Tuesday, May 24, 2011

Why aren't FACEBOOK adspace prices higher??

Let me qualify what I am going to say by clarifying it is opinion based on my sentiments on Facebook and not on research.

Right now any ads run on Facebook are both underpriced with comparison to other advertising inventory online, as well as relatively ineffective. Why?

To me it seems that Facebook faces a conundrum. To keep the main area of their pages "pure" with the social utility of the posting and messaging, they must make Ad space minimal. SO as long as Facebook is as popular as it is, it seems that Ad space will continue to be minimal. BUT if Facebook becomes less popular, either due to novel competition or burnout, then they have space on their pages that could sell like Gold to the LONG TAIL of the remaining users of Facebook.

So either Facebook sells out some of its most loyal users and puts ADs more centrally located in the pages, and makes more money that way, or membership remains extremely high due to new functions and relatively low ads.

Thoughts?

5 comments:

Adeel said...

The prices are not high because of many reasons. i.e.

1) FB is unable to attract the FB users towards the ad banners on side bar.

2)We all use FB only as a networking tool and reluctant to hit ads.

3)FB as they are planning to go public don't want to focus on advertisement but would like to provide more features including privacy as the most important to their audience and future stockholders.

I am quite sure we will see a big reorganization and innovation in FB ad display after the IPO

Felipe said...

I agree with Adeel. I also expect some innovation particularly in how companies use FB to micro-segment and target customers.

The wealth of dynamic data that FB hosts can be used more effectively to identify trends and customer needs. One example discussed in class was the status change to "engaged". But this is only the beginning, FB can think of its features not only in terms of its users but also in terms of the information and usefulness for its advertisement clients.

Both, dynamic data generation (e.g. status change, events)and customer information (e.g. location, groups, demographics, education, employment)constitute the competitive advantage of FB vs. other on-line models with advertising revenue. For example, advertisement in search engines can be more effective to reach a customer who is searching on-line for a specific item, but FC can be much more effective to do brand building and establish a relationship with the customers.

The great challenge though is to strike the right balance between what remains completely private (unusable for marketers) and what becomes public and useful to micro-segment and target very specific groups of customers.

lenore said...

Another step Facebook may soon take towards solving the problem of keeping their pages "pure" while including ads, is to feature ads that look more natural and are "editorialized" for the Facebook medium.

Gawker.com is a good example of a site which features ads that are clearly marked but look very similar to actual content.

For ex., people on Facebook could start posting status updates sponsored by advertisers, which Twitter currently offers. In addition, people might soon be post pictures and links that are actually advertisments.

Hoonmo said...

To me, FB is like diary, which means that it is my own property. Even though FB have provided platform, all pictures and comments that I and my friends have left is priceless. Moreover, I want to make my facebook look more nice and customized, since most of my friends will come and see it. It will be frustrating to see some banners of a certain company that I have never even heard of, in the center of my private space.

This is the reason why FB cannot fully utilize its inventories. If they do, they will loose their core benefit proposition.

Elias said...

Ads in general function in a market where demand and supply set the rates as there's open communication in the marketplace. And Digital marketing rates in particular have a strong correlation between the prices and their effectiveness... This is the main advantage of digital marketing (effectiveness + targeting).
I don't necessarily agree with the fact that ads on facebook are cheap if you take into account effectiveness. Impressions are very cheap but based on my experience very innefective in driving people to the fanpages... per click is not that cheap as they make sure to display enough times so you get the number of clicks you target. For me the intuition behind facebook ads is what do you expect from facebook on the first place... Do you want to have a large fanpage with huge number of fans that just add you once and never come back to the fan page... or you want to have a smaller but very engaged community that activily participate who are adorers of your brand and become key opinion leaders throughput their virtual social networks as well as in thei daily social life.

My mainpoint here is that if in general prices of facebook are cheaper than other digital platforms is because neither the brands not the digital agencies understand clearly how to use facebook as a tool for brand building or for sales generation.

When companies put a google ad tide to a search, this ad will direct consumers to a website where they can purchase the product generating a transaction... so its effectiveness is very high... this is not the case of faceboook.

Facebook is good for having a direct open online platform with your consumers, but it depends on the brands to use it effectively. Also, Facebook itself restricts a lot the use of its tools for messaging the your fanpage members...