Apparently Facebook is said by some to be valued at $75 billion. Facebook’s revenue, just under $2b last year, derives mostly from online ads.
I visit Facebook most days and was only dimly aware that it had ads. I just looked, and yes, they’re there: not on the main newsfeed page, but on my profile page. I’m trying to get my head around the fact that buying Facebook ad space is a good investment.
Question: have you ever clicked on a Facebook ad? Have you ever clicked through and then purchased?
Secondary (or maybe really prior) question: Does it matter to advertisers whether Facebook users click? Or is the point just to put the name of the product in the corner of people’s eyes, for brand awareness?
Anticipated objections: 1. Yes, I know the readers of this blog are not a good sample of FB users. 2. No, I don’t think “businesses wouldn’t buy ads if they weren’t effective” is obviously correct, though it does carry some force.
Update: Reader Rod Carvalho points out that the same question applies to Google — so feel free to answer that too!
Quomodocumque 
I have never clicked on a Google ad either, and GOOG is valued at X, where X > $75 billion. The mind boggles…
Huh, I’m not seeing ads on the main newsfeed, either. That’s odd, they’re normally there. Mine are usually game ads or ads from companies that are hiring, though I see a fair share of Groupon-style stuff and real estate scams.
Anyways: I occasionally click on a game ad, though only very rarely. And for game companies, it definitely matters if users click (and not just any users, you want ones who will subsequently spend in game): a game company that bids more per click than the expected lifetime value of that user won’t stay in business very long. Which isn’t to say that some game companies aren’t incompetent, of course, but I can personally attest that some pay very close attention to those clicks.
I have only clicked on Google sponsored results accidentally. I have clicked on a couple facebook ads, but no purchases resulted. One was for tshirts with funny things written on them; I wanted to see more. The other was a baby product that seemed convenient that I hadn’t known existed, but in the end decided it was not convenient enough (and the facebook advertised product was not as well rated as the fisher price version).
I don’t think I’ve ever clicked on a Facebook add, and currently I use an adblock plug-in that prevents me from seeing them.
I’ve definitely clicked on Google sponsored results, and likely purchased things as a result. But I buy a lot of stuff on line, and only click on the sponsored results when I’m actively shopping for something particular. Of course, with Google the merchant only pays when someone clicks, not when the result is shown, so this is how it’s supposed to work. (I’m not sure if Facebook uses the same model or not)
Google’s gross revenue last quarter was about $8.6B which I think is essentially all from people clicking on there sponsored results. They made a profit of $2.3B, so they make more than $8B each year.
Facebook on the other hand apparently generated $2B in revenue and $400M in profit last year, but it’s hard to know since they’re not publicly traded and don’t release the data.
Like Nathan, I’ve clicked on google ads but never on facebook ads. In fact, I can’t remember ever clicking on ads any place other than google. Of course, google knows everything there is to know about me, so they are very good at showing me relevant ads…
Do you know if anyone clicks on the Google ads on this blog, Jordan? That would get around objection #1.
I too have an adblock plugin on the browser I use for both Facebook and Google, and I don’t think I see any ads on either.
On the other hand, I’ve bought at least two products after seeing them advertised on Hulu (one quite recently). I clicked through the links on Hulu but then bought the items on Amazon, so I’m not sure whether their tracking of me would be adequate to tell them that I actually bought anything.
It’s possible I joined LivingSocial because of a Facebook ad, and I’ve bought a bunch of stuff from them. I also recruited a couple of other members. But I never clicked on any other ads at all, and never bought anything.
As somebody who runs Google ads on my blog (but you won’t see them if you click the link on this comment— I’ll leave it a secret what you gotta do to actually see them) I can attest that yes, people do click. And from having Amazon affiliate links on some posts, I can attest that they even buy things after clicking. The percentages are dismal… around 1% for clicking Google ads, and something much smaller for buying Amazon products. But yes, those links do get action.
I have clicked on exactly one facebook ad in my life. It was when there was an ad for the joint meetings. Yes the joint AMS-MAA meetings. I clicked it in an attempt to prove that it was an illusion, but it wasn’t.
I have often wondered what the AMS-MAA paid for this ad and why. I even posted the question as a status update, didn’t get any good answers.
I also have to say that I can’t remember a single other product/event that I have ever seen advertised on facebook. And I was on facebook not more than an hour ago. So not only do I not click their ads, but they have no impact on my conscious mind.
As with Nathan and others, I have clicked on and purchased from googles sponsored links.
Oh, as an aside, facebook now has roughly 700 million users. So that really amounts to a value of only $107 a user. Though it remains confusing why anyone is paying them $107 for me to ignore ads.
I suspect that ads on Facebook targeted at mathematicians are substantially cheaper than ads targeted at other demographics (e.g. ads for dating sites targeted at single people in particular age ranges).
Maybe it’s time for mathoverflow to buy some Facebook ads targeted at people who list things like analysis or PDEs or ergodic theory among their “likes”?
Wait, there aren’t actually Google ads on my blog, are there?
My adblock plugin resides in my brain. My mind rarely focuses on Google ads or any other kind of ad, and I’ve never clicked on them. No one is making money off of me.
I can’t say much about Facebook since I have not yet considered establishing myself in Facebook and rarely visit there (although someone has been telling me I have to finally get with it). Even if I did, my presence would be buried by a French Canadian music celebrity of the same name, just as he buries me in Google searches.
Yes, Facebook uses a pay-per-click model. At least in some circumstances, I think they may experiment a little more broadly than that. (E.g. I heard chatter about them possibly offering pay-per-install as an option for game ads, though I don’t know if that was ever implemented.)
Yes, wordpress.com will show ads to users who aren’t logged into WordPress accounts: http://en.support.wordpress.com/no-ads/ Surprised me when I first saw it, too.
I have clicked on exactly two Facebook ads: one was for a “targeted ad” that was asking me if I wanted to get an MS in mathematics, which was sort of funny. The other was for a relevant job listing for a company that, appropriately enough, does social media ad targeting. Google ads, yes, all the time. They’re frequently more useful than the organic search results when you are looking to buy something.
I don’t use Facebook all that often, and I’ tend to click on ads for professional curiosity because they’re related to my line of work. I can say that from my experience working at a comparison shopping site, it’s incredible just how much people click on ads. I think tech-savvy people have learned to ignore them, but technophobes have not (yet).
I only see them when I read on the iPhone, strangely…
I think Google makes good money from other companies that pay Google to develop specialized searches of their internal websites and for access to the Google cloud. That said, I have clicked on FB ads that were music related (new album releases, concerts coming to town). I don’t think I’ve ever clicked on Google ads.
Google gets almost all of its revenue (99%) from advertising: http://bit.ly/iKyR4t
Having worked as a mathematician, and then in finance as a quant, and now in the internet advertising industry, I can easily say that the way money works in advertising is the easiest to understand of the three. In academics one is paid purely at the whim of the cultural assumption that education is a good thing- in other words, a pretty abstract idea based on a long-term investment concept (moreover, and people in academics seem to forget this often, it’s really the calculus we are paid for- have you seen how small math departments in European countries are where the calculus is taught in other departments such as physics and economics?). How much revenue did my last number theory paper rake in? We could only possibly answer that after a long long time. In finance there’s definitely money going through but it is evanescent and fragile, as we all learned in 2008. However, advertising online is very stable, extremely profitable and gives incredible fast feedback, on the order of days (rather than months for finance and decades for research). So wondering why Google is worth money seems kind of silly if you don’t start with wondering why professors get paid at all.
Having said that, it’s important to distinguish between an ad-revenue source like Google, which actually makes good money, from a social media center like Facebook or Twitter or FourSquare, which is valued based on its omnipresence and potential influence more than any revenue. In other words, yes, people click on ads (maybe not you or me) and yes people definitely do make money on ads, and they keep track of how much in real time, and they stop paying when that goes down too much. It’s a very robust little ecosystem.