Facebook Might Be Hot, But Is It Justified?

Yes, Facebook is worth $15.5US billion. Yes, we all wish we were the ones who invented it, and can now hold out on an IPO float much like Pavlov holding out on giving up food to his salivating dogs. We can’t all be so lucky. As we all know, however, just because something is hot, doesn’t mean the attention is justified. I read a great contrarian article today about the flaws in Facebook’s system, and how the selling point of ‘contextual advertising‘ (which, for those who aren’t into Advertising PR rep buzz words, means personalised ads) could be undeliverable by the system at present. Money quote:

So Facebook does not really know sophisticated things about me. But even basic information that it ought to know is beyond its grasp. For example, if I add the Flixtster application and start displaying movies that I’ve rated on my profile you’d think that Facebook would learn that I like movies. But it wouldn’t. Facebook’s system has no idea that the Flixster application is about movies and has no idea what kind of movies are being displayed.

In short, different aspects of Facebook don’t talk to themselves, so all the Facebook advertisements have to go by is basic profile information — hardly revolutionary.

As it stands, Facebook does not know all that much about us, and the ads that we are shown are not relevant as a result. The jury is still out on whether social networks can get big via highly targeted advertising. Early trials have shown that CPC is not a likely route and CPM plays are just not as interesting. Yet, Facebook is certainly very aggressively pushing for monetization, likely in preparation for a future IPO. Will they be able to turn it all around and re-invent contextual advertising? The company is full of brilliant people so it’s certainly possible, but so far it does not look impressive.

Facebook isn’t doing anything all the different from any other web page, and certainly not differentiating itself from the other social sites. If it wants to live up to the hype, it’ll require a move outside of the box. Microsoft as your majority outside stakeholder isn’t exactly the influence in ‘outside the box’ thinking, either.