Facebook's can't-win ad strategy

The pressure is on to 'monetize' the social network's huge membership, but its members balk at its every effort.

By Minyanville.com Mar 5, 2013 2:41PM
Couple with laptop copyright CorbisBy Carol Kopp 

Have you heard about the latest blowup over a Facebook (FB) money-making scheme? 

It seems that the company is offering some users preferential placement of posts on the news feeds of other people for a $7 fee. Or, taking it just a step further, Facebook may be burying the posts of those users, unless and until they pay $7.
Both options have only been inferred by users from their actual Facebook experiences. Facebook isn't about to give away proprietary information, and/or enrage its users even more than usual by describing how it prioritizes the posts its users see.
In truth, this latest move is relevant mostly to commercial users, who are eager to get their marketing messages seen by the largest possible audience. They are even more eager to get those messages delivered for absolutely free, as they have been doing since Facebook was founded.
Facebook presumably did not purposefully create a free advertising vehicle (that is, the standard posting function) that's more effective than its paid vehicle (display advertising).
But that's what it's got. And, based on its efforts so far, there is no way that Facebook can deliver advertising that's effective for sponsors and yet does not alienate its user base, which is immense but not necessarily loyal to a fault.
In fact, every time Facebook's big thinkers step outside the box on advertising, they step in it. The company's great strength, in the competition for online advertising dollars, is its ability to sort and sift its vast database of personal information on its users, gathered from their profiles, their posts, their shares, and their likes.
The problem is, Facebook's users have a natural aversion to having their every trivial comment and keystroke collected, stored, distributed, and even, on occasion, misinterpreted.
Here's an example: Facebook appears to be selling your "likes," to appear under your name on the news feeds of your friends because you have previously clicked the "like" button on a link in that site. For example, I "liked" a news story that appeared recently on CNN, because I thought some of my friends would find it equally interesting. Days afterwards, my Facebook news feed proclaimed that I "liked" the following CNN headline: "Burt Reynolds Hospitalized With Pneumonia." Excuse me, friends, I've got nothing against poor Mr. Reynolds, though his current health is not of pressing interest to me, and I never even clicked on that story anyway.
Again, the above is an inference based on actual Facebook usage, not on a company announcement. But I can think of no other possible link between me and Burt Reynolds.
If you think that's relevant only to your posts related to news sites, consider how much you'll appreciate it when advertisers start attributing to you endorsements for random products available on eBay (EBAY), or maybe some medical procedure described in horrible detail on Health.com. And then they'll store those "likes" forever, for access by total strangers, prospective employers, and your mom.
Part of the problem is that Facebook and its advertisers appear to be approaching and defining each opportunity in the crudest way possible. You can see this by taking a look at the right side of the Facebook screen, where the (properly labeled) display ads appear, supposedly personalized to each user. At the moment, my top page has seven ads, and five of them are for the same celebrity diet scam. That's must be because I'm an American female, since I can comfortably swear I've never posted a hint about my weight on Facebook.
So, Facebook presumably has failed to find a way to sell advertising targeted at any of the valuable little demographic sub-groups that my activity on the site reveals that I belong to: people who follow political news closely, who live with cats, watch "Game of Thrones," like to go to warm places during the winter, have strong connections to New York City, and so forth.
This means that Facebook is offering its advertisers less value than they could get with judicious purchases in traditional media. That would be very bad news even if there weren't another website out there that had the same advantages as Facebook: vast user reach, daily usage, and the ability to collect, sort, and sell information related to actual usage.
And that is Google (GOOG). Of course, Google has gotten slapped around, too, for stepping outside the box on advertising practices. But its relative success in bringing in advertising dollars is attributable to its core mission of search, and the way its search works.
It’s the immediacy that counts. Google could rake in the dollars without ever storing any of your searches or using any personal information about you. Each search you enter expresses a current interest, and Google responds with related information and actionable advertising offers, properly separated so you know which is which.
It's not clear why Facebook has been unable to pull that one off.
Not that Google is content with its core competency, either. So, it remains to be seen whether Google or Facebook will be first to find a way out of the advertising box without frustrating or offending their billions of customers around the world.

More from Minyanville
Mar 5, 2013 4:17PM
Facebook doesn't understand that people don't want their personal information sold and given to companies or 419 scammers without a say in it. You can't opt out of having your information sold. You have no say as to where your info goes.

That is the major problem with FB: It is a service with such hidden caveats that you don't find out what they are till you find out the hard way.

So trying to monetize all 900 million users of Facebook means it will only end one way: Badly. 

Mar 5, 2013 4:30PM
Short FB.  It is getting long in the tooth.  Something "cooler" will be here by next year
Mar 5, 2013 4:30PM
its a fad nothing more....no matter how much investors want to make this a tangible product, its never going to last...and people don't really care about facebook
Mar 5, 2013 7:18PM
Facebook is nothing more than a "Madoff" sized scam designed to line the pockets of the few from those of the many before it goes the way of MySpace.
Mar 5, 2013 5:07PM

The high cost and potential cost of sharing your personal information with the world.  Now that social networking has been firmly established for some time now, the trade-offs to being constantly connected to everyone everywhere is quite clear.  Facebook will go the way of other hot tech items and fade away.  Something similar will remain, but only those people that really have a great need to be overtly "social" will be regularly contributing.  I'm surprised the backlash to being overly out there hasn't happened more strongly and sooner.  Glad I never invested my time or money in FB.

Mar 5, 2013 5:36PM
People that put their money into this fad are going to regret the day they ever heard the word Facebook. The ones that bought in on IPO day are already regretting it to the tune of about negative $15 a share.
Mar 5, 2013 6:02PM

Facebook really needs to get their acts straight and stop the B/S with its users. I liked it for sharing with distant friends and family.

I had Facebook account since 2009. I deleted last summer. However, you have the option of "Deactivating" or "Deleting". They are very specific on the difference between the two and will tell after 14 days. So why it that when I chose to DELETE the account it is still active 9 months later and it was brought to my attention by my nieces, distant friends and family. So I signed in to check. Still there as if I had never left. Each time you sign in you just re-instated your account and will have to Delete again. After four times of doing this, I just deleted everything one by one every piece of information on my account. Everybody I know knows how to reach me by other methods.

I won't recommend Facebook to anybody. But most people are on Facebook. But I think now Facebook may be reaching its end of the line.


Pay to be on facebook, go back to myspace.

Mar 5, 2013 6:25PM
Making it up as you go is not a business plan.  And therein lies the crux of the matter: FB did not have a clear monetization strategy the day it IPO'd.  Especially in the main, key crucial area: a viable mobile platform.

If anything, it had an Emperor's New Clothes strategy intended to enrich the insiders and victimize the dupes that bought in at $42+/share.  All the meanwhile tricking the gullible into revealing every painful last detail of their personal history and lives to be mined by all sorts of organizations---for all sorts of purposes.  Big Brother's wet dream.

Its business model is as real as a western town TV set and ignores the fickleness of its main average demographic -  14 y.o. teenagers.  Good luck with that.

Mar 5, 2013 6:09PM
Problem is that after they hack you computer with spyware, they place the add in the middle of your friends news feed.  Any company that pays for this type of underhanded treatment is immediately on my "Do NO Business" list as unethical companies are not worth more time that the delete button.  I am sure glad that Facebook assigned a bogus e-mail address to my account so I don't have to deal with the spam.
Mar 7, 2013 4:49PM
My side ads show ....Treatment for Alcoholism .....Get "ripped" without steroids, Visit Israel and donate to a Jewish movie !!

Whoever wrote their ad algorithms is a f*cking moron ! 

Mar 7, 2013 2:46PM
Once you start with facebook you find your information sold to everyone and tons of spyware programs loaded onto your computer.  When facebook throws this back in your face through directed advertizing you quite quickly decide that a friend who lies, cheats and steals is not really a friend.  Of course my facebook information is bogus and the spyware is now blocked.  Same for my friends.  The best thing that facebook has done is change my e-mail to one of their bogus internal accounts.  It eliminates the spam and hate mail.
Mar 6, 2013 10:23AM
I wrote that this was the next step for Facebook in a blog post last year. http://www.tumblr.co​m/blog/socialplanetw​atch
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