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


  1. Aaron Zakowski April 8th, 2013

    Interesting analysis David. Somehow I think that AdWords will be strong be the market leader for quite a while still.

    However, I think you can look at the analogy a different way as well.

    Viewed for the social networks’ users’ point of view, FB is showing more and more ads and trying to squeeze every last bit of revenue out of each of their one billion users. Google+ on the other hand is providing some awesome features and does not include any ads. Curious if this will help G+ for their active users.

  2. David Elaine Alt April 10th, 2013

    In broad strokes, I agree with your analysis.

    I would offer that there is one main thing to consider about the limits of this analysis: Google search does not compete with Facebook in the same way that Gmail competes with Yahoo Mail or Hotmail.

    Mail clients are, for all practical purposes, identical. There is hardly anything you can do with one that you can’t do with another. Once a better one comes along, people can completely abandon the inferior one.

    But is there any way that you can say that people use Google search in the same way as Facebook? While people may be spending more and more time on Facebook, will they really abandon searching the web?

    Despite how the Facebook advertising platform matures, do you really think that it will be able to provide the same kind of specific and actionable context that AdWords provides? Likewise, do you suspect that the B2B market will ever find a niche on Facebook?

    Certainly advertisers may continue to shift budget from AdWords to Facebook if they start getting decent returns. But I think there are limits to how much spend they will transfer, since the context and purposes are so different.

    Basically, I think that both will be around for a while. While Google may genuinely be taking steps backwards, I doubt that they are doing anything that will allow Facebook to totally eat their lunch in the same way that Gmail ate Yahoo and Hotmail’s.

  3. David Rodnitzky April 11th, 2013

    Aaron and David,

    Thanks for the comments. I agree with both of you that AdWords is not going anywhere! My point was more metaphorical – that I find it interesting that Google is taking away features while Facebook is adding features, and that this – at a very high level – could indicate cultural problems within Google, not unlike the cultural problems that plagued Yahoo in the early 2000s!

  4. terry whalen April 12th, 2013

    and just last Tuesday, Google announced that for enhanced campaigns, mobile bid adjustments can be done at the ad group level, starting sometime in May. So, they are adding back control there – especially with SKAG-style campaigns.

    Today’s ppc assoc blog post is about this!

Leave a Comment

David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.