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Comment by chailatte | Hacker News Reader

"Obviously Facebook isn't a mature company at the moment"

Mature in terms of what? They are a 7 year old company with 500 Million users and 3000 top tier workers.

"I don't think it's unreasonable to expect that Facebook will be earning more than Yahoo within a couple of years."

With that logic, I don't see why Yahoo can't earn more than Google within a couple of years. All they need to do is to 'focus on monetizing', just like Facebook can (if they only put their mind to it).

Anecdote: Google converts 15X more than Facebook in my circle of peers that have used both.

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No-one disputes search converts more than social ads, the question is cost. As long as CPA makes it viable people will invest in Facebook ads.

Facebook can improve monetization hugely and they're clearly working on it.

Look at how the new profiles encourages people to list employer and job title, Facebook have learnt from Linkedin that allowing advertisers to target by job/industry is hugely valuable. They're going steal a hugely valuable ad market from Linkedin.

Furthermore local advertising on Facebook is vastly under-utilized, there's a whole cottage industry springing up of local affiliate firms who act as brokers buying ads from Facebook and selling leads to local firms.

"They're going steal a hugely valuable ad market from Linkedin." Why? Facebook isn't known for career/jobs. It's for users to look at fun photos, chat, and play games. I contend it would be hard for Facebook to be known as a professional site (let alone have the credibility for advertisers to migrate en masse)

"Furthermore local advertising on Facebook is vastly under-utilized" If we both already agree that search converts better than social ads, why would local advertisers switch from Google to Facebook? If it's only about price, Google can undercut Facebook in an instant.

EDIT: If anything, the recent attempt to add job/career to profile page for Facebook smacks of desperation. Like trying to go after an established market.

Advertisers don't care if it's a professional site or not. Look at the Oracle ads in consumer news magazines. Companies will advertise where they can reach their target market.

Right now on my Facebook page I have two professional ads (one for a CRM system and one for a business IT news site) and two Facebook game ads.

On top of that Linkedin is truly awful when it comes to targeting. Their job categories are ridiculously broad, if you want to target Software Engineers or Aero Engineers, you can't. Instead you have to target "IT" and "Engineering" - categorizations which combine together barely related roles.

It would be very easy for Facebook to offer more precise targeting, that alone would be a killer feature over Linkedin.

Search has a higher CTR but not a higher eCPA, a well designed Facebook ad can convert much more cheaply than buying targeted keywords, you'll need to buy many more ads, but the end cost is what matter.

(Incidentally most local companies don't advertise online at all, it's not a case of stealing customers from Google, etc. but rather a case of persuading them that it's worthwhile. Hence the rise of local ad brokers who buy CPM and sell CPA, as it's much easier to convince a local business to advertise through you if they don't have to pay you until after you generate business).

Most advertisers don't have the budget/time/patience to run and manage ineffective ads across multiple sites. Especially when you know your Facebook users have a mindset of 'fun', i.e games, chatting, photos. Sure, some companies have huge budgets (oracle), and some companies are just trying their luck (small CRM company), but that's no way to have a very profitable advertising platform. Sooner or later these advertisers will leave for greener fields. After all, what good is ads targeting, when the users ignore the ads to play games/look at photos?

As far as cost for ads is concerned, I don't think Facebook stands a chance. Google can undercut Facebook anytime with their 30 billion dollar cash reserve.

Consider it from an advertiser prospective if you make $5 per customer, and it costs you $1 to get a customer from Facebook, then you'll quite happily keep paying Facebook $1 for as long as you keep getting customers. If Google undercut them and offer you ads for $0.50, you'll buy both !

I currently buy ads at Google, Facebook, Linkedin and PlentyOfFish. Find me another source of effective advertising and I'll advertise there too.

Unless your margins are razor thin and you have tiny volumes, it seems unlikely that the extra time you have to spend managing your ad campaigns would justify not using them. After all just because the CTR of Facebook is smaller than Google it doesn't mean you have to invest more time into it because your ad has to be seen 100x more often to get the same CTR.

That was a mispeak. I should've used 'money-losing' instead of the word 'ineffective'. My point is there are only certain ads that is money making on Facebook, thus my reference to users' mindset of 'fun'.

Google has a lock on the (incredibly profitable) search advertising market. For Yahoo to match that they would have to increase their search market share (as well as improve their monetization of it).

That's a much harder problem than matching Yahoo's revenue. As far as I know, most of Yahoo's advertising revenue is display based, and the money made from that is basically a factor of page views.

Anecdote: Google converts 15X more than Facebook in my circle of peers that have used both.

Converts what? Sales? If that's the case then it doesn't surprise me (search advertising is incredibly efficient). But what you might find surprising is that I find you can get Facebook advertising for less than 1/15th of the price of the equivalent Google ad (by choosing CPM instead of CPC ads).

They aren't mature because they are taking external funding rather than funding growth from profits.

http://www.boston.com/business/articles/2008/09/24/buffett_i...

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