Facebook just announced a new RTB-enabled ad exchange for advertisers to "buy impressions" in real time on a per-user basis. (RTB = Real-Time Bidding)
Either they've lost their minds or they're desperate to try something, anything to regain the initiative since the IPO fiasco.
Too many people than I care to count have made the point that Facebook users are on Facebook to communicate and socialise, not to buy products. Facebook themselves have touted their ability to help advertisers with the branding problem, not what is known in the trade as "performance media" (i.e., an ad that helps achieve a specific goal, whether that is a click-through or a lead or a sale).
But the very act of tailoring brand advertising to the individual user defeats the original purpose of branding as Don Marti lucidly explains here. The point of brand advertising is to shout from the rooftops that one's firm or product is of high quality. Shout? Why? Because:
When a firm signals by advertising, it demonstrates to consumers that its production costs and the demand for its product are such that advertising costs can be recovered. In order for advertising to be an effective signal, high-quality firms must be able to recover advertising costs while low-quality firms cannot.
Targeting users precisely for brand advertising leaves consumers unable to assess whether the ad comes from a reputed company or a guy in his underwear selling worthless widgets from his parents' basement, because web users know that web ads are cheap.
This is of course not the case when the brand being advertised online is a large, well established one. Every web user knows that IBM and Ford are big companies with reputations to maintain. But that is the crux of the matter -- those reputations were not formed by campaigns targeted down to the individual. They were formed via various forms of broadcast media. Try establishing a brand new brand (uhh...) exclusively with targeted advertising and without leveraging an established brand. Get back to me once you've run out of budget.
RTB is a good thing. Performance media is a good thing. But mashing those ideas with brand advertising is a bad idea in the long term.
I meant to write a longer post where I say more on this and a related topic but that will have to wait for now. I promise that post isn't about Facebook... or isn't exclusively about Facebook!
Quick update: the broadcast-advertising-as-signaling-mechanism concept is certainly true in India. Smart start-ups in India turn to TV, radio and print at the first possible chance when they can afford it, because the relatively conservative Indian consumer (especially in smaller towns where scams are not unknown) interprets being on TV as being high-quality.
