It's Become Tragically Clear That Facebook Chased The Wrong Business For Years
Nicholas Carlson | Sep. 25, 2012, 11:13 AM
Now, as Facebook has begun selling ads in a different, much more lucrative way that others have been doing for years, it feels like Facebook's tactic has put the company years behind schedule.
How Facebook has sold ads for most of its history: Advertisers tick off a bunch of boxes on the type of people they'd like to reach and then Facebook shows their ads to these people.
That's the "old-fashioned way," because that's basically how advertisers have been buying TV ads for decades. Advertisers have a group of people to whom they would like to market their products, and they look for the TV shows that have that audience.
In other words, they look for inventory that is targeted to an audience based on data a publisher provides about its audience.
For the past five years or so, Facebook has sought to improve on this old-fashioned model by giving advertisers more detail about the type of people they can market to.
Instead of just knowing where those people are located, their gender, and their age, Facebook can tell advertisers where the people viewing ad inventory work, their marital status, and what their "interests" are.
All this extra data was supposed to be a gold mine for Facebook, and Facebook built up a huge ad sales apparatus to sell ads targeted with it.
Eventually, Facebook's ad business grew to annual revenues of just under $5 billion per year.
That sounds pretty big but …
It turns out this whole tactic may have been a big waste of everyone's time.
That's because in recent weeks, Facebook has begun selling ads in a new way that makes its massive inventory much more valuable—three times more valuable, according to one company buying the inventory and reselling it.
This new method is called re-targeting. It has been used by ad-sellers outside of Facebook for years... ( more at http://www.businessinsider.com/facebook-fbx-2012-9 )
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