Here's the thing that most people don't know unless they are in the "industry":
* The gaming industry is most likely driving a lot of this growth. I'm sure Machine Zone and Supercell are doing between $5M - $10M a day on FB alone.
* FB is re-defining attribution. They want to bring in big brands and are re-defining last-click to "Multi-touch". Their end game ofcourse is to say the reason why you decided to make a trip to Macys is because you first saw Macys content on FB.
* FB requires developers to send them analytics when they want attribution for Ads. This means that not only does FB have info about the install, but they have all the data about the usage, in addition to all their demographic data.
* FB still is the only reliable source for advanced targeting of ads. This has massive impact on ROI for performance marketers.
* FB by far has the best tools for advertisers with so many bells and whistles that resellers like Nanigans can make a healthy margin just by managing the optimization.
* FB allows any performance marketer to form a closed loop feedback system. Are CPI's on FB high? Yes. But if you know the LTV of your user (now possible with proliferation of analytics tools) you can afford to bid very high at volume (eg Uber) and still get a great ROI.
A lot of people misunderstood you. physcab isn't talking about gaming on Facebook. He's talking about Game of War and Clash of Clans, which are both mobile games. Like another poster has said, games are 75% of the top grossing on the App Store. And absolutely most of Facebook's revenue, if not literally all of it, is mobile gaming ads (especially slot machines).
I'm not sure if the gaming industry is driving the growth per se. Based on my experience, it's really people buying into smartphones and paying for software (in the form of IAP in games) for the first time in their lives.
To be pedantic, people going upmarket in Android is probably their source of growth in revenue. iOS has been pretty rich for a while now and it's unlikely that there are users who are spending more or more users who have started spending. But Android had a HUGE amount of space to grow in terms of Android phone owners who actually spent money (based on numbers I've seen in 2015). I would imagine that's where the money's coming from—the average Android user has gotten a little richer, started spending more on IAP on Android, and therefore game developers bid higher on ads targeting them.
It's like Upstream Color, except instead of a mind altering slug drug, it's Slots Vacation.
> He's talking about Game of War and Clash of Clans, which are both mobile games. Like another poster has said, games are 75% of the top grossing on the App Store. And absolutely most of Facebook's revenue, if not literally all of it, is mobile gaming ads (especially slot machines).
This is false.
Facebook's revenue in 2015 was $17.9 billion. Total mobile gaming revenue for 2015 was approximately $25 billion [1]. Unless mobile game companies spend most of their revenue on Facebook ads, this can't be true.
The poster claimed the growth was being driven by gaming. This quarter showed a 30% revenue increase over the previous year. If the gaming industry were to be responsible for the entire growth, they would only need to have spent 1.2 billion more than they had the previous year in Q4. If facebook were to see a 30% increase this year overall, they would only need to spend about $6 billion more this year (or about 25% of their profits).
Given that Supercell spends about 50% of their profits on marketing overall (which amounts to $500 million) this is plausible. Especially since you can further reduce the total cost by noting that physcab only stated that most of the growth was being fueled by gaming.
EDIT: However, after reflecting on this, this seems entirely backwards. I believe that physcab was claiming that it was games displaying mobile ads. Thus Facebook is paying the gaming industry, not the other way around.
Disagree with many of these sentiments here. As a performance marketer, and someone who also was in the games industry:
FB Gaming market has flattened. FB has taken numerous methods to rely less on gaming revenue. FB revenues was 10% from game companies when the company went IPO. Much less now, not even mentioned.
Mobile is good at driving mobile installs at scale, limited competitors here. But as a general performance marketing channel, they do better at ecommerce and consumer focused businesses.
Most of FB advertising revenue is coming in from Brand marketing. Performance is steadily growing, but not as you suggest, the reason for this growth.
> FB still is the only reliable source for advanced targeting of ads. This has massive impact on ROI for performance marketers.
A few years ago, a report came out saying that approximately 6% of Facebook advertisers were actually seeing a positive ROI. A more recent survey of small businesses [1] showed that 41% felt they received some positive ROI. These numbers suggest that Facebook advertisers are likely losing billions of dollars per year overall. There just happens to be a large glut of capital out there willing to chase metrics other than ROI right now - things like brand recognition and app installs. Eventually though, some people are going to notice that they are losing money, and the gravy train may at least slow down.
A lot depends on how well you can model attribution. If you're measuring last-click, you're going to see a wildly different story than if you can measure the impact the measure of a impression, mid-stream click, etc. I'd guess most small businesses are not invested in developing stronger attribution models, so looking at Facebook spending vs. something like paid search, as apples-to-apples, is going to make Facebook look worse than it likely is. That's not to say advertisers aren't chasing metrics other than ROI, but just calculating an accurate ROI can be something beyond the scope of many.
Pretty sure gaming is NOT where Facebook's revenue growth is coming from. Almost all the growth has been coming from mobile advertising for a couple years now.
Here's an exercise. Go to the App Store, click on Top Grossing. Out of the 150 apps displayed, how many are gaming-related? I counted 113. Thats 75%. I don't have the charts but you can compare this to a year ago period. My guess is that percentage has grown. This is not an accident.
He's not talking about FB gaming. He's talking about mobile games.
Mobile games that are not played on Facebook are paying Facebook for ad space so that they can reel in additional whales. Games like Clash of Clans & Gears of War.
If what you are saying is true, then it's phone apps (games) driving this revenue. In that case, it seems to me that one should actually buy Apple stock. Because phone apps will only spend this kind of money on Facebook ads if they are able to generate RoI in the app store via in-app purchases. And Apple gets a 30% cut of that without doing anything. So Apple must be making as much revenue as Facebook from this phenomenon.
How does SuperCell earn money on FB's platform? Afaik all of their games are iOS and Android only and I've never seen a display ad of any kind in Boom Beach (the only SC game I've played) although admittedly I don't sign in via FB.
Supercell, like most big mobile gaming companies, make their money on in-app purchases. Someone leaked SC's internal dashboard 2 years ago [1]. At the time they were making $5M a day in rev just in CoC. You can get App Annie estimates of revenue for other companies pretty easily, but last I checked SC was able to dramatically increase LTV of users over the years so this has likely grown.
I'm not contesting that SC makes millions every day from in-app purchases, just pointing out that the money is presumably split with Apple and Google not Facebook. Although you can login to Clash of Clans with your Facebook account, it is not a Facebook game.
I wonder what happened in their 4th quarter though. They seem to have seriously clamped down on expenses. I wonder if this is an actual policy effect or just somehow they skipped building datacenters in Q4.
I couldn't edit my comment but you're right. I meant $5M-$10M per month. But the mobile gaming industry as a whole is a huge revenue driver, probably 20%-30% of FB's quarterly rev.
Sorry for the throwaway, I work in ad tech. Other posters are saying they see hardly any fraud on Facebook. My employer is a more traditional ad tech company (think exchange and direct buys) and we estimate 60-70% of our exchange inventory is fraudulent, and at least 15% of our impressions are delivered against fraudulent sites (of course we don't tell the customers). In reality the numbers are probably higher. The problem is that literally everyone except the end customer is making money off this. As soon as anyone talks about the need to do something about it the whole "let's not rock the boat", "what about our revenue targets", "well you can't tell Sales that" crowd comes out.
I personally think there's a reckoning coming soon to traditional ad tech. There is so much fraud, such ludicrous and impossible revenue and impression targets, so much pushback against shitty and annoying advertising, and so little incentive to be honest with the customer. It can't last like this.
I would think that customers are reasonably sophisticated when it comes to stuff like this, particularly when they are spending real $$$. How difficult is it, for something like brand advertising, to do before/after poll's to discern how effective the dollar spend is in promoting a brand (with conversion to sales, it's even more trivial.)
Done properly, the customer doesn't actually care if 99% of the exchange inventory and impressions are fraudulent, as long as they accomplish whatever objectives they set out to.
Put more explicitly, if the objective for an advertiser (or, more likely, their agency) is to build awareness of a brand, they can measure a measure awareness among their target group, run a few million dollars of advertising, and then measure awareness again to see the difference. Done with enough customers, and enough programs, you start to get a very clear sense of where the dollar is best spent.
Your hand wavy usage of "measure awareness" is the problem. How do you do such a thing?
When you're advertising on multiple channels, even if you did have a solid measurement of awareness (you don't), you still wouldn't know what was responsible.
This is the appeal behind things like Facebook ads. It seems you have a very clear sense of what return you're getting because there's such precise targeting and tracking. The issue is that neither of those have anything to do with the first portion of your comment: measuring awareness. You still need to measure awareness objectively and no one knows how to do it.
The people best equipped and most ready to act like they do, however, is — you guessed it — Facebook and similar ad networks!
Besides, the ad industry has been kept afloat with exactly the type of behavior that grandparent describes for decades if not centuries. What makes you think they're more sophisticated now?
The polling is often done by randomly inserting Vizu polls into the page somewhere and hoping someone fills them out. Of course hardly anyone does - who can be bothered? Still, they've managed to establish themselves as a credible third-party verifier (not saying they actually are credible - I know sometimes people running the campaign will fill these out to show that the campaign is working)
Also, I'm not saying it's all fraudulent and doesn't work at all - of course if that were the case everyone would know. What I'm saying is that the brand is massively overpaying, because a large percentage of their delivery goes to fraudulent bot traffic. And it's pretty much in everyone's financial interest except the brand's to turn a blind eye.
Also, it's important to know how campaigns are actually delivered: firstly, Sales sells something wildly optimistic like delivering 1m impressions a day to 45-50 y/o women in Florida. As time goes on and delivery can't be met we loosen the targeting parameters in order to "deliver in full" even though this delivery is no longer to the customers specifications. We might tell them we're doing that, or we might not and hope we get away with it. Then after the campaign we take whatever numbers we got and create a story out of it that makes us look good. If we're working with an agency we give it to them and they presumably spin it some more before presenting it to the customer.
Don't forget that a lot of this is often driven by the brand managers who want to grow their budgets. If it turns out that they can't spend $1m on "45-50 y/o women in Florida" in a quarter, then their budget will get trimmed appropriately, reducing their stature and sway in the organization. The fraud problem in digital advertising is a hard cycle to break when there's people on the brand-side helping encourage it.
Yes, this is 100% accurate. No-one wants their budget to shrink. Agencies will come to us at the end of the year with unspent client budget that they really don't want to give back, lest they be given less to spend the next year.
Okay, so this question is one I'd never ask in 'real life' without knowing you very well first, but I suppose it's different here because you're anonymous and free not to answer. But apologies anyways if it seems rude.
Why do you do this work? You clearly know what you're doing; perhaps you're very good. And I won't presume to know your reasons or the underlying belief system that may or may not support it.
But from my personal perspective, it sounds like hell to spend my productive days essentially just selling stuff. Is it that you believe in what you're selling? Is it that in your moral framework being good at this job trumps what seems like a bad way to spend your time?
I'm truly asking out of curiosity, by the way. I'm a front-end developer and a significant portion of my work, when I work, is essentially dressing up ads with websites that don't add up to much of value (within the parameters of my own perspective on life). So judging you would be hypocrisy.
But I'm actively unhappy about it, and any excitement I show involves the craft, and I'm looking into ways to apply my craft in ways meaningful to me. And I'm curious to know how this works for you.
I am not against advertising per-se. I think there is some truth to the idea that advertising keeps the Internet free. It's also a part of the sales cycle that drives the economy, and keeps a lot of people in work. I think the fear of tracking is a little overblown, too - everything I've seen about tracking in my company is extremely focused on keeping user data anonymous (at least as much due to fear of a lawsuit and bad PR as out of ethical standards). I've never heard anyone suggest doing anything with that data other than trying to use it to deliver better results for our clients. We have massive amounts of tracking data, but we don't know who anyone is or where they live. We seem to try hard to keep it that way. Now, it may be possible for someone with sufficient access to take the data and figure out names and addresses, but we never even let that data into the system, and we have stringent, externally audited controls, so it would have to be a malicious act. You'd be out of a job in a heartbeat if you got caught doing that.
So, I don't have a moral problem with the way my company in particular is using data. I think the fact that your mobile phone operator will sell your location is much more concerning. There are a lot companies in the ad tech space, and I'd bet a lot of them care a lot less than we do about personal user data.
On the issue of fraud in particular I can truthfully say that I've only just become aware of it. I am an engineer on a small component of the platform. Communication between departments is not great, so I have been disconnected from the reality of how campaigns are run. It wasn't until I looked into our data while diagnosing another issue, and subsequently reached out to account management, sales etc that I realized what was going on. That was in the last few weeks. Since then the issue has blown up and we're working on a plan to deal with it. Whether that plan has teeth and is enacted will tell a lot about the willingness of the company to do the right thing for our customers. I'm cautiously optimistic, but that optimism is tempered by the general negative attitude toward transparency that I've seen from leadership in the company.
I also am planning to leave the company before the end of the year. This is as much for personal reasons as work ones. The company is dysfunctional and oftentimes its own worst enemy. I wouldn't work for a company like this again, and would ideally stay out of ad tech entirely.
unless you're talking about really sophisticated fraud, i think advertisers and publishers both care about it.
I'm on both sides of the coin.
As an advertiser, click fraud is obvious when I see a huge disparity between google analytics and the ad network. You'd have to put a lot of effort into sending fake traffic that actually engages with the advertiser's landing page.
As a publisher, I know that if I send a bunch of BS traffic to my advertisers they will blacklist me and starve my website.
Regarding your estimates, I agree for really broad traffic.
If your targeting options are very vague/loose you can buy ad traffic for very cheap, but you end up with a large number of click fraud.
Most advertisers should want to be as narrow as possible with their targeting. The tricky thing is that when everyone is bidding on the golden goose egg demographics the price jumps quickly.
In some cases, you're better off buying the 'general audience' traffic for pennies just because of sheer volume multiplied by chance.
Companies the spend the most on Facebook ads track the resulting revenue they earn very closely.
So even if lots of clicks were fraudulent, they're looking at ($ earned from clicks)/($ spent on clicks). Based on Facebook's continuing increase in earnings, it's safe to bet that lots of major advertisers are seeing this ratio returning >1, and are therefore increasing their spend.
Facebook is the only platform that lets advertisers target a mass audience with very fine demographic precision. Google you lose the demographics. Television, you lose the the precision.
All advertising platforms deliver fraudulent/worthless/imaginary/bogus views. Print has a problem with publishers making up circulation numbers. Television has a problem with ads running while no one is watching. Radio has a massive problem as their listener numbers have collapsed. The display ad exchanges have tremendous problems. Mobile apps have an incredible amount of accidental clicks which may often either be 10 year olds trying to play a game or just outright fake. Video ad networks have a problem with ads auto-playing on repeat that are seen and heard by no one.
Google and Facebook are about the easiest to deal with, by far.
To comment on that: whenever I accidentally click a mobile ad because it pops up above what I was trying to click, I make sure to click it for another 2 minutes over and over again.
Hopefully someday all ad networks decide that they only get fraudulent clicks from me, and stop their practices.
To expand on this, I think you can eliminate a significant amount of this fraud by properly configuring your ad campaigns (or whatever facebook calls them) and using "tricks of the trade". The companies that spend the most on facebook ads, will likely allocate a good amount of resources to hiring people who are experts in facebook marketing. So you have a lot of people not being experts in configuring their ads getting fraudulent clicks/likes/followers/stalkers/customers/etc and losing money on advertising when they go down this route, but the big companies spending more money on facebook as they get better at new_revenue/ad_costs.
I came across a guy a few months ago who generates a six figure income for himself via click fraud, though apparently via Google's platform.
I think their is a certain amount of Black Market SEO Google/Facebook/Whoever will write off as an acceptable loss because the technology just isn't their to stop it (or at least the financial incentive is not there).
Basic heuristics however seem to be able to keep the big offenders in check, and that's all that really matters it seems.
> * Is anyone aware of evidence of the extent of click fraud on Facebook? I see a lot of discussion about it but not a lot of data.
This probably counts more as an anecdote than as data, but at my last startup we bought about $100,000 of Facebook advertising and never saw click fraud (we tracked downstream behavior and revenue very carefully). Far and away Facebook provided the best traffic compared to any other paid channel.
Also anecdotally and at a smaller scale, our experience is similar. What Facebook have claimed in their reports appears to match our data from other sources reasonably well.
Facebook has a kind of campaign that is explicitly to garner likes, nothing illicit about it.
There are multiple articles about the quality of the demographic you get when you use their official platform. Conspiracy theorists point out that likes are a very weak signal of interest, and thus it's hard to judge if you got good likes or bad likes.
Facebook has a conflict of interest in choosing who to show your like ad to: if both Alice and Eve are willing to like you with equal probability, but Eve is less likely to be an engaged fan, Facebook should show your ad to Eve.
You got your like, so you're happy, but your content is less likely to organically go viral, because Eve isn't as engaged as Alice would have been. Notably, not all of your fans will see your posts: Facebook no longer guarantees delivery to people who have liked you. Luckily, Facebook will help you run a campaign to target the fans of your page that you just paid to get.
I wonder how much of that revenue came from VC-backed startups that just want to acquire a user-base whatever the cost. Mobile app install costs $4+ for iPad and $2.5+ for iPhone. Even at a 100% install to launch rate and a 5% conversion rate, companies need to make $80 per paying users for the numbers to work. This just doesn't seem sustainable to me.
If you run a gaming company, you're most likely tracking everything you possibly can about who is spending in your game.
If you are running a facebook campaign, you will buy either on volume (don't care what the price is, just give me the user, ie Uber), ROI (make sure the LTV of the user is less than the CPI), or profit (make sure we're still making money even after apple's cut)
Facebook allows you to form a closed loop feedback system. If Uber knows the LTV of a customer is $100 and CPI's on FB are $10, go to the bank and get as many of those customers you can.
Most of the app ads you see on Facebook are for games which is how they can justify spending $4+ (the big mobile game companies make billions in revenue).
At my company we're realizing how great of an advertising channel Facebook is, in the fact that we can immediately narrow down our target audience to people who have liked a certain page.
It's just very weird to me that a social network that everyone my age and younger never use. I never, ever post to Facebook and rarely look at it because it's just my family on it. I connect with friends over snapchat and meet new people on Twitter.
Meeting new people is nearly impossible on Facebook. Maybe that's why it's such a great advertising platform with such great revenue? Everyone is on it (your whole family joined) and the only way for a company to get your attention is to pay.
There a psychological bias called the "false consensus effect" whereby people overestimate how similar other people are to themselves. It's backed up by things like confirmation bias where you tend to socialise with people similar to yourself so it feels like most people really are like you.
The simple reality is that you just don't know enough people to draw any statistically relevant conclusions about society. It may well be the case that none of the young people that you know are on Facebook, but that really only says something about who you know, not about young people's attitude towards Facebook in general.
To your point, I'm also younger and have very few friends on Twitter. If anything, twitter is old and full of noise. My friends all use fb, Snapchat and IG
Google is all about searching for results and Facebook is all about demography and thus brands.
So Facebook is taking a lot of advertising budget to establish brands that used to be for print and television.
Simple example: Diapers. By the time you have a baby, Facebook knows that you as a couple are expecting and you will see ads establishing relevant brands. You would never see those ads on Google, because at that time you're not searching for them.
This used to be the business of television advertising. So you know the brand Pampers long before you ever think of buying a pack of them.
Can you elaborate on why you think Google wouldn't know before FB?
Many (most?) people don't go posting anything about pregnancy before for ~3 months traditionally, and odds are you are going to be searching for symptoms when you first notice something is wrong health-wise.
When a doctor or test confirms you are pregnant, I'd be willing to bet that users are immediately pulling up their favorite search engine to figure out next steps vs. blabbing about it to their BFFs on FB.
Now, if you are basing it purely off of carpet bombing people targeting off of demographics, yes, FB probably has more solid data there as it is self-reported and not inferred. But you sure as heck won't get self-reported pregnancy info earlier than Google will know you are interested in it.
If anything, I'd argue Amazon would have that data in a similar timeframe if people start looking up pregnancy books.
This also entirely discounts the notion that there is 3rd party data sets at play which both Google and FB leverage to enrich their data.
All of this is not to say your point on the brand advertising is incorrect--I actually agree with that as the "feed" has become the new television. But definitely do not agree on the specific example cited.
The odds are very good that people start discussing things like pregnancy in Messenger at the same time they start googling symptoms. Public posts aren't all FB has available.
That's actually a great point that I forgot about. It is scary to think about how they are mining personal conversations like that, particularly about something so sensitive.
Could easily lead to a situation like when Target outed a girl as pregnant to her father [1].
You are correct, though it's worth noting that advertising spend as a % of (American) GDP has been constant for a long, long time [0]. FB and Google are probably still competing for money that was previously spent on TV/Radio/Periodicals, but still, everyone's competing for a slice of the same pie.
I'll give another perspective: In my industry at least, Google has become incredibly expensive due to a few unicorns spending ridiculous amounts of money just to put competitors out of the game (because they have the money for that, even if it doesn't make sense from a unit economics point of view, and Google is cool with it). By contrast, Facebook remains very effective for the same kind of goals, at least for the moment. I get the feeling this isn't unique to my industry so yeah, I'd venture to say there is a lot money shifting platforms.
That's a contradiction. If some companies are "spending ridiculous amounts of money" on Google, that's evidence of increased revenue for Google. It's not hard to believe that both Google and Facebook are growing.
The biggest advertising agency holding WPP spent $1 billion with Facebook and $4 billion with Google in 2015 [1]. Both figures are up compared to 2014, by 56% on FB and by 38% on Google, so the growth of advertising budgets on Facebook was faster, but Google still dominated.
What's impressive is that WPP alone brings in around 5-6% of both internet giants revenue. I wonder how the few multinational advertising giants (WPP, Omnicom, Publicis etc) compare to a long tail of local agencies and individual advertisers.
I realize both are competing for ad dollars and can be called competitors for that fact [1], but my own use of them really doesn't overlap. I use FB for interacting with friends and family, I use Google for interacting with the rest of the web. FB's search is not optimal and Google+ is well... it's not something my parents or my kids are going to use. There's not much overlap in my video viewing habits either. I don't sit down to watch a video on FB. How would I even find something to watch on FB? YouTube search is incredibly impressive and satisfying. I'm sure FB and Google would like to take more of each other's markets, but I don't see how they would do that. I may be projecting, but I think most people are satisfied with two great services and don't feel the need for one that does it all.
The impact would be lower CPCs for mobile ads. People moving their ad spend over to Facebook from Google. One of the interesting myths people used to believe in was that adding a new advertising platform would add more ad dollars to the digital economy. However, the pool of ad dollars is finite, the people who spend them have fixed budgets so when they shift them to new inventory they take them away from somewhere else. And the way that is reflected in Google's number is their auction system for ads gets lower bids as fewer people are competing for various spots.
Thanks, I figured I was missing something since I don't know much about the ad business other than what I read about in regards to the impact of ad blocking and efforts such as Brendan Eich's company to mitigate the problem.
I graphed Google search trends for different platforms [1] a few weeks ago. If Facebook is like the others, it crossed its peak three years ago and is dying ever since, something that matches my personal experience on Facebook. So where does this disparity come from, how can Facebook keep announcing new records while the search trend points downwards for about three years? Did they manage to break free from the correlation? Maybe because of the widespread use of its apps? Does the rise of WhatsApp play a role in the presented numbers?
Don't get mislead by the normalization, Facebook has still more than six times the search volume compared to the peak of Myspace.
* If someone has the Facebook app then they're not going to be heading there via Google.
* Instant articles means they get a cut of advertising revenue from external sites such as Daily Mail and New York Times when users click on a shared story
* It is plausible that they have improved their ad targeting algorithms so that those who want to see an ad are more likely to see it.
If someone has the Facebook app then they're not going to be heading there via Google.
On the other hand a lot of other searches contribute to the search volume and should track the popularity of Facebook, problems with the app, developers looking for API documentation, discussions of policy changes, people looking for jobs, news about the company and so on. So even if people are using the app the search volume should say something about the popularity. One thing I can imagine though is that a shift from the web to the app might decrease the search volume by such a large amount that it totally obscures the trend of the other kinds of searches I mentioned above.
I expect most searches are from people typing Facebook into Chrome and hitting Enter.
If those people are shifting more and more to the mobile app then they won't be doing that so much. Sure, they'll search if there are problems with the app, or they're after a job but that has got to be less than those trying to access the site.
That is exactly what I meant with my last sentence. According to the graph from this article [1] the number of web users halved between Q1/12 and Q4/14 while the number of web and mixed users combined increased by about seven percent. It's hard to match against the search volume, it may or may not explain it.
As already mentioned, from my personal experience I would say I see evidence for the decline, I see no new users but I have seen a few users leave. Maybe there is also regional variations, older markets already losing users while newer markets are still growing.
So Facebook makes less than $3.7 per user per quarter or some $15 per user per year.
Don't anyone find it amazing how little money they make per user (and still have a good business)?
The article doesn't say how much time the users spend on FB, but they say that users spend 100 million hours monthly on watching videos. If we assume that's 50% of the time spent on FB, users spend 200 million *365 = 73 billion hours yearly on FB or in average a little less than 50 hours per user. For $15.
So roughly speaking, Facebook makes $1 for every 3 hours a user spends.
Except that most of Americans between 16-22 (the oldest FB audience) have quit. The lagging indicators are the user acquisition in emergent markets and the revenue. In the case of Blackberry for example, the revenue peaked at least two years after the actual product was dead.
I have several accounts that I set up for research purposes with close to 5000 friends each, mostly 17-25. All friends became inactive in the last 4 years.
It could be that the people who accept friend requests from randoms with 5000 friends aren't very strongly attached to the service in the first place, and aren't the core market or the bread and butter of FB.
That sounds like you sent random friend requests to strangers (please correct me if I'm wrong). I'd expect that there would be some correlation between users who would accept a friend request from a stranger and the likelihood that they would go inactive.
> Except that most of Americans between 16-22 (the oldest FB audience) have quit.
That's an extraordinary claim and requires extraordinary evidence. You don't have any.
As someone who's actually in that demographic I can tell you it's patently false. Facebook continues to be the hub of social networking, particularly on college campuses. If you're having an event of any sort, Facebook is the place you announce it. Messenger is becoming the dominant messaging platform for most people I know.
If you're going to make extraordinarily bold claims, it'd be good to offer some actual evidence. Or at least put your money where your mouth is by taking a large short position.
From your profile, it looks like you're German, not American. Germans have always had a tepid relationship with Facebook and it's definitely not a core or strategic market for them.
Please don't be rude to others on HN, especially when you think they're wrong. The GP shouldn't have been so aggressive, but replying like this makes things worse.
Your comment would be fine without its first and third sentences.
I suspect that a couple months is too short a time frame to judge this—too prone to sample bias and normal fluctuation. But please keep flagging such comments when you see them. No one can read all the comments posted to HN, but we can and do read all the flagged ones.
In case anyone is wondering, the way you flag a comment is to click its timestamp to go to its page (a speed bump to prevent people from doing it impulsively), and then clicking 'flag' at the top. You need a small amount of karma (currently 31) before that link appears.
The insult isn't in the word sassafras, of course, but in being supercilious in a discussion. The reason you shouldn't do that is not because this place is "fragile" but because it's a rude thing to do.
Apple makes more profit than all of Facebook's revenue times 3. Yet Apple stock goes down and Facebook, which has a price/revenue ratio that makes no sense whatsoever, goes up. Apple makes products people generally love, and Facebook makes money from ad and ad like things which people hate (and eventually will block). I really don't understand the stock market at all.
Stock isn't bought just based upon last quarters profits, but on how much investors think can be derived in the long term.
Facebook have done better than investors expected. Apple have done worse than investors expected. What makes you think people hate Facebook ads? Facebook ads are the only ones that I have ever clicked on, and then made a purchase. I think they are well targeted and very effective.
How many of the 1.59B users are still active, at least once a week? Not just have the app installed and receive just notifications but actually open the app or website?
Facebook is mainly used by 30+ woman's nowadays, to share their baby, cat and dog photos. And is a huge ghost town with much of the profiles haven't been updated or have posts for multiple years. It's like MySpace in 2010.
Facebook (and to some extend Google with its bullish Google+ auto-written posts based on Youtube comments, etc that no one wanted) single handed destroyed/burned the notion of social networks because of pure greed. Yet social network as in 2008/09 (at its peek) were great, than came the broken "newsfeed" that doesn't show all friend updates in chronologic order anymore, but selected featured filtered crap.
[I am talking about Facebook the app or website - the social network. Not the messenger app nor WhatsApp nor Instagram]
If you bothered to read the article, you would know the answer to your question. All of those 1.59B users login to facebook at least once a month, which are reported separetly from the Messenger users, who are 800M.
The big question mark for me is whether FB will be the advertising giant to finally crack the attribution nut.
You see, the age old problem of "I know I'm wasting half my budget, I just don't know which half" is still alive and well. These days, we have SO MUCH data about cross-channel attribution that it can be hard to plot a path forward (and that's if you are even aware of this concept and its implications).
For those who are savvy, display and video CPMs might seem a bit inflated right now. There is a major opportunity to leverage analytics to prove to advertisers the incremental lift of their display and branding efforts. Dedicated attribution services like VisualIQ, Adometry, and Convertro have been getting snapped up by big advertisers, but so far nothing has really reached the SMB and mid-market level for solution pricing.
I'd LOVE to spend more of my budget on FB and display, but when they mix view-throughs in with click conversions by default, that raises red flags. What is the value of a view-through? It is sure as heck not 100% attribution credit, which is what the default would place it at.
Attribution is a super deep and very complex subject (and one I'm very passionate about). Getting better visibility is my top priority for 2016 as it is many other advertisers. Structuring proper tests is unfortunately not just a software issue, particularly with smaller businesses with less data as you need to control for many factors.
That said, Google has fired the first shots in this fight with their awesome basic attribution tools in GA that they give away FOR FREE. I'm dying to see what they do with their Adometry acquisition and whether they will make that available to the masses.
FB has a huge opportunity here and I know they've been making inroads in this area with Atlas, but I'd personally love to see them release "Facebook Analytics" as a direct competitor to Google Analytics, and make a real effort to prove the value of their inventory from an incremental lift/attribution standpoint.
I'd LOVE to spend more on branding if I could be more certain of the actual impact it is making to allow me to justify the budget I'm putting towards it compared against more directly measurable options lower in the funnel (like some aspects of paid search, which has its own attribution issues). The tools just aren't there though.
If FB can provide advertisers with the tools to more definitively say "this is making you money" and not just "oh, we summed up all these random stats and call it Engagement--look at the shiny engagement metric!" I'm confident they would find advertisers even more willing to open their wallets, shift spend away from the GDN and exchanges, and stop questioning or caring about click fraud since it would be a self-correcting issue (ie. high levels of click fraud would in theory result in lower perceived incremental lift if proper analysis was conducted).
If you are at FB and touch Insights or anything related to attribution on Atlas, please dear god contact me--I live right near HQ and would LOVE to have a deep conversation on how to improve this for advertisers.
I appreciate you sharing your information as it came across as an honest attempt to be helpful, however I think you might find it helpful to read this post by Avinash Kaushik [1] and then reread my post. I do digital advertising for a living, and that post is what I recommend to all who are new to the concept of cross-channel attribution as it is a very complex topic from both a data, math, and business standpoint. Easily one of the biggest opportunities and problems in the ad industry at the moment (and has been for some time).
No worries. I am actually in conversations with a client right now about multi-channel attribution, as I know it's a problem. The reason I responded the way I did was about your comment here:
> If FB can provide advertisers with the tools to more definitively say "this is making you money" and not just "oh, we summed up all these random stats and call it Engagement--look at the shiny engagement metric!" I'm confident they would find advertisers even more willing to open their wallets, shift spend away from the GDN and exchanges, and stop questioning or caring about click fraud since it would be a self-correcting issue (ie. high levels of click fraud would in theory result in lower perceived incremental lift if proper analysis was conducted).
Engagement metrics to me are much more about brand awareness then it is converting sales, so I didn't understand why you would point to engagement metrics when questioning tools that drive sales. Are you saying that you use conversion based ads on FB and aren't confident that their attribution window provides a highly accurate view of their performance?
NP, I can see why that might have been read in a different way.
I may have mixed my points up a bit, but basically I've noticed that they seem to lump quite a few things under "engagement" (an autoplayed video that plays for 3 seconds from someone scrolling in their feed is apparently a valid view). I'm using engagement in the broader sense, not the specific definition in the FB platform here, although it is pretty all encompassing there as well in terms of Likes/Comments/Shares (none of which are really the apples to apples at all).
My bigger beef is on the view-through side. Attribution windows alone don't dictate attribution weighting. You really need to be measuring incremental lift, otherwise you end up with lots of people seeing an ad and a ton of view-throughs, but a lot of wasted spend since many would have converted without the impression.
Yes, tracking last-touch is easy. but last touch is far from the whole story, and once you move away from simply tracking last touch, it gets really complex.
Sure, the user saw the facebook ad or clicked on the facebook ad. But... does that just mean that facebook is good at showing ads to the sort of people who already buy those products?
(I know that when I'm running without ad-blocker, I already own most of the products that correctly-targeted ads try to advertise to me. My argument is that the ads are merely following my preferences, not driving those preferences.)
I'm not sure you're completely understanding how it works. I can actually run an ad on Facebook and with a conversion pixel I can see what the ROI return is. Read this for more details:
"Attribution" means more than just the last click.
If you see an ad on TV, and then 2 minutes later receive an ad on Facebook for the same product, click through and buy then how much is the TV ad responsible vs the Facebook ad.
Same for Youtube ads. Typically (as a very broad rule) people don't click through to purchase from a Youtube ad. And yet lab (and other) studies show an increased propensity to purchase a specific product after Youtube advertising exposure.
As an ad buyer, how much do you spend on those TV/Youtube Ads, vs how much for the final click.
lcs's point is that sometimes that (paid) final click comes from a user who was probably likely to purchase anyway. So an advertiser would be better off paying more for wider exposure than for that final click (assuming a fixed budget etc etc).
This is a live problem right now, and a solution is worth billions of dollars.
Interesting. Is that true even if you're only able to consider last-touch rather than the whole picture? (For example, if you're a performance marketer working on commission for leads or sales.)
I've not yet seen spectacular results for video, speaking as someone in the above category (some of the time) but my hunch has long been it can be very effective.
I'd be shocked if this was the case given how much of video is pre-roll and the "view but don't click" nature of it. You'd have to have a pretty friggin' compelling CTA to get someone to click it and drop your cookie.
"but so far nothing has really reached the SMB and mid-market level for solution pricing" that's exactly what we are trying to do at AdTriba.com, cross-channel management and data-driven attribution modelling for SMBs.
1) They've pulled bait and switch when they decided to charge to reach users that have already liked your page. Most of those users liked your page because you've posted a link to FB on your site.
2) Click fraud is rampant [1]
3) They make money on copyrighted videos + ripping off YouTube content creators [2]
Big spenders do a lot of due diligence to make sure that the money they spend is actually giving them a positive return. It's not like businesses just throw millions down the drain and hope it gives them results. Facebook is working great for them and it is not a scam otherwise businesses wouldn't be spending billions on advertising there every quarter.
Or, as pointed out in a comment above, everybody is lying to everybody and the only loser is the customer. The customer may still find advertising to be a net win, but they have no clue to what degree it is such.
If the rights holders do not want to enforce take-downs on their content (eg because they're getting promotional value from it or otherwise), then it's not in any way wrong to benefit from said copyrighted content. In fact it's smart and appropriate to use copyrighted content in that case.
Just because something is copyrighted doesn't mean it's inherently or by default illegal or improper to use without permission - it means it may be.
Just want to say that it is default illegal to infringe copyright. It is a civil offence in most countries, but it is still illegal. You can be sued and "But you never complained" is not a valid defence. This is true of any country that signed the Berne convention. In many countries if you infringe copyright for profit, it becomes a criminal offence and you can actually go to jail.
I am not a lawyer. This is not legal advice. Read the copyright law in your area. You will undoubtedly be very surprised at how wrong you are.
You could repeat the exact same sentences for Facebook usage of videos as well.
Both FB and YT are benefiting from copyrighted content used illegally. The copyright owners don't have time to search and hunt down every last one of thousands of copies of their videos posted. Even when they do, the new ones just pop up a week later and people uploading are getting smarter with various tricks that prevent automatic detection.
To say Facebook is the biggest scam is too extreme. Click fraud exists on every single platform. Pay a hundred mechanical turk and they can click for you all day long.
I guess it depends on the industry but from my own personal experience, fraud is non-existent if your targeting decently specific (i.e. specific interests).
Facebook makes it really easy to track your cost per conversion (e.g. subscribe, signup or sale), and if you report revenue data back to them you can track and optimize for revenue.
The only excuse for loosing money on FB in the long-term is unsuccessful experimentation and that shouldn't be huge quantities.
* The gaming industry is most likely driving a lot of this growth. I'm sure Machine Zone and Supercell are doing between $5M - $10M a day on FB alone.
* FB is re-defining attribution. They want to bring in big brands and are re-defining last-click to "Multi-touch". Their end game ofcourse is to say the reason why you decided to make a trip to Macys is because you first saw Macys content on FB.
* FB requires developers to send them analytics when they want attribution for Ads. This means that not only does FB have info about the install, but they have all the data about the usage, in addition to all their demographic data.
* FB still is the only reliable source for advanced targeting of ads. This has massive impact on ROI for performance marketers.
* FB by far has the best tools for advertisers with so many bells and whistles that resellers like Nanigans can make a healthy margin just by managing the optimization.
* FB allows any performance marketer to form a closed loop feedback system. Are CPI's on FB high? Yes. But if you know the LTV of your user (now possible with proliferation of analytics tools) you can afford to bid very high at volume (eg Uber) and still get a great ROI.