Several advertisers have admitted that of late, the results they get from advertising on Facebook are better than those achieved from advertising on Google, and that is in spite of spending less on Facebook than on Google.

According to several advertisers and marketers, the response they have been getting from Facebook has improved substantially in the last 6 months, and due to this, more and more businesses are buying ad space on Facebook.

Tim Kendall, director of monetization at Facebook, however, maintains that the advertising growth curve at Facebook has maintained a steady pace and there has been no sudden jump in the demand for ad space on their site. It is true, though, that the number of advertisers on Facebook has tripled over the last three years.

One important factor for this growth surge at Facebook is the ability of advertisers to find their target audiences accurately from the profile data available about Facebook users. Facebook has always been very strict about users using real names and information on the site, and has often deleted profiles that posted false information. As a result, demographic data on Facebook is more reliable than on other networks.

When a Facebook user likes a product they are likely to recommend it to most of their friends, who are already on Facebook. This feature has certainly attracted a lot of marketers to Facebook.

While Google has not commented on this topic, Facebook has announced that they have logged annual sales to the tune of $500 million. Coupled with Facebook’s fast growing user base, it may only be just a matter of time before the social networking leader out performs Google on the advertising front.

comScore and DunnHumby recently conducted a study on the effects of online advertising versus television advertising, across 200,000 consumers, recording their behaviour through the use of supermarket loyalty cards.

Their research showed that the boost given by online advertising to offline sales was not only higher but also faster than the boost provided by TV advertising.

The comparative study showed that the sales lift achieved by TV ads was 8% over a period of 12 months, while the lift from online ads was 9% over just 3 months. In parallel terms, the percentage of sales lift achieved through TV ads was 36% and that through online ads was 80%.

In 2008, Google had commissioned Harris Interactive to conduct a study among 3 consumer packaged goods (CPG) brands, in order to study the effects of traditional TV ads versus the effects of online platforms.

Accordingly, the study was carried out by running identical ads on TV, on a computer screen replicating a YouTube video environment, and on a computer screen replicating a click-to-play video embedded in the content. The results revealed that all the platforms were equally effective in the ability to convey their message about the brand and its strength, and thereby encourage users to go ahead and make a purchase.

While these findings should encourage marketers to shift their ad spend towards online advertising, TNS Media Intelligence has found that the ad spend for TV ads remains static at 58% since 2005, while ad spend on online ads has grown in 2009 from 2% to 4%. And that additional 2% has come through relocation of funds from radio and newspaper ads, but not from TV.

Gian Fulgoni, the executive chairman of comScore says, “these early results confirm the ability of online advertising to successfully build retail sales of CPG brands on par with the impact of television advertising. It is likely that the more precise targeting ability of the Internet – especially in terms of accurately reaching the desired demographic segment – is a key reason for its effectiveness.”

The email sent out yesterday informs advertisers that if they wish to continue running ads on Google AdWords, they will need to use Visa, MasterCard or American Express credit cards or switch to direct debit payments before the end of the month.

In their own words…

“We are writing to inform you of an upcoming change affecting the use of Switch cards with AdWords. As of July 31st, 2009, we will no longer accept the use of Switch cards. Please select an alternative form of payment to fund your AdWords campaigns before July 31st, 2009 to keep your ads running. Google currently accepts Visa, MasterCard, and American Express credit cards. ”

No reason has been supplied for this change in policy.

The move could be to drive more advertisers to pay via direct debit, rather than credit cards. Google introduced the ability to pay for AdWords accounts via direct debit in the UK only in August last year. Current postpay users paying by credit cards can switch to direct debit.

Instructions for switching to direct debit can be found on the AdWords Help centre at:
http://adwords.google.com/support/bin/answer.py?answer=50328

Google still does not allow pre-pay users to switch to postpay or direct debit.

On Internet Explorer

When seen on an Internet Explorer (IE 7+) window, with no toolbars installed, ads now cover 49% of the screen area for Live Search results when seen on a monitor with 800 x 600 resolution, 44% of the results area at 1024 x 768 resolution and 37% of the results area at 1280 x 1024 resolution.

Ads seen on IE 8 with no active toolbars on an 800 x 600 monitor

On Firefox

With just one active toolbar installed, on Firefox the ads now cover 55% of the screen area for Live Search results when seen on a monitor with 800 x 600 resolution, 46% of the results area at 1024 x 768 resolution and 38% of the results area at 1280 x 1024 resolution.

Ads seen on Firefox with one active toolbar on an 800 x 600 monitor

According to Tina Kelleher of Microsoft, these changes have been made taking into consideration the feedback sent to Live Search by adCenter advertisers. This alteration will enable the generation of more clicks for pay per click campaigns being run on adCenter.

A recent report from analytics firm Covario found that global technology firms increased their ad spend on pay per click ads on Microsoft adCenter by 45.7% in the last quarter of 2008, compared to the same period in 2007.

The placement of a fourth mainline ad was introduced by adCenter last September in the U.S.A; and has shown very encouraging results in that market since then.

There is no mention of any consideration for how this change might be received by users and the impact it might have on the perceived quality of Live Search results.

The two leading search engines have now decided to consolidate the deal, and extend the contract into a broad-based partnership. Under the terms of this agreement, Yahoo! will display Google ads alongside their own organic search results in the U.S. and Canada, and outsource a part of their search ad inventory to Google. They will retain the right to do the same with other providers as well.

Yahoo! will have the discretionary powers to decide which pages the Google AdSense for Search and AdSense for Content ads will be displayed on. This deal will not affect their actual organic search results in any way.

Though details of the financial transaction are not available, the deal is expected to generate an additional, $800 million in revenue for Yahoo! annually. In the first year itself, there is expected to be an increase in cash flow ranging from $250-450 million.

Yahoo! will follow the same open bidding system as Google AdWords, to deliver third party ads to their search results, thus making it possible to include Microsoft in the scheme of things.

In order to avoid any hassles with anti-trust laws, at a later stage, Yahoo! and Google have decided to wait for three and a half months, before implementing the deal, thus giving the U.S. Department of Justice, enough time to study the implications of the deal.

As of now, the deal will continue for a period of 10 years. An initial period of 4 years, followed by two terms of 3 years each, at Yahoo!’s option.

Both companies have the option to terminate the deal, in case of a change in management of either organisation. However if Yahoo! chooses to terminate the deal within the first 2 years, it shall be liable to pay Google a termination fee of $250 million less 50% of the revenue earned by Google through the deal.

As an additional incentive, the companies have agreed to allow interoperability of their instant messaging services.

Google’s chairman and CEO, Eric Schmidt, says “This commercial agreement, provides Yahoo! with the opportunity, to deliver more relevant ads to users, and provide advertisers and publishers with better, advertising technology.”

It is believed that this deal will further strengthen Google’s dominance in the search advertising market, while at the same time finally pulling down the curtain on the possibility of a deal between Yahoo! and Microsoft.,

Investor Carl Icahn’s reactions on the issue are yet to be known as his strategy to replace the board of directors at Yahoo! depended on Microsoft’s interest in buying over Yahoo!

Needless to say, if this deal does go through, it would help Yahoo! avoid Microsoft’s bid to buy them over. The benefits of such a deal for Yahoo! in the long run, though, are extremely limited. Yahoo! would be handing over control of its most important asset – Yahoo! Search Marketing – to Google and would turn into a sitting duck in the future.

Shareholders should be worried about the competency of Yahoo!’s board of directors if this information is true. They are either taking desperate measures to avoid being acquired by Microsoft at all costs or are trying some really poor tactics to get Microsoft to raise their bid. Either way, their actions seem puerile and selfish with little or no thought to raising shareholder value.

Analysts have reported that a Google-Yahoo! deal would increase Yahoo!’s revenues by about 33% and Yahoo! shares would likely gain $5. Such a deal could raise an additional $1 billion for Yahoo! annually, according to Citigroup Global markets analyst Mark Mahaney. However Microsoft’s offer of $45 billion might seem far more enticing to shareholders.

It is almost certain that if such a deal were to take place, Microsoft would make its displeasure known by invoking antitrust laws. Microsoft’s top lawyer Brad Smith has said, “Any definitive agreement between Yahoo! and Google would consolidate over 90 percent of the search advertising market, in Google’s hands. This would make the market far less competitive, in contrast to our own proposal to Yahoo.” Smith further mentioned that Microsoft would closely assess all its options.

ValleyWag suggests that in order to avoid antitrust issues, Yahoo could set up an ‘open market place’ and invite both Google and Microsoft to make bids for advertising there. This system could work well if Google were really interested in keeping Yahoo! out of Microsoft’s clutches which seems like a reasonable belief.