Right on about Need vs. Awareness .... Think of Coca-Cola or McDonald's, or even Budweiser. There are many large companies that use TV/Internet to keep their brand strong. Everyone knows about these brands, there is no direct "need" for any of their products (one could argue against this but I digress), but they need to keep advertising so when you are hungry, or thirsty, or sober you turn to them first.

That´s right, I think there´s also a hybrid, probably like banner advertising, google adwords, amazon recommendations and gmail, which is showing you ads for things you might be interested in but not necessarily actively seeking.

When you see an ad for coke on the street there is just some probability you are thirsty or will remember coke when you become thirsty, with adwords and other kinds of contextual advertising there is also a probability you might be interested in what the advertiser is presenting you, so they might just hit a need or making you aware of it, and not really creating it as in creating demand.

Great point. I was just watching some Saturday Night Live clips on NBC's web site. I was surprised that so many commercials one's forced to watch in their video area do not fit the mood of the site at all. Even on the Internet, when the commercials could be targeted better, they are not. This shows that traditional advertising networks that are transitioning to the Internet are still following the old approach, and it takes a new company to react to solve new problems and cater to Internet users rather than thinking of the Internet as a cheaper distribution source for traditional methods. Old media wants a "presence" on the Internet, new media lives and breathes the Internet, and is made up of regular people who are the stars to their social circle.

Sounds like NBC are creating a Meatball Sundae (to steal Seth Godin's term) - that is what his latest book was all about.

Matt's essay is actually consistent with what you said if you read all of it except the title. It seems like it should have been titled "Why Facebook's Ad Revenue Will Stay Less Than Google's."

We don't know that either. For example, the old-world analogues of Google are the classified ad section and the yellow pages. Both of them cater to people who know what they're looking for, and so have excellent focus. Yet I'd imagine that many, many times more money gets spent on TV commercials than on classified ads. It seems like "creating demand" is a much bigger market than "meeting demand", and if FaceBook can succeed at the former, it could be many times bigger than Google.

>It seems like "creating demand" is a much bigger market than "meeting demand"

I think that it's just easier to spend money on creating demand - Maroon's whole point about Google being the theoretical limit for targeting is that it's a hard task. Most people spend much more free time consuming media than discovering things, and it's the search part of discovery that is applicable for targeting.

Hmm, I wonder if you TiVo or the cable companies could mine your channel-surfing behavior to improve ad targeting (but that would require customized TV feeds instead of broadcast, yada, yada, yada). That would be interesting to identify other "discovery" activities that people do.

I'm not trying to defend his essay, merely stating that it argues something different from what's in the title.

That said, I'd caution against using your imagination to assess ad spending. Ask the nearest small businessperson what they spend on yellow-pages listing.

I don't disagree with you, especially in that television advertising isn't going anywhere (though DVR is clearly reducing value) but that doesn't refute the fact that Facebook won't make as much money off of online advertising as Google.

Supposedly a picture is worth a thousand words. I wonder how many pictures a video is worth. Or how many 468x60 internet banners a full blown page in a magazine is.

I think the big disadvantage to internet advertising is it feels so cheap, even when it isn't. When you see an ad on ESPN, you know somebody spent a lot of money to put it there, and that lends credibility. When you see an ad on espn.com, you don't get that sense even if the company happened to spend more online than the guy on television.

I would love to know television's effective CPM rate versus Google's

Yep, that's because Matt's really arguing that Facebook can't make money using the same model as Google, even though the title of his post implies he'll be talking about advertising in general.

He certainly didn't explain how "advertising works," only how search advertising on Google works.

Even more towards the point of the essay, users of Facebook are not looking for products and services. Facebook lets people keep tabs on each other and maintain more acquaintances but almost no one goes to Facebook to locate goods or services.

The problems is not only that Facebook lacks the ability to pinpoint precisely what its users want in the manner that Google can, it's that Facebook is the wrong environment to sell specific things to people. Again: people use social sites to keep tabs on people, not to buy stuff or look for specific items or services. The only ads worth showing on Facebook are those that emphasize brand loyalty, and frankly, the money is better spent on television ads.

He goes on to suggest that MySpace are the ones capitalizing on something like "demand creation", by realizing that people go there to waste time and therefore MySpace is doing a lot in terms of entertainment properties. Matt doesn't use the same terminology you're using, but I think he's getting at a similar idea.

He also says that creating demand is less profitable, so if the best you can do with your ad inventory is to create demand, you'd better have a much lower cost structure to accommodate that. I can't see into their wallet, but I'd imagine Facebook is burning through money pretty quickly.