In four years, Google has built its search engine into one of the biggest money machines ever. From July to September 2007, advertisers spent more than $4 billion on ads targeted to Google searches. And Google just keeps on growing—the $4 billion figure is 60 percent higher than the company's take during the same period last year.
By some estimates, the search engine's take now represents 40 percent of all online ad spending. Like all the other Web operations with dreams of hitting the big time, social networking sites want those Google bucks. Facebook, which now claims 50 million users, unveiled an advertising network Tuesday that targets ads based on members' profiles and online behavior. I'm sure there will be an early feeding frenzy as advertisers climb over one another to try Facebook's system. But in the long run, is it another Google? Not likely, because targeting users on a social network is fundamentally different than going after consumers on a search engine.
Facebook's ad delivery system has two components. Social Ads are targeted to the data in members' profiles. For example, my Facebook page lists me as a Gawker Media employee. (I write for Valleywag, one of Gawker's blogs.) I'll probably get Social Ads aimed at Gawker's majority demographic of twentysomething Manhattanites: White Stripes albums, American Apparel T-shirts, and DVD compilations of Mad Men. Conversely, if I document my lust for a black Cadillac convertible on Facebook, I'll become a trusted referral to my Gawker colleagues—"Paul Boutin recommends the Cadillac XLR-V." Start saving!
The company's other new ad program, called Beacon, lets companies place applications on Facebook pages. For example, Travelocity could create an app that allows users to book airline tickets, and OpenTable might build a feature for making restaurant reservations. Again, my actions will become endorsements displayed to my Facebook friends: "Paul Boutin reserved dinner for four at Moose's on OpenTable."
(Not to be left out, MySpace, Google, and Yahoo! announced their own social network advertising programs earlier this week. But as my fellow nags at Valleywag have shown in charts, none of these also-rans has the buzz or reach of the Facebook platform.)
How is Facebook's ad scheme different from Google's? Instead of waiting for you to search for something specific, such as "Bono sunglasses," Social Ads tries to figure out what you'll want to buy based on where you live, whom you hang out with, and what they bought. If you're a Silicon Valley professional in San Francisco, for example, you might get an ad for a Prius. This model is less like Google's keyword-targeted ads and more like Amazon's suggest-sell offers: "People who bought the same books as you also bought Heroic Conservatism." But when I go to Amazon, I'm already shopping, or at least window shopping. On Facebook, I'm more likely to be goofing around—I'm not going to list everything I buy and rate it. Unless Facebook can partner with a huge number of e-commerce sites to collect purchase data, it's going to lack enough stats to do the serious number-crunching that's necessary to predict who'll like what. There's nothing more annoying than weak recommendations. Even Amazon, which has much more useful data than Facebook will likely ever have, screws up a lot of the time—it's been trying to sell me Ursula K. Le Guin novels ever since I sent one to a friend.
I felt better about my gut feeling when blog millionaire Jason Calacanis blew up at a conference for Facebook developers. "Google has the greatest advertising in media history—search advertising. When you type a word into the box, we know what you're looking for. When you're on Facebook, we know you're looking to meet a girl or talk to your friends." Facebook's social ads, Calacanis says, will be skipped over by users who'll see them as noise that's interrupting all the other stuff they go on Facebook to do.
Compared to Social Ads, Beacon seems more rational. Beacon is directly geared to recording your purchases and consumery interactions with other, non-Facebook sites.Restaurant listings from your friends? Good idea. Facebook's 50 million users are surely an elite group: college-educated, wealthy, Net-savvy. Anyone would die to advertise cool products to them. But to become as big as Google, Facebook will have to convince online sellers of less sexy, less upmarket commodities—earplugs, socks, salt shakers—to spend their ad dollars on Facebook instead of on Google.
That's just not gonna happen. Your Facebook profile is your public persona: The music, books, TV shows, political candidates, and celebrities you love or hate. The site's ad model is based on personal endorsements—cool stuff, important stuff, and things that make you look good when they show up in everyone else's news feed. I'm sure there are people who'll blog about their socks. But there aren't 50 million of them, and they won't keep their friends long.
The secret of Google's success? They let you market anything, no matter how uncool, to anyone who can figure out a PC. We can Google for anything and buy it without anyone knowing. Google for "dandruff," "hemorrhoids," or "erictile disfunction" [sic]. Boom, boom, and boom—$4 billion adds up fast. Do you think I'm going to let Facebook use me to hawk Preparation H to fellow writers? Not a chance.