Google AdWords Video Launches, Facebook Misses Q1

Google launched AdWords self-serve video advertising to all AdWords advertisers this week. You may be thinking that video advertising has no place in a paid search advertising campaign, but there are indeed ways that millions of advertisers, even those with strict ROI-focused objectives can benefit from a video advertising program. In other news, Facebook isn’t even public yet and is already disappointing investors by not growing revenue from the fourth quarter of last year to the first quarter of this year. More on both topics below.

Yes, video and video advertising can help you reach both direct response and awareness/branding objectives in concert with paid search. To start a video campaign using AdWords, simply log in and select a new campaign. In the pull-down menu option for campaign type, you’ll now find “video campaign” as an option. After selecting that option you’ll be presented with a somewhat familiar setup screen.

You can use all the current targeting options as search marketers, including: | Demographics | Topics | Interests | Placements | Remarketing lists | Display network keywords | YouTube search keywords. As a search marketer, you may want to focus on two of them, remarketing lists and YouTube keywords. If you get most of your inbound visitors from search, create a remarketing list and set that pixel on your site (either key pages or everywhere) and then remarket to those visitors with video. When selecting YouTube keywords, make sure that your video is relevant.

Have fun with video advertising.

Facebook may not be a paid search platform, but for many advertisers, the same teams make decisions about or even manage pay per click (PPC) search and PPC social. Facebook reported this week in its pre-IPO S-1 filing that year over year revenues increased by 45 percent, while the quarter over quarter revenue declined by 6 percent. There are several potential contributing factors to the unexpected drop in advertising revenue between the end of last year and the beginning of this year. While analysts seem to have focused on weaker advertiser demand, one can’t leave out other revenue-centric issues relating to ad supply, changes in Facebook’s targeting algorithm, changes to the Facebook page layouts, and of course, potential changes in ad receptiveness by users. While Facebook sells both cost per click (CPC) and cost per thousand (CPM) inventory, most folks believe the majority of revenue comes from CPC ads.

Like Google, Facebook has more advertisers for each profile than it has room for ads. So Facebook must choose for display the ads that have the highest yield based both on a high likely click-through rate (CTR) and a high CPC bid. Many factors go into this calculation, including the general performance of that ad against similar profiles, as well as the frequency of ad exposure (that specific ad) against the individual who is eligible for the ad based on their profile. The differing ad types, some of which are also triggered based on activity within a user’s social network, should get treated differently by an algorithm. Plus, if I were designing the algorithm, the strength of the ties between network members would possibly determine whether or not to serve a Sponsored Stories ad or perhaps a traditional ad with a higher CPC. Perhaps social ties and the Sponsored Stories ads aren’t unique anymore and the CTRs are dropping on those. All yield factors are a challenge to factor in.

Let’s explore the other variables:

Overall user growth. Facebook has a very high penetration of users, particularly in the developed countries where the advertising market is strong.

Page views per user per month. Facebook’s users probably follow a typical power curve or Pareto effect where a small percentage of users use the platform much more often than the average and similarly some of those users will drive far more revenue than the average user. If those highly valuable users grow bored of Facebook (less page views) or choose to ignore ads that they previously interacted with, the impact could be dramatic even as new users join Facebook. The power user at Facebook controls Facebook’s destiny because if they change their behavior negatively, the page views disappear.

Facebook layout changes. Facebook made changes in layouts but most of the ad-related changes resulted in more ads being shown. Yet the changes to the feed may have entranced users into the feed content, lowering the CTR on the ads. There’s a downside to giving users what they want most, because ads are not on the list of things users prefer.

Advertisers may also have decided that they don’t have the human resources available to rotate ad creative sufficiently to keep the ads fresh (because ads are targeted toward specific profiles, the ads can “burn out” with users ignoring them after having seen them too many times, having decided the offer isn’t relevant).

Facebook isn’t in trouble, but perhaps it’s better that it go public with a recognition among investors and advertisers alike that once you have amazing reach and user engagement, it gets harder to meet high expectations of all the players in the ecosystem.