Why Facebook Wouldn’t Make Money 10 Years Ago

By David Cohen 

Facebook posted strong second-quarter earnings, with 88 percent of its total revenue coming from advertising, but would it have been able to deliver similar results in 2003? No, according to Kenshoo Chief Marketing Officer Aaron Goldman.

In a post on the Kenshoo Social blog, Goldman highlighted seven things that did not exist 10 years ago, all of which are key to the social network’s performance today:

  1. Advanced targeting: Today, you can target precise prospects and customers based on social network likes, interest, and connections, and/or what you know about their behavior off social networks (e.g., custom audiences and Facebook Exchange). 10 years ago, the best you could do was target a certain page/category on a website, and maybe overlay geographic settings, as well.
  2. Sophisticated data management: Today’s marketers are quite evolved with how to collect and use data to improve online advertising these days. Many leverage data management platforms to store and map cookies, allowing them to buy only the best ad impressions. As a result, much of the waste that ran rampant in remnant inventory 10 years ago can be eliminated, and/or that garbage is turned into another marketer’s treasure when they realize who the person behind the impression really is.
  3. Native ad formats: Ads on social networks no longer look and feel like ads. 10 years ago, ads were just banners smashed in above and around content. Today, social ads are highly integrated into the fabric of each social network and with respect to the content (e.g., News Feed promoted posts and sponsored tweets).
  4. Better tracking and attribution: Marketers can now close the loop from impression to click to conversion and see the full value of social media ads. Our research shows that Facebook ads are 12 percent to 30 percent more valuable when marketers apply alternative attribution models to last click. 10 years ago, the last click was getting all of the credit, and/or marketers were relying heavily on publisher-reported numbers, and, hence, giving credit for the same conversion to multiple sources.
  5. Optimized bid algorithms: Today’s ad servers are much more flexible and scalable than they were 10 years ago. Whether it’s a demand-side platform or bid management platform (of which Kenshoo is the recognized leader), the technologies that deliver ads take into account thousands of variables when determining the exact right amount to pay for each impression or click based on its actual value. 10 years ago, there was no such thing as real-time bidding. The best we could do was daily optimization.
  6. Savvy online shoppers: People are more comfortable buying stuff online these days and, thus, convert better following ad interaction. 10 years ago, conversions were fewer and farther between. Showrooming meant searching online and buying in store.
  7. Tailored Web experiences: Marketers have gotten pretty darn good at creating digital assets to meet the perceived intent of visitors based on entry point and device type. 10 years ago, there were no smartphones and tablets, so it didn’t matter if you had an optimized site or app. But there was also very little customization going on with landing pages and other “fixed” Web experiences. This is another reason why conversion rates lagged and ads just didn’t work on social media properties.

Readers: Do you have anything to add?

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