by adam on January 31, 2011
In my experience the problem with the facebook advertising platform is that it doesn’t effectively allow for different types of advertisers to compete on an even playing field.
You could make the argument that since they allow for all different types of interest/demographic bidding, that there are many micro playing fields for different types of advertisers to compete on, but this analysis fails to capture the one most important vector that drives internet advertising, which is intent.
The beauty of Google’s adwords platform is that for any given keyword, a one-man custom boot making shop in Texas can profitably compete against internet retail giants such as Amazon because for certain keywords the intent of the searcher is more aligned with their product offering than Amazon’s.
In a generalized second-price auction such as Adwords, since advertisers are attempting to maximize their ROI on a per-keyword basis, they are not perversely incented to maximize their CTR at the expense of receiving lower CPC’s and an increase in less qualified traffic.
On the other hand, on the facebook advertising platform, different types of advertisers who will have wildly different costs for customer acquisition are competing for impressions and clicks head-to-head. This in turn causes two kinds of major distortions in the marketplace:
1) Advertisers with the highest customer acquisition value will eventually rise to the top, crowding out the smaller guys. e.g: you will see more ads for attorneys and real estate agents then you will for restaurants and dry cleaners.
2) Ad Copy / Images will trend towards becoming more and more attention grabbing in a never-ending arms race towards a higher CTR = lower CPC.
In the long run, neither of these two attributes is conducive to a robust and sustainable advertising platform for facebook.
My answer on Quora to: Is advertising via Facebook as effective as Google Ads? http://qr.ae/4GYA