Facebook signed an advertising deal (update: also in NY Times) with Microsoft that will put Microsoft adCenter sponsored links and other ads on the Facebook site. There are no financial terms available for the deal, which runs through 2009.
This news is most notable because the partner that Facebook chose isn’t Google.
Google has been hyper aggressive in stalking the big advertising deals, going so far as to give 90% or more of total revenue to select partners (such as, reportedly, AOL and Ask), and guaranteeing nearly $1 billion to Myspace in a deal announced earlier this month.
Google is generally thought to generate more revenue per page than either Yahoo or Microsoft due to their method of choosing which ads go on top. While Yahoo places the highest bidding ad on top, Google also takes into account the click through rate on individual ads in deciding which go on top. This seemingly simple feature increases revenue substantially, and along with Google’s superior search product is the single biggest factor in Google’s financial success to date. Yahoo, it is worth noting, is developing a similar system, called Panama, which is rumored to be launching later this year.
When Google combines their more-effective platform with aggressive revenue sharing and guarantees, there is no room for Yahoo and Microsoft to compete.
Until today, that is. My hunch is that Microsoft bought this deal with a revenue guarantee and is flat out willing to take a loss to get into the game. Google would not let this deal, and the massive number of Facebook pageviews, go without a serious fight.
Thanks for the email tip, Noah.
Big Deals, Big Money – Microsoft has the cash to handle it and get more exposure in the meantime.
Note: Noticed the ‘edgeio’ advertising on the side there Mike. You get paid the $10K a month for that one or was it a ‘freebee’
nope, they’re paying for that ad.
Nice post!…but interestly I recently noticed the Search2.0 Eurekster is allowing swicki owners that use Google Adsense to upload their Adsense account to their swicki (saw other ad options as well – but Adsense pertinent to this post) which is very interesting as Google doesn’t seem to use CTR yet to rerank their search – but something eurekster does with all thier search feeds from Yahoo, Ask, etc, on blogs like TechCrunch – so would be interesting to test them together…maybe those two click thru rates in verticals may work together? Just a thought.
Good analysis…from a former and early Google ad sales insider.
As advertiser on Google the information about “the click through rate on individual ads in deciding which go on top” is very helpful.
Thanks!
We rolled out an advertising campaign on facebook and several other sites. The facebook CTR was several fold lower than anywhere else. Buying ads there is currently a complete waste of money.
Just fyi.
If the CTR on social-networking sites like Facebook is as low as many advertisers are claiming, then “the massive number of Facebook pageviews” is not really worth as much as it might seem.
It seems to me that the reason why Google wanted to lock in the MySpace deal is not simply because of the ad inventory. A big reason is that a huge chunk of the Internet population are on MySpace everyday and when these users enter in a web search on MySpace, Google wants to be the search engine that handles that request. I think that’s where the real ad money is being created. Not on the ads displayed on the pages of MySpace itself but the AdWords ads accompanying the millions of Google searches that are directly originating from users on MySpace.
Michael:
I like your suit. You looked all pimpled out.
http://money.cn...on=money_latest
> When Google combines their more-effective platform with aggressive revenue sharing and guarantees, there is no room for Yahoo and Microsoft to compete.
> Until today, that is.
Not at all. Yaho and Microsoft can and will compete if they decide it makes sense for them to overall. They potentially might even lose money (as Google’s been suggested to do in some deals) if they feel locking out a competitor and other intangibles will pay off.
But to highlight that “today” is hardly a new era, I’m going to link drop. Feel free to edit as you like, Mike.
July 2006
Lycos Powered By Windows Live & Retriever Directory
http://blog.sea...g/060720-074026
SuperPages Upgrades Maps With Microsoft
http://blog.sea...g/060711-174442
May 2006
More On Amazon Dumping Google [For MSN] & Missing Paid Listings
http://blog.sea...g/060502-101548
March 2006
Moneyextra.com Partners With MSN Search
http://blog.sea...g/060321-092851
Nov. 2005
MSN Powers UK’s Times Online; Ask UK Scales Back Ads
http://blog.sea...g/051121-141547
So why’d did MySpace go with Google? Maybe the rev deal was better. Or maybe MySpace figured Google was the most money from the least threatening partner (MSN and Yahoo have huge member bases and big social networking plans compared to Google’s poorly performing Orkut).
And why did Facebook go with Microsoft? Maybe the financial deal was super sweet, or maybe there are other intangibles that factor in as well.
Not surprised by this at all. Google would love to be “The” social network snapon, but when you’re trying to stand out of the crowd, you can’t do what everyone else does.
Don’t like microsoft’s offerings personally, but good move on Facebook’s part.
Both Facebook and MySpace should be sharing the ad revenue with the users; they are the reason they are generating it in the first place.
Do your homework…you are assuming MSFT paid more for the deal because they have more cash and are willing to fund a loss…that logic would have meant they would have paid for the mySpace deal…perhaps there is a different way of monetizing the pages than just text links that provided Microsoft an edge in this deal…do your homework.
Andrew..come on..are you serious? while you may be right in the fact that members are clicking hundred of times per month ( 785.47/month/users on Facebook ) , you have to acknowledge that those websites are offering a free service..I mean..they spent some time programming it and they are paying people to do so..These 7 millions kids are having fun surfing the website …all this because of programmers..
I have a question for you : Do you believe that your insurance company or even your car dealership could share their revenue with you?
Anybody thinking about advertising during the usual task of e-commerce
like search , find and obtain.
Congrats for the Business 2.0 article Michael!
Congratulations on the Business 2.0 article Michael. Do you think search engine advertisement is only to remain as keyword relevancy focused or it can be more focused into verticals and categories.
I agree with Franck, we should not expect platforms to share revenue and all, but we might see in the future that content generated by user will get
revenue far more than the site it is hosting, just like top actors and actresses demand their own fees based on their brand image and recent
blockbuster hits. Then those branded user content can be moved from one hosting site to another hosting site on the user’s terms.
But generic social-networking is all because of the platform, so the ad revenues on that activity should and will remain with the platform.
Wow! More Google hating! “OMG someone didn’t ink a deal with Google!!”
Mike,
On community sites the difference between the ad serving/matching technologies is irrelevant. Again, the MySpace deal has *minimums* which simply means that Google employs a valid (albeit 1999ish) strategy of promising big money but being forced to renegotiate one or two months in because the metrics don’t pan out. Report on that renegotiation and you get major props.
This has been going on for several years now. MSN may have done some slight deal sweetening, but there were lessons learned during the bubble–unnatural acts don’t pan out. You can pretend like they will (for hype) but there safeguards against it and even a general unwillingness to waste cycles and resources (in the case of Yahoo).
Come on… I like Mike, but this is just pure arrogance…
http://www.vall...ire-is-dead.jpg
Good to see Facebook is doing business with MSN. This will give MSN some credibility in the space.
Well if Google has already gotten a hold of Myspace, I don’t blame Microsoft for trying to take Facebook. Poor Microsoft is fighting hard to stay in the race.
Of course I’m serious Franck . In order to sustain a UGM community you will have to give back more then programming. You have to give incentive outside of the ability to create a network of friends. You have to give back to the community larger then the way business currently understands revenue sharing.
Paying users wouldn’t make sense – first of all, would there be tiered rewards for different levels of users? If that happens, then all of a sudden casual users feel like their contribution isn’t valued. Also, once you are paying your contributors, you’ve monetized their involvement and in a way “poisoned” their participation. Perhaps non-monetary rewards for users – whatever that may look like – would make a bit more sense, but I don’t think the people holding out on joining Facebook are doing so because they’re expecting a reward.
From a users perspective Google no longer has a superior search product. The game is a bit about entrenched usage habits and distribution.
Microsoft still has the same ability to buy lots of distribution that it had in 1997 when it launched IE. They are going to push Google to give away their core product in order to be competitive, just as Google is working on ways to provide Microsoft’s bread and butter for free.
An excellent example of where the company has paid its users is netscapes new ‘digg’ like service. They are paying good contributors a $1000 per month to continue submitting content. I know for one this made me feel like I wasn’t needed in the community and stopped posting content. They seem scared to loss users so paying on a fraction of them was their best choice? I believe if Facebook and Myspace began rewarding its users with cash we would see the down-fall of these services. Instead they have been offering free content since the beginning. (ie: iTunes downloads, free music, concert tickets etc…)
Danny, not sure if you are still on this thread. If you are, do you agree with the core statement that average CPC on Google is significantly higher than Yahoo or MS at this time? If you agree with that statement, then the rest of my argument is valid, IMO.
I’m dead on. Netscape’s business model is not a goos example ‘Jeff.’ The new Netscape are “posers” trying to impose a fasle reality of payment onto grow a system of duplication.
I’m dead on. Netscape’s business model is not a goos example ‘Jeff.’ The new Netscape are “posers” trying to impose a false reality of payment onto grow a system of duplication.
what difference it makes to simple people …. we dont care google gets it or msn or even yahoo …. ? to me all this thing is high profile business about which every day user donot even care ….