Thoughts on Facebook’s Ad Platform

Note to reader, please consider the following as a DRAFT only.  I’m still working on the software which will let you collaboratively edit it with me (if you so choose) without having to register.

If you listen to Facebook’s earnings call and you read the latest from the analysts then you already know that FB is looking for the technology which will give them the boost they need in mobile advertising.

Mobile is said to be a major problem for the company, because ad revenue is lower on mobile, and yet mobile timeshare is increasing. It’s their own dark knight rising. But it’s also an opportunity; to be the best mobile advertiser would put facebook in an entirely new position in the marketplace, and one I think they would be more comfortable in.

They say you have to be paranoid in Social because consumer taste changes too quickly for one company to stay on top. OK, so you hire great people, and you find great people to lead them.  The right people identify these new opportunities. When corps get large, it ultimately is all about the management. A company is an exercise in the careful distribution of scare resources (in the face of non-linear returns).  The non-linear return part is critical, and why risk-seeking behavior should be encouraged up to a point.

There was a recent article claiming that up to 80% of the clicks on their facebook ads were actually bots, which received almost 1000 upvotes on Hacker News (a truly incredible number, makes you wonder who wants to make sure the story spreads).  All ad traffic is going to contain some mix of human and bot clicks – it’s the age old problem of not being able to tell human from machine on the internet.  But an ad network is ultimately judged by its return on investment, which is simply a factor of the cost-per-click and the conversion rate. If all the clicks are bots, you can see where conversion rate is headed…

If you combine weak impressions and click-through rate on mobile with weak conversion rate on desktop, it adds up to a major headache. Facebook needs to get better at selecting, displaying, and tracking the ads it serves to users on screens both large and small. All those great new photo sharing features (or whatever) aside, facebook’s core product, like Google’s, is your eyeballs. And more specifically, their ability to monetize your eyeballs.

TODO:

  • Research ‘Sponsored Stories’ (currently driving $360m in ad revenue) feature, how it plays well in mobile.
  • How is Facebook fundamentally different from AdWords, and what should Facebook be leveraging from AdWords to improve their own performance?
  • What would the perfect mobile ad look like, and how would the user interact with it?
  • What’s the next paradigm shift for ad delivery that facebook could get in front of?