The Magic of Facebook Ads

I had an amazing experience tonight on Facebook that I thought I would share.

Barack Obama is coming to Wake Forest tomorrow. Limited tickets were available for free on a first come, first serve basis to the student body. Unfortunately, I wasn’t quick enough, and didn’t get a ticket, and neither did my two roommates. After four years at Wake, I’ve missed the chance to see a number of big name political speakers, and I wanted to make sure I got to see at least one before graduation.

I tried emailing my fraternity’s listserv to see if anyone had any extra tickets they weren’t using - no luck. I emailed the president of the campus College Democrats - no tickets left, the event is sold out. However, I was determined to get a ticket, so I turned to the best medium I knew to contact as many college students as possible - Facebook.

At 11pm tonight, approximately 10 hours before the doors were scheduled to open for Obama’s speech, I created a Facebook ad offering $25 to anyone with extra tickets. I was easily able to target it to all students at Wake Forest (though I could have customized it further - by interests, class year, major, and many other criteria). I chose to pay per click, and set a maximum budget of $5. After I pressed “Create my ad”, it was a matter of minutes before Facebook had shown my ad over 6,000 times. Within the hour, I received messages from 4 separate people offering to sell me their tickets. The entire thing cost me $4.97 - that’s only about 8/100ths of a cent per impression. (As a side note - this is incredibly low as far as online advertising goes - a problem for Facebook that has been mentioned before as one of their biggest weaknesses)

Tomorrow morning both of my roommates and I will see Barack Obama speak in a sold out coliseum that I didn’t even have tickets to until less than 10 hours before the event.

Now that’s the power of the internet and social networks - and it’s those kinds of results and precise targeting that make Facebook worth $15 billion (though I do think that’s a bit high, considering their monetization difficulties).

 
Posted around 1am on 04/29/08 | | Filed Under: Journal, Politics, Technology

Barstool Economics (on Taxes)

As the presidential elections approach, we’re hearing more and more (especially from the Democrats) about raising or eliminating wage caps for social security taxes (as a side note - this would represent the largest tax hike in American history), repealing President Bush’s tax cuts for the rich, or other various plans that would further increase taxes on the top 25% of American wage earners.

I was forwarded the following parable, written by David R. Kamerschen, Ph.D. Professor of Economics at the University of Georgia entitled “Barstool Economics”. I think that while it is a bit simplistic, it is definitely timely and interesting.

Continue reading…

 
Posted around 12pm on 04/13/08 | | Filed Under: Finance and Economics, Politics

Overview of the Subprime Mortgage Crisis

Subprime MortgageThe effects of the subprime mortgage crisis are all over the news – foreclosures are up, the stock market is down, investment banks are failing, and politicians are making empty promises to fix the problem.

But how did we get here? Why are people defaulting on their mortgage payments? And what effect does this have on the markets and economy?

The explanation begins with a description of a special kind of loan employed by many homeowners with less than perfect credit, or those that may be borrowing more than they can afford – an adjustable rate mortgage (ARM). These mortgages often come with a low introductory “teaser rate” that makes the loan seem cheap. However, after a certain period of time, the loan’s interest rate “resets” to a much higher rate (often higher than the borrower can afford to pay).

So why would a borrower agree to an adjustable rate mortgage, knowing that the higher rate is more than they are able to afford? Many times, these loans are made to people with poor credit, and are the only kind of loan they can get. They’ll often take a short-term view and sign the loan, hoping to be able to refinance before the higher interest rate takes effect.

Another major contributing factor has been the United States housing bubble. In 2005, home prices were higher than they’d ever been, and seemed to have nowhere to go but up, having experienced price appreciation of 10% or more in each of the previous 4 years. Real estate was the hot, “sure thing” investment. Home buyers had no problem signing an ARM, because they assumed that as the price of their home continued to rise, they could either refinance or flip the house before the higher interest rates kicked in.

Just one problem – bubbles burst. By 2006, housing prices had peaked. Throughout the year, they corrected downward, and by the end of the year, had experienced double digit declines in some markets.

By this time, all those ARMs signed in 2005 are beginning to “reset” to much higher interest rates – often more than doubling peoples monthly payments. Faced with payments far too high for their budgets, people normally would sell the house and “buyout” the mortgage with the proceeds. However, real estate prices are substantially lower than they were in 2005 – meaning that selling the home would not net nearly enough to cover the amount of the mortgage it was purchased with (at inflated 2005 prices). So, unable to meet their monthly payments, and unable to sell their homes for enough to buyout their mortgages, this leaves the homeowners only one option – default.

Continue reading…

 
Posted around 1pm on 03/31/08 | | Filed Under: Finance and Economics