This would make logical sense. BUT! it turns to not be the case. Larger accounts: Pepsi, Johnson&Johnson, Tmobile, etc tend to just take a massive budget and blow it on ads. They don't necessarily care about the ROI or click tracking. They just want to shove banners in front of people's faces before the quarter ends. What is nuts -- is that these large accounts (we used to call it dumb money) are almost all of the ad revenue. Accounts that care about click ROI tend to be low budget -- that is why facebook/google will push these people into self service ad portals.

Small businesses care about ROI in the abstract, but are generally so time strapped just running their business that they barely have time to even set up attribution or measure ROI beyond "I spent this much and it kind of seemed like I got more business".

Major multinationals are sophisticated enough to correlate their ad campaigns with product sales. And they have the resources to run numerous ad campaigns simultaneously in multiple regions and iterate on the campaigns that work. Smaller players are less able to do that, and are forced to rely more on metadata like click through rates because they can't see the bigger picture.

Pepsi cares about making you read the word "Pepsi" over and over until you buy one, but you don't buy them from pepsi.com, you buy them at every restaurant/store you go to.

Well, sure. They are going for brand awareness. There's an entire field of study around it.

Large accounts are not enough to keep FB and the like afloat. The small accounts do care about conversion rate, etc.

Many have "totemic" advertising where they think slapping their name everywhere will be what gives them success when they are already well known and widespread enough that people wouldn't forget about them if they stopped advertising tomorrow. Brand awareness is a thing but it seems overhyped - especially when it forgets the downsides of obnoxious advertising.

If as the old joke the moon was painted a cocacola logo that would give brand awareness in perpetuity but it would piss off a lot of people rightfully.

Agencies would hire me late in the process, when most of the campaign was specced out (as some silly app on a page). I saw many times that the campaign wouldn’t really be that viral etc. But the design had already been nailed down and it was my job to make it happen.

So what they would do is just buy 50,000 likes and maybe get some organic action. They showed the results, the guys at the brand showed the results to the giys upstairs, everyone seemed happy.

It was one of the things that made me realize current social media platforms were about fake or shallow online engagement, and gave me the impetus to start Qbix

From what I've seen, the big brands don't really know the ROI of their ad spending. They allocate X% to digital, Y% to outdoor, Z% to TV, etc. Then they sub-allocate across channels within each category. It's not really about ROI.

And smaller advertisers don't have much in-house capability to measure ROI. Instead they rely on Facebook's own analytics.

Only a handful of companies I've seen actually build their own analytics, measure customer acquisition cost, and match acquisition cost to lifetime value for specific customer cohorts.

The smaller firms that do their own analytics invariably discover that 95% of the traffic from "paid social" Facebook ads is low quality, high churn, with deeply negative ROI. And it's impossible to isolate the 5% high quality, low churn, positive ROI traffic and just pay for that.

It's true that "seriously investing" in Facebook ads is much more involved than the equivalent investment in search ads, but it's absolutely false that the traffic from Facebook ads is definitionally low quality.

In general, last-click methods will substantially under-value FB and over-value Google. This occurs because you see an ad on FB, don't click, but search to get back to the website, and click on a Google ad.

I've found, that for a lot of b2c businesses, FB provides extremely good ROI. Google is much better for b2b though.

If by "perform better" you mean "generate traffic" then I agree with you. Facebook ads really do result in a lot of clicks.

And if you're running a political or awareness campaign, maybe that's what you want. But it's hard to measure ROI for this kind of campaign except by comparison with other traffic sources.

On the other hand, if you're selling a product or service, and you track narrow cohorts from prospect through conversion, repeat buy, defection and churn, you can compare total acquisition cost of the cohort with LTV of the cohort.

Regardless of the product or service, I usually see CAC >> LTV at the cohort level.

Within a cohort, usually < 10% of customers have CAC <= LTV, but it's nearly impossible to target this subset in advance, so negative ROI dominates the cohort.

The old "I know half of what I spend on advertising is wasted but the problem is I don't know which half" still applies, despite all the promises of digital advertising.

Often even when the advertising account is directly held by the advertiser there is an intermediary managing the ad spend.

And the intermediary is incentizived to spin the numbers as best they can.

I am taking the Ponzi scheme here refers to numbers of users? Because for Facebook's Client, it is obvious that Ads is working and bringing a positive ROI. And these ROI are not paid out directly by Facebook ( which could easily distort the number ) but results measured through other channels. Which means from Facebook's clients perspective it is not a Ponzi scheme at all, as there is nothing to lose from its Client.