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Tuesday, September 25, 2012

Facebook's Ads Are Terrible, and Always Will Be

Posted By on Tue, Sep 25, 2012 at 11:00 AM

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Every day for the past week or so, upon signing into Facebook, I've been greeted by a cross-eyed baby trying to lure me into taking part in a get-rich-quick scheme connected to Forex trading. (Word to the wise: If you see an advertisement with the word "Forex" in it, it's almost certainly some sleazebag outfit trying to part you from your money. Trading currencies isn't something non-professionals should ever do.)

On Monday, that cross-eyed baby, nonsensically but strategically placed in the Facebook ad to draw my attention, was in my mind when I came across this Atlantic piece by Derek Thompson. He asks: "Can Facebook possibly build a business model that isn't inherently creepy?"

The answer is: almost certainly not.

Thompson isn't referring to the weird, sometimes disturbing pictures that advertisers often use to draw your eyes away from your newsfeed and the other ads on the page, but to the news that Facebook has teamed up with Datalogix, a company that amasses information on Americans' shopping habits. Advertisers on Facebook want to know whether their ads translate into sales, so now Facebook is sharing information about its users with Datalogix, which compares that information to the data it collects from millions of Americans via their use of loyalty cards.

So, for example, when you buy condoms, Preparation H, or jock-itch powder from CVS, that data is compared to your Facebook activity to help determine whether CVS's ads are effective. Facebook insists that the information it shares isn't attached to users' identities. And it says it offers an "opt out" option -- which consists of a link, buried on Facebook's "help" page, to Datalogix's website. You can't opt out on Facebook itself.

Which, well, we're probably just going to have to get used to the fact that big corporations are assembling vast amounts of data about us. It's the price we pay for the Internet being mostly free. We should be vigilant about the worst practices (of which the Datalogix partnership might be an example), but if we want to use sites like Facebook, we're going to have to accept some infringement on our privacy.

But what does it say about Facebook that it has to resort to this kind of thing, and to running ads by peddlers of sleazy get-rich-quick schemes and other lowbrow scams? It says that mass-audience sites like Facebook are terrible advertising platforms. You don't see ads for Forex trading in the pages of the New Yorker or during commercial breaks for Mad Men, despite the fact that Facebook's audience is vastly larger than the audiences for either of those.

Facebook boasts that its users number close to 1 billion. I don't believe that number, because I see so many obviously fake profiles. For example, there are dozens of profiles of "Mit Romney" with one "t." Most have been there for weeks or months, which I must assume makes many of them "daily active" users according to Facebook's criteria. The other day, Facebook actually suggested that I become friends with one of the dozens of Lyndon Baines Johnsons on Facebook.

Hundreds of millions of actual people are regular Facebook users, and yet the company can't sell itself to serious advertisers at the level needed to charge decent enough rates to send the cross-eyed babies elsewhere -- to Demand Media or Examiner.com, for example. So we are subjected to sleaze merchants and Facebook's desperate attempts to peddle our personal data to giant corporations.

All of which explains why the company's stock had been nose-down ever since it went public in May, and why, as Barron's predicted this week, it will keep falling for a while. And that leaves aside the fact that mobile ads are an even worse business than web ads, and people are flocking to mobile. However popular it might be, Facebook just isn't a very good business. 

Dan Mitchell has written for Fortune, the New York Times, Slate, Wired, National Public Radio, the Chicago Tribune, and many others.


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Dan Mitchell

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