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First off, I know technical people love Google. They love the idea of all that intelligence and capital all flowing together and creating really exciting technology. However, I’d say that Facebook has been beating Google strategically for the past year.

The Internet’s Dirty Secret

The internet doesn’t run on top secret algorithms, or cool server technologies. Instead the internet runs on good old commerce. Five years ago, Google really innovated in this market, and created a new advertising that was extremely effective called Adwords.

Now, the market within Adwords is becoming too competitive. It simply isn’t the best bargain for advertising. Instead, Facebook has become the advertising innovator. They now give the best value for advertising dollar spent.

They have disrupted the market with their advertising solution.

Customer Building for Dummies

Facebook has built a platform for businesses to build customers, and permission marketing. Rather than paying to simply have people see your page, Facebook has innovated by letting you pay to have people “Like” your page, granting you access to start having a conversation with your potential customer.

In simple terms, Facebook is selling you a relationship with their marketing, and Google is selling you eyeballs with their marketing. You can guess which is more effective.

Technology Fragmentation On Google’s Side

Think about coming to the internet for the first time from a small business’ perspective. What tools would you need to get your company online?

For Google, you need the following fragmented, painful tools:

Adwords – Pay to get people to your site, hopefully set up some way of capturing their information
Google Sites – Build a website, get your information up
Google Analytics – Test your advertising, see where your visitors are coming from, where the action points are at
Google Apps – Manage your online points of contact

And this is just a bare minimum to get up and running for a small business owner who has very little time to spare on technology. The fragmentation here is a real pain point.

Contrast this with Facebook’s Fan Page System:

Set up a Fan Page
Pay for Traffic
Use the Fan page to have a conversation with your customers

There is almost immediate entropy built in to Google’s Advertising Solutions if you’re not very sophisticated. On the other hand, Facebook’s platform is built to spread your business. Everyone who likes your page shows up in all their friend’s feeds.

Big bang for your advertising buck.

The Eyes Are Worth Less Every Day

My internet marketing friends are seeing this happen every day. The old reliable people who still clicked on Myspace ads are becoming more sophisticated. Everyone is becoming blind to the barrage of ads, even the basic web surfers.

Facebook’s advertising model is most certainly the way of the future. Only listening to the people your friends already trust.

Google’s Billion Dollar Mistake

Google’s strategy in advertising has been to track everything you do, and target ads at you based upon what pages you’ve seen, and what you’ve searched for. This does not create a better experience for the end user.

This creates paranoia for the end user.

But again, Google’s solution for everything human is a better algorithm, so damned if I don’t really need to see ads on every site I visit for my last search.

But Search Is Everywhere!

Do you know any women between the ages of 18 and 30? How many times do they check their Facebook profile on an average day?

I’d say Google is only providing on sort of information stream, one that isn’t targeted to our personal lives. Guys may be interested in searching algorithms all day, but girls are more interested in information streams from their social contacts.

And women are the future arbiters of commerce.

When All You Have is a Hammer…

Google’s only hammer is algorithms. Algorithms will solve every conceivable problem. But for their main customers (business owners), algorithms aren’t what they need. They need to start building relationships with new customers.

Google is ignoring their customers, and hasn’t been solving their needs very well for a long time. Instead, they try to let algorithms solve the problems of dealing with humans. And that is the last thing we humans want.

A world where you speak and the only thing that talks back is the algorithm.

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

– Warren Buffet

What matters most in your business?

That your product delivers more results than it cost.

Your market must get much more out of your product than what they’ve paid for. Warren Buffet and his fellow value investors call this spread between a purchase price and intrinsic value delivered a “margin of safety”.

For them, an investment is worthwhile with a margin of safety above 90%.

Consider 37signals, and Basecamp. For the price of $24 a month, business owners are getting access to tools to impress and land more clients. This means purchasing Basecamp pays for itself quickly, and becomes an asset in the hands of its users.

But Basecamp improves its “margin of safety” for potential clients by letting them try their product free. If the end user ends up getting more value than $24 out of their month’s usage, they continue paying.

Look at any successful company and you’ll see the same few formulas for business success. Capitalists invest an initial sum of money in product creation, and then minimize the costs for delivering the value to as many people as possible.

Example: The iPhone has millions of dollars of research and development built into it, and we all get a piece of that pie for the steal of $200.

Smart Investing Means Searching for Informational Imbalances

For Warren Buffet, his initial investment criteria was a “margin of safety” of 66%. This type of investing meant he’d look for companies trading at a market value of a third of their actual liquidation price.

To find such steals, he leveraged informational analysis harder than anyone else. He looked at the markets, searching for pieces of information other people has glossed over. Such steals are rare, and so most of his investment time was spent searching.

Later, he came to change his mind, as he acquired vast resources of capital. Instead, his motto became:

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

In other words, as you get bigger, you can focus on value delivered for investments over haggling for price.

Maximize Investments in Your Business

This is where your informational leverage comes into play. In what areas, realistically, are you weakest? A true investment means getting big results at a fraction of the price.

Throwing money at a PPC campaign sending visitors to your purchase page is not an investment.

Creating goodwill within a community (your target market) is.

We’re past the point now where we can call people prospects. Things are shifting quickly, and people’s BS meters have become very attuned to marketer’s tricks.

Investing in solving your customer’s problems first and build beneficial relationships daily. By investing in positive results for your market, you’re minimizing capital risk, and maximizing potential for geometric growth. A PPC campaign only scales as much as your budget and expenses allow. An active campaign to deliver results freely has the potential for a geometric growth curve (due to social media, etc.) like we’d love to see instead.

As a bonus, we don’t have to act like our customers are morons. No more psychological manipulation or cheesy sales letters.

Beneficial Relationships are what make businesses work.

Instead of focusing on psychological tricks to get people to buy, focus on serving your prospect’s every need. This is the model that will build success.

Invest in delivering more value for cheaper to your customers.