GM Says Facebook Ads Don't Work, Pulls $10 Million Account

Not exactly your main point but I have to agree that there's nothing stopping Facebook from being the next MySpace. Seriously. Not a thing. I think at this point the massive user base and their investment (their friends, photos, life in general) is about the only thing keeping them from switching. But even that can be overcome by others simply by making the switch easier by importing that information (think using Facebook's downloadable data on you as a means to do that). I can see ads getting lots of Likes because others friends like Movie or Brand X but beyond those kinds of ads people on Facebook aren't likely to leave the site. In fact the whole site is designed to keep you there do ads are kind of useless. Likes are meaningless. They don't generate dollars. Brand awareness is about the best thing you can get from Facebook.

You're right. Intent is seriously important. People use Google search as a means to get to another source of information regardless of whether their intent is navigational or informational. People on Facebook simply stay on Facebook until they're ready to either get offline or go search google.

1) GM is exactly the right type of advertiser for Facebook. They don't want you to buy a car right now, they want to get the brand in front of you. They, with all their resources, can't get it to work.

2) Google Adwords-style advertising is the absolute shortest line between a person who has a need and someone willing to fulfil that. To be worth more, Facebook has to either make "brand awareness" advertising bigger than "need fulfilment", or somehow figure out a way to beat Google at need fulfilment before Google heads them off. The thing about need fulfilment is that the user is already motivated to solve their problem, at this exact point in time that they're searching. You just have to fulfil that. That's worth pure gold for a marketer. Currently on Facebook the "need" is to get more cows, or whatever. To be "worth more" than Google, you need to use the social graphy thing to figure out how to get someone to spend money. But see #4.

3) I haven't spent one cent on Facebook, so either find a way to get me to spend one cent, or increase the value of the "whales" somehow.

4) Google knows a lot more about me than FB does. I spend every day telling Google what I'm thinking about, via the searches I do. Facebook, I might click a "like", or post a status. You can be sure that the things I'll "like" are a tiny subset of the things I search about. Google therefore has to hold back in which information they use about me, so they don't look creepy. Zuck would be happy looking creepy, but he's not able to get enough info to even begin to look creepy. [edit: so really, Google could make more by flicking a few "add creepy" switches. If FB desensitises us to that first, Google is still more likely to be able to leverage it.]

So, what would make Facebook worth more? Maybe if they leveraged the asset of having-everyone-on-board in a way to make the specific applications (e.g. search) irrelevant. They've done a reasonable job already, what with integrating it into websites, but that still isn't making them money in any direct way. Indirect ways are not going to beat the direct way.

So, Facebook is still a bit like Google pre-Adwords. We have a great lock, still looking for the key.

[edit: please tell me why I'm wrong. Really - I'd love to hear a way Facebook could win, would be an awesome lesson!]

No one is saying that Facebook, as it currently is, is better or more effective than Google in terms of user monetization.

My point is that their current methods are terrible and they still bring in $4B per year. If they can actually increase the quality of their user monetization, then they certainly could bring in a lot of revenues.

Also, no one is saying that Google's current way of advertising isn't superior to Facebook. It's very effective, but Facebook doesn't need to be better. It just needs to make more money. Given the fact that it is has 1 billion users and the metrics indicate that they are more engaged for longer periods of time, it has plenty of opportunity for better monetization.

My point is that the OP was projecting Google's way of monetization thru search onto Facebook, and that's not the right. You don't go to Facebook to search, you go to browse your friends' lives, which is a different experience. It's like channel surfing as opposed to going to the library to work on a research project. If you try to buy ads from Facebook you can see right off the bat that it's not the same as Google. You don't select users based on keyword searches. You can select your users based on their interests, their age, etc. And this information is likely to be much more accurate than the information that Google distills from the sites you click on, etc.

If they can come up with a better way of monetizing their users through some better ad platform, or through better products and services, then they could make a lot of money, and they wouldn't be the risky investment that some people think they are. That is what you're betting on as an investor, that Facebook can actually improve their monetization. If they can't, then they are dead meat.

Full disclosure: I have no association whatsoever with Google or Facebook besides using their ad platforms, and my hope is that Facebook gets down to about a $50B market cap shortly after the IPO before I buy.

I haven't heard anyone with volume saying fb ads work.

"If you look forward 5+ years, everyone is doing much of their internetting via their phone"

Sure, but a nontrivial portion of that internetting will be with your phone in either a laptop or desktop dock station. Laptops and desktops are dying... laptop and desktop form-factor interaction with computer isn't.

One of the larger of the several reasons I'm grumpy about the way that cell phones has evolved with all their heavy vendor lockdown is that I should be able to use a cell phone as a full netbook with only a bit of effort. It's a f'ing computer, stop pretending it's not, let me in! Instead, hacky half-assed bullshit is barely in hardware beta from a select group of off-brand manufacturers, even as "a Linux desktop" is a solved problem. If I didn't have to invest in both a laptop and a cell phone I could justify a much nicer cell phone to myself.