May 07, 2012

What Is Facebook Hiding?

I would like someone from Facebook to explain to us why they will not reveal click-through rates for ads on Facebook.

Since advertising is their primary source of revenue, and since click-through rates are a legitimate, recognized measure of online advertising effectiveness, it seems reasonable that they would do so.

Thus far, Facebook has gotten away with not revealing these numbers. They have managed to hide behind the gaudy number of members they have and the amazing popularity of their free services.

They have also been protected by an advertising industry hungry to have another Google and not inclined to challenge Facebook by asking too many unpleasant questions.

It seems likely, however, that in the fullness of time, when the exuberance and shininess of Facebook wear off, advertisers are going to start asking the emperor about his wardrobe. Like exactly how effective is Facebook at motivating people to link to their messages -- in other words, click on their ads?

Click-through rates for online advertising in general are abysmally low - on average, fewer than 1 in a thousand. Consequently, the online ad industry and complicit ad agencies have been desperately trying to convince us that clicks don't mean anything. This nonsense simply will not sell, and anyone foolish enough to believe it deserves what he gets.

Third party sources have done analyses which estimate that Facebook ads have a click-through rate that is about half the industry average. Rumors I have heard say that the actual number is one-fifth the industry average -- an alarming 2 clicks in 10,000. This isn't even large enough to be called rounding error.

With an IPO upcoming, and billions of dollars about to change hands, it doesn't seem quite gentlemanly for Facebook to continue refusing to reveal these numbers.

Unless, of course, they are trying to hide something.


Tim Orr said...

Maybe this:

Anonymous said...

What does it matter? They do offer CTR for your own ads/campaigns... Who cares about an aggregated statistic? Besides sales generated (sell-thru) per dollar invested matters more. And different businesses / products have unique margins, with variable levels of CTR being profitable.... (at both extremes) or not. Am I missing something?

Anonymous said...

I'm confused as to why you think CTR is the only metric that matters in online display advertising? You're making the assumption that unless someone clicks on an ad there and then that it has no impact on them whatsoever. 80% of clicks are generated by 20% of the audience, so it's a duff metric at best. Why not focus on conversion rates, visibility of an ad or dwell times? It's like suggesting TV is 'dead' because only 0.04% of people instantly go out and buy something after seeing a commercial...