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Facebook SocialAds -- great idea but no Google killer

We have had a parade of new web advertising concepts lately: Yahoo's Smart Ads, Google's Gadget Ads. Now we have Facebook's SocialAds.

Just as people are throwing around absurd valuations on Google, we now have some bloggers doing the same with Facebook, that's how important they are interpreting SocialAds to be. In keeping with the current silly season regarding all things Facebook, a $100 billion valuation has been projected for the company based on this development.

Background --

SocialAds will take advantage of all the profile data that users enter in Facebook. Knowing a user's age, location and interests will allow precise ad targeting. It's a no brainer for Facebook to use profile data for ads served on the Facebook site and, indeed, they are already trying this out with their Facebook Flyers initiative.

Many in the blogosphere, however, are speculating that Facebook will extend their advertising efforts beyond their own site and put in place a full blown ad network. How will they do this? All Facebook users have a cookie stored on their hard drive that identifies them to the site. That cookie can be used by ad serving software to look up a users profile in the Facebook database and target banner or text ads to that user. You won't have to be on the Facebook site for this to work as long as your cookie is available. Given the timing of the Microsoft investment in Facebook, there is the assumption that Microsoft may help support, build and run this new ad network.

Is this the Google killer?

The more excitable bloggers are proposing that this will eventually topple Google from the top of the web advertising heap. It may be useful to contrast the two approaches.

Google AdSense is available for any web publisher, big or small, in many different languages. The Google software crawls a publisher's site to identify what kind of content is present and serves ads that are complementary to that content. There is no reliance on cookies, it doesn't care who the users are. It assumes if the user is on the site, then the user must be interested in that kind of content. Judging by Google's revenues, they have this system working pretty well.

SocialAds, by definition, are based on Facebook profile data. As such, an ad audience will be limited to those people who actually have Facebook accounts and have taken the trouble to enter a sufficient amount of useful information. Even with Facebook's large user base (as many as 50 million), it is still just a small subset of worldwide Internet traffic.

Essentially, it seems Facebook would be basing the reach of their ad network on the popularity of their site. To me, that seems dangerous. What if Facebook is overshadowed by the next big thing, Web 3.0 or 4.0 or whatever. This would drastically reduce the value of their ad inventory and the usefulness of their profile data. Google, on the other hand, would just keep chugging along.

Given Google's head start, near universal acceptance and continuous improvement of their AdSense system, I don't think Google will have anything to worry about for quite some time.

P.S.: Enough speculation. On November 6, Facebook will make their announcement at the ad:tech conference in New York City.

Sources: thanks to Techmeme for listing several pertinent blog posts including those at TechCrunch, VentureBeat and Adonomics

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