Ad Customization Backlash

Title: Analyst warns of Facebook-ad backlash, sets $16 stock price

Date: October 8, 2012

Source: CNET

Link: http://news.cnet.com/8301-1023_3-57527892-93/analyst-warns-of-facebook-ad-backlash-sets-$16-stock-price/

A recent article describes continued backlash to the Facebook IPO. This time Facebook's valuation was further challenged by their efforts at monetization through ad targeting and customization. "A BTIG analyst says Facebook's recent efforts aimed at making more money are too aggressive, which could annoy users and make them less likely to log on." Richard Greenfield subsequently lowered his target price for Facebook to $16 in the next twelve months (vs. a $20.40 close on October 8). Ironically the same efforts that have bolstered Google's brand and valuation, have hit Facebook hard.

It seems the technology at play and the tactics used are not to blame. It's the presumed idiosyncrasies of the customer base and user experience impacted by custom ads. Facebook's pressure from investors to grow is to be expected and its tactics are tried and true -  "increased advertising efforts, testing out advertising on third-party sites and apps, working with companies to advertise to already existing consumers and tracking user activity online to retarget ads." Mr. Greenfield's concern in my opinion is misplaced. Facebook users have come to expect and ignore the ads that interfere with the user experience. Users might be annoyed by the ads making them less likely to click on them. However, the social draw of Facebook is enough to keep traffic up. Facebook can verify impressions within a target audience even with limited click-throughs much like a television advertising model.  

Moreover targeted ads are welcome additions to the Facebook experience in conjunction with  better policing of pages.  Users are unlikely to "like" corporate or branded pages and are annoyed by techniques designed to trick them into participation.  I tend to agree with part of Facebook's assertion that their targeted ads "become a part of the news feed experience." Facebook need not create any third-party ad networks on top of its already powerful user network. Isn't that what users are doing anyway - broadcasting their personal brands?