I often get asked for stock advice, and before weighing in I give the caveat that I don’t trade public equities so you get what you pay for when it comes to my opinion. However I was recently asked why Google is more valuable than Facebook, and on that topic I have one simple point.
Whenever you Google someone’s name – and you can try it with your own name – there are no advertisements on the results page. However, if you Google “Mediterranean cruise” or “refrigerator” you find advertisements. This illustrates that there are two different types of pages created by Google – pages about people (“people pages”) and pages about things (“thing pages”). Every Google result can be lumped into one of these two categories.
Thing pages are far more valuable than people pages when it comes to advertising. This is backed by years of hard data – advertisers have tried buying “people” keywords on Google, and for 99.9% of the world’s advertisers people-based search terms results in a much lower ROI than buying relevant keywords about things.
While Facebook has nearly as many page views as Google, most of those pages are people pages. Examples of people pages are photos of your friends, your friends’ pets, and your friends’ kids. As an advertising medium this inventory just isn’t worth very much. Facebook has also taken steps over time to limit the ability of advertisers to create thing pages on its site, such as giving advertisers a timeline as a home page instead of a flat profile page, which makes it very hard for advertisers to tell their story. I expect Facebook will fix these issues over time by adding more “thing pages”, but in the meantime they will continue to lag Google.