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Facebook Maximizes Long Term Revenue

Facebook’s online ads seek to maximize long term revenue. By only showing the ads people want to see, Facebook ensures a better experience on its News Feed. This idea is based on the fact that if advertisers get more return, they will spend more. After all, this makes sense because showing ads to consumers who are not interested will not benefit the advertisers. Facebook’s auction success is symbol for why the company is doing so well. By catering the user’s experience on the News Feed, Facebook maximizes the time the user spends online. Simply put, if the user likes what they see, they will spend more time on their site.

This is similar to our discussion on advertisements in class in regards to generalized second price auctions. This article goes into detail about how Facebook uses Google’s basic method of generalized second price auctions. Like Google, Facebook is basically seeking to sell advertisement spots to certain audiences that have similar interests. Instead of simply selling a slot, Facebook customizes its ads it shows to users on the News Feed based demonstrated interest. Such an approach is slightly different from Google because users have the option to tailor the ads they see by saying whether they like them or not. This may not maximize short term, but it looks to the future in capitalizing on information from a user.

Source: http://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/

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