Facebook has gone public and we hear more and more concerns about the effectiveness of its largest source of income: paid ads. Facebook is well aware of this conversation, and has been experimenting with alternative advertising models for a while. After all, it needs to convince investors that revenue from its paid ads will continue to grow over time.
Personally, I think paid Facebook ads are yet to reveal their full potential. Why? We need to take a quick look at Google, and review the one thing Google knows better than anyone else.
Comparing Facebook’s paid ads with Google’s one would assume Facebook has a huge advantage because it actually knows who the users are. After all, users voluntarily provide Facebook with their names, birth dates, locations, workplaces, hobbies, likes, friends, and pretty much everything else. Google dreams of obtaining such information, which is why it’s trying to push Google+.
Yet according to the The Wall Street Journal, Google’s paid search ads actually outperform Facebook’s, even without information about the users. Why? Well, first there’s the obvious reason: People go to Google to be directed to other places, so they are more susceptible to ads (while Facebook is a destination site). But that’s just the beginning.
Facebook knows almost everything about you, but it doesn’t know the most important thing for businesses: that you’re ready to buy. And if there’s one thing Google knows better than Facebook, it’s that you’re looking for a product or a service right now.
Apparently, knowing where you are in the buying funnel is often more relevant than anything else. So, does this mean Facebook is in trouble? Is Google the real future?
Not necessarily. Facebook’s recently discovered but not yet activated “want” button is definitely an interesting step. However, enhancing the Facebook algorithms is where a lot of the potential really lies. Facebook already has a great deal of information about us, and as we continue to increase our searching and browsing within the Facebook platform, there is an opportunity for it to improve its data-mining and modeling algorithms in order to analyze user behavior, and therefore, better predict and differentiate between the things we “like” and the things we want.
For instance, the fact that users “like” a brand does not necessarily mean they’re planning to buy from it. However, if Facebook notices a user’s recent visit (or frequent visits) to a brand’s Facebook page, and possibly to similar brand pages (which might show us that the user is in comparison shopping mode), then it can start honing its assumptions about that particular user and serve more relevant ads. This, of course, is just an example, yet it shows the potential Facebook has. It already has the data; now it just needs to optimize its competencies. Facebook’s revenues depend on it, and so I believe it will net out positively over time. This is just the beginning.