File this one under statements of the obvious -- though it's one that may ultimately keep Facebook and its investors awake at night.
In the wake of General Motors' decision to dump its paid Facebook ads, the product leader of Google's European display-ad business virtually thumbed his nose at Facebook -- a company that could soon be valued at more than $100 billion thanks to an IPO premised on the strength of its advertising business:
Seriously folks, did you really expect consumers to be in transactional mindsets on Facebook?— Jason Bigler (@jasonbigler) May 15, 2012
Of course, there's no love lost between Facebook and Google, who are both vying to be King of the Internet while raking in the bucks from advertisers. And it's worth noting that the Google exec in question, Jason Bigler, just heads up display-ad products in Europe -- not the company's entire display-ad business, as others have suggested.
But Bigler's tweet isn't just competitive sniping (though it's most certainly that as well). Because there really is a fundamental difference between a Google search ad, which is displayed for people who are actually looking for something, and Facebook's effort to draw the attention of folks who are just trying to catch a look at photos of their friends at the bar.
Over at Business Insider, Nicholas Carlson likens Facebook's advertising approach to that of TV networks:
When an advertiser buys air time for a commercial during a particular TV show, it's because that advertiser has been told by the TV channel what kind of people watch that TV show, and the advertiser has decided that those kinds of people are the kinds of people it wants to reach.
Facebook does the same inexact thing: It sells ads targeted based on the kinds of people who will see them.
In effect, Carlson suggests that Facebook ads are like TV spots without the arresting images -- and thus far less effective than either better-targeted search advertising or more emotionally involving video. It's a pretty neat argument, although it's incomplete because it leaves out the entire social aspect of Facebook's appeal.
From Facebook's perspective, paid advertising on its site works best as a way to draw people into other forms of "engagement" -- visiting company pages, playing with their apps, entering contests, registering for newsletters or updates. More to the point, such campaigns should not only draw in the original viewer of the ad, but also as much of that person's social network as possible.
And then they tell two friends, and so on. Or their newsfeeds do. Anyway, you get the idea.
Still, it can be awfully tricky to hook people into this sort of thing, as GM has learned. For every success out there, there are undoubtedly at least a handful of flops -- maybe a whole bunch of them, in fact. "It is not easy for a brand to get Facebook advertising to work," Hussein Fazal, CEO of Facebook-ad optimizer AdParlor, told me via email. "It is not as simple as just turning on an ad buy."
As a result, it's painfully clear that despite the sums Facebook's advertising engine is already raking in -- $872 million in the first quarter of this year alone -- this aspect of the social network's business is really still a work in progress. What's more, it's one that's out-of-step with much of Madison Avenue and its big-company clients.
That's far from saying Facebook will fail, of course. But it's unquestionably true that its approach to advertising and marketing rests on a huge and still largely untested assumption -- namely, that social-network users can be successfully co-opted as emissaries of brand promotion who happily "like" products and widely share company-friendly stories in what Forbes' Robert Hof calls "a supercharged version of word-of-mouth."
That's at least one conceivable outcome. Is it likely? Facebook's IPO is essentially a $100 billion bet that it is. So stay tuned.