Options on Facebook ads as a financial product

#1

Post by mjnet » Fri, Feb 12, 2016, 12:05 AM UTC

Traditional stock options allow people to buy the right for a certain amount of an underlying product for a fixed price and sell it later to market value...

I can imagine business owners would be interested in the idea of a virtual market around Facebook ads. It would work in a way such that people/traders are betting on reaching a certain conversion value, generated by the predefined ad they invested their money in. The difference between the invested money and the total generated conversion value will be the win/loss of this deal. Assuming the business owner is at least break-even with paying the difference to the conversion rate, if positive, this would boost his business as well.

Thoughts/comments/ideas? :)

Re: Options on Facebook ads as a financial product

#2

Post by noodlio » Fri, Feb 12, 2016, 12:09 AM UTC

Interesting, but how do you control/check that there was (not) a conversion?

Re: Options on Facebook ads as a financial product

#3

Post by bbcbasic » Fri, Feb 12, 2016, 1:14 AM UTC

Business owner with great conversions won't participate. Business owner with sucky conversions will.

See http://www.investopedia.com/terms/l/lemons-problem.asp

Re: Options on Facebook ads as a financial product

#4

Post by thenomad » Fri, Feb 12, 2016, 10:46 AM UTC

Slightly confused - who's generating the ads in this scenario, and who's paying for the ad space?

Re: Options on Facebook ads as a financial product

#5

Post by AznHisoka » Fri, Feb 12, 2016, 1:19 PM UTC

Impossible. Forget if anyone would want it. The Government would never allow it. Otherwise we'd have eBay options a long time ago.

Re: Options on Facebook ads as a financial product

#6

Post by bbcbasic » Fri, Feb 12, 2016, 6:43 PM UTC

AznHisoka wrote: post #5

Impossible. Forget if anyone would want it. The Government would never allow it. Otherwise we'd have eBay options a long time ago.

You can buy racehorse options though :-)

Re: Options on Facebook ads as a financial product

#7

Post by notahacker » Fri, Feb 12, 2016, 7:56 PM UTC

thenomad wrote: post #4

Slightly confused - who's generating the ads in this scenario, and who's paying for the ad space?

or what the ads are being converted into and who monitors the conversion...

Now there is a room for ad agencies with a close relationship with the end product to link their pricing to conversion rate and eliminate the campaign buyer's downside risk. But even if Facebook positively encouraged it, I don't think a market for third parties to speculate on something as complex, heterogenous and generally low value as social ad campaigns exists.

Re: Options on Facebook ads as a financial product

#8

Post by spoonie » Sun, Feb 14, 2016, 10:47 AM UTC

The main point of stock options is a tax hack: it's a way to give someone something (a promise) that has a face value but no taxable value. Generally speaking, you pay taxes on stock options when you exercise them, not when you earn them. The difference between strike price and market value at exercise time is incidental. I don't think stock options are a good analogy here. Maybe you want 'ad futures', like 'pork belly futures'.

Re: Options on Facebook ads as a financial product

#9

Post by kasey_junk » Sun, Feb 14, 2016, 2:38 PM UTC

spoonie wrote: post #8

The main point of stock options is a tax hack: it's a way to give someone something (a promise) that has a face value but no taxable value. Generally speaking, you pay taxes on stock options when you exercise them, not when you earn them. The difference between strike price and market value at exercise time is incidental. I don't think stock options are a good analogy here. Maybe you want 'ad futures', like 'pork bel…

Options as pre-ipo startups may or may not be primarily a tax hack, but options more generally are much more than that. Like most instruments they are a mechanism for pricing risk.

With that in mind you could see some sort of ad derivative. I'm not sure if it would be options, futures or bundled tranches. Its not clear what the OP means.