Facebook advertising – does it work?

March 20th, 2010 by John

Without doubt, Facebook is a phenomenon that seems to of taken to world by storm over the last year to 18 months. With a wildly varying valuation of between the $15 billion that Microsoft bought into Facebook for and between $3 and $8 billion that recent investment rumours have created, it’s certain to deliver a significant pay day to its founders when it IPO’s ( as it certainly must do soon) in the next year or so. BUT, the question that is currently in hot debate in bloggs around the world is, does it have a viable business model and does advertising on Facebook work?

At the moment the only viable business model for social networks seems to be the tried and tested advertising one; i.e. you have a captive audience that keep coming back so sell them something! The only problem with this is that the omnipresent Google seems to have pretty much sewn up the biggest part of all advertising revenue aimed at actually selling product and even though other content networks are proving effective in garnering Brand advertising, it’s a bold Marketing Director who decides to have deep Brand ad pockets in these recessionary times.

So, going back to Facebook. Unless they can find some way of getting a significant revenue stream from Facebook apps (like the iphone app store) I can only see advertising revenue as being the way to pay dividends when the great and the good end up owning shares in the floated Facebook.

This leads me on to my question – does Facebook advertising work? Well, I was a bit of a sceptic up until about 6 months ago when I was doing some online marketing consultancy for a global education community. We established a Facebook page to support their community and rapidly gained around 1000 fans to their page. The obvious marketing support for this was to try some Facebook advertising in order to direct traffic to their Facebook Fan page.

To say that the ad management for Facebook advertising is rudimentary when compared to Google is an understatement, but if you just want a “quick and dirty” method of placing a simple block ad with text message level of copy then it’s pretty easy to get an ad live on Facebook. The fact that you can target against Facebook member’s profile keywords proved useful in this instance as we only wanted to target teachers and you can also target at country level quite easily so we initially trialled the US and UK Facebooks.

I started with a low level budget mainly to gauge what level of impressions we’d get and what the click rate would be. The interesting point to note on this was that the level of impressions was extremely high compared to what you’d expect on something like Google content network but with a very low CTR. That said, once I did some initial tweaking and testing of budget levels and changing creatives we got to a level where the Facebook advertising was delivering a regular level of Fans to the page at a very competitive cost per conversion.

I quickly pushed the advertising outward facing, directing it to my clients community site and established some dedicated landing pages along with a simple user journey directed to the community sign up page. Again, after some tweaking this started delivering sign-ups to the community and within a short period of time the cost per member was coming in at some of the lowest levels of all paid for online media.

This sounded too good to be true and quickly proved that as a sustainable and extensible method of member acquisition, it had a serious shortcoming – a ceiling was quickly hit in terms of how many clicks we could get. It seemed that increasing the spend into anything near the level of say a Google PPC campaign just didn’t get the clicks.

Without doing any serious level of investigation as to why this is the case, my gut feeling from 20 years of promotional marketing is that Facebook’s very level of engagement with their audience is the reason why Facebook advertising will never be their single best route to monetisation. People go on Facebook to interact through Facebook NOT to find a route to another site to interact on.

So does Facebook advertising work? Well my answer is yes if you want to include it in your media mix but don’t hang all of your hopes on that alone.

Giants sleeping!!

May 6th, 2009 by John

What does the news that Micosoft are making 5% of its UK workforce redundant (http://www.paidcontent.co.uk/entry/419-microsoft-laying-off-five-percent-of-uk-staff-in-global-cutbacks/) signify for the outlook of the digital economy? Is it something that should send us all into blind panic or is it just another example of the rather cruel metaphor of a giant of a company simply “shaving off some of the fat”.
Will Microsoft now release 5% less software, will they be 5% less productive, and will the retail price of their products drop by 5%? With a company the size of Microsoft none of these scenarios could possible ever be realized and the main outcome of this culling will probably be a PowerPoint page showing a reduction in overhead costs of x dollars over y years meaning z bonus for whichever financial wizz kid worked out that sacking people makes a company more efficient.
I may be naïve but aren’t Microsoft a massively rich corporation who must almost be a micro-economy in their own right and don’t they say on their website as part of their mission (http://www.microsoft.com/about/default.mspx) that “Every successful corporation has a responsibility to use its resources and influence to make a positive impact on the world and its people.” Dropping thousands of staff because the balance sheet is looking a bit ropey isn’t, to my mind, using all of its resource and influence to make a positive impact.

Google Increase Checkout Prices

March 16th, 2009 by Darren

When Google Checkout was launched in 2006 its unique pricing model brought online payment processing to a point where it was cost effective for small and large businesses alike. It had a low transaction processing cost of 1.5% + £0.15 per transaction and rewarded AdWords customers by waiving the transaction charges on up to a total of 10 times their monthly ad spend. For small businesses this meant that there was a cost effective method that allowed them to add card payments to their available payment methods.

On March 11th Google issued an email informing Checkout customers that the pricing structure would be changing as of 5th May. Free transaction processing from AdWords has been removed and the simple transaction processing change has been replaced with a tiered model not too dissimilar to other providers ranging from 1.4% to 3.4%+£0.20.
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