Facebook And Advertisers

Facebook continues to be an astounding success with the public.

It is not, however, such an astounding success with advertisers.

One of the problems Facebook has is that the free part -- having a Facebook page -- is way more attractive to marketers than the paid part -- advertising.

Unfortunately for Facebook, you make more money selling stuff than giving it away. It's one of those pesky laws of economics.

Ads on Facebook are very close to invisible. According to IT World the click-through rate for Facebook ads is about 5 in 10,000. That is astonishingly low. (According to an unofficial insider at Facebook, the true CTR is 2 in 10,000.)

Recently, Facebook has been crowing about an 18% increase in its CTR. Strangely, their press release neglects to give us the raw numbers. (Yes, that was sarcasm.) An 18% increase from what to what? Here's a tip from an old science teacher -- when someone gives you results in percentages but neglects to give you the raw numbers, they're hiding something.

But let's give Facebook the benefit of the doubt and assume that the "5 in 10,000" number is correct. An 18% increase brings the click through rate all the way up to almost 6 in 10,000. Be still my heart.

While consumers spend about 15% of their online time on Facebook, Facebook is only garnering about 6.4% of online ad dollars. There's something very wrong here.

The numbers for Google, on the other hand, tell a much different story. People spend less than 4% of their online time on Google, but Google attracts (according to my calculations) about 44% of online ad dollars*.

If you were to do an index of ad dollars per unit of time spent, Google is about 25 times more efficient at producing ad revenue than Facebook (also my calculation.)

This is not the only problem Facebook is facing. To a large degree, marketers evaluate the success of their Facebook efforts by "likeonomics" i.e., the number of people who "like" them.

The issue here is that 2/3 of all the "liking" done on Facebook is done by people between 13 and 24 -- in other words, people with no money. Jim Edwards, at CBS MoneyWatch says...

Social media marketing firm Vitrue says youngsters' preponderance can actually hurt a social media campaign's value...

It's the online equivalent of allowing gangs of teens to hang around in the mall... Sure it looks nice and crowded, but it's deterring older shoppers who actually have money to spend.

Additionally, marketers are starting to think more carefully about the value of a "like" -- especially since you can now buy Facebook fans in bulk for 10 cents a pop.

How much is it worth to have a 16-year-old like you? Ask Napster or MySpace.

Or Ask Dippin' Dots...
Dippin' Dots, a quirky ice cream product, is one of the world's top 50 product brands on Facebook. Ranked at #40, with over 4.5 million fans, it ranks higher than mega-brands like Gatorade, Domino's Pizza, Nike Basketball, Snickers and Barbie. Last week Dippin' Dots filed for bankruptcy.


*Web numbers are notoriously unreliable - especially mine. According to a recent chart at Business Insider, Facebook's ad performance is even worse than the numbers I quote. According to this report they have about a 3% share of  online ad revenues while Google has a 46% share. Thanks to Roger Lewis for this.

Thanks to David for some info that helped this post. I don't use last names of people employed at agencies anymore. Last year a reader who contributed info to this blog almost got fired. 

Social Media Adoption Among Fortune 500

As a follow-up to Wednesday's speculation about The Future of Social Media, I am reprinting the conclusion of a study done at the Center for Marketing Research at the University of Massachusetts Dartmouth.

The adoption of blogs, Twitter and Facebook in the 2011 F500 (Fortune 500 - TAC) appears to have leveled off with no significant change in the past year. Twenty-three percent (114) of the 2011 F500 have corporate public-facing blogs. There has been a slight increase in both Twitter use (60% in 2010, 62% in 2011) and use of Facebook (56% in 2010, 58% in 2011).

These results may signal a leveling off and possibly retrenchment when it comes to the adoption of social media among the 2011 F500. There is also evidence of change in the adoption of these tools by industry and a clear sign from some companies that these are not part of their communications strategy. Given that the F500 are the titans of American business, we may be seeing the slowdown in business adoption of social media. At the very least, this group appears to have slowed or stopped its adoption of the three most prominent tools – Blogging, Facebook and Twitter.

If you'd like to read the entire study, you can find it here.

Thanks to Tom for this link

The Future of Social Media

One of the principles here at The Ad Contrarian is that we never make predictions. The primary reason for this is that it's way more fun to ridicule stupidity than generate it.

So today, we are not actually trying to predict what will happen with social media, instead we are just going to engage in a speculation about it. You understand the difference between a prediction and a speculation, right? A speculation is a prediction couched in candy-ass weasel-words that the author can wiggle his way out of when proven wrong. Consequently, this is a speculation.

It seems ridiculous to us now, but not that long ago having a company website was seen as a sure-fire route to wealth and fame. Companies were hysterically racing to get websites up and running.

Because it was new, sexy and everyone was doing it, a website became the top marketing priority for virtually every company on the planet. If you didn't have one you were doomed to imminent collapse. Clients were frantically looking for agencies to get websites created and launched.

Today, every company, former company,  proto-company, and bullshit-artist-trying-to-be-a-company has a website. Unless you’re an online store, it is highly likely that your website is just as lame, just as stultifying dull, and just as dusty and lonely as all your competitors’ websites.

But you try to keep it up and running and attractive because -- even though it gets very little attention from anyone but you -- the people who do visit it are thought to be genuine prospects. Whether this is true or not you mostly don’t know. But you think it’s true, so you play along.

For a good education in the true value of websites as differentiators, I suggest you take a quick pilgrimage through the websites of some big ad agencies and see how mundane they are. (Here are some examples: #1, #2, #3.) And remember, ad agencies are creative enterprises. Their websites are about 100 times more interesting than the average insurance company or muffler marketer. 

In fact, what most non-transaction-based company websites have become is a necessary but not very bankable cost of doing business – like brochures, or business cards, or signage. You gotta have it, but you really don’t rely on it to generate a whole lot of revenue.

I have a hunch that's the future of social media. Once the hysteria wears off and the bubble starts deflating, a social media program will become another necessary cost of doing business, but not a huge differentiator or revenue generator. Already, every company, former company,  proto-company, and bullshit-artist-trying-to-be-a-company has a Facebook page and a Twitter feed. Some even have blogs. Shut up.

From time to time, someone will have a terrific social media idea (e.g., Old Spice) that will be a hit and have a big impact on their business. But, just as today, they will remain the very rare exceptions.

For the most part, the millions of business enterprises with social media programs will muddle along using social media for customer relations and sales promotion -- legitimate and valuable uses -- but not a magic carpet ride to fame and wealth and brand building as promised by the hyperventilating jive talkers in the social media industry.

And if I’m wrong, no problem. This was just a speculation.