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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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A CPM Here, A CPM There … Now You Are Talking Real Money

Comments (6)

Today’s Techmeme meme is based on Facebook advertising brings poor results.

Techmeme0712

Most of the posts are talking about the rotten clickthrough rate (0.04%) on Facebook.  Some of the posts – like Scoble’s – have some constructive suggestions about how to make the advertising more relevant (note to self – “tie it to people, just like Google ties AdSense to search results.”)

In the past two weeks, I’ve seen or heard of four Facebook focused ad networks that are about to launch that are specifically aimed at Facebook apps.  One of the TechStars companies – J-Squared Media – has a rapidly growing Facebook up (Sticky Notes – 232,137 users – ranked #52) so we are getting an inside look at the action, traffic dynamics, and advertising (oh yeah – and dealing with scale on short notice.)

So far, it’s all about the CPM.  I’ve seen proposals ranging from $0.50 / CPM to $15.00 / CPM.  Do the math – it’s interesting.  I expect the CTR will be low (< 0.1%), but some of the CPM based ads that I’ve seen are awesome and – especially if they are interactive in page with a call to action – render CTR meaningless.

Remember also that Facebook doesn’t really want anyone to leave Facebook (at least I don’t think they do.)  In a conversation yesterday at Me.dium, we were trying to figure out the correct way to describe it (e.g. “inverted AOL”, “walled fortress”, “AOL 2.0 without the fee.”)  We never got satisfied with the label, but the concept is an important one if you are trying to figure out the really effective long-term advertising approach.

  • http://blog.thylmann.net Oliver Thylmann

    Again, linking to The Paradigm Shift, conversion rates seem to be not so good from social networks: http://plentyoffish.wordpress.com/2006/08/09/bebo-and-myspacecom-reality-check-based-on-436-test/

    If we think further what Google has done, and what the internet enables, it’s performance marketing. More and more advertisers are or will measure their conversions from traffic.

    I buy the idea of interactions in the banners itself, but then the question becomes what the quality of the sign-ups are. People need to understand that they sign-up somewhere else.

    I don’t really see $15 CPM coming to Facebook at this time. Not anywhere. At least not over a meaningful amount of the traffic. Even at $1 CPM one might argue that a pay version of Facebook makes more sense, as I will likely not make more than 1000 impressions a month and will more likely pay $15 a year to have it ad free and a bit more features.

    Google works because they make $60 CPM on searches, and that for a reason. Might be it’s inflated now and only worth $40, but its worth that.

    Oliver

  • http://blog.thylmann.net Oliver Thylmann

    if you have an example of a transactional banner that is working, I would be all ears. :) Your comment on the plentyoffish blog seems to have hinted at the fact that they are performing really well and if that includes people that also track the quality of resulting leads, then I am even more interested. :)

  • http://www.feld.com Brad Feld

    I expect that at least one of these ad networks will start placing meaningful numbers of ads in the next 30 days on Facebook apps.

  • http://rickstratton.net rick

    I would be very surprised if any ads were ever very successful on Facebook.

    They’d have to be very very cool or for something that appeals to the main FB users – tweens/genY.

  • http://lastresort.xepher.net Rachel

    CPM isn’t the goal – it’s about the impression.

    Through Facebook, I’ve found tons of new bands thanks to iTunes giveaways, clicked around a few contests from sponsored folk, and so on. Have I actually BOUGHT a Jeep yet? No. Do I plan to later? Sure.

    Try some of the sponsored groups versus the flyer ads and see what kind of return they get. :) They typically have very active communities if nothing else.

  • Dave

    The purpose of advertising is not always immediate sales. Ad campaigns can have measurable goals that are distinct from online sales – including brand or product awareness, intent to buy, or perception of value. These are long-term effects that move the needle, even if you don’t measure it in clickthrough. Given the audience of Facebook, that might be the most important use of their ad platform. Read “What Sticks”.

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