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Facebook advertising does not equal a social success story

So Facebook has finally gone public (that’s old news). But now it actually has to start making money to keep its shareholders happy. That might be a little bit harder than originally anticipated as new research shows that Facebook advertising is not all that popular.

Sponsored stories and advertising are how the recently listed social media giant plans to make its money. But in a recent survey conducted in the United States by Greenlight, a search engine marketing company, this could prove to be a very difficult road for Facebook to travel successfully.

Forty four percent of internet users worldwide said that they had never clicked on a sponsored listing or an advert in Facebook. That is a significantly large number. Add to that the 31% who said that they rarely ever clicked on either forms of advertising and you have a vast majority of Facebook users (75%) who refuse to have their social media experience monetised.

So let’s look at this from another angle. This time the survey looked at the chances of a user “liking” a brand or a company on Facebook.

This time there are 35% of respondents who said that they would do this more often than not, while 37% said that they would rarely do so and then 17% said that they categorically would not like a brand or company.

So what does this mean?

Well, it does not mean that Facebook is going to go belly up; even though its share price is not exactly soaring like everyone thought it was going to (down 26.9% from its starting price).

What it does mean is that Facebook, like every other social media site and content provider, needs to find new ways of making money — because advertising is simply not going to work anymore. Advertising has become like the ugly second cousin that you never want to hang out with.

In the same survey, users were asked what types of content they would click on more frequently and the following is what came up: interactive content.

People want to be entertained; they want to interact, they want to contribute. This is the lifeblood of a successful campaign in today’s world. Advertising is too slow and too “what my dad had”. Today we demand more and platforms are being forced to provide more on a regular basis. Facebook is not immune to this simply because they have bulk — in fact that are more susceptible to it because of its bulk.

I personally think that Facebook might have to think again about allowing companies to “freely” place this content on its site and run the risk of alienating its users. What it cannot do is rely on its advertising model for success or even worse, force its users to start paying.

Author | Jonathan Houston

Jonathan Houston
Jonathan Houston is passionate about digital marketing and digital strategy. During the day, Jonathan is the Head of Digital Marketing for HKLM. Jonathan's work at HKLM includes strategy conceptualization, focusing on the alignment of digital marketing to business strategy as well as assisting HKLM's clients on fulfilling their digital... More
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  • http://twitter.com/garymeyerza Gary Meyer

    I’m not sure I agree with this. A Facebook ad should be used and seen as an invitation to join a community, not to sell a product. Brands who understand this make very good use of FB ads and do  really well… you could even call it a “social success”. Content is what “sells” your product. Sponsored stories allow brands to spread content at a higher than natural rate into their page’s community. 

    These two things are just as important as Adwords is to Google and should make the company as profitable in the longrun.  

  • http://twitter.com/Jingo27 Jonathan Houston

    I agree with you Gary; but the numbers don’t lie. If the users are not clicking on the sponsored stories or the adverts (however they are used) then they are 1. not going to show a ROI for the advertiser and 2. Facebook is not going to make money.

  • http://twitter.com/garymeyerza Gary Meyer

    Yes and no.. I think those stats apply specifically to a “traditional ad” (one with creative and copy). Traditional ads are useless on FB. Sponsored stories (post and page like) work a little differently.. in someways they’re indistinguishable from a normal Facebook post in your feed, but are paid for and super effective. Sponsored stories have always been far more clicked than traditional ads. People click on them because they don’t see them as ads. 

  • http://twitter.com/Jingo27 Jonathan Houston

    Unfortunately we cannot distinguish between “traditional ads” or “sponsored stories” the numbers give us the average. And revenue is revenue no matter which of the two vehicles advertisers are using. Add on to that the trend that Facebook revenue is down 6.5% (Q1 2011 vs Q4 2011) and that CTR’s have fallen 8% and averages out at 0.051% means that either Facebook needs to ensure that it makes “sponsored stories” and other captivating methods of rich media delivery on its site available to its audience; or it needs to better educate its advertisers as to how to run a properly targeted campaign that does not push product; but rather encourages engagement so that at the end of the day the platform can sustain itself and make a profit.

    Unfortunately too many marketers are still product and sales orientated as they are measured on these numbers and not by the engagement in their communities. 
    All of that being said; I agree with your sentiment!

  • Sam Crous

    3% click through rate on 5000000 plus users is not bad. The stat needs to be compared with traditional media channels to really see. No doubt FB intends making money a number of ways – I wouldn’t really be concerned with this.

  • Kmanthie

    I think the idea of “tricking” people into clicking on “paid-for” content that they might think is a genuine thing and ends up being nothing more than paid-for infotainment will not last long as time goes by, because once more and more FB users figure out that they’re being tricked into clicking on to a page because it seems like something worth checking out only to find out that it’s nothing but a shill or a marketing gimmick than they will be much more wary about doing so after they’ve been “burned” a few times, then, once the general population of FB users figure out that these things are just glorified ads, they will stop clicking them too just as they don’t click on manifest ads currently…

  • http://www.greenitweb.co.za/ Simphiwe Mkhize

     Marketing on Facebook is the wast of time and money

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