What I've Learned About Facebook

It's no secret that I'm not a huge fan of Facebook. I thought it was a neat idea early on, but like just about anything else it loses its luster when your mom becomes aware of it. So like the rest of the cool kids on the Internet I migrated to Twitter, which is actually much better suited to meet the needs of finance and econ information junkies like me. I didn't delete my Facebook account (it's really the only way to keep in touch with my old Marine buddies), but I more or less left it in my rear view.

Part of what I did on my time off was soft launch a side project I've been meaning to get off the ground for a couple of years now. Naturally, I wanted proof of concept before I plowed a bunch of time and money into it. So my alternatives (as I saw them, anyway) were to advertise a landing page on Google and compete for some relatively spendy eyeballs, or give Facebook advertising a shot and see if I could achieve better results for less money.

How does this relate to Wall Street, you ask? Well, one of the primary arguments against Facebook stock recently has been their seeming inability to capitalize on mobile advertising despite the fact that better than 50% of Facebook users interact on mobile platforms. I'm going to cover my surprising mobile findings in a minute, but I wanted to give you guys a breakdown of Facebook as an advertising platform from an advertiser's perspective, and that might help you to better judge the value of the stock.

The biggest appeal to advertisers considering Facebook is Facebook's unique ability to target users with a laser focus. I have to admit that I was amazed at how narrow I got my target audience for an ad I ran for four days over the holiday weekend. I was able to screen users for location, language, age, family status, and a very specific interest. When it was all said and done, I had narrowed my target audience down to 32,880 Facebook users.

At first I went the CPM route, which means I bid X dollars for every 1,000 times my ad was displayed. I quickly figured out that this was getting me nowhere. Sure, I only spent $4.18, but that only garnered me 3 clicks for a miserable .003 CTR (click thru rate). The ad displayed over 110,000 times and didn't get any bites, so my cost per click on it was $1.39.

I changed it up a bit and bid on individual clicks, which looks more expensive but in reality it isn't. I bid $1 per click with a $10 daily maximum just to check it out. I was pretty amazed. By the end of the weekend I had 157 clicks with a .352% CTR, and my cost per click was down to 32 cents apiece.

Now here's the surprising thing (at least to me): 40% of my click thru traffic was mobile. I set up Google Analytics to track it because I was curious about the mobile reach. It broke down to 31% iPhone and 9% Android (another 50% Windows and the rest Mac and Linux).

So, obviously Facebook is reaching mobile users with advertising. And based on what I've learned about how mercenary Facebook advertising can be, I'm less inclined to think that mobile is going to be the long-term albatross that many analysts think it will be for the company. What do I mean about mercenary?

Well, Facebook has adopted a pretty Darwinian (some would even say Machiavellian) approach to ad sales. It's great for Facebook, it's even great for a lot of advertisers (I'm pretty pleased with my results so far), but there could be a lot to hate about it if you've spent a lot of money to build a following only to have someone else swoop in and steal them from you.

Case in point: Larry Kim, CEO of Wordstream, thinks it's pretty messed up that Coca Cola can target all the fans that Pepsi Cola has spent millions to develop. And he's got a point. Facebook advertising enables an advertiser to target users so specifically that it does make it easier to poach customers.

On top of that, Mark Cuban isn't exactly stoked about the way Facebook is driving advertisers to use their more expensive Sponsored Stories ads. I'm with Cubes on this one. There's no doubt that Sponsored Stories get results (my hit rate on the few I did was stellar), but they get expensive QUICK. And if you're battling an ad algorithm that thinks you suck for some reason, you're going to have a hell of a time getting in front of your target audience.

Overall, I've kinda changed my mind about Facebook. I'm still not a user (aside from posting the occasional

), but I'll probably continue advertising and might even give the stock another look if it drops below $20 again.

Anyway, I've gone on longer than I meant to. If you guys have any questions, hit me with them in the comments.

P.S. The project I'm working on is just a little side deal. Trust me - nothing that's gonna put a dent in the universe. I can't go into details at the moment, just know that it's something I've wished was available for some time now and it looks like a bunch of other people wish it were available too, so maybe I'll sell a few.

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