Will social networking giant Facebook kill search giant Google by sucking up advertising dollars? In the short term, the answer is clearly no. Longer term, that answer is very unclear. I chatted with nearly two dozen people who are buying ads on Facebook. Many of them are also purchasing ads on Google (GOOG) and other online venues. The overwhelming sentiment? Facebook ads are actually more effective and do a better job of getting them in front of their target audiences.
Take the case of Christine Caravo, founder of gift box company Carebox. She ran parallel ads on Facebook and Google and compared them both on Google Analytics, Google's free Web analytics tool. "I found that I got much more bang for my buck with Facebook," she says. "I went though $100 on Google Adwords in a couple days and only got 34 clicks. I spent $60 on the same campaign on Facebook and got 300 clicks."Caravo's experience is probably wore widespread than Larry and Sergey would like to admit. Sure, Facebook remains dwarfed by Google. But in conversation after conversation, business owners and marketers said something has changed in the last six months to make Facebook for them a far more attractive player and, in key ways, a superior option to Google. At the same time, roughly 80 percent of major brands are buying ads or running campaigns on Facebook. Google spokespeople declined to comment for this story.
For its part, Facebook denies it has made any massive changes under the hood that have spurred advertiser demand. "If I were to show you our advertiser counts and revenues and plotted over time, there has been no big step change," says Tim Kendall, Facebook's director of monetization. "It plots a nice, steady increasing curve."
But take that with a grain of salt. Kendall admits Facebook has tripled the number of advertisers using its platform over the past year. At the same time, other key factors play in Facebook's favor. One is the broadening demographic base of users as the average Facebook user gets older.
Perhaps most importantly, Facebook ad buyers tout the ability to finely target display or text ads to show up on pages of Facebook users, with profile data exactly matching a desired demographic or interest group. "The neat thing about FB, is that you can really, really target those most likely to purchase your product or service," said Brittany Miller, an online marketing expert with Pensacola advertising and marketing agency Ideaworks USA. "Since Facebook users make all of their interests, likes and dislikes public, you can use that information to tag specific 'key terms' in your ads that will appeal to a potential consumer. For instance, for the sorority charms, we can tag women who are currently attending college and who belong (or are 'fans of') specific sororities."
This tagging capability is drawing new customers like flies to honey. "We have only been advertising on Facebook for the past four months or so, but the ability to target ads by job title is pretty powerful and is what attracted us to the platform in the first place," says Reed Alexander Atkin, CEO of Legal River, an online legal services marketplace.
The appeal is particularly strong for niche companies with unique products. "I think they've done a good job allowing us to target people by affinity, which is really important for us, as we primarily target radical bacon lovers, who eat our porky products and then tell their friends about it," says Dave Lefkow, founder of J&D's Foods, a maker of bacon-flavored mayonnaise and bacon-flavored salt. Lefkow is spending $600 to $700 per month on Facebook versus $1,800 per month on Adwords. That's a radical shift from zero spent on Facebook two years ago.
Facebook is cautious to say that it's not going after Google's bacon. According to Facebook's Kendall, Google is pursuing people on the fulfillment side of marketing, while Facebook is targeting the demand generation side of marketing. However, that gap is rapidly collapsing as click-through ads on either platform can easily link back to e-commerce pages.
In an online environment, that gap, created primarily in an offline world, has no reason to exist. Rumors have surfaced that Facebook plans to begin integrating chat and VoIP applications into the system, both of which would allow sticky fulfillment systems such as click-to-chat and click-to-call. Even Kendall acknowledges it's a natural progression. "The marketing slogan that we use is 'Find your customers before they search,'" says Kendall.
As Facebook continues to grow its 300-million strong user base, it will have more online real estate to target with ads -- which provides even a stronger case for Facebook ads. That's particularly the case in many niche areas where a limited number of relevant searches occur daily, but millions of users who have interest in those niche areas log on and spend 30 minutes per day hanging out on Facebook. Equally important, a Facebook display ad may have the possibility to go viral, something that Google ads presently do not have.
Facebook disclosed this week it had finally gone cash-flow positive and was expected to log annual sales of $500 million. If the example of Google and its soaring growth in the early 2000s is any indication, Facebook could be set for a very rapid ramp up to multi-billion dollar revenues. With many advertisers already opting for Facebook over Google, the two online giants appear set for a much bigger showdown -- perhaps sooner than everyone thinks.
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