With Google netting over $1 billion in profits per quarter, obviously the Google AdWords program that provides ads contextualized to search terms is highly effective for marketers. In a previous post I discussed how the Facebook Flyers program may give Google a run for some of that money.
It’s not that I see AdWords spending declining, but as marketers move their advertising away from TV and into web-based vehicles, I see Facebook having potential to capture a nice chunk of that growth. Google’s program, being based on search, means people are looking for something in particular and are inclined to click some link to go to some other web site. As Alec Saunders says, there is more likely to be an intent to buy, which may “bias advertisers in favor of Google Adwords.”
I think they should be biased in favor of Google Adwords. It’s obviously a great business that’s already working. In Facebook, people are focused on their networking, not looking for someplace else to go.
But Facebook Flyers do have at least three significant advantages that could lead to them being successful in grabbing a nice share of online advertising revenue.
First, Facebook has no external incentives for Click Fraud.
With Google’s Adsense program, by contrast, people who have Google ads on their site have a financial incentive to participate in click-fraud rings.
For example, if Arnold runs up clicks on the Google ads on Bob’s site, and Bob clicks on Google ads on Carl’s site, and Carl clicks on Arnold’s Google ads, the only losers are the advertisers. Arnold, Bob, Carl and Google all share the proceeds from the extra clicks. Google claims to be cracking down on click fraud to protect the viability of its pay-per-click model, but its partner sites have powerful incentives to pile on extra clicks.
With Facebook Flyers, the people on whose profiles the ads appear don’t share in the revenue. Facebook is the only beneficiary of the clicks, so no one else has any incentive for click fraud. And if Facebook employees run up the clicks, it will only hurt the long-term viability of the Flyers program.
Google has to pay the site owners to have its ads included. Facebook owns the site where lots of people are spending lots of time. Some people say companies are factoring click fraud into the price of their Adwords bids. Probably so. But even if the click-through rate is low, if the clicks are more likely to be real, this gives Facebook a major advantage.
Second, Facebook has a huge amount of demographic data about its users.
It’s great for Google to bring up ads related to a keyword search, when someone is out looking for a particular product. But in Facebook, particularly as its keyword targeting becomes more sophisticated, it should be possible in some cases to serve ads to people before they know they want something. That’s what Amazon does with its book recommendations. I don’t know whether my wedding video flyers targeted to engaged women in my local community will work or not (I probably need to raise my per-click bid above $.10), but if my ad shows up before the brides-to-be think to use Google to search for video and photography services, Facebook might beat Google to the Altar.
Third, less competition for Facebook Flyers may mean lower per-click rates than what you find with Google.
Everyone is using Google, so they are bidding up the price on keywords. The Facebook Flyers program is newer, so you may have a better chance of getting clicks at a lower price, at least until it becomes widely perceived that this is a worthwhile advertising platform. So there is an early adopter advantage here.
And if no one clicks your ads, you’re not out anything.
On the other hand, the Facebook Flyers are limited to one per page, so the inventory to sell may not be as big, which may drive up the price you need to pay to have your flyer seen. The engaged women I’m seeing as potential customers may also be college students, and a company offering used textbooks online may be bidding to have its flyers displayed to the same people.
And of course, Facebook has its Flyers Basic program, on which you pay for display instead of paying per click. If Facebook has a choice of getting a guaranteed $0.002 for each flyer it serves, as opposed to $.10 per click, it may make sense to bias toward the guaranteed revenue. The break-even for Facebook in the PPC program, at $.10 per click, is a 2 percent click-through. (So yeah, I definitely need to raise my bid.)
I’ll keep you posted on what I learn, and will appreciate hearing any examples of Facebook Flyers success you have.