Facebook: Understanding The Moneymaking Machine

PR Log (Press Release) – Nov 03, 2009 – In May 2005 Robert Arnold from CTSoft anticipated that the market of digital advertisement were going to be compromised by the appearance of social networking participants. He was right.
The last two years Facebook took almost 20% of the market share of Google PPC, making an important impact on the profit expectation of the giant search engine in that area.  Facebook was able to demonstrate several advantages over the typical PPC approach of the search engines.
Allow me to outline some of them:
Impressive captive market. More than 300 million of users worldwide and more than 23 million visits per days in North America with a 79% of returning ratio (daily!). Not even Wikipedia was able to reach that numbers.
Segmentation. The characteristics of Facebook’s market consent to segment it by age, gender, location and personal preferences. That level of categorization was one of the main features of the value proposition of the digital advertisement introduced by Facebook.
Image ads. Facebook offers text ads along with image ads for the same price. Advertisers found this very appealing and innovative.
Indirect bidding. The positioning of the ads in Facebook doesn’t relate to the direct price for click, but to a original equation that average ad’s investment, participants and rotation. With that system Facebook was able to deliver first place positioning by equal rotation, according to the investment of the ad, removing the concept of “bidding war” of the PPC.
Nevertheless original good vibe of Facebook digital advertisement has changed nowadays.  Google has significantly recovered part of that lost market, basically due to two major reasons:
Its smart move in order to match the segmentation concept of Facebook. A year ago Google has changed the metadata structure of the algorithm in order to categorize the location of the users. This has been a powerful new feature of the PPC offering of Google that is still being improved.
The other important feature was the incorporation of unlimited visual ads for the network partners of Google, up to date the network has more than 1,550 sites that represent more than 40 industries and categories. Advertisers may find hundreds of options for advertise in specific industry-oriented sites or popular industry searches in popular sites like Youtube, AOL, etc.
There are also an imperative differentiation between Google and Facebook that must be outlined. Faceebook users have a lack of interest on the ads, since their main purpose to visit the site is network with friend and contacts. The level of effectiveness on the ads is minor that the Google typical user: The focus factor.
Google visitors, for instance, are looking for something specific. Facebook users, on another hand, are not necessary looking for any particular item or service. They perceive the ads as a complementary decoration, clicking on the ads that occasionally snatch their attention.
Leonard Casseu from SAP proved that the traffic of Facebook shows a lower conversion than Google’s traffic. His designed a PPC campaign at the beginning of 2009 for SAP offering. He obtained 98 daily visits from Google and 150 visits form Facebook, driving visitors to a microsite within the main site. The 34% of visitors from Google engaged the company for more info and pricing, Facebook, on the other hand, only got 4% of action from its visitors. The investment of the PPC campaign was more expensive in Google than Facebook, but at the time of the conversion rate and CPL (Cost Per Lead) Google’s numbers represented a high value: $12 CPL for Facebook and $1.9 CPL for Google.
Remember that clicks with no conversion represent a monthly cost that can become financially dangerous for big campaigns.