I would have to agree with you. I NEVER click on ads from Facebook or any other social site. The only time I click on ads, is when I do a Google search for something I want to buy.

Conventional wisdom is that online ads have really diverged strongly into the performance-based and the brand-based. Google is strongly skewed towards performance-based ads — you are explicitly seeking something when you do a search, thus finding an ad that fulfills that need is much more likely to garner an “action” — in most cases, the click (though, the “action” is starting to mean an actual purchase or registration, etc.). On the other side are brand-based ads that are not really intended to drive a particular action at the moment you view the ad, but rather are a way to drive awareness and/or esteem for a brand (for instance, I think the “wrap” ads that Pandora has do a nice job of this). Facebook seems to struggle a bit in the middle, where they want to drive performance-based ads (where you pay per click) AND brand-based ads (where you pay CPM on impressions).

Ultimately, performance of the ads themselves will determine the value, but the ad industry has not really gotten very good at determining price levels. It’s not unusual to see pricing spreads for similar inventory going for as much as two orders of magnitude different prices (on a CPM basis), but I suspect the industry will become increasingly efficient in the next couple of years as the measurements become more standard and more transparent. I suspect Facebook is seeing a very wide spread in terms of performance of their ads, and they are able to analyze all of that data to drive to better and better ways to make it work. Their targeting proposition is quite strong (and will likely become even stronger as they add more ways to target people), but I don’t think their formats have been optimized yet.

Google ads work great for certain kinds of things — when searching for a product, for instance. But, keywords are fairly limited in their scope in terms of targeting lots of different kinds of ads, and Facebook definitely has a leg-up in terms of the kinds of information they have about particular people an advertiser wants to reach. Facebook, with Beacon, is already showing that they are thinking about ways to build a distributed service around their data, and that is a potentially very potent way for them to monetize their broad reach, but they have a long way to go to live up to expectations.

@Nathan — I agree with the performance-based ads AND brand-based ads to some extent, but I feel that with Google ads the user is more aware of the ads versus Facebook Ads where the user is trained to ignore the lower left hand column and bottom of the page because it is “just” ads.

Good post. Interesting as well, because of course Google took the whole idea for AdWords from GoTo/Overture which did exactly what you describe initially. You bid for keywords, but instead of just ads, they -were- the results. Ultimately (and it’s worth noting that they did NOT have a weight emphasis for quality) this model didn’t explode (though syndicating these ads to Yahoo, etc was successful), and Google won out.

@Surya.

Yea you’re definitely right Surya. You’re the one with experience in old school Google advertising. I think Google just executed at a more user friendly level.