FaceBook Ad Copy for the Math Challenged

Saw this ad today on FaceBook. When you do the math it doesn't quite add up, unless there is a new time-keeping system that I haven't heard of yet.

You Want Targeting? I'll Show You Targeting!

Yet another example of smart usage of FaceBook's treasure trove of user-submitted information showed up today when I logged into FaceBook. Check out this incredible ad:

I happened to be 36 years old, a male, and I could spare a few pounds. So how did this ad target me so precisely? Well, in truth, I don't think the advertiser knows anything about my weight, but they do know - and can target - my age and sex via FaceBook advertising.

So for advertisers who want to spend the time, you could basically create 100 separate ads - each one targeting a sex and age over a 50 year age range - and create ads that seem to "know" the user.

Now that's what I call targeting. Get ready for a lot more ads on FaceBook like this really soon!

Postscript: Just a moment later I logged into FaceBook again and found this ad - not quite as good as the first one, but still not too shabby!

$100 of Free FaceBook Advertising!

This is quite possibly the easiest way ever to get $100 of free advertising, and for those of you who have not yet tried out advertising on FaceBook, this is your chance!

To get your $100 - just join the Visa Business Network on FaceBook. The link (I think) is here: http://apps.facebook.com/visabusiness/business. You get the credit regardless of whether you are an existing or new advertiser.

As I've noted in the past, FaceBook advertising has huge potential from a geo-targeting and psychographic targeting perspective. Of course, the flip side to that argument is that the performance of FaceBook campaigns to date (from my own anecdotal experience) has been below that of what I'd expect on AdWords or Yahoo Search Marketing. But hey, since you're getting the clicks for free, I somehow doubt that you'll be disappointed.

Note that I am not receiving any affiliate revenue for referring you to this group (trust me, if there was a way I could . . .). But once you join feel free to link in to my Visa Business Network group. Just search for PPCAdBuying.com.

Classmates.com: We're Like FaceBook, but With Less Features and We Charge You

Last year I wrote about the different paths taken by FaceBook and Classmates.com and how Classmates' decision to charge consumers up front may have ended up costing them the market that FaceBook now dominates.

Today I received an email from Classmates with the subject line "Classmates Has Big News, David." I assumed that this would be the announcement that Classmates had finally abandoned their subscription fee and adopted the FaceBook 'monetize with advertising' model. Alas, old habits die hard. Here's the email's contents:


That's right - it's a FaceBook-style news feed and friend finder, but you still have to pay for it. And of course the number of people you know on Classmates at this point is probably about 1/10th the number you know on FaceBook. Less features and less friends - and you get to pay for it. While I often like the idea that "less is more", it doesn't apply in this case.

What's Better Than a Database of Intentions? Actual Intent. How Social Media Advertising Out-Targeted Search Engine Marketing

John Battelle described search engines as the "databases of intentions" - when a user enters a query into a search engine, that user is telling the search engine something about his wants and needs. Indeed, the entire point of a search engine algorithm is to decipher this user intent and serve up the most relevant results (and, of course, to stymie search engine optimizers at the same time).

You would think that a database of intentions would be the ultimate targeting opportunity for marketers, and - until recently - I would argue that this was indeed the case. The problem, however, with this database, is that it is an inferred database. Sure, we can infer that a user typing in "male pattern baldness" is a man who is balding, and in most cases we'll probably be right. But what of the person who types in "mortgage" - is he (or she) looking to get mortgage quotes, learn about the current housing crisis, do academic research, get a job in the mortgage industry, pay their existing mortgage, or something else entirely? And then there are words like "laker" which could be about the Los Angeles Lakers, Lake Trout, or someone with the last name "Laker."

As search marketers, we end up doing a lot of inferring. Often the difference between a successful and unsuccessful campaign rests on our ability to correct determine which keywords have the right inference for our campaigns. Since every search marketer is playing the same game, the result is that keywords with clear inference tend to receive much more advertising competition than keywords without. This is the difference between buying the keyword "Miley Cyrus" and "Buy Miley Cyrus CD."

Wouldn't it be great if users could tell us more about themselves? Their interests, their demographics, their personal history? To some degree, this information is available through behavioral targeting, or from user registration information on portals like Yahoo. But the behavioral targeting to date has only been broadly applied - you can choose a particular age range (18-35), or a particular geography, or sex, but none of this really presents an opportunity for personalized marketing.

Advertising on social media can, and likely will, provide the first opportunity for truly one-to-one marketing. The beauty of social media (at least right now) is that users have an incentive to provide lots of honest information about themselves. Think about your profile on FaceBook. You add your educational background, your interests, or relationship status, your current employer, and so on. You do this because you want to connect with old friends or meet new people like you. Indeed, the fact that your friends will see your profile is a further incentive to be honest since any wanton lies would be seen by people who know that you are lying.

This is much more valuable information than the behavioral targeting that can be gleaned from a user profile on Yahoo or from user-entered registration data on non-social networks. It's commonly accepted that users who are forced to fill in personal data purposely lie about their demographics. As one columnist put it: "Users lie to protect their privacy, they lie to protect their identity, they lie because they think their data will be misused or shared with third parties, or they lie because opt-in/out policies are misleading or mistrusted."

But at least for now, most social media users don't lie. The result is a goldmine of not just inferences of user intent, but user-defined extensive descriptions of their intent. And this presents the first opportunity for marketers to truly create micro-behaviorally targeted campaigns.

Here's an example of the micro-targeting currently available on FaceBook. Let's say I want to sell Iowa Hawkeye football tickets to football fans in Iowa. And for whatever reason, let's say that I want to upsell these users on a dating site. Check out the targeting FaceBook offers for this unique and granular user set:
80 people are in my target group - now that's a narrowly tailored audience. Granted, this targeting excludes people on FaceBook who have not fully filled out their profiles, but you can only assume that over time the percentage of people who complete their profiles will only increase.

Much of this targeting can be done on Google - you can buy the exact match "Iowa Hawkeye Football Tickets" and geo-target your ad to Iowa only. But the ability to serve this ad only to Iowa graduates who are men, etc, etc is not - and likely will not - be available in Google for some time to come. Indeed, I recently pointed out just how bad the demographic data currently available in AdWords really is in a recent post.

Of course, the flip side to this entire argument is that we are currently at a point in the development of social media where users still trust the social media networks and advertisers haven't truly embraced advertising on this medium. As a result, users are still honest about their personal data. At some point - perhaps soon - the scales may start to tip; once users realize that their personal information is being used by advertisers, their honesty may diminish or - as has already happened several times on FaceBook - they may revolt against the use of their personal data.

I believe, however, that despite some very public missteps in the user of personal data, the social media companies still have the chance to use this data in a way that satisfies privacy advocates but also provides the most targeted advertising available anywhere online. Who needs a database of inferred intentions anyway?

Online Procrastination Businesses: Trend or Fad?

The couch potato watching TV for five hours a day made TV networks billions of dollars. These days, couch potatoes are still not getting exercise, but they gotten up from the couch and moved to the computer.

When you think about all the "in" online businesses these days, many of them revolve around mindless ways to pass time online. Here's a few examples:

• Twitter.com: A site where you send people short updates on what you are doing at the moment. For example, if this was a Twitter post I might write: "I'm writing a blog about Twitter." Apparently, people really like this site.
• Virtual Goods on FaceBook. My friend Jeremy at LightSpeed Venture Partners estimates that FaceBook makes $15 million a year selling "virtual goods." For example, for $1 I might buy a picture of a flower and email it to you. Not a real flower, mind you, a virtual flower. Amazing.
• LinkedIn Groups. As I just noted in a prior posts, there are apparently hordes of people obsessed with joining as many groups on LinkedIn as they possibly can. Many of these people probably once also collected Garbage Pail Kids.
• Virtual Worlds. Second Life is the most obvious example.
• FaceBook applications. Be a pirate or a cowboy; takes movie quizes; etc, etc.

A lot of these 'businesses' have received significant investment, media coverage, and users in the last few years. The question I have is whether they are actually sustainable businesses.

My analysis of potential long-term success is based on the classic marketing distinction between a "trend" and "fad." A trend represents a sustainable change in behavior. Increasing usage of the Internet is a trend. Couples having their first child after 30 is a trend. Hybrid vehicle usage is a trend. A fad, on the other hand, enjoys a sudden and significant spike in popularity, but then quickly fades into near oblivion. Think "New Kids on the Block", The Pet Rock, mullets, and The South Beach Diet.

You can make a huge amount of money exploiting both trends and fads, but successful exploitation requires different techniques for each. Exploitation of a trend requires an investment in infrastructure, branding, and long-term planning. Think of the Toyota Prius as an example. In the first few years of its existence, it was sold almost exclusively to fanatical environmentalists, many of whom were willing to wait months or years to get one. Toyota sold only 15,000 Priuses in 2000-2001, the first year of sales in the US. In 2007, they sold 181,000 (up 69% over 2006!). Toyota didn't make money in these early days, and then didn't sell many cars. But each year of the Prius' existence, demand grew, production costs declined, and the Prius progressed from niche car to well-known brand.

Had Toyota executives spent billions on Super Bowl advertising in the first year of the Prius launch - and expected to sell 500,000 cars every year starting with the first, they would have lost a lot of money and cancelled the project immediately. Toyota, however, understood that hybrid cars had the potential to be a long-term trend and opted to introduce the car slowly and wait for demand to intensify.

A fad, on the other hand, needs the exact opposite approach. When the latest teen band gains stardom on the Disney Channel, the marketing objective is to exploit the band as quickly and as frequently as possible. As far as I can tell, Hannah Montana is the current "it" teen band. As such, the singer is touring constantly, they've created a tour movie, and the toy aisle at the drugstore is loaded with all sorts of Hannah related products (kids makeup, karaoke devices, etc). Marketing execs at Disney know full well that Hannah Montana probably has at most one or two more years of popularity before the next generation of kids become infatuated with another teen sensation.

So let's apply these lessons to marketing online procrastination businesses, like Twitter or a FaceBook application. My sense is that the majority of these businesses are fads with little chance of ever becoming a trend. The novelty of reading a text message diary of your friends will likely fade away, as will the novelty of getting your friends to sign up as 'pirate supporters' on FaceBook. Indeed, the novelty of Friendster and MySpace seems to have faded significantly. It's not out of the question that FaceBook may someday suffer some of the same fatigue.

Whether you are talking about a rock band, movie star, video game, Internet site, or social media application, if the point of the business is to provide entertainment and procrastination, there is a very high chance that your business will be a fad, soon to be replaced by another fad. How many rock bands are true dynasties? How many video games make it past a sequel? How many social media sites have shown more than one year of continual growth?

One important note: there's no question that there are social media applications that currently have (or will have) an application beyond entertainment. Consider Flickr (photo sharing), LinkedIn (networking), and even FaceBook itself (contact list). All of these sites - though considered to a greater or lesser degree entertainment by many users - also have an element of utility that may enable them to be trends instead of fads.

But when we are talking about virtual Texas Hold 'em on FaceBook - with no value beyond entertainment - the assumption must be that we are witnessing a fad. In such a case, the best thing to do from a business perspective is exploit, exploit, exploit and hope that you sell the business ASAP.

Message from Facebook: Big Brother Has Written on Your Wall, and He Wants to Sell You Something

Those of you hiding under a rock today no doubt still heard the news that Microsoft invested $240 million in Facebook for a mere 1.6% of the company, giving Facebook a hefty $15 billion valuation.

This investment begins a period that will truly define Facebook's fate. Right now, the company is on top of the world - phenomenal membership growth, massive valuation, and sexy enough to attract Silicon Valley's brightest - even from Google - to join and grow the company.

But contrarian that I am, I have to point out three major challenges Facebook now has in front of it.

1. Will Facebook Users Embrace Microsoft? With this investment, Facebook is no longer the hip community founded by and for college students. It's big business. There is no longer anything counter-culture about Facebook. So the question is: how will Facebook's core users react? Will 20-somethings want to be part of a community that is backed by Microsoft, formerly known as the evil empire?

A potential analogy here might be Barack Obama. When Obama was a 'potential' candidate, he was cool, hip and had tremendous buzz. Now that he's an actual candidate, however, many people see him as just that - a political candidate. It's hard to keep your 'outsider' street creds when you are in the midst of a race to be the ultimate insider. Will Facebook suffer the same fate?

2. Will Facebook Users Embrace Monetization? Despite the good work of the Bill and Melinda Gates foundation, Microsoft as a company is all about money. Suffice to say, to value Facebook at $15 billion, Microsoft is betting that Facebook will find a way to turn eyeballs into dollars.

And it therefore comes as no surprise that Facebook is planning a big upcoming advertising announcement in the near future. While savvy Facebook users have no doubt expected this for some time, it's an open question as to how they'll react when part of Facebook's real estate starts to be paid space. After all, these are the same people who went bonkers when Facebook introduced the "newsfeed" a few months back.

3. How Will Google Fights Back? OK, Microsoft *finally* beat Google out for a deal. Good for Microsoft, it's about time. Now Google is in a new position as a company - what to do when you lose an acquisition/investment play. This loss is not going to go down easy over at the Googleplex, both because they see Facebook as a threat and because they absolutely hate Microsoft.

Google is going to react to this move, and likely react aggressively. Indeed, it's already been suggested that Google may be launching an open source platform to rival Facebook in a matter of days. The tenuous friendship between Facebook and Google may be officially over, and Facebook needs to brace themselves for a potential battle.

I'm not suggesting, of course, that it's all downhill from here for Facebook, merely that the greater your success, the greater the challenges. Google is an example of a company that faced these threats (adding paid ads to their site, grappling with the silly 'don't be evil' mantra, fending off attacks from Microsoft and Yahoo), and has clearly come out the other end quite nicely (market cap bigger than Citibank or WalMart - I call that a success). But once you get to the top, everyone wants to bring you down. In the coming months, we'll see how Facebook deals with the pressure.

Attention Facebook: Sell! Sell! Sell!

Good news for Facebook this week. Microsoft is rumored to be interested in buying a stake in the company at a valuation of up to $15 billion. On top of that, the press is preparing for the inevitable passing of the traffic torch between MySpace and Facebook. And, indeed, if you look at the Alexa rankings for the two companies, you can see that it is only a matter of time before Facebook is the social media king.

So does this mean that Mark Zuckerberg was right to reject Yahoo's $900 million offer? Are the 20-somethings at Facebook HQ the future leaders of Silicon Valley? Should we start counting the days until Facebook surpasses Google?

To quote ESPN's Lee Corso, "not so fast, my friend." Yes, hindsight has shown that that $900 million offer was too low, and yes, Facebook will soon be the #1 social media site and one of the top Web sites in the world. But things may not be as rosy as they seem.

For starters, the mere fact that Facebook has so rapidly eclipsed the once-dominant MySpace goes to show how fickle Web users are when it comes to social media. Indeed, it almost seems like every generation develops an affinity to their own social media site, making yesterday's site old news.

Consider what happened to Friendster (now for the 35+ crowd) when MySpace arrived, and what happened to MySpace (now for the 25+ crowd) when Facebook arrived. New sites - targeted to younger generations - such as Hi5 (now for the under 16 crowd) are popping up. What's to prevent these upstarts from upstaging Facebook?

It's also worth repeating the apparently-forgotten adage to never look at gift horse in the mouth. Frankly, despite the fact that $900 million has turned out to be a low ball offer, I still think that any start-up that turns down $900 million has a lot more hubris than it does intelligence.

Indeed, I once worked for a company that was (allegedly) offered something north of $450 million from an acquirer, turned that down, and (again, allegedly) is now being sold for something south of $50 million. Hindsight is indeed 20-20. Did we think we were going to be worth a billion? Of course. I remember fantasizing that we could be worth $10 billion.

How many times have you heard this story: A guy walks into a casino in Vegas, throws a few quarters into a slot machine and wins $1500. He immediately walks out of the casino and spends the rest of his vacation sitting near the hotel pool. Have you tallied your count?

OK, now count how frequently you've heard this version. A guy walks into a casino in Vegas, throws a few quarters into a slot machine and wins $1500. Over the rest of the weekend, he spends $2000 on slots hoping for that next big strike. He leaves town wondering where his money went.

Humans are hopeful animals. We almost always look the gift horse in the mouth and opt for the two birds in the bush. Young humans - say 23 year old CEOs - are especially hopeful. Some may go so far as to even say naive. They assume that what goes up can only go more up, and they presume that their predecessor's failures were due to their incompetence and nothing else.

Sometimes, these CEOs get pretty lucky and seem to prove naysayers like me wrong. Most times, they don't.

Why Isn't Classmates.com Facebook?

Facebook is all the rage these days in Silicon Valley. Every day I hear about a new 'killer app' - or in Facebook terminology, 'killer widget' - that's getting downloaded by the millions by Facebook users. In fact, I think that the best way to get any startup funding these days is to describe your company as a 'Facebook widget monetized by Google AdSense.' Even if this is a totally nonsensical concept, these are the buzzwords that make VCs start to reach for their checkbooks.

And as much as I like to be a contrarian when it comes to the latest Internet crazes, I have to admit that Facebook is pretty cool. It's part social network, part voyeuristic, part cool tech apps. I could see myself spending way too much time on the site in the future.

Interestingly, as with all good ideas, Facebook isn't really that novel. In fact, I'd argue that the basic concept of Facebook is no different than Classmates.com. Indeed, Classmates was founded in 1995, back when the founder of Facebook's voice was starting to crack.

So why, then, isn't Classmates.com Facebook and Facebook nothing? What did Classmates.com do wrong and what did Facebook do right? And what's to prevent a new challenger to Facebook from doing to Facebook what Facebook did to Classmates?

As with everything online, I have a theory . . .

Classmates.com: A Business Strategy without a Content Strategy

Classmates.com spent and made a lot of money. Unless you have only been surfing Craigslist and NPR.org for the last ten years, it's hard to miss the ubiquitous Classmates banner ads across the Internet.

Back around 2000, I succumbed to the Siren's song of the Classmates ads and signed up for a free account. No sooner had a signed up than I received a rather vague email telling me that "a classmate was trying to contact me." I went into my account, only to discover that to actual see which classmate wanted to contact me, and what they had to say, I had to sign up for a paid account.

To me, this all smelled pretty funny. It reminded me of the Poetry.com 'poetry contest' I entered. I wrote the absolutely worst poem I could imagine (it was an ode to my friend Joel's love of big belts - and even more amazingly, they still have it on their site - read it now by typing in last name "Rodnitzky") and submitted it. Amazingly, my poem was selected to be published in a fine edition of poetry and I was strongly encouraged to purchase a copy of the book, as well as a trophy, and to attend an International Poet's Conference. All in, my award was going to cost me $1000 or more.

And that was basically the strategy behind Classmates.com. Get people in the door by blitzing the 'net with advertising, send them a vague come-hither message promising a reunion with an old pal or fling, and then monetize them.

Did it work? Well, basically yes. When Classmates was acquired by United Online in 2004, the site had 1.4 million paid subscribers, 10.3 million monthly active accounts, and more than 38 million registered members. In the first three quarters of 2004, the company generated revenues of $54 million - 75% from subscription fees. Oh, and they were acquired for $100 million.

On the flip side, however, Classmates must have spent hundreds of millions of dollars and bought hundreds of billions of advertising impressions to generate those 1.4 million subscribers. And even the revenues of $54M only brought in about $4M of operating income.

What this basically means is that Classmates had (and probably has) incredible subscriber churn. They spend a lot of money to acquire a customer, the customer sticks around for a few months, and leaves.

My guess is that customers leave Classmates for the same reason that I never subscribed in the first place - they feel that the site is basically doesn't have content to keep them paying month after month.

Classmates.com drew people to the site by promising them the addresses of lost acquaintances. But once you got those addresses, what's the point of sticking around? Why pay $30/month for the off chance that someone new from your high school comes aboard?

Imagine, on the other hand, what would have happened if Classmates had taken more of a Facebook approach. In other words, instead of just creating a database of people sorted by city and high school/college, what if Classmates had invested as much money in content creation as they did in their marketing?

So instead of serving 5 billion impressions of ads every month, they only served 1 billion, and spent the rest creating Facebook-like Apps and feature enhancements? Had they really built out a cool site 10 years ago - a site that actually gave people a reason to stick around for many months - they might have reduced their churn considerably.

And once churn is reduced, the subscribed base would have gone up, consumer interaction would have gone up, and profit would have gone up.

Instead, they went for the $100 million strategy - advertise, monetize, churn, wash, repeat. It worked pretty well. Until Facebook.

Facebook: Content Strategy, Business Strategy Unknown

Now that Facebook is free, I've got to assume that the subscriber base for Classmates.com is dropping like a rock. Facebook has basically taken the raison d'etre of subscribing to Classmates and given it away for free.

Moreover, Facebook is cool and sticky. It's not just about getting information about lost friends, it's a social community. Combine free and more fun and Classmates.com should just pack it up.

And - at least right now - you could argue that Facebook's "free and sticky" strategy is also good business sense. After all, Yahoo has reportedly made several billion dollar plus offers for the company. So Classmates spent hundreds of millions to end up getting acquired for $100 million and Facebook has spent far less and is worth over a billion. Advantage Facebook, right?

Well, maybe. I would say that the jury is still out on whether Facebook will be an economic success. Yes, it's true that someone will pay a lot of money for them at the moment. My question is whether Facebook will really be able to generate revenue as a company.

Facebook basically has the exact opposite problem Classmates had. Classmates was run by business folks who just wanted to find a way to charge people money. People got mad when they paid money and didn't get much value out of their payment. So they left.

Facebook is run by content people who initially just wanted to find a way to provide great content to people. If Facebook tries to directly monetize their users (either through direct subscription costs, premium services, or heavier advertising presence), their users will get made because they'll feel that the 'spirit' of Facebook is being violated.

It's possible that such a user backlash could lead to a wide-scale revolt and exodus from Facebook. We are talking about some very touchy, indignant users here. Just ask Facebook about what happened when they released their "new feed" product. As TechCrunch reported at the time:

Frank Gruber notes that a Facebook group has been formed called “Students Against Facebook News Feed”. A commenter in our previous post said the group was closing in on 100,000 members as of 9:33 PM PST, less than a day after the new features were launched. There are rumors of hundreds of other Facebook groups calling for a removal of the new features. A site calling to boycott Facebook on September 12 has also been put up, as well as a petition to have the features removed. Other sites are popping up as well. There seems to be no counterbalancing group or groups in favor of the changes.

Keep in mind, this wasn't an attempt to monetize users - it was a feature that would reveal limited user information to that user's friends.

So imagine the outcry when Facebook announces that users can purchase additional bandwidth for a certain cost, or that a large part of the real estate on every Facebook's user's page will be sponsored. It could get ugly.

Classmates, Facebook, Something in Between?

My point is basically this: Classmates and Facebook went about creating business with polar opposite approaches - one business-focused at the expense of content, and the other content-focused at the expense of business. In both cases, the companies failed (or have failed to date) to recognize that business without content will fail, and content without business will also fail.

To truly survive as a long-term online business you need to do both. Is Facebook a financial success? Ask me in two years.