Comment by ssharp | Hacker News Reader

Comment by ssharp | Hacker News Reader

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Are marketers really putting blind money on Facebook like they do on other forms of offline advertising -- or they did with online advertising during the first dot-com bubble? Or are they putting up money, measuring their CPAs against LTVs and changing advertising tactics when CPAs get too high? There are lots of choices for online advertisements today and a platform will produce profits as long as the platform produces profits for its advertisers.

Snapchat's CEO clearly disagrees when he says: "VC dollars are being spent on user acquisition despite unknown [lifetime value] of users — a recipe for disaster."

So he's saying people take VC money and invest it in poorly devised advertisement strategies. I'm not familiar enough with VC-backed companies but is this that common? Are Facebook ads, AdSense, etc. just filled with dumb money from VC investments? In my experience, that answer is no, but maybe things are different.

Curiously, I'm wondering how Snapchat is valuing the lifetime value of their own users, considering revenue from their users is zero.

When I worked in the Facebook advertising space we were definitely tracking "engagement" with our clients' ads. But this was often artificial measures like "clicked like" or "downloaded the app"; we did sometimes measure actual revenue (i.e. "clicked the ad and then bought something at the linked store") but this was less common and many ad campaigns simply weren't set up for that kind of response.

So it's not completely blind, but I suspect many companies are paying for "brand awareness" and "user engagement" - the things they can measure, like the drunk looking for his keys under the streetlight - and maybe haven't fully validated that those translate into real revenue.

> So he's saying people take VC money and invest it in poorly devised advertisement strategies. I'm not familiar enough with VC-backed companies but is this that common?

This was very common in the last dot-com boom. That time, Yahoo was the beneficiary of the funds. People were blindly throwing money at "internet advertising", without any clue as to whether they were getting any value or not. And VC-backed companies were doing even more so (and buying shitty Superbowl ads....)

You are repeating what OP said. He's asking about now, not then.

My interpretation was that the marketers are very savvy at measuring the efficacy of advertising, but they're benchmarking it against an unknown LTV.

As you mention, Snapchat has no way of measuring their own LTV. If they were to do any Facebook advertising, they'd just be shooting in the dark.

Revenue is not zero - they have sponsored posts and now take a percentage of money transfers.

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