Author Topic: FB - Facebook  (Read 339273 times)

valueInv

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Re: FB - Facebook
« Reply #40 on: October 10, 2012, 01:48:15 PM »
More on FB's potential search direction:

http://techcrunch.com/2012/09/16/faceboogle/

Good article, and that's what I was getting at with my post in the last page.

Facebook has the most valuable collection of consumer data ever collected. If they are able to do so slowly, and in a way that doesn't annoy users, they have enormous potential to further monetize this info.


-I currently have no position in FB.

More than that, they have 2 billion eye balls to sell advertising to.  Ask any newspaper if they could sell advertising with that kind of exposure levels.

Facebook has been in business for over 7 years now, and everything I've heard is that the effectiveness of their advertising is hit-or-miss, at best. I think seven years with little competition is plenty of time to develop and monetize a successful advertising business if it were possible.

They have focused on user growth and not monetization. Even though more than 40&% of usage is on mobile, they barely started mobile advertising recently


jeffmori7

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Re: FB - Facebook
« Reply #41 on: October 10, 2012, 02:11:23 PM »
And now they are focusing on monetization, because we see a lot more ads using Facebook..and it is really really annoying...it could really deteriorate the product they are offering in my opinion..just saying!

ItsAValueTrap

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Re: FB - Facebook
« Reply #42 on: October 10, 2012, 03:03:34 PM »
Facebook has been trying to monetize its product better for a long, long time.  Remember Facebook gifts???

The advertising business model will probably work fine for them.  Right now they are cash flow positive.  Advertisers can track the results of their FB campaigns and know what return on investment they are getting because users can be tracked through cookies (just like Google advertising).

If you look around on affiliate marketing websites (all these guys track their ads and have positive ROI), you can get information on what they think about FB and other sites:
http://justindupre.com/dating-ads-facebook-vs-pof-where-should-i-run/

--------------
On the other hand...
http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-lost-my-faith-in-facebook-advertising/

Quote
it could really deteriorate the product they are offering in my opinion..just saying!
Facebook does put effort into making sure that its ads are ok.  Many advertisers/marketers bitch about their ad getting rejected.

A lot of scammy things tend to eventually get banned on Facebook.  If Facebook was out to make a quick buck they would not do this.
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ItsAValueTrap

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Re: FB - Facebook
« Reply #43 on: October 10, 2012, 03:28:35 PM »
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I will gladly take the other side of that bet. Being short these frothy social networks has been a saving grace for us this year and has contributed over 12% of our net gain this year. As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.
I definitely agree with you that these dom-bomb 2.0 stocks should be shorted.  But Facebook is a little different and it may do well in the long run (as long as it doesn't become the next Myspace, Friendster, or ICQ).

- It generates positive free cash flow
- There are advertisers on there with positive ROI.
- Even valueless advertisers make money.  Newspapers, magazines, phone directories, and TV all have advertisers who are wasting their money.  Facebook has a blend between the positive ROI guys and negative ROI guys.  (Google tilts strongly towards positive ROI, Facebook is somewhere in between, traditional media tilts towards negative ROI.)
- Facebook has scale.  This is important because advertisers will spend more time optimizing their ads for sites that drive high-volume.  Some affiliate marketers ONLY deal with Google Adwords for this reason- they just can't be bothered with the smaller fish (Bing, Yahoo, Facebook, Myspace in the past, etc.).  Optimized ad campaigns means that the advertiser has higher ROI --> they can bid more for the same clicks --> more competition --> the biggest sites get more per click than the smaller sites.
You have this very odd dynamic where scale gives a huge boost to profitability.
- In the future, they may monetize traffic better.

Facebook is a great business with a ridiculous valuation.  (IMO, it definitely deserves a lower PE than Google.  Google has a stronger moat and has upside in monetizing gmail, android, and youtube alongside adsense and adwords.)  Whereas many of its dot-bomb 2.0 brethren are not good businesses and do not have positive cash flow or profitability.
« Last Edit: October 10, 2012, 03:31:56 PM by ItsAValueTrap »
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valueInv

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Re: FB - Facebook
« Reply #44 on: October 10, 2012, 03:38:19 PM »
Quote
I will gladly take the other side of that bet. Being short these frothy social networks has been a saving grace for us this year and has contributed over 12% of our net gain this year. As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.
I definitely agree with you that these dom-bomb 2.0 stocks should be shorted.  But Facebook is a little different and it may do well in the long run (as long as it doesn't become the next Myspace, Friendster, or ICQ).

- It generates positive free cash flow
- There are advertisers on there with positive ROI.
- Even valueless advertisers make money.  Newspapers, magazines, phone directories, and TV all have advertisers who are wasting their money.  Facebook has a blend between the positive ROI guys and negative ROI guys.  (Google tilts strongly towards positive ROI, Facebook is somewhere in between, traditional media tilts towards negative ROI.)
- Facebook has scale.  This is important because advertisers will spend more time optimizing their ads for sites that drive high-volume.  Some affiliate marketers ONLY deal with Google Adwords for this reason- they just can't be bothered with the smaller fish (Bing, Yahoo, Facebook, Myspace in the past, etc.).  Optimized ad campaigns means that the advertiser has higher ROI --> they can bid more for the same clicks --> more competition --> the biggest sites get more per click than the smaller sites.
You have this very odd dynamic where scale gives a huge boost to profitability.
- In the future, they may monetize traffic better.

Facebook is a great business with a ridiculous valuation.  Whereas many of its dot-bomb 2.0 brethren are not good businesses and do not have positive cash flow or profitability.

I would change that slightly. FB has the potential to be a great business. While they have had advertising for a while, most of their ad infrastructure is only now being put into place. They have just launched their ad exchange, retargeting, etc. The early numbers look good but it is far from a proven business. Their old advertising business is going to decline with the switch to mobile. To be successful, they are going to have to evolve new advertising techniques and formats that don't exist today. The problem is so far, they just did what Google did. But what is good for search in not good for social. I think they are learning that and are adapting. They have a lot of data and they have a lot of options. People forget the options part. User do many things on FB - post status, view photos, visit profiles, send messages, like things, play games, so on and on. All these different activities offer different channels of advertising. And Facebook is expanding its options with "verbs".

Now that the stock has tanked, they feel the urgency of monetization. They have to act quickly or they will bleed employees. I'm still waiting for the news that they are expanding their ad sales team in a big way.


ItsAValueTrap

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Re: FB - Facebook
« Reply #45 on: October 10, 2012, 04:15:18 PM »
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Their old advertising business is going to decline with the switch to mobile.
I honestly don't think it's that big of a deal.

Smartphone owners will still likely use Facebook on the desktop because the desktop experience is better (larger screen, faster typing, easier to add new friends, etc.).  And there will be ads.  The smartphone experience is complementary. 

The problem with smartphones is that people probably won't buy things on a smartphone.

*I do not own a smartphone and probably won't for a few years.  So I could be talking out of my ass.

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The problem is so far, they just did what Google did.
The monetization is very different between Adsense and Facebook ads.

In Facebook ads you target based on location, age, likes, interests, etc.  Targeting is not very good.

Whereas Google Adsense is doing something new and interesting.  Previously, ads were based on the content of the website.  For some websites that is amazing because sites about web hosting and weight loss will display relevant ads with very high cost-per-click.  But Google is adding a new element.  It is showing you ads based on websites that you have visited before and things that you search.  This may be a FAR better way of targeting ads.  In the past some sites would only display ads with very low cost-per-click... but now these sites may display ads with higher CPC that are actually more relevant to the user.  If Google knows that you're interested in web hosting, then it will display high CPC web hosting ads on sites that have nothing to do with web hosting (e.g. your gmail account).

*I could be wrong though.  This new thing that Google is doing may not be that huge of an improvement over their previous approach.

**At the end of the day, from the perspective of the advertiser/marketing, Facebook and Adwords and Adsense are completely different beasts.  Even Adwords and Bing/Yahoo are different enough that some affiliate marketers don't bother with Bing/Yahoo (the other reason is because Google drives so much more traffic than Bing/Yahoo).  Yes they could copy their ads from Google but sometimes it's not worth the effort for them as the bidding algorithms are different on Bing/Yahoo than Google.  The demographics are also different... Bing/Yahoo has people who are less savvy computer users, many of whom are too lazy to switch their default search or was tricked into installing a toolbar.
« Last Edit: October 10, 2012, 04:35:05 PM by ItsAValueTrap »
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ItsAValueTrap

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Re: FB - Facebook
« Reply #46 on: October 10, 2012, 04:37:06 PM »
If you really want to understand this stuff, you could go get a $100 Google / Facebook coupon and start advertising yourself.

Start here:
uberaffiliate.com/affiliate-marketing-guide/uber-affiliate-marketing-guide/

*I should point out that the type of affiliate marketing advocated in that guide is morally bankrupt.
« Last Edit: October 10, 2012, 05:29:22 PM by ItsAValueTrap »
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valueInv

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Re: FB-Facebook
« Reply #47 on: October 22, 2012, 01:40:31 PM »
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons.

But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.

Some new data:

http://techcrunch.com/2012/09/13/facebook-exchange-results/

If you remember from the Google thread, I have long maintained that FB is going to put pressure on Google's ad rates and its growth once it goes IPO and ramps up monetization. I have argued that Google does not have the moat that people think it has.

Well, we are just beginning to test my hypothesis. The next two years will tell if I am right.

http://techcrunch.com/2012/10/22/adobe-online-ad-report-google-cpcs-decline-10-as-facebook-brand-engagement-surges-896-ios-conversion-rates-2x-androids/

ItsAValueTrap

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Re: FB - Facebook
« Reply #48 on: October 22, 2012, 06:42:25 PM »
I don't think it makes too much sense to pay attention to cost per click unless you normalize it for other factors.  If Google reported same-keyword CPC then it would be a little more meaningful I would think.

Factors that affect CPC:
- If Google relaxes its ad policies and lets more ads show on search, then CPC will go down.
- mobile versus desktop
etc. etc.

2- Honestly I think that your thesis about Facebook taking away Google's ad customers is so obviously wrong.

a- Clearly Facebook and Google are used for different purposes!!!

b- Most of Google's advertisers measure their ROI.  They can track user clicks to a sale.  As long as their ROI is positive, they will keep advertising.  Sometimes Google makes fundamental changes to how ad bidding works and what ads are allowed/disallowed... this can cause temporary disruptions to advertising (it did one quarter where Google missed estimates).
To a lesser degree, most of Facebook's advertisers measure their ROI.  Though there are a lot of branding campaigns that are likely a waste of money.  This market could theoretically wash away once the social networking hoopla gets tired.  Note that almost all traditional advertising is like this... they often do not/cannot measure ROI.

If you advertise based on ROI, why would you care what Facebook's market share is?  The only time you start to care about Facebook is when you factor your own time into your ROI calculations.  It takes your time to setup ad campaigns.  Right now, many affiliate advertisers completely ignore Facebook because it isn't worth their time.  If Facebook advertising can somehow generate 10-20X the ROI of a Google ad campaign, then this could cut the other way.

c- You do not seem to have any domain knowledge and I would encourage you to learn about online advertising.  $100 Google and FB advertising coupons are easy to get.  Sign up for an account, read online marketing tutorials, etc. etc.

*Long 1 share of Google, not shorting Facebook.
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valueInv

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Re: FB - Facebook
« Reply #49 on: October 22, 2012, 11:03:45 PM »
I don't think it makes too much sense to pay attention to cost per click unless you normalize it for other factors.  If Google reported same-keyword CPC then it would be a little more meaningful I would think.

Factors that affect CPC:
- If Google relaxes its ad policies and lets more ads show on search, then CPC will go down.
- mobile versus desktop
etc. etc.

2- Honestly I think that your thesis about Facebook taking away Google's ad customers is so obviously wrong.

a- Clearly Facebook and Google are used for different purposes!!!

b- Most of Google's advertisers measure their ROI.  They can track user clicks to a sale.  As long as their ROI is positive, they will keep advertising.  Sometimes Google makes fundamental changes to how ad bidding works and what ads are allowed/disallowed... this can cause temporary disruptions to advertising (it did one quarter where Google missed estimates).
To a lesser degree, most of Facebook's advertisers measure their ROI.  Though there are a lot of branding campaigns that are likely a waste of money.  This market could theoretically wash away once the social networking hoopla gets tired.  Note that almost all traditional advertising is like this... they often do not/cannot measure ROI.

If you advertise based on ROI, why would you care what Facebook's market share is?  The only time you start to care about Facebook is when you factor your own time into your ROI calculations.  It takes your time to setup ad campaigns.  Right now, many affiliate advertisers completely ignore Facebook because it isn't worth their time.  If Facebook advertising can somehow generate 10-20X the ROI of a Google ad campaign, then this could cut the other way.

c- You do not seem to have any domain knowledge and I would encourage you to learn about online advertising.  $100 Google and FB advertising coupons are easy to get.  Sign up for an account, read online marketing tutorials, etc. etc.

*Long 1 share of Google, not shorting Facebook.

1, You assume I don't have domain knowledge
2, You assume that Google does not generate revenues from display advertising.
3, You assume that because ROI is hard to measure, a form of advertising is not valuable. (Take a look at the share of TV advertising for the last 5 years)
4, You assume a difficulty in ROI measurement for FBs future products.
5, You assume that FB's advertising need to generate 10x to 20x ROI of Google for advertisers to switch.