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Dax Hamman

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Will Facebook Excel on Google's Turf?

Posted: 01/11/2013 12:05 pm

Over the past few years, the tech world came to perceive Facebook and Google as enemies controlling different tech kingdoms: Facebook is supposed to be the king of social, while Google reigns over search and advertising. But all that's changing. With the launch of Google+, Google is showing that it's not giving up on social just yet. And now Facebook is showing that it's not afraid to move into Google's territory.

In September, Facebook launched the Facebook Ad Exchange (FBX), an advertising exchange that allows advertisers to bid to serve targeted display ads to Facebook users in a real-time auction. Considering that Facebook controls 25 per cent of the display ad inventory on the Internet, this was a pretty big deal. It opened up a giant new Internet neighbourhood to advertisers who have come to appreciate the power of bidding for targeted display impressions in real time.

FBX itself might be considered a step into Google territory, considering Google's immense influence in the space. But last month, Facebook took an even bigger step in the direction of Google when it announced that it was partnering with my company, Chango, to allow FBX advertisers to target Facebook users based on the searches they've performed on other sites -- including on Google itself.

It's easy to see why both companies came to this business model: there's simply nothing as effective in digital advertising as the power of intent that's revealed by search terms. After all, if I search for "iPad soft case" or "Michael Jackson replica wig," there's a good chance I want to buy that item.

Google came to this business model first, but it took them years to figure out how to make it work. The company was founded in 1997, but a truly successful version of their Ad Words program, which allows advertisers to serve text ads based on search results, didn't launch until 2002. Once Ad Words became wildly successful, Google set out on a long road to leverage its search data to dominate as much of the display ad market as possible.

Facebook has taken a similarly long advertising journey, and now that the social network has grown to over a billion users, the company finds itself in a uniquely strong position as it introduces search targeting to FBX. The Google search ad market has become saturated and expensive -- bids on the most valuable Google keywords, such as "insurance," now cost almost $70 per click. Using FBX to target a user on Facebook's trusted platform based on the very same keywords, however, is significantly cheaper and promises to deliver a much stronger return on investment.

With Facebook's latest moves into Google's turf, advertisers will likely flock to FBX, and, as a result, Facebook may be on the verge of much greater advertising profits. Now to see what Googles does next in social.

 

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