Want to make a lot of money overnight? Here’s how: set up a quiz application and throw on advertisements which promote IQ tests that you purchase through your phone and you’ll be headed in the right direction. That’s the current state of the Facebook platform since Facebook is not aggressively policing it. Yesterday I posted about the latest developer trick and a number of commenters came to the same conclusion: Facebook needs to enforce the developer terms.

The Race To The Bottom Started When The Platform Launched

Back when the platform launched, SocialMedia emerged as the leading ad network by providing crush advertisements which lead to somewhat misleading survey sites. While Facebook told SocialMedia to stop displaying the advertisements, many other companies decided that they were going to keep using them, ultimately making things more difficult for SocialMedia. Within a short period of time hundreds of millions of dollars were being generated through crush ads, and companies like Tatto Media, which later paid a $500,000 settlement, began raking in the cash.

While crush advertisements eventually saw a decrease in click through rates, the banner advertising networks continued to evolve their creative. SocialMedia lead the charge with putting users’ profile images in advertisements and many ad networks followed suit. Tatto Media has moved on to other sites and as of Wednesday that company claimed to become the “third largest ad network worldwide according to the March 2009 comScore Worldwide Key Measures Media Metrix report.”

Now millions of “satisfied” customers can vouch for the valuable IQ quizzes that they’ve signed up for, right?

Why The Race To The Bottom Happened

Before you dismiss the value of social advertising, you first need to understand how the landscape emerged and what the general advertising economy is like. When Facebook launched the platform back in 2007, it was the beginning of a phenomenon which has generated the most advertising inventory for any single company in a long time. No other social platform has come close to reaching the total number of users that Facebook has and the number of page views being generated by the site.

The result is that the value of the “average impression” has been reduced and as many published in the media, the CPMs began falling drastically. So how on earth can developers boost their CPM? That’s easy! Install one ads from the most aggressive ad networks and you’ll see your CPMs double at a minimum. Many developers are even seeing drastic increases in CPMs recently as these networks become more prevalent. That’s why you’ll see a number of hate comments in my article about aggressive advertisements last week.

The bottom line is that these advertisements work and they exist all over the web, not just on Facebook. The difference however is that Facebook is trying to build a “secure” and “safe” environment for users in which they generate trust with each user. Internet users already know not to click on every link they see on the web and they choose to avoid specific sites because they know they could end up with spyware or something worse. That’s exactly what Facebook needs to avoid because they’re damaging users’ trust.

How To Make A Business Out Of Applications

Not all advertisers on Facebook are misleading users however. On Wednesday I posted an interview with Murti Hussain of Peanut Labs. During the conversation I discussed how choosing the “moral high ground” has impacted his business. He said business is booming and now he can count numerous large brands that are using their service for getting valuable market research completed.

Some of the ad networks which are pushing the limits also claim to be developing their own in house algorithms for optimizing advertisements but unfortunately those “socially optimized” ads can’t compete (on a revenue basis) with the aggressive ads. So can developers build sustainable businesses without these aggressive ad networks? Yes! If the developers have a long-term vision, there is a huge opportunity present but when short-sighted app developers are only focused on making a quick buck, there ends up being a bad environment for everybody.

Not all developers are focused on the short-term and many have even opted out of displaying aggressive advertisements. Unfortunately many of the developers don’t see the ethical dilemma and instead see their bank accounts soaring. Some legitimate developers also see their bank accounts soaring but ultimately they’re being damaged by those that just want to make a quick buck.

Conclusion

In the long-term I firmly believe that the honest and ethical developers and ad networks will win this battle but they can’t without the help of Facebook who so far has taken a relatively hands off approach. Many developers are waiting for the day that Facebook strictly enforces their terms. This doesn’t mean they hope that Facebook clamps down on viral channels, it simply means that Facebook sticks by what are already well defined terms.

In regards to terms for Facebook platform advertising, the company doesn’t have well defined terms. Contrast that with Google who is clear about what is legitimate and what isn’t. The ad networks will listen as well, Facebook just needs to define the rules and then enforce them. With an additional $200 million in the bank, you would assume the company has the resources. Perhaps we will just have to wait until a boisterous Attorney General who is up for re-election decides to hold Facebook responsible for what are completely misleading advertisements.