Lap Ming Lee is the founder of TechShip2038, a blog based in Hong Kong about the startup scene in Asia.
Recently I read two articles about Facebook’s advertising business model. The first article is by Chris Dixon. It describes how successful startups usually rely on “a single major product or business innovation,” and in the case of Google it is Adsense/Adwords. A brief definition: Adsense is for publishers to display their own ads, and Adwords is for marketers to create advertisements which appear in search results.
For Facebook, they still rely on an old business model that utilizes display ads exclusively.
The difference between Google and Facebook is tremendous. Chris argues that for Google, Ads provide real value for its Adwords customers because the ads are displayed while users are searching for something they want. Facebook users, on the other hand, use Facebook to socialize with other friends. They are not searching.
Google makes the vast majority of their revenues, therefore, when people search for something to buy or someone to hire. They don’t have to stoke demand – they simply harvest it. When people use Facebook, they are generally socializing with friends. Chris uses a metaphor on this point: You can put billboards all over a park, and maybe sometimes you can convert people from non-purchasing to purchasing intent. But you end up with a cluttered park, which is not very effective advertising.
The second article that I read provided an example of what Chris Dixon described. This article was supposedly published before GM pulled its advertising budget from Facebook. Titled, “I put my family business on Facebook. Here’s what happened,” the article describes how Facebook advertising has no viral effect and is essentially ineffective. Although ads can be targeted, the users that end up clicking are mostly random. The only positive aspect is that these users are all in the country selected when the advertisement was created. Peter Faulkner, the author of the second article, spent 160 pounds on ads and only got two clicks from 2 random people. He writes, “I decided to view the profiles of all those who clicked the ads. They hit one common spot – they were all in the UK. But they were aged from 13 to about 70, many were unemployed or in education.”
Does this mean that Facebook advertising is useless and we should all switch to Google Adwords? I don’t necessary agree. Ever since I started this blog (http://www.TechShip2038.com) 4 weeks ago, I have been tracking visitors that come to the site. I noticed that when I was reaching out to more people through Linkedin and Twitter, or when I was writing about “How” articles or going to events, my visitors clearly improved. But when I was blogging about when and where events were happening, and doing my Sunday re-blogs, the visitor numbers hit an all time low. (By the way, I have around 700 visitors, 550 unique visitors after 4 weeks.) This clearly shows that there is a positive correlation between the amount of effort I put into each article and my visitor count.
People that pay for advertisement on Facebook somehow believe it will transform their website overnight from regular Joe to pop-star status. And somehow the viral effect will magically happen. There is a lot more to creating a viral effect than simply advertising. If your website is not sticky in the first place, creating an advertisement will not create the ROI that you are seeking.
It is similar to meeting Lebron James, paying to play basketball with him for 5 mins, and then expecting other fans to want to play with you afterwards. If you are not good in basketball, it doesn’t matter how long you play with Lebron; other people won’t play with you. You need to have a very good website or good product from the start for others to notice you.
Chris Dixon was correct in pointing out the flaws of Facebook’s advertising business model. But I think publishers should stop complaining about Facebook advertising. I believe they should be spending money on improving their website before spending money on Facebook ads. I am still trying to figure out how to make my own blog more sticky.
Some common terms you might want to know for this article
- Stickiness: How attractive your website/ product is for users to return in the future
- ROI: Return on investment
- Publisher: People that put content online
Edited by Matt Johnson