Imagine if google knew BOTH your search term and your complete personal history. Then the ad price and conversion would increase enormously.
That is what Google is trying to get a piece of.
Also, even though your example is obviously not meant to be taken as is, it shows that targeted demographics quickly don't have a lot of data behind them. Successful stories in AI usually involves lots of averaged data with only little "focused" data to adapt your model quickly (e.g. as done in speech recognition where models are estimated on 1000s of hours from many speakers, and the model is then adapted for the one speaker to be recognized).
I think the value of the so called social graph for advertising is overestimated. IMO, what's interesting about facebook is more the amount and diversity of data than its personalized nature. But then, I have little knowledge about algo for advertisement targetting, maybe the situation is different than the domains I am familiar with.
Unethical behavior does not scale in business, no matter how much your calculations rationalize it. In the end people just go away from sleazy businesses. GM and Ford might tell you a story about it and millions of others short term profit oriented businesses also.
Theres only so much bullshit you can pile up before your reputation catches on to you.
Why do people buy Coca Cola? Is it because of the tremendously expensive advertisements they put out or is it because the stuff is ubiquitous, tastes fairly good and is usually not surrounded by a lot of competing products at the places where it's sold?
Don't believe me? What about if you're in a restaurant that sells only Pepsi. Do you leave the restaurant in search of another that sells Coca-Cola? Most people probably don't, thereby proving that all the so-called "positive emotions" advertisements instill in consumers do absolutely nothing when the time comes to make purchase. Theoretically, yes, in a situation where you can choose either Pepsi or Coca-Cola for (roughly) the same price, Coca-Cola's advertising campain may have an effect, but such situations are exceedingly rare. In most purchasing decisions there are variables that have much more significance than the advertising history of the products.
So ads are, probably, not effective. And despite this fact, there has been an industry selling them for over a century and that industry has been getting richer and richer, thereby proving that you can perfectly well build a business on scamming people and keeping it up indefinitely. You do, however, have to keep playing around with some superficial parameters of your business model to keep it convincing. Which is exactly what Google is doing here.
(btw, I use - and love - Google's services, but never in my life have I clicked one of their ads or even looked at one for more than a split second)
And its obvious that Coca-Cola's marketing has been waaay better than Pepsi's. And also I believe that Pepsi is quite comfortable in its #2 position. As is Burger King in its own.
Don't forget, that second biggest player in a huge market is usually still a friggin big behemoth. And that for Pepsi and BK being #2 is a core business strategy. Less upside, but also less downside. These companies basically use their bigger competitors as a hedge against market change.
Marketing in general, I agree, has some non-bullshit aspects to it. Not many, though.
But certainly the marketing that causes Coca Cola to be sold in way, way more places than Pepsi has been very effective.
That's why we skip ads in my house, they are just too hot to handle.
One of the reasons Google's advertising programs are so successful is that they are measurable. A site can compute return on investment and know that for every $X spent on Google ad clicks they are generating $Y in sales.
The retailers I'm talking about may not be representative, however: they already had a strong market presence and strong brand recognition before they went online. Maybe there are businesses that have started from scratch online that did see significant revenue from adwords, but I doubt it.
For businesses that can best exploit Adwords targeting, it can be breathtakingly effective. I've dealt with specialist contractors who saw 25000% ROI on their Adwords spend. Search terms like "loan consolidation" and "car insurance" cost tens of dollars per click and are absolutely worth that much.
A lot of sales guys sell by telling stories, not necessarily by persuading metrics, and all the contextual data makes for GREAT stories.
I disagree, for certain businesses it is more beneficial then Adwords. I have had really good experiences with Facebook Ads.
Here's my 2 cents:
1) Cheaper than Adwords, much much cheaper. The ads tend to be expensive when you first get an estimate from Facebook, but in practice, this number goes down 5-fold. Also, in comparison to Adwords, it is at least 5-fold cheaper.
2) Easier to target people. This depends on what you are doing, but I believe it works better if you are trying to build a community with a specific interest. However, Adwords is probably better for targeting advertising for an e-commerce store.
3) If you advertise your fan page, you have a hook to constantly advertise to your fans. I like building my fan page, generating conversation, and sparking interest. It is important to give users good content, but it also doesn't hurt to self promote about 10-20% of the time. It all depends on what you are doing.
If you've collected marketing data that tells you your conversion rate among pet owners is 2% when your conversion rate among the general public is 1%, then you know that every ad you show to pet owners is going to have twice the impact on your bottom line.
Ad targeting enables you to collect this kind of data and to exploit it once you have it. If you find the right audience, your advertising dollars can go more than twice as far.
But, the real problem with facebook users is you are far less intrested in adds while on a social website and a lot of clicks are simple mistakes.
Buying an ad on Facebook that happens to be related to something they once had interest in, and may still do, will result in it being shown while they are not always looking to solve a problem or buy a product, but to entertain themselves, and most importantly may not care about that subject at that moment.
Online advertising is not a cut and dry field. You can get great results from either place, but you won't get the same results from both, at least in my experience.
Without going into specifics, think of this data as just another signal to use in ad targeting. Maybe users in certain regions are more likely to purchase a product? Maybe men versus women, people who have kids, people in certain income ranges. We ad people use all this info to eek out performance from campaigns.
Google is going for the holy advertising grail with +
- Google Engineer: If I'll better target demographics and increase conversion - I'll be able to raise my per ad price by 200%
- Ad Campaign Manager: better conversion rate? OK will pay max 15%-30% more per ad.
- Google AdSence Manager: we'll lose 80% of revenue if target narrow demographics - screw it
It would really be expanding the number of $100 clicks available and I think thats almost inevitable.