Posted on 25. May, 2012 by in Digital Marketing


So the long-awaited Facebook IPO is here amidst what appears to have been quite a tumultuous week for the company, with first GM announcing that they were cancelling $10 million in advertising on the platform and then within 2 days of the IPO, close to 20% of the initial share price being wiped off the price of a single share.

In many ways Facebook is one of the most divisive exponents of the digital and technological revolution. It never fails to cause debate on wider sociological issues – should the platform be more open? Should it be more closed? Is it one of the catalysts of a social revolution? Or is it merely a vehicle for change? – but with GM pulling their spend, investors showing a lack of faith in future earnings and Facebook by their own admission yet to take full advantage of new platforms such as mobile it seems the debate for advertisers specifically has shifted onto business value issues, more specifically, does spending money on Facebook display advertising represent value for money?

Facebook is enormously popular, this can’t be denied. What can’t be ascertained as easily however is its value as a display advertising platform. It could be argued that as Facebook has such a large user base that it is therefore a good place to advertise. According to the Wall Street Journal, it has a near 25% share of all display advertising on the web whilst only having a 9.5% share of spend, which suggests that they themselves still haven’t figured it out how to provide an ad platform that allows them to sell ads at more premium prices.

Facebook offers two fundamentally different opportunities to advertisers; Facebook pages and Facebook ads. The pages are free and offer a strong platform for creativity and communication and have, for many, been a resounding success whereas the paid option isn’t nearly as strong. Facebook ads typically have CTR’s of approx. 0.03% on display ads which suggest the power of creative execution within the formats is limited and largely ignored by users, I’m aware of the limitations of CTR as a metric, hence the use of it here purely as a creative performance metric, returns on DR campaigns have typically been difficult to sustain and of low volume.

Despite the depth of data, the granular level of audience targeting available to advertisers and the creative platform available, results would suggest that most aren’t getting anywhere near the type of performance out of their Facebook advertising that they believe they should compared to other more traditional display media.

Of course, Mark Zuckerberg himself said “we don’t build services to make money; we make money to build better services.”

And herein lies the problem. Facebook advocates would argue that the real value of Facebook exists in its ability to allow brands to communicate with individuals who want to communicate with them and vice versa. They would argue that it exists in its ability to allow advertisers to effectively tell their story on another digital platform where sharing is ingrained in the proposition, to create another dimension to their product and service offering, which in turn enhances its value whilst also giving value back to those who seek them out.

But it would seem many advertisers still don’t really know what to make of Facebook as a platform. Unfortunately, for some, they still see the platform simply as a means of getting cheap reach on a large scale. Perhaps distracted by what’s shiny and relatively new, it would seem many advertisers have fallen into what I’m going to call “MisPinterepting”; using a new tool or technology as the reason for adopting an idea rather than using an idea as the reason for adopting a new tool.

Perhaps Facebook is a space where people don’t want to be interrupted by advertising per se and where they consider such advertising as (ironically) a gross invasion of privacy. Those same people though, when need or interest compels them, will still seek out a product or service on Facebook.

Yet it’s not all on advertisers. Facebook itself could be seen as not having helped itself either. With the discontinuation of the conversion tracking program for advertisers in 2010 and with little improvements made to their self-service ad feature (where are the auto optimisation features?), the ad platform feels strangely neglected almost as if Facebook themselves are aware that ads are not their core proposition or as way of an admission of not yet having figured out a coherent supply strategy.

So maybe Facebook ads don’t generally represent value for money in the direct manner in which most advertisers find use for them. The stats don’t lie. For many, the space is ineffective, inefficient and largely forgettable. They ads arguably also add very little value to a member, a member that is hesitant to be advertised to without a value exchange – especially in certain industries such as automotive. So perhaps GM is right to pull such large spend but yet they are also wrong.

Many advertisers have found a lot of success through using Facebook as a platform, that’s not disputable. It just so happens that most of the case studies of those who have been successful involve advertisers understanding the dynamic of the audience , the platform and how the audience uses the platform, to amplify their advertising propositions. They use Facebook as part of a paid, owned, earned marketing strategy tailored to specific audiences over an infinite period of time, not as a multimillion pound hammer to hit a £10 nail in order to achieve short-term ROI metrics.

Needless to say though that advertisers, like investors (and end users generally) often find and perceive value in products and services in different ways than were originally intended by the producer. So it is with Facebook; it appears so focused on providing value to its users and growing the platform that its investors and some of its largest spending advertisers have partly perceived its current and future value in a completely different, mostly ineffective way.

Regardless of ad performance, strategic roles and perceived value, the news of the last week and its IPO leaves the service in a sticky situation; investors and advertisers both demand similar things; quick, cheap and direct returns on investment. If Facebook isn’t perceived by either as being able to provide that then its ability to add value for these stakeholders in other ways will surely need to be maximised to avoid even more tumultuous weeks in the months ahead.

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