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.
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.
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.
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.
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.
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.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Facebook's stock needs to hit a certain dollar amount for its young CEO to gain the title.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.