Before I begin, here are three facts about Google from their investor page that we should have in mind:
a. How do we make our money: Today, the majority of our revenue comes from advertising. (Many articles have estimated this majority to be around 96% of Google’s revenue)
b. Who are our customers?: Our customers are over one million of advertisers […] who use Google Adwords to reach millions of users around the world.
c. Who are our competitors: We face formidable competition […] particularly from companies that seek to connect people with information on the web and provide them with relevant advertising.
From the above, we can deduce that Google is effectively dead without advertising. And companies like Facebook, could kill their advertising revenue. In his post Luqman gives these three reasons to support why Facebook cannot topple Google, and here are my responses to them.
a. Monetisation: Google has a formidable monetising machine that works for them perfectly. [..] Google has hundreds of thousands of sites that sell ads for it. The point here is that, even when you don’t visit any of Google’s platforms, chances are they will still make money from your visit online.
Well good for Google! But there’s a reason Google is recruiting more and more people at breakneck speed
to improve its ad system and losing share value as a result. Google’s ad system, which works based mostly on the content of the website I’m reading or identifies Keywords in what I am searching for or viewing on Google.com, YouTube et al., will ultimately be churning out a lot of irrelevant ads to me. And the savvy marketer should know this. Here’s why.
Google’s adwords page says: For example, an ad for a digital camera may show up next to an article reviewing the latest digital cameras. This was / is a great move by Google and it may have been one of the best targeting systems when they first begun it. But sorry Google, just because I’m reading a review of the latest digital camera doesn’t mean I’m interested in one. I have read whole reviews on Nokia phones, not because I’m interested in getting one, but only so I know how to respond to Luqman when he takes swipes at the iPhone’s popularity (*chuckle*).
In addition, Google does not tell you which websites your ads would show up on when you use their Adsense platform. This is undisclosed data. So in effect, you have no idea who is seeing your ad. You just keep your fingers crossed and hope you got your keywords right – which still doesn’t guarantee the right people are seeing your ad.
On Facebook however, the ad system works very differently. I have a whole list of interests and hobbies. And none of them is on there just because. They are my real interests, even if some may be more dominant than others. I am “liking” stories and brand pages and content all over the web, that tell Facebook more and more about my psychographics. I am putting up statuses on how I wish someone would buy me an iPad2 and how I like Benz cars.
Make no mistake, the talk of Facebook’s incredible data is no mere ruckus. It is fact. And with more and more people using Facebook and being teased into sharing information about themselves with subtle tools like the Facebook “Like” button, platforms like Facebook are kings of targeted advertising. Facebook’s psychographic data is its competitive advantage.
All it would take is for Facebook to begin a system like Facebook adsense (which is already in the works by the way), and Google could lose customers big time. Facebook’s ad platform, even at this early stage, offers incredible targeting options (see here
) that Google can’t hope to beat with their keyword strategy. The growth potential is massive, both for Facebook and for advertisers. Currently, advertising is restricted to the actual Facebook alone. Yet, this year alone, the Facebook ad market is expected to grow by 118%, to $4 Billion
. Last year, Facebook advertising alone accounted for 14% of UK’s online advertising
Should Google be worried? Google does not tell you which websites your ads are showing up on but Facebook allows you to define exactly which users you want to see your ad and how they should see it. Facebook gives you Google’s keyword and location targeting, and then some more.
Now compare the two options. Which would work better for the advertiser? Should Google be worried?
b. Diversification: Again one thing people forget is that Facebook has only one product – well it’s Facebook. Google on the other hand, has YouTube, Blogger, Gmail, Chrome OS, Android and Search. Now compare the two.
c. Strategy: All Google will need to do to beat Facebook on the latter’s own turf is well elucidated by Professor Micheal Porter thus: “[a] second and far more common type of imitation is straddling. The straddle seeks to match the benefits of a successful position while maintaining its existing position. It grafts new features, services, or technologies onto the activities it already performs.” The point here is that it’s easy for Google to copy Facebook.
A common error most people make. Check the Facebook support
page. Facebook does not have only one product. Facebook has Photo sharing, Video Sharing, Credits (JC Penney already allows Facebook users to shop with credits), Games & other applications, Places (Hello FourSquare!), Chat, Notes (For Blogging), Pages and others. And that’s what Luqman failed to identify. There is nothing Google offers right now that Facebook cannot offer. So yes, that argument about “straddling” is actually what Facebook is using against Google.
Facebook can do search. Actually scratch that – it does, with help from Bing. Facebook can do YouTube. FaceBook can do Blogger. Facebook can do Gmail. Facebook, as far as I can see, has no reason to do an OS, on PC or mobile – but it can. Facebook is working on features that allow you to send text messages from inside your message inbox. Facebook can do PayPal. Facebook can take on Amazon. And it has 641 million plus users, and counting, to sell it to. And the impressive part of this is that a lot of these products, even though not fully developed, are already enjoying good usage.
Facebook has also been tweaking and improving their system a lot recently, adding several subtle features and products that many a user misses. What Facebook is becoming, is what some refer to as a “mini-internet”. Luqman explains that Google can take on Facebook easily. But history has shown that this has been an almost impossible feat
. Google Wave? Google Buzz? Facebook competitors. Have they hurt Facebook’s numbers? Erm, not that I know of. Wave had a very weak 1 million user population at the time it was scrapped. And now, Google has launched “+1″
to counter Facebook’s “Like” button. Let’s not get our hopes up.
Luqman goes on to say that Facebook’s PHP platform is too mediocre for Google to draft strategies around. But should Google ignore the fact that Facebook went from 150 million to 640 million plus users in just 2 years? Should Google forget that Facebook has risen, beaten Yahoo, and is now only second to Google in the U.S when it comes to website traffic and users?
And why do we we keep comparing Facebook to MySpace and Hi5? We shouldn’t! MySpace, big as it was, was never even close to what Facebook is now. Facebook beat MySpace on both worldwide members and traffic – in 2009! We keep saying that Facebook will die like hi5 and MySpace. But Facebook is reporting record usage. Currently, the website averages about three hundred unique site visits – everyday. And time spent on the platform has also shown no signs of letting up. It is rising.
So am I the only one noticing Facebook’s growth? No. Advertisers are paying attention too. Facebook / Social Media marketing is now taught in schools. There are whole courses devoted to marketing brands on Facebook. Advertisers are moving to Facebook in numbers. And Facebook has not even begun to scratch the surface of their advertising potential yet.
Should Google be afraid? I really can’t answer that. I believe that’s a question we should leave for MySpace to answer.
*Note: For the sake of keeping this post short, I have not discussed several factors that work in Facebook’s favour when it comes to the ad market. This includes Nielsen’s research on the value of social media ad impressions: on how Facebook’s social ads increase brand awareness and purchase intent; and also how Facebook’s 1 year old “Like” is recording incredible usage and how websites are fast adopting other similar tools like Facebook comments and authentication which are massively increasing Facebook’s psychographic data.