It is hard to describe an IPO that raised some $16 billion as a failure.
But clearly some skepticism about Facebook's ability to generate enough future incremental ad revenue to warrant a +$100 billion valuation has been a factor in the weak stock performance since opening day, rather than skyrocketing as so many other Web darlings have in the past.
With 900 million users
generating billions of monthly page views, it is no wonder that Facebook (for now) is the top seller of display advertising in the United States. Surely that generates a fantastic among of data that
is critical for advertisers. It does, but not the right data -- and therein lies the problem.
The user data offered to marketers by Facebook is demographic and psychographic in nature. This has some value, but to date, no other company has proven that it can be used as a core revenue driver on the Web. All of the other central players in this space, including Google with Doubleclick and Admeld; Yahoo with Rightmedia and Interclick; Microsoft with Appnexus and also Newscorp with their Rubicon Project, offer marketers the ability to more effectively overlay purchase intent behavior in various forms of user data (re-, search re-, behavioral) targeting.
What is intent data? A consumer visits Google, Yahoo, MSN/Bing and enters a search for “best rates for car
insurance in NJ” or “Caribbean cruise deals." Clearly this indicates more than a passing interest, it shows a person on a mission. Based on this "intent" action, the user can be served ads
for auto insurance or cruises deals in the banner spaces they are exposed to on various sites. In some cases, within seconds of the intent action being recognized.
Ownership of data that indicates a user’s intent to purchase is the one key asset that is shared in common by companies that have been successful in their efforts to monetize Web audiences. However, this type of user behavior does not occur in the Facebook ecosystem, where users engage largely in social and photo sharing activities, from which
there is no ability to infer purchase intent. Facebook will need access to consumer purchase intent data, which it not own natively, to achieve revenue goals.
Google recently announced that Youtube pre-roll ad spaces are enabled for real time bidding, a protocol that allows marketers to overlay intent data with a torrent of additional data points, and automate their media buying and optimization efforts. The fact that the most established form of demographic targeted advertising, when transferred to the Web is now being infused with purchase intent data, further signifies its importance to online media and demonstrates how far behind Facebook is.
Currently, for its core inventory Facebook does not allow advertisers to target using external user data.
To compound matters, Think Realtime campaign data reveals that a consumer who recently searched for “brake parts” is more likely to purchase when watching a DIY video about auto repair on Youtube than they are viewing non-endemic content, like the weather or music videos.
To be successful, Facebook will need to first enable the use of external user intent data or somehow begin to create this internally. They will
then need to find a substitute within their ecosystem that is as useful as endemic context is for ad exchanges when mixed with user intent data.
Whether by taking these steps or some other approach, Facebook will need to solve the user intent data problem if they are going to compete in the display economy with Google, Microsoft, Yahoo!, and Newscorp.