I don't get it, so why did Microsoft choose to renew the deal if they're supposedly losing money hand over fist?

Also, the report described performance from January 2008 to December 2008. While it's nice to have documents passed from the future, I think the real question would be the performance in 2006-2007.

It's hard to believe that Facebook and Myspace would sport such wildly divergent clickthrough rates given the similarity of their audiences. What gives? These numbers don't pass the smell test.

@ck209: Hey, ck209, the report describes performance for January to December 2006. Sorry, the type's a bit small, so hard to see. As for Microsoft's deal with Facebook, I suspect they're just desperate to get into the text ad business.

@horatio: Hard to believe, but I've seen the reports. They're the genuine article, and you can probably get confirmation by chatting up any media buyer you know. Also, the audiences aren't *that* similar. Myspace's average age is surprisingly high. It's not all teenagers. Facebook, on the other hand, is heavily weighted toward university students. They're more highly educated, obviously, and less responsive to advertising.

Facebook is primarily a communication tool, much more so then MySpace. Facebook is similar to email, IM, or a closed forum for friends. Consumer behavior on communication devices is anathema to advertising.

Myspace on the other hand is a partly a communication tool but also a more traditional content website, where you can check out tons of stuff from people/brands/places you don't already know, leading to much higher clickthroughs.

While this is interesting, I think FB has never really sold its strength as being traditional ads. I think that Zuckerberg and others would claim that it's innovative ads (see, Apple Students Groups, profile pages, etc) that drive significant consumer involvement. While CTR may be low, they are still a great visibility tool.

Media buyers, rightly or wrongly, often take click rates as a proxy for engagement. So, even if the client is buying brand awareness rather than running a direct marketing campaign, they look at the numbers to judge whether anyone's interested. Innovative ads are good for press coverage in the ad trades, but almost all spending by agencies is on standard banners, and text ads. Facebook is a phenomenon, and will find ways to make money, but advertising will probably always be problematic for them.

Perhaps Google is sending their army of AdSense clickbots (from project "Goose Revenue") to Facebook to ruin the party for Microsoft. LOL

Excuse me but this post isn't fit for ValleyWag! It's super relevant, interesting, and important! ? Wazzup?

This report should convince every ValleyWag reader to sign up for Facebook, on the basis that Facebook has the least intrusive advertising and highest ratio of content relevant to the user!

Hey Nick...

My thoughts on why MySpace skews 'older' is because everyone is 99 years old.

I run Norway's largest community website myself, and we have the exact same click-thru rate; 0,04%. But we find that if we show ads meant for boys towards boys, and girls vice versa, the click-thru improves up towards 0,15%. Never the less: Community-websites really doesn't have the same click-thru percentage as other, more content-oriented websites. You're generally less bored at communities ;-)

@IanSchafer: Ha, funny. But it's panel data, which has nothing to do with the ages that users submit, which shows that Myspace's users are way more diverse than one would think.

Facebok's strength is in the social graph-the connections arebased in the real world. You know your friends on facebook in real life, and therefore the communication that happens naturally on Facebook is more valuable than that of Myspace.

And all these active Facebook users are getting older-25+ is the fastest growing demographic- its not just college students anymore. There are different ways to get advertisers a chance to connect with their targets, and I think Facebook, or the third party developers on the Facebook platform will figure it out.

Facebook announced the other day that they're going to let advertisers target their users based on personal information, and they're working on a system that will predict what a user wants before they want it.

For one of our key advertisers, our target is the Youth market so we're bang on with the site. There's a lot of research/stats out there, i.e. Kidfluence shows that the Youth market in Canada influence $20 billion of household purchases and spend an approximate $1.7 billion of their own money (this is 2002 Tween data so the Teen+ market would be higher as many have part-time jobs). This research and similar others have been the basis of reaching them young to build brand preference.

We're aware of the low CTRs but that's not so important to us given awareness and brand preference objectives. Community publishers have taken the low CTR in mind by offering highly competitive CPMs. I'd also think that any engaging site/application would yield low CTRs overall anyway for standard ad units, i.e. IM placements have historically delivered lower CTRs but, given the cost-efficient CPMs and targeted reach, we use it.

Another thing to note is that overall, community sites (particularly FB) will require higher frequency not only because of higher engagement with content and applications but because these days, the Youth segment (including myself though not as young) generally have a minimum of 5 browsers open at any given time. Unlike news/reference sites, people visit then generally close the window. With community sites, people keep the page open as it's a means of communication for them via email, pokes, wall posts, etc. As a result, ads are firing in the back with no audience - not unlike a missed TV spot when we refresh our popcorn bowl...

To put the Facebook CTR into context what are the average CTR for different web sectors?

You would have thought that something so intelligently put together as facebook would not have to resort to the last chance business model of the average Internet loser.

Today, facebook, or rather Microsoft, is serving up a really annoying flashing green banner telling me "This is not a Joke - Congratulations You Won" ...

And it just goes on an on and on. After several pages I decided my facebook activity could wait a while, maybe the advertisers credits will run out or something.

Unfortunately this kind of advertising adds a "spammy" element to social media and it might cause people to look for alternatives.

I think that this media offers a great way to reach out and touch people. Google has the market by the short and curleys, so any large viable option is welcome.

On the CTR the young crowd does really poor in my exprience, they just don't click on ads. I ask some why and they say that advertisers are trying to sell them something . Yup that sounds right to me and is the whole idea. The undeclared objection is they don't trust them. What you need to do for the young market is the great mystery. I really like the idea that you can choose demographics and sex for better targeting.

All righty then - I've now spent in excess of $12,000 on Facebook ad campaigns over the last 5 months and have several data points to report.

1. The average CTR does seem to run between 0.02 and 0.04, as others have reported.
2. Facebook's "bidding" system appears flawed. I (not quite randomly) varied my daily CPC bids. I almost always spent my daily budget by the end of the day. It did not seem to matter whether I was bidding X or 2X (where 2X was the "recommended" CPC). In other words, I was able to get twice the number of clicks by ignoring their recommended bid price.
3. My demographic may be skewed (in fact, I'm sure it is - my average age was 44 for facebook traffic), but - if the assumptions regarding the clicking habits of facebook users segregated by age that you all are using are correct - then my results should be BETTER than the average.

I haven't bothered to advertise on Facebook yet, even though the audience would be pretty good for my startup legal practice (young and techno savvy, focus on college grads, high percentage of potential entrepreneurs). The well-publicized poor Facebook CTR is definitely a factor, but I think the quality of the ads is plunging downwards, becoming an infinite negative feedback loop...in the last two weeks, the Facebook advertising I'm seeing has degraded to the point where over half the ads are for balding treatments and bikini fat reduction, with grotsque pictures. I'm sure penile enhancement will be next. Nobody under the age of 50 is going to click on that crap, and nobody over the age of 50 is going to click on that crap. Way to destroy your user relationship.