“The mission of my organization is to make meaningful connections between people and businesses.”  – Andrew Bosworth, Head of Ad Engineering, Facebook

Hal Varian, Google’s Chief Economist, is famous for developing Adwords’ Quality Score algorithm – his instructional video is mandatory viewing for anyone even considering using Adwords for advertising.

Less well known (for now), is Jon Hegemon, Facebook’s Chief Economist. Jon’s decisions into the Facebook Ads Relevance Score algorithm significantly affect both advertisers and Facebook’s shareholders.

So how have Jon’s decisions differed from Hal’s?

There are really two key distinctions in the difference between Google’s Quality Score (QS) and Facebook’s Relevance Score (RS):

1) Facebook Ads compete on equal footing with regular content.

Google is famous for its ‘Chinese walls’ between the paid advertising algorithm (driven by QS) and its organic ranking algorithm (currently at Panda 4.2). Both are separate, independent algorithms overlaid on the same Search Engine Results Page, SERP.

Facebook, on the other hand, scores all content equally – whether ads or ‘organic’ content.

From this one decision alone, Facebook is sending a clear message to advertisers that if you want to be seen, your ads need to be just as engaging (of not more so) than a status update from a friend.

2) Relevance is based on most value added to the entire system

As a follow on, Adwords advertisers only need to be concerned with what other advertisers are doing. As long as your ads are more relevant that your competitors ads, you’ll be rewarded with higher ad position at lower CPC than your competitors.

When Facebook is calculating Relevance Score, it is calculating the sum total relevance of all potential advertiser’s ads and organic stories, then shows the winner. Facebook will prefer one advertiser over another based on Opportunity Cost to the entire system (per user feed). In other words, FB advertisers who can add the most value to the entire ecosystem win (as opposed to just beating other advertisers).

Because of Jon’s decisions, Facebook doesn’t nearly make as much money as it could (in the short term) on purpose.

He knows that if he created a system that rewards “ads that are just as enjoyable as everything else that shows up in your Facebook News Feed” then “it will maximise revenue in the long term”.

Wise marketers will follow suit.

HT to Cade Metz of Wired for a fascinating and hard to find interview with Jon

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About Adam Sugihto

Founder of Intentional - a specialist Pay Per Click Advertising Agency based in Melbourne, Australia. Member of Perry Marshall's Marketing Mastermind since 2011. Google Adwords Qualified Individual since 2010.

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Business as Art