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Facebook Clickthrough Rates

As everyone is aware, social networking sites now carry tremendous influence, and supposedly, exposure on one of these websites—whether good or bad—can tremendously affect your business/blog’s traffic. Thus we can expect that websites like Facebook make a good deal of money from advertising revenue (Facebook supposedly making 85% of its revenue from advertising).

In the situations we discussed in class, we considered pricing ads based on clickthrough rates, valuations of the buyer, and harm done to everyone else via the existence of the buyer. The assumption that we made in class however, was that the reported clickthrough rates were legitimate and real. So what if the clickthrough rates we were looking at were faked?

There has been significant discussion in the past few months regarding Facebook and advertising fraud. A recent study by the Advertising Research Foundation (ARF), sought to distinguish actual interaction (legitimate clickthrough rates) vs noise (accidental clicks). To do this, they ran a blank ad on Facebook. According to the results, the blank ad received only .01% less clickthrough rate than an actual ad. In context, a regular ad only receives a facebook clickthrough rate of .09% to begin with. The implications are staggering. If the majority of Facebook ad clickthroughs are faked, there is little reason for any business to advertise on Facebook.

Regardless of whether or not Facebook is committing fraud with its advertisements, the company admits that it may have as many as 50 million fake users.

Trust is something that Facebook seems to be quickly losing. In an industry where numbers can very obviously be faked by fake accounts, how would one begin to consider an accurate pricing model for information that may or may not be fake?



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