Targeted advertising and Facebook

Stefanie Olsen at CNet asks, "Can Facebook feed its ad brains?", in an article that describes some of the challenges Facebook will have as it attempts to drive substantial revenue from its website.

Some excerpts:

Facebook must figure out how to serve the right ads to the right people in real time.

That's no small task. In fact, it's a massive computing problem and one that very few companies apart from Google and Amazon have mastered.

Now Facebook must figure out how to take billions of data points about its members and turn that into an automatic ad machine .... With advertising, it's all about matching the right person to the right ad.

Machine learning in online advertising might involve trying many different techniques on affinity groups to figure out which work best ... No one obvious technique is the silver bullet for social networks -- no one has solved the problem of serving ads in that setting before.

I am quoted a couple times in the article arguing that purchase intent is weak on Facebook. People do not come to Facebook on a mission to buy a product. This makes it particularly challenging to get Facebook users to perceive the advertising not as annoying but as useful, which is almost certainly a necessity for their ad platform to generate the unusually high revenues that appear to be expected in their $15B valuation.

For more on advertising and dealing with weak purchase intent, please see my earlier post, "What to advertise when there is no commercial intent?".

Update Eric Eldon posts details on what Facebook has launched so far, saying:

Users will be able to add advertisers as friends ... [and] click on ... buttons ... [that] share the advertising information with their friends on Facebook ... This sounds far-fetched as a successful advertising strategy.

Facebook ... will also run what it is calling SocialAds, which take social actions from your friends -- such as a movie rental -- and combine that information with an advertiser's message to display the most "relevant" ads to you ... The risk, however, is that users will bristle when they get hit with such ads.