ADOTAS – It’s almost Valentine’s Day and the marketing world is lining up with chocolate hearts and red roses for their new love interest – Facebook. Last year, according to a Mashable article, advertisers, enamored by the idea of reaching Facebook’s more than 600 million registered users, spent about $1.86B on Facebook advertising programs.
But does Facebook love them back? It’s still unclear just how much ROI marketers are getting out of their paid advertising programs on Facebook.
A recent study by Webtrends found that the rates U.S. users are clicking on Facebook Ads are beginning to decline. In 2009, the click-through rate on Facebook Ads aimed at getting consumers to become fans of a brand was 0.063%. In 2010, the rate declined to 0.051%.
At the same time, Facebook Ads are getting more expensive, rising from 17 cents per thousand in 2009 to 25 cents in 2010. While those costs are still lower than most Web-based display advertising, many marketers would like to make their Facebook Ads more effective, to make up for the rise in costs.
Before improving their Facebook Ads campaigns, marketers need to clearly understand what Facebook offers in terms of audience, reach and advertising results. Here are three insights about Facebook that every marketer should keep in mind.
Facebook Is Not Google
Marketers have always had a thing for Google with its sexy ROI-driven paid search programs, and they’re hoping to replicate the same results-based advertising magic on Facebook. But while Facebook may have more visitors than Google – according to Quantcast’s December 2010 estimate, Facebook had 8.3B billion monthly visits against Google’s 4.6 billion – reaching the Facebook audience is much more difficult than reaching Googlers.
Google’s reported 2010 revenues of just under $30 billion compare to Facebook’s 2010 revenues of an estimated $2 billion. Assuming those estimates of Facebook’s revenues are close to reality, then Google generates somewhere between 10 times and 15 times more revenue on a substantially lower volume of visits. Stretching the analysis even further, by my estimates Google is more than 20 times as effective at monetizing its visits than Facebook at present.
Now before the legions of Facebook believers get all fired up about the quality of this analysis, I am the first to stipulate that data I’m using and the assumptions I am making are imprecise at best. The purpose of these rough calculations is to make the point that Facebook has a ways to go in figuring out how to monetize it massive audience effectively. In other words, Facebook may have more users and they may spend hours on the site every day, but so far they aren’t clicking on ads at the same rate Web searchers do on Google.
Facebook Fans Don’t Really Like You that Much
Just because someone is a “fan” of your brand doesn’t mean they’ll convert to paying customers or influence others to do the same. According to the WebTrends study, it costs an average of $1.07 to acquire a new fan on Facebook. That might seem like a bargain in marketing-spend terms, but many of the marketers we work with have struggled to convert “fans” and “likes” into brand awareness, traffic and actual sales revenue.
Acquiring fans on Facebook is just the first step. After you build up a fan base, you have to engage these fans to share content about your brand, participate in contests and promotions and eventually make purchases.
The truth is, even if you bought some ads that generated new fans, your brand is likely in the very early stages of Facebook marketing – so measuring real ROI may be months or years away, when you figure out how to turn these fans into customers.
Facebook Users Don’t Search, They Share
On Google, users “search” for a topic, product, or news item – making it easy for advertisers to target their offers to the specific interests of searchers in real-time. But on Facebook, people don’t search – they read and share content. That makes advertising to these users more challenging, because while a user may have identified that he ‘likes’ Doritos, he is probably more interested in posting pictures of his kids than clicking on an ad for Doritos.
To succeed with Facebook advertising, marketers need to think in terms of engaging and interacting with their fans – whether that’s through free content updates on their wall or through paid ads targeting fans as they hang out on Facebook. In other words, a promotional ad such as “Free Shipping Today Only” that would work well on Google may fall flat on Facebook. Instead, users would be more likely to respond to an ad that offers insider deals or information, a fun and interactive app, or a compelling contest.
The good news is that Facebook does love marketers – it’s just not sure yet how to best deliver advertising to its massive user base. As Facebook figures out how to deliver engaging content, interactive apps, or other new ad formats suited especially to the Facebook user, ROI will undoubtedly rise. In the mean time, marketers need to understand the promises – and limitations – of Facebook as an advertising platform.
By getting a headstart in these early days, marketers will build knowledge and expertise in how to reach a social audience and be positioned to make the most of the programs and campaigns targeting Facebook’s massive and highly engaged audience.