Alex Iskold writes on Read/Write Web that there is “a myth floating around that contextual advertising is going to help Facebook justify its $15 billion valuation.” He goes on to say that the reality is much different:
- Facebook does not know much about us
- The data that Facebook has is not structured
- People are not coming to Facebook to click ads
Read the post to see exactly why he makes these assertions and then continue on to the comments to see several readers take him to task for having no real backup for them. My reaction to the post, is that Facebook’s ad programs are in their early stages and it’s too soon to tell just how successful the company will be with its targeted advertising.
While Facebook is currently running ads similar to those found on media and other web sites (presumably cpm and cpa), the buzz is all around its attempts at highly targeted ads. Given how hard the company is pushing the envelope, it clearly feels pressure to justify it’s valuation by bringing to market a highly effective ad program based on social networking. Implicit in this is the notion that the “everyday” kind of ads it’s running now won’t do it. Iskold adds to this idea by suggesting that Facebook users don’t click on ads. Anecdotal evidence would certainly bear this out, but it’s just that – anecdotal.
If Facebook users don’t click on ads, it may not be because they never will, but simply because the wrong ads are displayed. At first blush, the major facebook demographic may seem pretty tight – college students. But this group is really much less targeted than many advertisers want. A myriad of interests bubble beneath the surface, and tapping into those interests is where the real money lies. Facebook should be able to do that because users list their interests, but that has yet to become reality (although it may soon). In the meantime, it’s niche social networks that would seem to hold some real promise.
Niche networks, those based on a shared interest, make obvious what they’re all about, whether it’s a sport, a hobby, or a geographical community. With the network itself doing the initial segmentation work, adding in behavioral targeting only increases the network’s value. While there are a lot of these niche social networks on the web, traditional local media sites, such as newspapers, should be well positioned to create them. With already strong ties to the community, newspapers ought to be able to build sites based on geographical communities as well as interests specific to their market. Let Facebook work the bleeding edge of social network targeting, local media can let the network do the heavy lifting and start to build vibrant local communities of interest that are appealing to advertisers.