[tworats]

I hope he's not actually putting his retirement money on the line here.

It's not about the quality of the ads, which he argues will get better with more data. It's about intent.

When I search on Google, my natural next action is to click a link. That link can be organic or an ad. If it's an ad Google stands to make money.

When I browse Facebook, my natural next action is not to click a link to an outside service/store. It's to continue to read status updates and browse around. Clicking an outside link is unnatural and unpleasant in this context.

This is the same reason ads on other Google properties such as gmail do so poorly - they may know exactly what you're likely to buy and could therefore present you with the perfect ad, but the activity you're engaged in does not naturally lead to clicking on ads.

[vibrunazo]

I just checked and Facebook gives you the option to buy ads per click, around $0.25 per click in my category. So why does it even matter if it has a low CTR? If the user didn't click, you didn't pay for it anyway. If the user does click, well there's your intent.

From my point of view as an advertiser, how is the CTR even relevant? Why do I care if google has 1% CTR and Facebook has 0,1%? If you assume both has the same cost per click. And I spend $100 on each. I'll still get the exact same amount of people clicking my ads on both.

Why does everyone keep repeating that facebook ads are only for branding, there's no intent, CTR is low? Doesn't the pay per click auction makes all of these irrelevant?

[glesica]

I don't necessarily disagree that CTR might not be the most relevant metric here, but at some point their revenue is limited by the CTR. If they have a billion page views per day, one ad per page (for simplicity) and a CTR of 0.1%, then their daily revenue is capped at 100 million * p where p is the average price per click.

So even if users coming from Facebook are more likely to actually buy something than those coming from Google (which would make Facebook ads more valuable than Google ads, all else equal), the CTR still creates a cap on how much they can earn.

[jack-r-abbit]

CTR is one piece. But conversion in another. And intent is important. Take two identical ads on Facebook and Google, with the same CTR and CPC, if the Google traffic has more intent to take action beyond the click (I'm not saying they are necessarily) then Google traffic is worth more. I worked in the LeadGen space for a good number of years and conversion rate is a very important piece of the puzzle. Generally speaking, intent leads to a better conversion. Plus, advertisers do them selves a disservice to attract higher clicks if that means their conversion rate is lower because the ad was bait. I've noticed that FB ads tend to have a spammy/scammy feel to them... bait.

[vibrunazo]

That perfectly answers my questions, thanks a lot.

Does anyone happen to have some real world example data of conversion rates between these ad platforms?

[prof_hobart]

You may get the same clicks/$ but you may get a significantly different numbers of clicks/day, and surely that's going to be an important consideration when you're deciding where to spend you advertising $.

[alain94040]

We've debated this point to death. By your argument, advertising on TV should be a failure, since people watch TV to be entertained, not to buy stuff right away. And still, 99% of TV shows are paid for by commercials. How come?

[gamble]

Advertisers have no way to measure just how ineffective their TV advertising is. It's pretty well established that traditional media marketing budgets have only the most tenuous link to results in the marketplace. Until recently, however, it had a singular advantage in that it was the only way to put an ad in front of a national audience.

Online advertising is cursed by a near-infinite supply and excellent metrics that immediately connect impressions to actions.

[bira]

FB ads are not a failure, they are just less effective.

[galenward]

Adsense is a $10b a year segment not based on intent - it's based on advertising you see when you are on random pages on the internet (like the New York Times).

Facebook will know what you want better than Google: they track you across multiple retail sites, see what you are looking at and even get structured data volunteered to them about that stuff.

[tworats]

I think you're making my argument for me: if anyone has stats on the total number of adsense ads served vs adwords ads served, we can derive the value of adsense vs adwords ads.

There are many more adsense ads displayed than adwords - it's google searches vs. most of the rest of the web. Yet it only makes up 1/4 of google's revenue.

Last I checked there was an order of magnitude difference between the value of an adwords vs. adsense ad.

[dpearce]

1/4 of Google's revenue is a pretty big deal. The author is suggesting that's the worst case scenario for Facebook, that they take over that $10B in revenue from Google. Add that to whatever they can do with Facebook Credits (with acquisitions like Karma), and their future looks bright.

[jack-r-abbit]

But timing can be important. Facebook may know that I have "Liked" someone's post related to hamburgers/milkshakes... but serving me a McDonalds ad when I'm reading my news feed may not be as effective as serving me one when I've just searched online for something related to hamburgers or milkshakes or viewing a food blog or something along those lines.