Facebook Ads seen by an outsider – could they be even better?

Introduction

The first thing you’ll find when you google for “Facebook Ads” is, besides the official Facebook page, a bunch of guides that will explain you how to make good use of them. Because the people who write them probably started using Facebook Ads after years using Google Ads, the main message in most of them is: Facebook Ads are different from Google Ads. The most obvious conclusion is that, instead of putting your links next to search results for “tents”, you need to target people who “like” camping.

A more interesting side of the story is the structural difference. Ads on Google have higher click-through rates, because they are about something specific the user was searching and was interested in even before he opened the browser to look for them. Facebook Ads, on the other hand, are a little bit like billboards on the side of the road. You notice them, but you’re more interested in your friends getting married or throwing birthday parties. You don’t necessarily pay much attention to the Ads consciously, but you look at them for quite a long time (while Google search results are gone after few seconds).

Up to now, Google has had limited success attracting branding campaigns on its search results. Try to google “cool jeans” and, believe it or not, you won’t see many major brands among the ads on the right side of the screen. The ones you do see are usually advertising a discounted sale, not how amazing their products are. Retailers take the lion’s share of the ads. I’m not a marketing expert, but my guess is that they assume that once you are at the googling stage, either you have already decided and want to buy online or you’re looking to compare prices and characteristics. Brands are not very interested in trying to change your perception of them at that stage, because the event of “googling for a given product” is too infrequent to influence your opinion significantly and happens too late in the decision process.

On the other hand, seeing a brand multiple times, while you’re thinking of something else, is exactly what it takes to make you familiar with it and make you think it is cool. A roadside billboard you see every day on your way to the office does that job.

Facebook Ads are more like billboards, but with some advantages:

  • Users can click on them and see the brand website
  • They are surgically targeted to the people you want to reach
  • Lately, Facebook introduced the “Sponsored Story”. If a friend of yours “likes” a brand on Facebook, you probably get to see it once on your feed (if at all). Sponsored stories give brands the opportunity to amplify that event and show it to you multiple times, on the right side of the page, together with the ads. For the past few months, we’ve kept seeing that our friends like Dior, Calvin Klein, Tommy Hilfiger, etc… and if our cool friends like a brand, we’ll obviously buy it too, won’t we? I can’t help admiring the idea of Sponsored Stories. Word of mouth (people telling others that they like a product/service) has always been extremely powerful. What our trusted friends think (and, to a smaller extent, what anybody around us thinks) strongly influences our perception of a brand, to the point that some brands actually faked word of mouth, by paying people to have enthusiastic and loud conversations in buses or subways about a given product or service. Facebook Sponsored Stories are more subtle and effective: they do not fake word-of-mouth, they amplify the real one, coming from our friends

Could Facebook Ads be even better than they are?

In a word, Facebook Ads are quite advanced. Could they be even better? I believe they could. I’ll focus on the second of the three points above. At present, Facebook allows advertisers to choose target audience by location, demographics (age, sex language), marital status, likes and interests, education and work (this is true for “normal” advertisers – key accounts might enjoy a little more privileges, but I don’t really know). While this looks like a dream to a marketing manager who spent his life buying space on TV and magazines, this is surprisingly little compared to how much Facebook knows about us. Facebook has the opportunity to be a lot more granular in segmenting the audience. Here are some ideas:

  • Depending on the IPs I log in from, Facebook knows how much I travel. This could be extremely useful for a telecom company raising awareness for a roaming promotion or for a credit-card company trying to increase cross-boarder transactions
  • Facebook has a pretty accurate estimate of how much money I make, from many different sources (how much I travel, the addresses of the hotels I log in from when I travel, the addresses of the houses I log-in from, the company I work for, etc…)
  • Facebook even knows how beautiful I am: here’s how. When you look at a friend’s wall to write happy birthday to her/him, on the left you see some of her/his friends. If one of them is particularly beautiful and you’ve got some time to waste, even if you don’t know her/him, you might click on her/his photo to see it full size rather than just the “friend thumbnail”. Now, Facebook knows how many people who don’t know me directly have seen my face by chance in the “friends” section of a common friend’s profile. Facebook could track the share of these people who clicked on my face and I bet that there is a high correlation between my beauty and that share. Wouldn’t this be useful for a fashion company offering discounts on trendy clothes? Or for a model agency’s recruiting campaign? (I’m writing it as if it was a breeze – obviously that ratio is just the beginning of the development of a beauty score, which would need to be sophisticated and well tested)
  • Facebook knows how smart I am, because of all the IQ test games and application that are on Facebook (I’m referring to the part of intelligence that is measured by logic tests). This would be useful, for examples, for companies recruiting people for roles where performance is correlated with analytical skills and IQ
  • If my friends comment on my wall more often than they comment on other people’s walls, then Facebook knows that I am popular among my friends and that I’m likely to be good at entertaining people. This could be used by companies trying to set a new trend or promoting  a new club: if I am popular and I propose to go there, my friends will follow me
  • From the photos I upload, Facebook knows what activities I enjoy more than just my likes and interests say

I’m obviously not saying that it would be easy to put the above into practice and to make money thanks to it. Even assuming that it is possible to get reliable estimates of the beauty, intelligence, popularity, wealth, interests and traveling habits of users, bringing them to the market would be even more difficult.

On the technical side, adding more variables to the available segmentation criteria might make the “cells” too small for the auction to be liquid (ads prices are determined by an auction: for a given segment of users, the price is the “cut-off” point in the supply-curve that fills in all the available ads on the users in that cell. If the cell is too small, this process might become problematic). On the commercial side, making advertisers trust such sophisticated segmentation (so that they are prepared to push the auction price for the very sought-after micro-segments) would take time and effort.

Anyway, on the technical side, math could help. Multi-linear regression helps insurance companies price their products with tens of millions of different “pricing cells” even if the actual number of customers is just a few hundred thousands. It could also help attribute a fair price to “cells” that do not contain enough users to run a point-wise auction. On the commercial side, it would probably be possible to identify early adopters and create success stories to convince the rest of the clients.

I’m curious to see what will be the future of targeting in on-line advertising. What do you think will happen? I’d be happy to read your opinions in the comments to this post.

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Google and social networking – The fight with Facebook

Google Plus recently made a major move in the social networking scene and people are talking about it: who is going to “win”? How will Facebook react? How will Google Plus evolve? While I don’t have answers to any of these questions, I do have ideas of how Facebook could respond to the rival move and how Google could make the best use of its assets to boost adoption of Google Plus. But before getting there, I’ll start with a short summary of Google’s social networking experiences in the past and a comparison of Google Plus vs. Facebook.

Google and social networking

Google has been interested in social networking for a long time. in January 2004, Google launched Orkut. Facebook would be launched a month later, with very similar features. Orkut was very successful in some countries, such as India, Estonia and Brazil. In India Facebook overtook Orkut in 2010, while in Brazil Orkut still dominates. Globally, though, Orkut users are 10 times less than Facebook users.

In October 2007, Google bought Jaiku, a social networking site developed in Finland a couple of years ago. The audience did not show much interest, to the point that in early 2009 the source code was released and Jaiku became a “social networking script” (within Google App Engine) more than a social network itself.

At the same time (October 2007) Google had tried to buy a stake in Facebook. However, Facebook ultimately chose Microsoft. Unsurprisingly, this led to some cooperation between the two companies, for example Bing search was incorporated in Facebook’s home page, allowing users to search their friends’ posts or the entire web. Google was looking for exactly that kind of opportunities of product integration, rather than the very small stake (1.6% of the company for 240 USD million) when they tried to invest in Facebook. And that’s exactly why Google executives were reportedly very disappointed to learn that Facebook had chosen otherwise.

In May 2009, Google launched Google Wave, which someone calls a social network, but which was very much oriented to professional collaboration rather than staying in touch with friends. Anyway, Wave was not very successful. When Google chose to discontinue it, Lars Rasmussen, one of the product managers in charge of developing it, left to join Facebook. Ironically, the unfortunate effect of the Wave dis-adventure was that Google lost one of their product managers (famous, for example, for developing Google Maps) to the social network market leader.

In February 2010, Google Buzz was launched (for the first time, the Google brand was used in the network’s name). The “stream” of events a user sees on the Buzz home page is relatively similar to Facebook’s homepage and clicking on someone you could see something not too different from their “wall”. Compared to Facebook, though, Buzz is more “communications” oriented (to the point that it was integrated in Gmail) and lacked a little bit of the “who I am” part: when you open my Facebook profile, you can see a list of my photos, a list of my friends, my likes, my phone number and email (if I chose to display them). On Buzz, you could only see the posts in chronological order. Everything else was several clicks away.

Google Buzz was not received well by the public. According to critics, on one hand, it was not very innovative (no new feature compared to Facebook), on the other hand, Google’s attempt at building on Gmail’s user base in order to make it popular was too invasive (for example, automatically “friending” the people one most commonly messages with on Gmail led to lawsuits about privacy violation). Gmail users still have the “Buzz” folder in their Inbox, but Buzz never picked up very much.

Google Plus vs. Facebook

Critics of Google claim that behind the lack of success in social networking there was a lack of attention and resources. They say that Google never really thought social networking was that important. Google Plus clearly disproves this type of criticism. First, the launch was performed with the same trick that had been very successful with Gmail: restricted access. People who had an invite to Google Plus could (consciously or not) call themselves cool. Second, Google replicated Facebook’s features better than it had done with Buzz, but at the same time, Google came up with highly innovative features.

Should Facebook be afraid of Google Plus? Apparently they are, as they blocked Google Plus ads and all applications to export Facebook contacts to Google Plus. But let’s take a look at the main differences between Facebook and Google Plus:

  • Before discussing the differences in the user experience, what about the competition for advertisers? It’s true that monetization is probably a second priority for Google Plus at the moment (and it might be never be on top of their list), but still, if advertisers strongly prefer either Facebook or Google Plus, the other might be in trouble (especially if it is Facebook). Facebook Ads are very advanced, but Google is the World leader in online advertising. Will Google Plus equal or outperform Facebook Ads? In this other post I mentioned potential improvements to Facebook Ads. Will Google Ads get there earlier? (assuming my suggestions make sense)?
  • Under the hood: the stuff I read on blogs up to date focused on the visible features. Before I cover those, there’s another key thing, which is invisible. When the number of your Facebook friends grows, Facebook only displays the “top news” on your homepage (you can still click “most recent” and see the whole chronology). The way Facebook prioritizes the news in your feed is a key factor in how pleasant the Facebook experience is and is currently based on how many comments they received and whether they come from your favorite friends or not. Personally, I can’t say that I’m completely satisfied with the way it works. Some times I get boring updates and the few times I click on “most recent” I see items that I really would have liked to see in the priority news. Will Facebook improve it? Will Google Plus do better? At the moment it is hard to say, especially because I don’t have enough activity on my Google Plus to make any prioritization required
  • Asymmetry of friendship: Google chose the “reverse twitter model” rather than the “Facebook model”. You can include someone in your circles of friends, while she or he does not include you. On Facebook, in order to be friends, the approval of both parties is required. (I wrote “reverse twitter” because on Twitter you can choose to receive news from someone, while she/he does not receive them from you, while on Google you can decide to share with someone, while she/he does not necessarily share with you). This is a matter of personal tastes I guess.
  • Invitation management: here I think Facebook is a little better. Inviting someone to join Facebook or inviting someone to “be your friend” are separate things. In Google Circles, it is a little bit messy. In your circles, you see both people who are already on Google Plus and people who are not. If you used Gmail to communicate with a friend who has more than one email address, it is even worse: you see them among the people you might want to invite, even if you are already in touch with them through their other email address
  • Circles: on Google Plus, you have to choose a specific “circle” (Friends, Family, etc… you can also create custom ones) when you “add” someone. On Facebook you can just add them to your friends and, only if you wish to, you can include them in “List of friends”. I read plenty of comments praising Cirlces as an improvement over List of Friends, and indeed they are convenient and intuitive. However, the Facebook approach, while cumbersome (it is not immediate to find the way to add an existing friend to a list), is also slightly more flexible: you can add a friend to more than one list, while on Google Plus you can only add them one single circle. On Facebook, though, you can’t (easily) send a message to everyone in a list of friends, which is a major drawback, but hopefully it will come soon. Again, I guess personal tastes
  • Applications: while Google Plus indeed has a “game” tab, I never received an invitation on my news feed to challenge my friend’s IQ or beat them at Angry Birds. On one hand, this makes Google Plus almost entirely spam-free, on the other hand people spend millions of hours playing Farmville and Mafia Wars.  On top of that, who does not want to be annoyed by applications can block notifications in few seconds. Anyway, Facebook has been around more and developers had more time to make apps for it. Maybe the same will happen on Google Plus in the future. For the third time, I would say there is no clear winner here
  • Huddle: with Google Plus mobile, you can have group chats with your friends from your mobile phone. Facebook does not have anything like that at the moment. Of course you can send messages to (multiple) friends with the mobile Facebook application, but it is designed and implemented more like email than instant messaging. Here Google Plus has an advantage
  • Instant upload: my company still sticks to Blackberries, then please take this as outsider comments, but on Android, the pictures you shoot are instantly uploaded to a private album. You can then choose to share them at a later stage. With FB for iPhone or BlackBerry, they stay on your phone and you upload them when you wish to share them. I don’t see that much of a difference
  • Pictures: Google Plus has Picasa and full size images, while Facebook resizes pictures aggressively. To me and to everyone who’s passionate about photography this matters a lot, but most users probably do not really care (photos taken by a compact camera in the evening and/or indoor are already grainy at Facebook size)
  • Privacy settings: I will not comment on this, because I did not look in depth and because there are tons of blogs that cover this in great detail, but I think it is just because bloggers are IT-savvy. The average user probably does not care much, unless there are significant issues, as it happened with Buzz
  • Google Hangout: this is probably the biggest difference and the most innovative feature. You can have video chats with multiple people at the same time, thanks to the Google Video plugin. You see the webcam streams from each of the the friends you’re chatting with as small thumbnails in the lower part of the screen and the stream from the one who’s currently speaking as a large clip on top of the small ones. Innovative and fascinating, just what Google Buzz was missing

Overall, I believe that Google has a small advantage in terms of the product itself, especially thanks to Hangouts and Huddle, but others might see things differently. I guess personal tastes matter a lot here.

At the moment Facebook is the market leader. What’s going to happen? I read people commenting that Plus will end up (almost) forgotten like Buzz and other commenting that Google Plus will wipe out Facebook just like Facebook (almost) wiped out MySpace. There is a third scenario, in which the two platforms coexist and, in the long term, each of them specializes in its own niche. It is not easy to tell what is going to happen and personally I don’t even think it is that interesting to make bets. What I’m going to do is write what I would do to win the battle, but this post is already too long. Then, in my next two posts, I’ll describe  what I would do if I was Google and what I would do if I was Facebook .