[mmaunder]

It does raise the question "What is Facebook's Killer business model?". They have defaulted into ads because that's what Google did and that's what works for many other businesses. But I've never clicked on a Facebook ad and I don't know anyone who has unless it was research. I'm seeing highly targeted ads based on my interests and demographic and I just don't click because I'm too busy social networking. Whereas with Google my intent is "search" and so I occasionally click.

After recently starting to use them again I'm blown away at how useful and engaging the app is. But the revenue just seems to be hobbling along considering their scale.

They've tried so many models and none really stuck like AdWords for Google. Long term I just don't see the same kind of revenue growth that companies like Google and Amazon have had and continue to have. For any investor in public companies that's kind of terrifying when it's not clear how revenue will grow.

[chintan]

>But I've never clicked on a Facebook ad and I don't know anyone who has unless it was research.

I often hear this on HN and from other techies. I bet you've never ran a serious Facebook or any other Ad campaign and measured effectiveness (in terms of business ROI).

I used to think like you, but they do work (even 0.05% click thru rate is considered effective!) and hence these companies make billions of dollars. Please stop making such ignorant statements. $3 billion revenue is not a small number.

[RobPfeifer]

In my experience, click-through rates aren't that great and conversion is really pretty bad. I've worked at 2 decent size ecommerce companies and the CPO hasn't ever really been profitable for social media ads especially compared to Google and Bing ads. Their advertising is really more comparable to traditional display or remarketing ads at this point which are generally less efficient for marketing spend and hence less profitable for FB's customers.

[dchuk]

Their killer business model hasn't been released yet, but it will ultimately be a competitor to Google's Content Network Ads. Facebook is the ULTIMATE retargeting machine (hence why Google created Google+, it's not because they want everyone to be more social, they want your social data for ad targeting).

I bet within the next 24 months, Facebook launches their content network ad platform and it will be the first true competitor Google will need to deal with simply because of Facebook's massive scale.

[pron]

Yeah, but where will those ads appear? I have absolutely no data on this, but it seems people are spending less and less of their web time on "the open web", and more of it on medium-to-huge websites, and those usually sell their own ads directly. Facebook will succeed at what you're suggesting only if their targeting proves so effective that medium-sized websites (say the big blogs and online magazines/news sites) can make more money running Facebook ads (after giving Facebook its share) than from staying independent.

[dchuk]

They'll appear anywhere you see a site currently running adsense ads. There's tens of millions of sites running those ads, there is far from a shortage of publishers for a new advertising network.

[robryan]

Yeah, people are crying out for an alternative to adsense but can't get anything near it due to the amount of information Google has to target ads and the inventory size. Facebook is well placed to offer as good returns with even better targeting. Just look at the amount of targeting options you get on Facebook now, I'd take those any day to what adsense gives.

[alain94040]

Even "techies" click on Facebook ads. I can share my experience: how do you raise awareness for a startup conference, since obviously no one goes on Google to search for it. Facebook is great at telling you about things you may want to know, but are not currently looking for.

The reason it works for Facebook is because of the amazing (scary) imformatiom they have on their users. But it can be put to good use.

[netcan]

I work in online advertising and I would agree if it weren't for the number. But, Facebook are selling ads. They probably still have a lot of low hanging fruit to pick. Advertisers have probably been getting a decent bang for their buck because it hasn't been the kind of economic climate that's very friendly to frivolous ad spending.

The only "theory" I can think of that would explain Facebook ad revenue as a temporary phenomenon is businesses trying it out or trying to get in early in anticipation of the ad platform improving. I don't buy that though, not at this point. I wish I understand the economics of it better.

[stefanbech]

Netcan, I read and old comment of yours from 3 years ago regarding a startup idea someone had.

http://news.ycombinator.com/item?id=439302

I'm working on a project that has some similarities to what you guys were discussing. Could we connect via email? You can reach me on stefan-at-wantr.com. Cheers.

[doctoboggan]

I know I am just one example but I am the opposite of you. I have never clicked a google ad (purposefully at least) while I have clicked many facebook ads. Facebook's ads just seem more relevant.