Newspaper dollars, Facebook dimes
Hard to miss the Facebook earnings news this week.
Facebook earnings beat expectations as ad revenues soar
Facebook Beats In Q2 With $2.91 Billion In Revenue, 62%
Of Ad Revenue From Mobile, 1.32B Users
Let's take a look at those numbers. (I'd like to fill
in more and better data here, so any extra sources
Mobile ads: 62% of ad revenues.
Total US ad revenue: $1.3 billion.
Which would make mobile US revenue about 800 million.
(Other countries are heavier on mobile, so this might
even be high.)
Americans spend 162 minutes on a mobile device per day
of which 17% is Facebook. So figure about 28 minutes
per day on average. (Average of all US "consumers", not
just mobile or Facebook users.)
That's double the time spent reading the printed newspaper.
US users spend an average of 14 minutes/day on printed
(Average of newspaper readers and non-readers. Just
print, not web or mobile.)
But how are newspapers doing with the ad revenue?
Even after a sharp decline, newspaper print ad revenue in
the USA is at $17.3 billion/year.
That's the 2013 number, so it's reasonable to expect it
to continue to come down as newspaper-reading time
continues to decline.
Let's say it comes down another 10 percent for this
year (which is faster than trend) and take a quarter
of that. That's $3.9 billion.
So the newspaper brings in more than four times as
much ad money by being in front of users for half
the time. The newspaper completely lacks all the
advanced behavioral targeting stuff, and Facebook is
full of it.
What's going on here? Why is
Facebook—the most finely targeted ad
ever built—an order of magnitude less valuable
to advertisers than the second-oldest low-tech ad medium is?
Here's my best explanation so far for the "print
dollars to digital dimes" problem.
Advertising is based on a two-way exchage of
information. You, the reader, give advertising your
attention. Advertising gives you some information
about the advertiser's intentions. That's often
not found in the content of the ad. The fact
that it's running in a public place at all is what
builds up your mental model of the product, or brand
On the other hand, advertising that's targeted
to you is like a cold call or an email spam.
You might respond to it at the time, but it doesn't
carry information about the advertiser's intentions.
(For example, you might be the one sucker who they're
trying to stick with the last obsolete unit in the
warehouse, before an incompatible change.)
As Bob Hoffman, Ad Contrarian,
Online advertising has thus far proven to be a
lousy brand-building medium. Walk through your local
supermarket or Target or Walmart and see if you can
find any brands built by online advertising. So what
is web advertising good for? Thus far, it has been
effective at search and moderately effective at a
certain type of direct response.
Without the signaling/brand building effect, those
targeted Facebook ads don't pull their weight, and
come in at less valuable than newspaper ads.
I'm not saying we should go back to dead trees,
but clearly mobile is leaving money on the
here. What's the solution? Paradoxically, it's going
to have to involve some privacy tech on the user's
end—preventing some of the one-sided data flow
towards advertisers in order to introduce signaling
More: Targeted Advertising Considered
Syndicated 2014-07-26 14:43:05 from Don Marti