Facebook Advertising is Fool’s Gold

May 29, 2012

Last week, Michael Wolff at MIT’s Technology Review wrote a bearish piece on Facebook’s advertising model. The core of his argument is that Facebook doesn’t have the big idea to propel them into their $100B valuation:

What might Facebook’s big idea look like? Well, it does have all this data. The company knows so much about so many people that its executives are sure that the knowledge must have value.

Facebook ads aren’t quite working. GM even pulled their $10 million in annual spend. All their revenue growth to this point has been based on user growth.

But why are Facebook ads failing? For years now, advertisers have been shouting from the rooftops about how Facebook is this treasure trove of information about customers. They can’t wait to target their ads so perfectly that it’ll only be shown at exactly the right moment to the exact customer.

This generation of marketers have found fool’s gold: the idea that targeting your ads based the attributes of people will make them more likely to click and buy.

It’s fool’s gold because people don’t buy things because they are male, between the ages of 18 and 25, who work in technology. Those attributes are merely a correlation that says “in general, people with these attributes might buy our product.” It’s why a “great” click through rate in online advertising is less than 1%.

People don’t buy because of who they are, they buy because of circumstances in their lives, jobs that need to be done. The concept of Jobs to Be Done answers the question of “what are the circumstances where a customer is most likely to buy my product?”

The original example of this is the story of Milkshake Marketing, where a fast food company kept trying to improve milkshakes by making them appeal to demographic groups. But again, someone didn’t buy a milkshake because they were a woman between 35-45 with 3 kids. 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.

Facebook advertising doesn’t work because they focus on showing you ads based on who you are, not what problem you are trying to solve.

Ironically enough, Google is running around afraid of Facebook, but their ads have been better targeted all along because they are shown at a moment where one has a job that needs to be done.

Facebook is no better at advertising than ValueClick or any other online ad network. They just happen to be able to correlate their customers slightly better than everyone else. That’s not the formula for a $100 billion business, just click through rates closer to 1%.

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TauTau

i agree the facebook spend has yet to show true ROI, but im sure with that critical mass of data its just a matter of time til they hit a sweetspot…hopefully for everyones sake
TauTau

i agree the facebook spend has yet to show true ROI, but im sure with that critical mass of data its just a matter of time til they hit a sweetspot…hopefully for everyones sake
Andrei Boiko

There is low CTR and other parameters because ADs are just bad, as a concept. Image with logo and brand name or product name just doesn’t compel me to investigate it. Not even a little. Also signal to noise ratio for the ads is so low, that people just don’t bother finding out if it is actually relevant signal.
Andrei Boiko

There is low CTR and other parameters because ADs are just bad, as a concept. Image with logo and brand name or product name just doesn’t compel me to investigate it. Not even a little. Also signal to noise ratio for the ads is so low, that people just don’t bother finding out if it is actually relevant signal.
Brett

I just can’t believe so many people actually bought into it! This kind of talk was going on before their IPO but people bought it anyway because it’s facebook.
Brett

I just can’t believe so many people actually bought into it! This kind of talk was going on before their IPO but people bought it anyway because it’s facebook.
creativerascal

FB is about your past (where you have been, photos already clicked) ..Google search is abt your present and future need. That makes a lot of difference
creativerascal

FB is about your past (where you have been, photos already clicked) ..Google search is abt your present and future need. That makes a lot of difference
http://about.me/joanjimenez Joan Jimenez

If you are in the Affiliate Marketing industry, you’ve known this for years.
http://about.me/joanjimenez Joan Jimenez

If you are in the Affiliate Marketing industry, you’ve known this for years.
Marty

While I agree that Facebook advertising doesn’t work, you’re confusing demographic trends with causation.

No one thinks that I like beer because I’m male and 32 years old, they think that 32 year old men are more likely to like beer than the rest of the population. So given the choice, with limited advertising dollars, to whom do you target your advertising? To the group that is full of the highest concentration of potential buyers.With the above in mind I contend that Facebook’s big boxes and leaderboard advertising is better than completely un-targeted big boxes and leaderboards. The problem is that big boxes and leaderboards don’t work well. That’s the real issue. Even if I want the damn product I still don’t click on the stupid Facebook ad.
- http://meloncholy.com/ Andrew
  
  Yes, exactly. I’ve only helped run 1 campaign on Facebook, but changing the targeted demographic from something fairly general (women aged about 18-45) to something more specific (women aged around 18-35 with particular interests and from particular countries, whom I knew from a Facebook page represented the target market) improved CTR by around 1900%.
  
  So from that point of view, it worked, albeit from a low baseline. But it still didn’t solve the main issue with FB adverts vs. Google search, which is the intent: almost no-one visits Facebook to buy the stuff in the ads, whereas people on Google self select by searching for the thing they want. Building a target profile that accurate is, to put it mildly, incredibly difficult, even with all of the info people volunteer to FB. (See also AdBlock’s “show me adverts in search” option – many people consider these genuinely useful.)
  - http://www.theideaschool.org Ryan Chatterton
    
    Could it be that instead of using FB ads to get sales, people might be wiser in using them to build brand awareness?
    
    The big miss in this space is that, at the end of the day, most Facebook advertisers are still essentially door-to-door salesmen. Of course nobody cares about your product popping up in or around their Facebook Page. Why would they? When have any of us ever cared?
    
    However, if you have a content marketing strategy (which everybody should), and produce free content for a particular audience, then Facebook ads are a perfect way to deliver your content to people who are highly likely to enjoy it.
    
    The real value here isn’t in spamming people with ads (that we’ve all grown used to by the way), it’s in using Facebook ads as a way to deliver targeted content, build a brand, and make your customers give a crap about you.
  - tom
    
    ”Show ads in search”… yes, I want to know who’s advertising heavily – so I can avoid them
Marty

While I agree that Facebook advertising doesn’t work, you’re confusing demographic trends with causation.

No one thinks that I like beer because I’m male and 32 years old, they think that 32 year old men are more likely to like beer than the rest of the population. So given the choice, with limited advertising dollars, to whom do you target your advertising? To the group that is full of the highest concentration of potential buyers.With the above in mind I contend that Facebook’s big boxes and leaderboard advertising is better than completely un-targeted big boxes and leaderboards. The problem is that big boxes and leaderboards don’t work well. That’s the real issue. Even if I want the damn product I still don’t click on the stupid Facebook ad.
- http://meloncholy.com/ Andrew
  
  Yes, exactly. I’ve only helped run 1 campaign on Facebook, but changing the targeted demographic from something fairly general (women aged about 18-45) to something more specific (women aged around 18-35 with particular interests and from particular countries, whom I knew from a Facebook page represented the target market) improved CTR by around 1900%.
  
  So from that point of view, it worked, albeit from a low baseline. But it still didn’t solve the main issue with FB adverts vs. Google search, which is the intent: almost no-one visits Facebook to buy the stuff in the ads, whereas people on Google self select by searching for the thing they want. Building a target profile that accurate is, to put it mildly, incredibly difficult, even with all of the info people volunteer to FB. (See also AdBlock’s “show me adverts in search” option – many people consider these genuinely useful.)
  - http://www.theideaschool.org Ryan Chatterton
    
    Could it be that instead of using FB ads to get sales, people might be wiser in using them to build brand awareness?
    
    The big miss in this space is that, at the end of the day, most Facebook advertisers are still essentially door-to-door salesmen. Of course nobody cares about your product popping up in or around their Facebook Page. Why would they? When have any of us ever cared?
    
    However, if you have a content marketing strategy (which everybody should), and produce free content for a particular audience, then Facebook ads are a perfect way to deliver your content to people who are highly likely to enjoy it.
    
    The real value here isn’t in spamming people with ads (that we’ve all grown used to by the way), it’s in using Facebook ads as a way to deliver targeted content, build a brand, and make your customers give a crap about you.
  - tom
    
    ”Show ads in search”… yes, I want to know who’s advertising heavily – so I can avoid them
http://twitter.com/diedsj Diederik Sjardijn

Interesting thought. Personally im under the impression that people expect from facebook what one would expect from google ad-words, eventhough people on facebook are generally not as far down the awareness ladder (read: Eugene Schwarz’ Breakthrough advertising) or atleast we dont know if they are as far down that ladder as they are on google… The lack of understanding of Schwarz’s awareness ladder baffles me in 90% of all marketing efforts i see around me.
http://twitter.com/diedsj Diederik Sjardijn

Interesting thought. Personally im under the impression that people expect from facebook what one would expect from google ad-words, eventhough people on facebook are generally not as far down the awareness ladder (read: Eugene Schwarz’ Breakthrough advertising) or atleast we dont know if they are as far down that ladder as they are on google… The lack of understanding of Schwarz’s awareness ladder baffles me in 90% of all marketing efforts i see around me.
Amit Ranjan

You might want to embed this deck in your blogpost… its a great visual representation of the problem with facebook ads… saw this on slideshare long time back… reminded of it when I read your post

http://www.slideshare.net/davidcushman/why-traditional-ad-models-will-not-work-in-social-networks-and-what-will
Amit Ranjan

You might want to embed this deck in your blogpost… its a great visual representation of the problem with facebook ads… saw this on slideshare long time back… reminded of it when I read your post

http://www.slideshare.net/davidcushman/why-traditional-ad-models-will-not-work-in-social-networks-and-what-will
Seanmalarkey

As someone who spends a lot of money on ads on FB – I couldn’t dis-agree more with the point you are trying to make about ads and their relevancy and why people buy.
Seanmalarkey

As someone who spends a lot of money on ads on FB – I couldn’t dis-agree more with the point you are trying to make about ads and their relevancy and why people buy.
Seanmalarkey

As someone who spends a lot of money on ads on FB – I couldn’t dis-agree more with the point you are trying to make about ads and their relevancy and why people buy.
Seanmalarkey

As someone who spends a lot of money on ads on FB – I couldn’t dis-agree more with the point you are trying to make about ads and their relevancy and why people buy.
Gary

All Facebook needs to do is release a ‘Social Adsense’ product on 3rd party sites (Facebook is already running the Like button on over 9 million sites, that same Javascript can be utilized to serve ads off of). The Google search queries are passed to the 3rd party sites and can be leveraged by Facebook in their ads, giving Facebook implicit and now explicit data to serve ads off of. That’s way more data than Google has…
Gary

All Facebook needs to do is release a ‘Social Adsense’ product on 3rd party sites (Facebook is already running the Like button on over 9 million sites, that same Javascript can be utilized to serve ads off of). The Google search queries are passed to the 3rd party sites and can be leveraged by Facebook in their ads, giving Facebook implicit and now explicit data to serve ads off of. That’s way more data than Google has…
http://twitter.com/daybreaker brad huber

“Facebook is no better at advertising than ValueClick or any other online ad network.”

I disagree. Your ultimate conclusion shouldnt be that Facebook is no better at advertising. It should be “If you use the same tactics on Facebook as you do for other regular online ad networks, then it is no better at advertising”

Which should be no shock. If choosing a demographic like 18-35 year olds only presents 1% click through on a normal ad network, why should you expect a better success rate just because you target the same demographic on Facebook? It’s still the exact same audience. Facebook is not some magic website that makes basic demographics click more ads than usual just because theyre on facebook.

The whole purpose of Facebook is that it gives you user data about likes, dislikes, favorite TV/Movies/Music, etc, along with a friend network that contains the same information for everyone.

If you dont use this data to refine your demographic to something like “18-35 year olds, with college education, who like indie music and have full time jobs” then of course your ad campaign will still have the same lackluster response as another ad network.

Not utilizing facebook’s valuable user data in focusing your ads and complaining about how it’s not any better is like trying to hammer in a nail using the handle, then complaining that hammers are no better than screwdrivers for hammering things.
http://twitter.com/daybreaker brad huber

“Facebook is no better at advertising than ValueClick or any other online ad network.”

I disagree. Your ultimate conclusion shouldnt be that Facebook is no better at advertising. It should be “If you use the same tactics on Facebook as you do for other regular online ad networks, then it is no better at advertising”

Which should be no shock. If choosing a demographic like 18-35 year olds only presents 1% click through on a normal ad network, why should you expect a better success rate just because you target the same demographic on Facebook? It’s still the exact same audience. Facebook is not some magic website that makes basic demographics click more ads than usual just because theyre on facebook.

The whole purpose of Facebook is that it gives you user data about likes, dislikes, favorite TV/Movies/Music, etc, along with a friend network that contains the same information for everyone.

If you dont use this data to refine your demographic to something like “18-35 year olds, with college education, who like indie music and have full time jobs” then of course your ad campaign will still have the same lackluster response as another ad network.

Not utilizing facebook’s valuable user data in focusing your ads and complaining about how it’s not any better is like trying to hammer in a nail using the handle, then complaining that hammers are no better than screwdrivers for hammering things.
http://twitter.com/daybreaker brad huber

“Facebook is no better at advertising than ValueClick or any other online ad network.”

I disagree. Your ultimate conclusion shouldnt be that Facebook is no better at advertising. It should be “If you use the same tactics on Facebook as you do for other regular online ad networks, then it is no better at advertising”

Which should be no shock. If choosing a demographic like 18-35 year olds only presents 1% click through on a normal ad network, why should you expect a better success rate just because you target the same demographic on Facebook? It’s still the exact same audience. Facebook is not some magic website that makes basic demographics click more ads than usual just because theyre on facebook.

The whole purpose of Facebook is that it gives you user data about likes, dislikes, favorite TV/Movies/Music, etc, along with a friend network that contains the same information for everyone.

If you dont use this data to refine your demographic to something like “18-35 year olds, with college education, who like indie music and have full time jobs” then of course your ad campaign will still have the same lackluster response as another ad network.

Not utilizing facebook’s valuable user data in focusing your ads and complaining about how it’s not any better is like trying to hammer in a nail using the handle, then complaining that hammers are no better than screwdrivers for hammering things.
http://twitter.com/daybreaker brad huber

“Facebook is no better at advertising than ValueClick or any other online ad network.”

I disagree. Your ultimate conclusion shouldnt be that Facebook is no better at advertising. It should be “If you use the same tactics on Facebook as you do for other regular online ad networks, then it is no better at advertising”

Which should be no shock. If choosing a demographic like 18-35 year olds only presents 1% click through on a normal ad network, why should you expect a better success rate just because you target the same demographic on Facebook? It’s still the exact same audience. Facebook is not some magic website that makes basic demographics click more ads than usual just because theyre on facebook.

The whole purpose of Facebook is that it gives you user data about likes, dislikes, favorite TV/Movies/Music, etc, along with a friend network that contains the same information for everyone.

If you dont use this data to refine your demographic to something like “18-35 year olds, with college education, who like indie music and have full time jobs” then of course your ad campaign will still have the same lackluster response as another ad network.

Not utilizing facebook’s valuable user data in focusing your ads and complaining about how it’s not any better is like trying to hammer in a nail using the handle, then complaining that hammers are no better than screwdrivers for hammering things.
http://www.profellow.com/ rjohnson008

Great article. I too have found Facebook advertising less than desirable. I’m also finding the same with LinkedIn advertising. I’d like to hear from anyone who’s advertised on LinkedIn – the good and the bad.
http://www.profellow.com/ rjohnson008

Great article. I too have found Facebook advertising less than desirable. I’m also finding the same with LinkedIn advertising. I’d like to hear from anyone who’s advertised on LinkedIn – the good and the bad.
http://www.profellow.com/ rjohnson008

Great article. I too have found Facebook advertising less than desirable. I’m also finding the same with LinkedIn advertising. I’d like to hear from anyone who’s advertised on LinkedIn – the good and the bad.
http://www.profellow.com/ rjohnson008

Great article. I too have found Facebook advertising less than desirable. I’m also finding the same with LinkedIn advertising. I’d like to hear from anyone who’s advertised on LinkedIn – the good and the bad.
Lewis Flude

Facebook should build a search platform to help people like me navigate the huge graph of data they own. Adverts there will be more relevant to my current needs, plus their current search is horrible.
Lewis Flude

Facebook should build a search platform to help people like me navigate the huge graph of data they own. Adverts there will be more relevant to my current needs, plus their current search is horrible.
http://www.webmentor.cr/ Marco Berrocal

You are right on the part that when you go to Google you are searching for something specific. At Facebook, you aren’t per se. You are just getting ads because you fall on a category that the advertiser “thinks” you might be interested. Great write up.
http://www.webmentor.cr/ Marco Berrocal

You are right on the part that when you go to Google you are searching for something specific. At Facebook, you aren’t per se. You are just getting ads because you fall on a category that the advertiser “thinks” you might be interested. Great write up.
Hm

I’ve been on Facebook since 2007 and I can honestly say that I have never once clicked on an advert on it. Actually I barely even notice or register their presence, they’re just over there in that ‘ignore’ space. And if they start getting intrusive, it’ll turn people off more. The best advertising / awareness campaigns on Facebook are viral creations developed to engage and be shared by the viewer. The rest is a waste of time and the whole site is way overvalued right now.
Hm

I’ve been on Facebook since 2007 and I can honestly say that I have never once clicked on an advert on it. Actually I barely even notice or register their presence, they’re just over there in that ‘ignore’ space. And if they start getting intrusive, it’ll turn people off more. The best advertising / awareness campaigns on Facebook are viral creations developed to engage and be shared by the viewer. The rest is a waste of time and the whole site is way overvalued right now.
Moo

On Google i search for: “Rent a car in San Fransisco” and I get ads for car rentals in San Fransisco. On Facebook I look at someones profile and I get random ads. That’s just fail.
- Gary
  
  That’s just plain FALSE. http://sphotos.xx.fbcdn.net/hphotos-snc7/577507_970111546709_18811629_39296813_76534665_n.jpg
Moo

On Google i search for: “Rent a car in San Fransisco” and I get ads for car rentals in San Fransisco. On Facebook I look at someones profile and I get random ads. That’s just fail.
- Gary
  
  That’s just plain FALSE. http://sphotos.xx.fbcdn.net/hphotos-snc7/577507_970111546709_18811629_39296813_76534665_n.jpg
KRISTIIINA

I AM SOO SICK OF FB ADS, THEY ARE ALL OVER MY FACEBOOK, ON MY PROFILE PAGE, ON MY NEWSFEED, THEY ARE NOW IN MY DREAMS!!!!!!!!
KRISTIIINA

I AM SOO SICK OF FB ADS, THEY ARE ALL OVER MY FACEBOOK, ON MY PROFILE PAGE, ON MY NEWSFEED, THEY ARE NOW IN MY DREAMS!!!!!!!!
http://twitter.com/rePinClub rePin Club

Demographics are important at least to narrow down your prospect. Try selling mascara to men only lead list. Heres an article I saw that has a diff take on FB http://howtodaytrade.biz/is-facebook-still-a-good-investment/
http://twitter.com/rePinClub rePin Club

Demographics are important at least to narrow down your prospect. Try selling mascara to men only lead list. Heres an article I saw that has a diff take on FB http://howtodaytrade.biz/is-facebook-still-a-good-investment/
multiscan

I perfecly agree. Only I don’t understand why all these thesis about FB failure are all coming out know, after they went public. I’ve been thinking all these things years ago. they are just trivially evident.
multiscan

I perfecly agree. Only I don’t understand why all these thesis about FB failure are all coming out know, after they went public. I’ve been thinking all these things years ago. they are just trivially evident.
http://twitter.com/erikdlarson Erik Larson

I have encountered some fairly strong evidence that Facebook is actually worse than ValueClick or other online ad networks. Facebook’s focus on making ads look like content has created a small group of users on the site that click to ‘like’ massive numbers of ads, regularly clicking dozens of ads a day, often 4 or 5 at a time, adding up to hundreds or thousands of likes per year – I call these people ‘booklicants’ since I am a geek, and since I thought they were bots at first.

This is misleading since most advertisers expect that people use Facebook the same way we (mostly) all do. In other words, we rarely click on ads, so if someone does click on an ad, that means something similar to clicking on a display ad somewhere else…it is a meaningful click in the way we expect. Not true.

You can read more here: http://wahanegi.com/do-not-advertise-on-facebook-until-you-read-this/
http://twitter.com/erikdlarson Erik Larson

I have encountered some fairly strong evidence that Facebook is actually worse than ValueClick or other online ad networks. Facebook’s focus on making ads look like content has created a small group of users on the site that click to ‘like’ massive numbers of ads, regularly clicking dozens of ads a day, often 4 or 5 at a time, adding up to hundreds or thousands of likes per year – I call these people ‘booklicants’ since I am a geek, and since I thought they were bots at first.

This is misleading since most advertisers expect that people use Facebook the same way we (mostly) all do. In other words, we rarely click on ads, so if someone does click on an ad, that means something similar to clicking on a display ad somewhere else…it is a meaningful click in the way we expect. Not true.

You can read more here: http://wahanegi.com/do-not-advertise-on-facebook-until-you-read-this/
ngkong

Facebook works or not really depends on what product you are selling. You won’t sell motorcycle, or life insurance in facebook. But products which people buy for fun like fashion, movie, local restaurant promo for this weekend, etc, those stuff sell hard in facebook.
ngkong

Facebook works or not really depends on what product you are selling. You won’t sell motorcycle, or life insurance in facebook. But products which people buy for fun like fashion, movie, local restaurant promo for this weekend, etc, those stuff sell hard in facebook.