Does It Matter Whether Facebook Changes the Way Advertisers Use It?

Facebook-F-logoFacebook Inc. (NASDAQ: FB) said is would simplify its ad formats to make it easier for marketers to invest to reach portions of its one billion plus members. The change will not matter. Facebook continues to control as much as a quarter of all the display advertising inventory in the United States. That inventory is sold at rates below those charged by much of the balance of America's largest websites. For those reasons, Facebook is very attractive to advertisers regardless of what minor modifications it makes. On the other hand, advertisers continue to be worried about some of Facebook's controversial content, as well as the social network's ability to easily segment and target its users.

The social network made an announcement about the change:

Over the past year, we have been gathering feedback from marketers about our ads products. One point we heard loud and clear is that we need to simplify our product offering. As the services we provide to marketers have grown, so have our new products; while each product may be good on its own, we realized that many of them accomplish the same goals.

So today we are pleased to announce an ongoing effort to simplify our offerings. When we work with a marketer, we always start with their business goals, and we are going to do the same thing with our ad products. Our vision is that over time, an advertiser can come to Facebook and tell us what they are trying to achieve, and our ads tools will automatically suggest the right combination of products to help them achieve it.

In the next six months, we plan to streamline the number of ad units from 27 to fewer than half of that while mapping all of our ads to the business objectives marketers care about — be it in-store sales, online conversions, app installs, etc.

The best way to look at Facebook's growing dominance of the ad market is its revenue and the growth of that revenue in the past quarter. Sales reached $1.45 billion, up 38%. For the same period, Yahoo! (NASDAQ: YHOO) posted total sales of $1.14 billion, down from $1.22 billion in the same quarter the previous year.

However, there are cases to be made in favor of Yahoo! and against Facebook, and they break into two parts. The first is that Facebook's revenue growth will be undermined by content that is controversial enough to keep some advertisers away. And Facebook's "membership" is hopelessly splintered. That makes in nearly impossible to target groups based on common interests in content.

Yahoo!, on the other hand, is built so that users come to its sites and services for specific reasons, and marketers can make use of these Yahoo! users' habits. Additionally, Yahoo! has made some acquisitions that will build its attractiveness to advertisers.

Ad units sizes and types will not be the key to winning the advertising war. There are much more complex aspects of how and why advertisers pick some sites over others. Facebook has an upper hand over many of its rivals. But that is based on size. Its future ability to draw marketers to a social network where finding and advertising to the "right" people continues to be in doubt.


Filed under: 24/7 Wall St. Wire, Internet Tagged: FB, YHOO

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