I totally get where you are coming from. And I would much rather be given an opportunity to have my voice heard with regards to the barrage of ads delivered to my web front door.

    If we are living a transparent, brutally honest web life - advertisers should have the courage to ask us if we like or dislike what they are ramming down my throat.

    And I work in interactive advertising and marketing. The key is to get the actual client, "advertiser" to buy into this...they are the ones afraid of "change".

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