If you were wondering why Facebook has Facebook ads, which I am pretty sure every entrepreneur was pretty confused about beforehand, then the good news is that you can now find out why.

Facebook decided to put a little graphic with links at the top of everyone’s newsfeed explaining why they need Facebook ads.

Facebook AdsFacebook Ads

As someone who has used Facebook ads for my website (See Facebook Pages And Ads), I know that there are a lot of great uses for their system.

Part of me admires this move towards transparency because it will quell all the ridiculous fears that people have about Facebook going to a paid model. Facebook ads, more than Google or other online ad sources, are completely demographic-based. That means cyclists are targeted for bike ads and business owners are targeted for marketing, accounting, and other business services.

Facebook ads

At the same time, it will probably be a good and bad thing for businesses using Facebook ads, because they might get a few pity clicks from people who want to keep the system free. Whether any of those pity clicks eventually transform into clients is the bad part of this idea.

The biggest challenge that I have with the Facebook ads self-promotion is that they treat this as a do or die situation. It does cost a lot of money to keep Facebook running. However, they make a lot more than their costs. The video that they used to explain Facebook ads states that the company pays close to $1 Billion dollars per year to keep the site afloat. At the same time, Facebook earns anywhere between $6 and $32 Billion per year.

Facebook, do not give a ‘woe is me’ speech about all of your expenses when your ROI is gigantically huge, and especially when you are on the verge of going public! Congrats on the money, but do not complain about the costs of doing business.

The campaigns will also give you a discount to advertise on Facebook Pages versus outside websites. Think about this for a moment. The vast majority of the ads done on Facebook (Note: Mine Included) go to Facebook Pages versus outside websites, such as SeasonForFree.com or MarketLately.com

That means while you get some benefit from having people join your fan page, businesses are essentially paying Facebook a lower amount to keep Facebook users on Facebook. Wow! From now on, I will be charging people less to read the second blog post at AndyNathan.net.

While this might be a simplification of the process, there is some degree of weirdness for having to pay Facebook less just to keep users on a Facebook approved page.

On the flip side, it is good to know that Facebook is a stable company because that means the site will be able to produce awesome tools for businesses and consumers for years to come. Whether I want to continue advertising through Facebook ads is a subject that you will have to find out about on the new membership site that Josh Alexander and I are starting for the new year.