Over the weekend, as I pondered an eMarketer report estimating Facebook’s advertising revenue at $1.86 billion (seems low), I wondered to myself: When will Facebook start to drive the kind of widespread graymarket activity which proved Google’s immense worth? Or will it ever?
Allow me to explain. Back in the days when Google and its rival Overture were on the rise (this would be pre-IPO for Google, so around 2002-3), an army of small time arbitragers were gathering, leveraging Adwords (and in 2003, Adsense) to make money in any number of ways. But the basics were pretty easy to grok: Say you could purchase a click on Adwords for the term “cute kitty” for fifty cents. And say further that when someone clicked on your Adword, they’d show up at a third-party site, and 10 percent of the time, they’d follow instructions to fill out a mortgage application. And say that further, you could sell that filled-out application to a lender for $15.
If you do the math – ten clicks costs you $5 on Adwords, but you make $15 for selling that lead, which converts one in ten times – it explains why a huge business sprang up around Adwords and Adsense. If you are paying attention, redirecting attention from cute kitties to mortgage brokers will pay extremely well. The same proved true for all manners of lead generation, from cel phone plans to life insurance to automobiles.
It’s legal, but it leaves a kind of queasy feeling in your stomach, don’t it?
Now, just that feeling has risen up around Facebook advertising in the past (in particular around social gaming), but I was waiting for it to break out full blown into the “real world” outside of Internet ponziland. When would Facebook become a hotbed of affiliate arbitrage across the board? To me, that would be a sign that Facebook was breaking out just like Google did in 2003.
So it’s funny how this story from RWW breaks just this weekend. And funnier still how it’s all about Google’s competitor, Bing, which has changed the economics of the Internet advertising ecosystem by pricing conversions well above previous floors. It’s all just too rich. Literally. (Google’s Matt Cutts points this out in his own way right here).
The details: RWW found the fact that a random website called “Make-My-Baby.com” was the third largest advertiser on Facebook in Q3 2010. Turns out, it’s an affiliate play driven by Microsoft Bing bounty money. In short, Microsoft offers a certain amount of money, per user, to anyone who can convert that user into a Bing customer. The company behind Make My Baby, Zugo, seems to be a vintage arbitrageur. In fact, Zugo hasn’t even updated its terms and conditions, which date back to 2009 and seem cut and pasted from a program they ran in England doing for Ask.com that they are now doing for Bing.
Clearly, Zugo has found that buying ads on Facebook pays well. The question remains, however, whether that is true for a whole new class of arbitrageur.
Ah, me loves me some Interwebs.
Update: Bing has terminated its relationship with Zugo, SEL reports. And Zugo was using MySpace inventory, NOT Facebook….
I don’t think it ever will. I might look at a few things my friends “like” & their opinions carry more weight, but I’ve yet to click on any FB ad. There is so much media push “visit us on FB” and pressure for everyone and anyone to get a FB fan page that the quality is diluting itself. People who use it for ads complain about the horrible ROI as compared to regular search. I don’t go to FB to find new things – I go to keep in touch with friends and family. The more the marketers intrude upon that, the more distasteful the site is to a lot of people. It needs to be very careful or it will become a cesspool of spammy marketing.
I don’t think it ever will. I might look at a few things my friends “like” & their opinions carry more weight, but I’ve yet to click on any FB ad. There is so much media push “visit us on FB” and pressure for everyone and anyone to get a FB fan page that the quality is diluting itself. People who use it for ads complain about the horrible ROI as compared to regular search. I don’t go to FB to find new things – I go to keep in touch with friends and family. The more the marketers intrude upon that, the more distasteful the site is to a lot of people. It needs to be very careful or it will become a cesspool of spammy marketing.
oh my god, you people are just so wrong with that story…
oh my god, you people are just so wrong with that story…
Surprise surprise, some companies are behaving in a morally questionable manner on the internet just to make a buck…
Surprise surprise, some companies are behaving in a morally questionable manner on the internet just to make a buck…
zugo wasnt using anything. zugo is just a toolbar distributor. and nobody terminated the relationship with zugo.
can’t you people do research or at least read what you copy?
zugo wasnt using anything. zugo is just a toolbar distributor. and nobody terminated the relationship with zugo.
can’t you people do research or at least read what you copy?
People who use it for ads complain about the horrible ROI as compared to regular search. I don’t go to FB to find new things – I go to keep in touch with friends and family. The more the marketers intrude upon that, the more distasteful the site is to a lot of people.
People who use it for ads complain about the horrible ROI as compared to regular search. I don’t go to FB to find new things – I go to keep in touch with friends and family. The more the marketers intrude upon that, the more distasteful the site is to a lot of people.
Wow…when will people get it? You think you can just slap ads up anywhere and make a business out of it.
The fact is, people on Facebook are not searching for shit. They’re updating their statuses and looking at friends stupid photos. The ads convert horribly. Bad ROAS.
On Google, well, I don’t think I need to explain this part.
Sheesh.
Wow…when will people get it? You think you can just slap ads up anywhere and make a business out of it.
The fact is, people on Facebook are not searching for shit. They’re updating their statuses and looking at friends stupid photos. The ads convert horribly. Bad ROAS.
On Google, well, I don’t think I need to explain this part.
Sheesh.
The more the marketers intrude upon that, the more distasteful the site is to a lot of people.
The more the marketers intrude upon that, the more distasteful the site is to a lot of people.
There is so much media push “visit us on FB” and pressure for everyone and anyone to get a FB fan page that the quality is diluting itself.
There is so much media push “visit us on FB” and pressure for everyone and anyone to get a FB fan page that the quality is diluting itself.
I don’t think so, The fact is, people on Facebook are not searching for shit. They’re updating their statuses and looking at friends stupid photos. The ads convert horribly.
I don’t think so, The fact is, people on Facebook are not searching for shit. They’re updating their statuses and looking at friends stupid photos. The ads convert horribly.