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A recent Vanity Fair article ballyhooed “the largely unnoticed shift in Facebook strategy: new content, new algorithms, and new alliances, combined to power a marketing model that could have the rest of the world scrambling to catch up.” While certainly a bit

yahoo email

This used to rule the email world.

hyperbolic, the article did piece together several Facebook strategies that are collectively creating truly superior targeting opportunities online: in particular custom audiences, FBX, mobile ad units, offline purchase measurement, and Graph Search.

In general, I agree with the author’s bullishness about Facebook’s advertising platform – it works well for advertisers and will only get better in the near future as Facebook continues to iterate at a rapid pace.

Around the same time that Facebook has launched all of these amazing features, Google has been, well, taking one step backward with their targeting capabilities. Specifically, Google recently announced what they are calling “enhanced campaigns”, which do have some enhanced ad text targeting capabilities but also have the serious downside of severely limiting advertisers’ ability to target users based on device, operating system, or carrier. No doubt the short-term result of enhanced campaigns will benefit Google’s bottom line, as advertisers (knowingly or not) start to spend more money on mobile advertising, but whenever advertisers have granularity taken away from them, the end result is usually a decline in advertiser ROI – and, of course, control.

Once upon a time there were two dominant email clients – Yahoo! Mail and Hotmail. These two programs started out as free, relatively ad-free products but eventually decided to either significantly increase the number of ads a user would see before, during, and after reading a message, or charge more and more for minimal amounts of storage and value-added features. Then Google released Gmail – no pesky banner ads, no upsells to additional features, and more storage that the other guys offered to sell you – but for free. Hmm, better interface, better features, and free versus stagnant interface, bad features, and costly – I wondered how that battle turned out. Well, three years after Gmail launched in 2004, Yahoo and Hotmail had about a 5 to 1 lead in terms of number of users. Today, Gmail is the largest email provider. Ironically, it’s no longer 100% free – you can now upgrade to get more storage and some other cool features. Sounds familiar, doesn’t it?

Yahoo and Hotmail could have kept users perfectly happy by putting in a modicum of effort to innovate and – most importantly – stopped trying to squeeze every last dollar out of users and continued to provide their email clients for free. Undoubtedly there were business unit managers inside both companies who saw charging for storage and services as their ticket to a nice quarterly bonus. That worked well for them and for their companies, at least until the competition arrived.

And here we are today with Google – clearly the dominant online marketing platform – taking away features as Facebook – the challenger – rapidly adds more and more great ways for advertisers to reach their target audiences.

No doubt it is far too early to conclude that AdWords will go the way of Yahoo! Mail and Facebook the way of Gmail. But history repeats itself, and in the history of Internet business, there are many instances of greed-induced blindness by incumbents creating opportunities for challengers to rapidly gain significant market share.

– David Rodnitzky