Irrational exuberance in Internet adland? Facebook made $3.15 billion from ads last year as an “afterthought”

alan-greenspan

By now you know Facebook filed yesterday to go public.  I learned about it on Twitter.

Shortly thereafter, Digiday Editor-In-Chief Brian Morrissey astutely posted five initial thoughts about Facebook advertising.

He got me thinking:  Facebook sees advertising as, basically, an “afterthought,” and, yet, they did $3.15 billion in advertising last year.

Pity the rest of us who spend every waking moment thinking of little but advertising and would celebrate, and retire on, the rounding error there.

Three point one billion dollars.

Do you know what it costs, advertising-wise, to get, say, 80% of America to know a new brand?  You do?  We’ve been trying to figure that out for decades.  But, let’s say $100 million is a safe bet.  OK, let’s say $200 million is a sure thing.

$200 million.  Or, put another way, $.2 billion.  As in, the bit that’s to the right of the decimal point on Facebook’s ad number.  Like, the part you’d just drop if you were in a hurry.  So, even though Facebook takes a page from the “Good to Great” model and notes they have but one measly percent of all the ad money spent on every type of advertising imaginable ON EARTH, trust me, $3.15 billion is a big advertising number.

Speaking of Facebook ads, they’re puny, easy to ignore and not exactly setting the world on fire performance-wise (Adweek Report: Facebook Ad Performance Is Abysmal, Jan 31, 2011).  Some folks still don’t know Facebook even has ads.  My kids know about them because they click on them by mistake.

Pretty much what you’d expect, really, from an afterthought.

Can you remember a Facebook ad?  I can.  It’s for a pair of pants that’s supposed to make a man’s butt look better.  I think it’s for a brand called Bonobos, or something like that. I’ve never bought a pair, but I’ve seen the ad a lot.

Outside of certain CIA budgets, advertising on Facebook may be the quietest $3.15 billion ever spent.

So, to me, the fascinating question is this:  why did advertisers spend $3.15 billion on Facebook ads last year?

I think the answer is “irrational exuberance” in Internet adland.

Social media is all the rage.  Everyone’s on Facebook.  Brands want to be “Liked” by lots of people.  And, when you advertise on Facebook, not only can you mirco-target your “afterthoughts” to microscopically-precise audience segments, but you can also track in glorious detail the effect of your little ads, complete with charts, graphs, colors, percentage changes and conversion ratios.  And there is practically no barrier to entry.  All you need’s a credit card and fifty bucks or so to get started.

It’s really quite fun to see those little ads actually grow those numbers week after week.  “And here you can see the number of people who ‘Liked’ us grew another 2.7% this month.”  Very gratifying, really, for the brand folks who’ve always had to sing and dance a little when the time came for demonstrating the latest campaign’s success.

Oh, but, there is one thing that very clean & simple, eternally-heading-in-the-right-direction Facebook ad dashboard doesn’t show:  how much more (or less) soap you sold last month.

Hey, as long as my boss is cool with that, so am I.

Alas, the lure of riding a wave with eternal growth that’s socially encouraged and cheap and easy to invest in is deceiving marketers about the real market value of what they’re buying.

If you bought a house in 2006, you know exactly what I’m talking about.

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