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GM says Facebook ads don’t work.The CEO of AdAge’s “small agency of the year,” VIA’s John Coleman, agrees.
He says Facebook ads are “some of the worst performing ads on the Web.”
Considering Facebook ad revenues are already decelerating, all this sounds like very bad news for Facebook’s $100 billion valuation.
Henry Blodget says that if Facebook revenues don’t begin accelerating again, that valuation will soon become absurd – especially compared to other tech company valuations based on revenue multiples.
But actually, all this is GREAT news: Facebook ad revenues are around $4 billion a year – and that’s with what everyone describes as a pretty terrible product!
Credit Facebook’s scale.
900 million people use the product every month, 500 million every day. Imagine what Facebook revenues would look like if the company ever came up with a good advertising product.
Facebook is trying.
Actually, it’s paying a lot of really smart people, including ex-Google ad whiz Gokul Rajaram, a lot of money to figure it out.
Earlier this Spring, the company launched an ad unit that takes the content brands post to their brand pages and increases its visibility to the Facebook users who have clicked “Like” (or some other Open Graph interaction) for that brand.
Coleman says the unit sounds interesting, but that the rollout has been slow, and that it hasn’t yet effected his agency’s spending plans (which are to spend no more or less on Facebook ads in the coming quarters).
The other positive piece out of this seemingly gloomy take is that Coleman and VIA have made Facebook’s “platform” an “integral” part of brand marketing.
By “platform,” Coleman mostly means those pages that brands set up on Facebook. Users can “like” them and subject themselves to interactions with the brand. Weirdly, perhaps, people do this in droves, and marketers feel like it is a very useful way of building a brand.
If advertisers depend on Facebook, it’s only a matter of time before Facebook figures out a way to tax them for the business boost the Facebook product provides. Facebook could, for example, just buy a Buddy Media for a few billion dollars.
(Some credit: BTIG analyst Rich Greenfield has made some of these points recently. You should follow him on Twitter if you want to be smart.)
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