More Facebook Monetization drama

Looks like a report showing that facebook’s CTR is around .04% and they and they might get bought by mircosoft is sparking a lot of speculation again.

From all the posts on facebooks CTR problem it looks like people are coming to the same conclusion I came to 8 months ago. That being that given Facebooks extremely LOW ctr they have no way of making huge amounts of money. Facebook can never monitize like google can because the Unique user to pageview ratio is far to high.

I’ve advertised on facebook a few times as a test, and again last week when their inventory got triggered by adsense ads. It is by far the worst site of all time to advertise. I got over 2000 clicks and 1!!! signup. The biggest problem with facebook is that nearly everyone clicking on ads is doing so accidently or using the service much in the way people use DIGG, ie to waste time/browse.

with a CTR of 0.04% facebook gets 0.4 clicks per 1000 ad impressions, or .4 clicks per CPM.

5 cent/CPM = 12.5 cents a click
50 cent/CPM = $1.25 a click
$1.00/CPM = $2.50 a click
$15.00/CPM = $37.50 a click

Brad Feld suggests that apps on facebook can get 50 cents/CPM to $15.00 a CPM. Looking at the above math that is clearly impossible. Note that the average price on search engines per click is only ~50 cents

Facebook really only has 2 options. Move the ads into better positions which will raise revenues by at least doubling CTR. 2 Find advertisers like myspace did that are willing to pay high CPM’s. But there are a very limited number of advertisers willing to pay insane prices.

30 Responses to “More Facebook Monetization drama”

  1. Brad Feld Says:

    Re: high CPMs. You say that there are limited advertisers willing to pay high CPMs (where you are presumably defining high as > $5 or $10 / CPM.) I disagree – I see a large population of advertisers willing to pay this. They are buying something different than keyword clicks on search engines – they are buying interactive display advertising. The CPM range for this seems to be $5 – $50 (I’ve seen some above $50) depending on eCPA. As more and more ad spend goes online, it continues to hunt for places to play, and as long as the eCPA is interesting (depending on however the advertiser measures it), the CPM is merely an input (rather than the anchoring variable.)

  2. Paul Says:

    .04 is super low…. I get from 2 -4 percent depending on the day. I don’t get facebook sized traffic though.

  3. Andrew Johnson Says:

    Sure, $50 CPM from perhaps Forbes.com?

    Advertisers are smart. They might pay per CPM but that doesn’t mean they are buying by it. No reason to blow millions on garbage traffic when that same money can go to high quality domain names, targeted search marketing, or dirt cheap viral campaigns.

    A lot of Web 2.0 companies are waiting for the sky to open and billions of brand dollars to fall on them. It may happen, eventually, but thats a poor business model for today.

  4. Oliver Thylmann Says:

    It’s interesting to see that instead of eCPM we are now thinking eCPA … has the same result though. With a $50 CPM, I need a direct conversion of 0.1% to have a lead price of $50.

    Of course if an interactive banner can lead to a lead rate of 1% then it is amazing. But why would something that has a CTR of 0.1% have a lead rate of more than that. hmmm…

    And the thing is really that people are already finding out that through the trackability of ads online, advertisers want something similar offline. I mean I have done this stuff for huge banks in germany, they do want data, unless the CEO wants to see his company when he reads Financial Times in the morning. That’s where exclusive homepage ads work very well. “We’ll by on Yahoo! tomorrow” … ;)

  5. Samantha Woods Says:

    I think the key to monetize facebook is to combine the collected user profiles with personalized ads.

  6. Massimo Moruzzi Says:

    imho…

    1) with the huge number of pageviews they have, they can make a killing even if they sell ads dirt cheap.

    2) selling banner ads is not their real business model. they’re into selling their members ‘flyers’ so people in their networks can see then and, in the near future, classified ads aimed at these same networks.

  7. Neil Says:

    ..wow, super low conversion, hence super low pricing.

    I think all sites in the space suffer from the same problem. When people come to a site to meet their friends, chat, look at photos, then they simply aren’t going to click on ads. Shopping sites, review sites, how-to-sites, are always going to be better suited to an ad revenue / affiliate model.

    Facebook are going to have to do something super smart to leverage their community into realizing their 3 billion (?) price tag. I hear that they are going to be developing a behavioral based ad model in the near future so they can up their conversion ratio and thus their prices.

  8. Brian Breslin Says:

    i think one of the issues to consider here is not the super low clickthru, as there are more innovative methods to advertise on the site. think of the transactional possibilities in the app platform, and the fact they could theoretically target ads like crazy with the amount of data they have on everyone. coupling this with yahoo’s smart ads would be nice move. behavioral ads.

  9. Massimo Moruzzi Says:

    no offence, but it seems to me that you guys would put “behavioural ads” (whatever that means) all over the place on ebay, too, if it were up to you…

  10. Neil Says:

    I’m not convinced about behavioral ads to be honest – they will work at first, then people will get used to them and then they will begin to fail.

    They definately work in an environment where you are already buying something (amazon for example), but on a platform like Facebook – who knows, possibly not.

  11. meir Says:

    If you were buying this inventory at a $0.05 CPM and you had a 200:1 conversion you would have paid $100 for 1 signup, and on POF this would be a Free signup. Wow, that’s expensive.

    A couple of questions, how much did this CPA come out to? This would indicate the CPM you bought at (if you can’t disclose this I understand).

    Secondly, how many impressions did run on this test? At a .04% CTR you would have needed to run 5mm impressions to yield 2000 clicks. Did you run this many? more?

  12. Markus Says:

    I’ve never been able to do better then $100/signup on bebo or facebook.

    in facebook google just tossed them into the content network one day, not sure what the CPm was as many ads were displayed with others. But it was definately over $100/free signup. Pretty much every click was accidental.

  13. Max Tower Says:

    Markus,

    You’re site is similar to facebook in that many of its users create a lot of pageviews. What sort of CTR are you seeing for your ads?

  14. Digg faz acordo com a Microsoft « tomáS Says:

    [...] quem não sabe, o Digg, assim como o FaceBook são sites com baixos CPM, ou seja, geram pouca renda para cada 1000 pageviews, mas agora com a equipe de vendas da Microsoft [...]

  15. brad.touesnard.com » Monetization of Facebook Says:

    [...] started writing a comment for Markus’ post about Facebook monetization, but it got long and [...]

  16. Seun Osewa Says:

    Max: The difference between POF and facebook is that POF has better targetted traffic. Dating site ads are very relevant on a dating site.

  17. » Forget the Next Internet Millionaire, Really - Web Publishing Blog Says:

    [...] others take notice. If Facebook is worth over a billion dollars with an audience of 30 million who buy nothing, what is an audience of 30 million super targeted & converting worth? Readers, here is the [...]

  18. Life:Water, Internet:??? « Thedotcomillusionist’s Blog Says:

    [...] rate is low. In fact, despite being one of the most popular and intuitive social networks, Facebook has one of the lowest CTR’s in its space. This has been a problem plaguing online advertising for a long time coming. Would I be able to [...]

  19. Life:Water, Internet:??? | thedotcomillusionist's Blog Says:

    [...] rate is low. In fact, despite being one of the most popular and intuitive social networks, Facebook has one of the lowest CTR’s in its space. This has been a problem plaguing online advertising for a long time coming. Would I be able to [...]

  20. SharedReviews.com Blog » Blog Archive » Monetizing Social Networks Says:

    [...] ended up running through 15,000 impressions without a single click on Facebook. And he’s not alone with his [...]

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  24. webkatalog Says:

    I think the key to monetize facebook is to combine the collected user profiles with personalized ads.

  25. Shawn Sears Says:

    Same old stuff

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