The future of Facebook’s ad revenues just got gloomier
General Motors spent 10 million dollars on Facebook ads over the past year, but today they said no more. Company officials say they have been unable to quantify the additional expense. However, they will still manage their Facebook page – a cost of $20,000,000 per annum. But Facebook will never see any of that money either because Facebook fan pages are free.
Some market analysts claim that much skepticism surrounds ad campaigns on Facebook and their cost effectiveness. These ads may increase a company’s and/or product’s exposure, but evidence showing a direct relationship of Facebook ads to sales is lacking.
General Motors’ big decision may also contribute to the loss of other Facebook ad clients, who come from a variety of industries. Many of these clients may no longer feel that Facebook is the right place to allocate their ad budget. This could mean another hit to Facebook’s yearly $3.7 billion dollar ad revenues, which comprise over 80% of the total.
Because of Facebook’s reliance on ad revenues for their status as a financial goliath, this news could have a huge impact on Facebook’s IPO (initial public offering), which is set to take place in the next few days.
A comparison of click rate of ads on Google and Facebook was performed by WordStream and showed an eight-fold larger click rate on Google – giving little reassurance to Zuckerberg. WordStream also claims that Facebook’s lack of tools for ad targeting and the inability to choose an attractive ad format is the reason for these poor results – because it’s not just about interacting with people, but interacting with them at the right time. For example, clicking the ‘Like’ button might initiate a live conversation dialogue between a company rep and the potential client who just moments ago liked the product/company.
Marketing campaigns are successful when respective sales can be counted – but with Facebook, a straightforward system is missing. Facebook ads are still in the rudimentary stages of development – while their user-base has grown to 900 million since its conception.
Facebook will soon commence public trading, but is it mature enough to step up to the challenge.
acknowledgement: this post was based on an article by Ewa Lalik
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