As we’ve commented on numerous blogs, the problem Facebook as is how to get a decent income stream. Facebook Ads will never be as popular or as cost-effective as Google ads, simply because FB is a forum website, not a search engine. People GO TO Google to look for stuff and Google Adwords can actually assist them in finding what they want. There is real value for businesses to advertise on Google.
But Faceboook is a fancy community forum. Sure, it has loads of followers and users, but the vast majority of those people do not inherently go there to look for something. to help them find stuff, or make a business or purchase decision. Most on Facebook are there to communicate with their friends. Having advertising or commercials popping up in or around the conversation is for most intrusive and generally unwanted. It’s like having a pushy salesperson come up to you at a party and try to sell you stuff.
Still Has a Place in Businesses?
This is not to say the Facebook can’t provide sales leads by way of referrals or viral marketing campaigns. In some sectors this is extremely effective. We’ve talked before about innovative US companies like Chick-fill-A who have been using Facebook and cross-channel campaigns for years with amazing precision, all viral-based. No Google or Facebook ads.
Another more typical small business case study is our local hair salon. They run a WordPress website and are also on Facebook. Half her leads come via the website and Google search, the other half via customer referrals on Facebook. Note I said customer referrals and not Facebook Advertising. The popular referral or viral marketing side of Facebook earns Facebook zero income. Only advertising does.
The numbers reveal all. Even though Facebook can claim to have more demographic data on their users, which means better targeting, the CTR (clickthrough rate) of Facebook advertising is still roughly a tenth of Googles. At best 0.2% for FB vs 2.0% for Google Adwords if you know your stuff. Much less if not done right. But are Facebook ads a tenth of the cost of Google Adwords or get more leads? No one asks.
Google Buys Wildfire App – Another nail in the coffin?
As well as the fundamentals around P/E ratios being all wrong, the other thing that will likely spook investors downstream is Google’s recent decision to buy Wildfire, which is another nifty social media app that allows users to promote specials and deals within Facebook. As well as being a good money earner for Google, Apps like this basically undermine Facebooks own Advertising efforts. A cunning move by Google.
In response Facebook will likely introduce technologies and new rules to restrict the ability to promote business offerings on Facebook using third party apps, unless you pay. Already Facebooks rules prevent users from running competitions on their site although many apps, like those from North Social appear to do just this. And Facebooks own recent acquisition of Karma, a social gifting app shows they’re not against incentive apps. But in terms of ad income opportunities, there’s also the simple fact that more and more users access Facebook on mobile devices, which has less screen space available for FB ads. Maybe the trick will be to give FB users the chance to opt out of advertising if they pay a small monthly fee? Many mobile apps already do this. Hey, even Sky TV used this ploy in the early days.
Perhaps if there were more Mathematicians in Wall street and less spin doctors, they would have seen the truth. This doesn’t mean Facebook will disappear any time soon or lack relevance in online marketing. It just means they aren’t as financially valuable as they and others believe. As a commentator to the article mentioned, they’re likely valued closer to $25 billion, not the $100 billion we first thought. They may have millions of users, but that alone doesn’t guarantee success online.
However it could take just one decision (or app) to turn things around. That’s the nature of online….