The key battle of this decade on the internet is clearly going to be the battle between Facebook and Google. In the first decade of this century, Google came from a startup to dominate search on a global basis. Since its launch in 2004, Facebook has gathered 750m members into its social network. Until quite recently all the traffic seemed to have been running in Facebook’s direction. Whilst the absolute amount of money spent on Adwords has been increasing, Google’s share of online advertising has been going down and the glory boys on the block are Facebook with triple digit increases in their advertising receipts. Social really did seem to be the way to go.

As I pointed out in a previous blogposts, Facebook potentially has more relevance to more businesses. Google tends to create a winner takes all economy where only a few sites in each category get onto the front page and prosper, whilst a long tail of thin pickings sit down on page three and beyond. Facebook on the other hand allows smaller businesses, even in crowded categories to recreate in a digital fashion the inline word of mouth networks that small businesses have always used to get business. Facebook seemed to be a better medium for recommendations, from people that you actually know.

But some cracks do seem to be starting to appear in the edifice: First of all, Google is fighting back – Google has launched a social network that does seem to be gaining some traction. Google + has nice features with more controllable privacy settings and the +1 buttons are now becoming just as ubiquitous as Facebook “likes”. But most important was some recent analysis that reminded us – as if we needed it -- that all eyeballs are not equal, that reminded us why Google was able to gain so much share against the previous advertising medium of choice, TV.

 The reason why Google grew so rapidly in its battle against TV was three fold:

First and most obviously it was the growth of the Internet as a medium that consumers used – the share of attention shifted and continues to shift to the PC and away from the TV and the advertising pound is moving with it.

Secondly, Google delivered what the Marketing director always wanted: measurability. Google could comprehensively demonstrate that their advertising worked. There was data to die for. No more the approach of department store owner John Wanamaker who famously said that he was sure that half of his advertising budget was wasted, but that he didn’t know which half (as an aside, I’m almost certain that this was first said by Wanamaker, although it has also been attributed to William Lever (Lever as in Unilever), J.C. Penney and Henry Ford).

But thirdly and most importantly, Google changed the game from push to pull, from interruption to intent. In the TV advertising economy the deal was “I will give you some programmes that you want to watch, but the price that you have to pay is that just when you’re getting entertained and paying attention, I will interrupt your enjoyment with a blatant sales pitch… Oh if you don’t want to you can always nip out for a cup of tea.”

Whole pseudo sciences evolved at targeting the right type of consumer through the right type of programme and interrupting their enjoyment with your ad; the gamechanger with Google was that the direction of intent changed. Instead of me selling to you, you signalled that you wanted to buy from me. By typing in a search the consumer actively signalled that they were interested in a certain product and so when Google served up ads, they knew that they were relevant. The customer had an intention to buy. This, in my view, was a critical innovation – a switch away from the mass produced TV era of mass produced goods that needed to be sold, towards a more individualistic consumer orientated modern marketing

Enough of that, what relevance has this for the Google vs. Facebook battle?

Well it’s clear that Facebook benefits from switch to media consumption via PC, they can also deliver metrics, but can they deliver intent? OK so I post on my Facebook page that I’m interested in Old Movies and Rugby, it doesn’t mean that at that particular time I’m interested in buying a Rugby shirt or a copy of Gone With The Wind.

Are Facebook still in the old media interruption game? Is advertising in Facebook just an irritation? It certainly seems so – click through rates on Facebook Ads are poor in comparison to Google. Facebook delivers 0.011-0.165%, compared to Google’s 0.4-0.7% -- this is a material difference and in time this will be reflected in prices and share of the advertising market that Facebook will be able to deliver.

As Market Sentinel said in its original article: A former Facebook intern, Cliff Chang, with disarming candour, admitted to this on the question-answering site Quora. Explaining why Facebook had taken down its own conversion-tracking tool, he admitted:

 “Some hilarious percent of people who generated pixels never received a single impression on them.”

If Facebook can’t compete strongly as an advertising platform it won’t be able to dislodge Google’s dominance in internet advertising (in 2010, Google owned 38.9% share of US online ad revenue, compared to 4.7% for Facebook, and eMarketer estimates that Google’s share will increase to 43.5% in 2011). The appearance of Google+ means that Google may finally be able to add an element of social proof to their own search results, diminishing Facebook’s USP.”

It looks like the guys from Mountain View could yet win the battle…