Why I’m betting my retirement on Facebook stock today | Hacker News Reader

Why I’m betting my retirement on Facebook stock today

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16 pointsdaryn31 comments

I hope he's not actually putting his retirement money on the line here.

It's not about the quality of the ads, which he argues will get better with more data. It's about intent.

When I search on Google, my natural next action is to click a link. That link can be organic or an ad. If it's an ad Google stands to make money.

When I browse Facebook, my natural next action is not to click a link to an outside service/store. It's to continue to read status updates and browse around. Clicking an outside link is unnatural and unpleasant in this context.

This is the same reason ads on other Google properties such as gmail do so poorly - they may know exactly what you're likely to buy and could therefore present you with the perfect ad, but the activity you're engaged in does not naturally lead to clicking on ads.

We've debated this point to death. By your argument, advertising on TV should be a failure, since people watch TV to be entertained, not to buy stuff right away. And still, 99% of TV shows are paid for by commercials. How come?

FB ads are not a failure, they are just less effective.

Advertisers have no way to measure just how ineffective their TV advertising is. It's pretty well established that traditional media marketing budgets have only the most tenuous link to results in the marketplace. Until recently, however, it had a singular advantage in that it was the only way to put an ad in front of a national audience.

Online advertising is cursed by a near-infinite supply and excellent metrics that immediately connect impressions to actions.

Adsense is a $10b a year segment not based on intent - it's based on advertising you see when you are on random pages on the internet (like the New York Times).

Facebook will know what you want better than Google: they track you across multiple retail sites, see what you are looking at and even get structured data volunteered to them about that stuff.

I think you're making my argument for me: if anyone has stats on the total number of adsense ads served vs adwords ads served, we can derive the value of adsense vs adwords ads.

There are many more adsense ads displayed than adwords - it's google searches vs. most of the rest of the web. Yet it only makes up 1/4 of google's revenue.

Last I checked there was an order of magnitude difference between the value of an adwords vs. adsense ad.

1/4 of Google's revenue is a pretty big deal. The author is suggesting that's the worst case scenario for Facebook, that they take over that $10B in revenue from Google. Add that to whatever they can do with Facebook Credits (with acquisitions like Karma), and their future looks bright.

But timing can be important. Facebook may know that I have "Liked" someone's post related to hamburgers/milkshakes... but serving me a McDonalds ad when I'm reading my news feed may not be as effective as serving me one when I've just searched online for something related to hamburgers or milkshakes or viewing a food blog or something along those lines.

I just checked and Facebook gives you the option to buy ads per click, around $0.25 per click in my category. So why does it even matter if it has a low CTR? If the user didn't click, you didn't pay for it anyway. If the user does click, well there's your intent.

From my point of view as an advertiser, how is the CTR even relevant? Why do I care if google has 1% CTR and Facebook has 0,1%? If you assume both has the same cost per click. And I spend $100 on each. I'll still get the exact same amount of people clicking my ads on both.

Why does everyone keep repeating that facebook ads are only for branding, there's no intent, CTR is low? Doesn't the pay per click auction makes all of these irrelevant?

I don't necessarily disagree that CTR might not be the most relevant metric here, but at some point their revenue is limited by the CTR. If they have a billion page views per day, one ad per page (for simplicity) and a CTR of 0.1%, then their daily revenue is capped at 100 million * p where p is the average price per click.

So even if users coming from Facebook are more likely to actually buy something than those coming from Google (which would make Facebook ads more valuable than Google ads, all else equal), the CTR still creates a cap on how much they can earn.

You may get the same clicks/$ but you may get a significantly different numbers of clicks/day, and surely that's going to be an important consideration when you're deciding where to spend you advertising $.

CTR is one piece. But conversion in another. And intent is important. Take two identical ads on Facebook and Google, with the same CTR and CPC, if the Google traffic has more intent to take action beyond the click (I'm not saying they are necessarily) then Google traffic is worth more. I worked in the LeadGen space for a good number of years and conversion rate is a very important piece of the puzzle. Generally speaking, intent leads to a better conversion. Plus, advertisers do them selves a disservice to attract higher clicks if that means their conversion rate is lower because the ad was bait. I've noticed that FB ads tend to have a spammy/scammy feel to them... bait.

That perfectly answers my questions, thanks a lot.

Does anyone happen to have some real world example data of conversion rates between these ad platforms?

Say I decide to buy a new set of speakers. Do I tweet that I'm looking for speakers? Do I announce on facebook that I'm looking for speakers? Or do I just start googling?

Twitter and Facebook might occasionally be clued in about some of my purchases, but google is in on virtually all of my purchases that are considered while I'm at a computer. They're first past the post and privy to a much higher percentage of what I buy.

Google's pageviews have more value (because they know exactly what people are looking for), Google IPOed at a valuation of 20% of what Facebook wanted in valuation, and Google is already entrenched into the market that the author is suggesting Facebook is going to have such an easy time moving into.

My money is on Google.

Sure, 20% of Facebook's valuation but also 1/2 of Facebook's revenues.

Facebook still has a lot to prove, but they also have a lot more opportunity to improve.

> but they also have a lot more opportunity to improve.

What's your case for that? They have almost a billion users. How many more are they going to get, and are users outside of the US and Europe (and a few scattered nations) of any value to Facebook at all?

Facebook has a lot of data about what you say you like, but Google has a lot more data about what you actually like. Hope you really didn't bet your retirement.

Betting one's retirement on a single security seems like a bad strategy regardless of how successful it's likely to be. I'm hoping the title is just hyperbole.

I've never clicked on the ads in Facebook. I've clicked on more ads while using Google. When I'm looking to buy something, I use Google. As with tworats, I do hope he's not actually planning on retiring with Facebook stock. Privacy laws could easily render the data that we give to Facebook off-limits.

So... Facebook has some code you can put on your page and you have an instant like button. Well... what if Facebook starts providing a neat little bit of code that also embeds an ad? If the Like button knows who you are... so will the ad widget. So now they are serving "Facebook ads" on other sites. Of course that is what Google does with AdSense... but does Google know as much about you on that page as it does about that page? I could see it possible for Facebook to grab eyeballs on other sites... sites that are currently monetizing with AdSense. Not that I'm convinced they would make a dent with this approach... but you can't just compare the ads ON Facebook to the ads on Google search. If Facebook was putting the ads on pages that had a different focus than what you do on Facebook... there is a chance.

AdSense has much lower margin compared with AdWords because Google has to pay publisher for displaying the ads. In the early days, (AdSense revenue around 1B) I remember google was almost paying every penny they got from AdSense back to the publisher. Only later, they started to make money, but still capped by the competition from microsoft/yahoo.

Facebook entering the AdSense market? It won't generate a lot of profit for facebook. The true profit engine for facebook is still the facebook site.

I feel like the author is overstating the benefits of a like button on every page. Google - and many other ad networks - also know the products being viewed if the site owner is using retargetted ads. Might facebook offer compelling retargetting? Sure. But I imagine the conversion rates would be, at best, comparable to other retargetting networks. Probably not a game changer.

I'm not even mentioning the reach of analytics.

All the author of that article managed to convey is an overwhelming sense of fuzziness in his thinking. e.g.

>Do the math on this: instead of growing it organically, we wake up one day and Facebook has taken over Google’s Adsense business. That’s $10B in revenues alone.

Bit awkward given the recent happenings over the weekend http://www.smh.com.au/business/world-business/lawsuits-pile-...

The graphs he cites as evidence are referring to google's display network verses google's total revenue. If that is the case, then the author is presenting no information about facebook. I hope that he did not invest based on these graphs.

This struck me: "Even if you didn’t click on the Like button, Facebook probably has a pretty good idea of what your next purchase will be."

I imagine the people best able to predict my next purchase issued my debit card, no?

You should never substitute a belief for an investment strategy. Seriously, even if your idea of Facebook's long term potential is correct, you can take a haircut on whatever random thing occurs today. Balance the utility of what you gain if you're right compared to the utility of what you lose if you're wrong (think twice if you really want to make a "heads, double your house's square footage, tails live off dumpsters at 65" bet).

If you want to start investing based on your beliefs, go ahead. But have a pool of money for that and be ready to lose it.

But for your retirement, diversify.

Agree. Did not read the story because once you say "I'm putting all my eggs in [this one basket]" then you are taking WAY too much risk on a single investment.

The guy probably should take some courses on retirement/investment planning.

Don't do it, unless you plan to work long years and/or die young. FB price might well be around $10 before long.

Sensationalist headline. Bad mistake.

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