I Don't Understand Facebook's Advertising Model

About three scandals and one stock market plunge ago, Facebook launched an advertising campaign to apologize for fake news, privacy breaches, spam, and other social media offenses.  This lovely ad promised that the company would fix these problems and get the platform back to its original purpose.

The ad was very effective and even made me choke up a little.  No surprise there, because I’ve found that the big tech companies produce the most compelling advertising.  I’ve also loved every Google ad.

But here’s the thing.  When Facebook wanted to apologize to a large audience, it ran a TELEVISION ad.  Facebook controls a huge amount of the country’s online advertising inventory, but when the chips were down, it went to the same platform used by Texaco, Norelco, and Kellogg’s in the 1960s:  the one-minute TV spot.

Facebook undoubtedly knew that limiting its apology ads to the online world would have minimal impact.  Successful advertising requires good storytelling through words and images, and the online world is generally unsuited for that.  



Online advertising can be effective for transactional messages (for example, “To buy this razor now, click on this link”) but not so effective for traditional brand ads.  Google ads I understand because I can see the value in buying prime space during product searches, but Facebook I don’t get.  And yet major ad agencies have twisted themselves inside out to shift their focus to Facebook.  What gives?

I ask this question as a Facebook stockholder myself, albeit one with a tiny number of shares.  I certainly do not regret the huge run-up in the Facebook stock price since its IPO.  (What I do regret is that I didn’t buy a hundred times more shares!)

But I still don’t really understand it.  I admit this as someone outside the digital ad industry, who would welcome feedback from insiders who can produce evidence on the usefulness of Facebook ads.  

I am not among those Facebook users who get wigged out by the company sharing my personal data with advertisers.  In fact, I prefer it because I’d rather see ads that are relevant to me.  I’m just not sure if it’s that effective.  

When I look at my Facebook page today, I see an ad for L.L. Bean.  Fair enough. I’ve been buying apparel from L.L. Bean since the days when you had to fill out a form from the Bean catalog and mail it back.  But I am so familiar with L.L. Bean that a Facebook ad will not sway me in the least to purchase again.

The “sponsored posts” in my Facebook newsfeed seem somewhat more compelling.  I usually just blip over them, but for the sake of this column I just went back and took a close look at what’s there.

The first four sponsored posts are  offers from:   
-- SeaVees, apparently a laceless canvas sneaker.  I probably wouldn’t buy one, but it’s not crazy for them to think I might., another sneaker company.

-- The Sundance clothes catalog.  Again, I have bought jewelry for my wife from Sundance but am unlikely to do so again until Christmas — and I won’t decide that based on a suggested post.

-- Vanity Fair magazine, offering a one-year subscription for $8.  This is more like it.  I would actually contemplate this offer. But I already get too many magazines at home, so used my willpower to decline.

So at least one of the four suggested ads piqued my interest.  Is that a good rate of return even if there’s not a sale?  I’ll leave that to the analysts to debate.

It’s probably unfair to say Facebook advertising is ineffective based on a handful of ads at one moment in time.  I am rarely moved to go out and buy whatever product is shown on TV either, although I am much more likely to at least see a TV ad, since I usually sit through TV advertising but almost always scroll past those suggested posts on Facebook.

I also wonder how Facebook makes money, given how seemingly cheap its ads are.  The company recently reported that the Russians tried to interfere in the 2018 midterms by placing 150 political ads.  The cost of those ads?  $11,000. At that price, you can’t really blame Putin.  Even I, as cheap as I am, would spend $11,000 if I thought I could affect the outcome of the upcoming elections.  

Although I’m a skeptic about Facebook effectiveness in promoting big brands, I am a big believer in what it can do on behalf of nonprofits, nearby cultural programs, and local businesses.  I’m on the board of a small nonprofit and have seen the value of raising awareness through targeting a few thousand potential donors.  I’ve also attended concerts and art shows that I’ve learned about on Facebook.  

Unfortunately there’s not much money in promoting nonprofits and small local businesses. Still, Facebook has convinced the major brands they need to be on this platform.  Will this hold? Maybe.  It says something about our political climate that Facebook is more in trouble for allegedly helping Donald Trump become president than for not being an effective advertising vehicle.

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