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The Reality of Facebook Ads

Facebook Ads: The Lowdown

There is no doubt that social media is the current king of the Internet. Half the time people spend in front of the computers and even their mobile phones and gadgets are dedicated to posting content and responding to messages on Facebook and Twitter, among others.

The boom of social media was almost immediately followed by the development of social media sites as advertising hubs. This fast progression is understandable. Advertisers will always go where people are. Seeing that everyone is more or less accessible via social media, it only makes sense for marketers to place their ads on these sites as well.

Facebook is currently the leading destination for social media advertising. In 2011 the social networking site had a total revenue of $3.7 billion. $3.1 billion came from advertising. The same trend continued on 2012. Out of the $5 billion total revenue, $4.2 billion was also from advertising. It is likely that advertising sales will increase further for the company because Facebook’s population continues to rise. Plus, its active user count is also rising and even reached 1.06 billion by the end of 2012.

So if the majority of consumers can be found on Facebook, what seems to be the problem with its ads services?

Reevaluations of Facebook Ads

As early as last year, Facebook’s biggest advertisement clients had expressed their intentions to look closer into their ad investments in the social media giant and reevaluate the effectiveness of Facebook ads. It’s not a matter of reach since it is assured that paid ads will be shown to a large number of targeted audiences. The real question is whether or not the ads are truly effective in urging people to take action, whether by buying the advertised product from the nearest retailer or following purchase links online.

Facebook Ads Debate

There are many things to consider here, primary of which is consumer response.

Negative Reactions to Facebook Ads

The reason why Facebook became so popular at the beginning was that it then was a unique platform that made socializing very easy for people who knew each other, whether personally or through email or chat. You could do so much on it: post statuses, send private message, hold discussions, share photos and videos, and then like and comment on those photos and videos. The feeds showed users the activities of their friends, letting everyone become updated with what’s going on with the people in their contacts list.

Today, these things are still present in Facebook. However, the proliferation of ads has also become very noticeable. When you click on Home, the second entry on your newsfeed is now a “Suggested Page,” which is practically an ad that Facebook thought you’ll be interested in. Aside from that, the bottom half of the righty column are all “Sponsored” entries which are also paid ads.

All in all, paid ads in Facebook can occupy as much as 2/3 of the on-page real estate.

That pretty much annoys the heck out of most users, which also happen to be consumers.

Now, advertisers know that annoyed consumers are unlikely to become buying customers.

This leads us to another point of concern regarding advertising on Facebook: what is the real purpose of the social media site?

The Reason Why People Are on Facebook

Remember that the real purpose of the site is to socialize. People are there because they want to get in touch with their family, friends, and acquaintances. They want to know what these people are into right now. Users are not there to look at ads or to purchase something. If they wanted to do that they can just turn on the television and watch infomercials, or search for something they’re thinking of buying directly on the search engine.

(There is an exception here though. There are SMBs (small to medium businesses) that conduct their operations on Facebook through their fanpage. For example, a seller of secondhand books would create photo albums of their on-hand stock. Customers would then reserve the items they want and finalize purchase details via private message or any other method required by the seller.)

In a recent Yahoo news article, the writer conducted a simple survey among his son’s friends to get an idea of teenagers’ attitude towards Facebook at present. One of their common complaints is that so many irrelevant posts have trickled into their newsfeeds lately, and they’re pushing down the posts and updates that they’re actually interested in. This made their Facebook experience less satisfying.

With all these reasons, it is understandable why companies like General Motors and Kia are, at the very least, questioning the effectiveness of Facebook ads. (Both companies are still paying Facebook millions of dollars a year though, and are not planning to pull out all ads from the social media site.)

Statistics for Clickthrough Rates

User reactions aside, there are also other critical points that need to be reviewed. One of them is the average clickthrough rate of Facebook ads. Search marketing company Wordstream recently conducted a study comparing the performances of Twitter ads versus Facebook ads. Their findings show that Twitter has a higher CTR at 1-3%, compared to Facebook’s average which is 0.119%.

Twitter vs Facebook Graph

It is easy to deduce why Facebook is getting far fewer clickthroughs than Twitter. With the exception of the Suggested Page on the main news stream, the rest of the ads are located on small placeholders along the rightmost column of the page. Users have become oriented to their nature (that they are advertisements, nothing more) and are therefore turning a blind eye on the right side of their screens.

Unless the client can get its ad on the main news stream advertisements on Facebook are pretty much ignored by uninterested users (which usually constitute the majority). News stream ads are, in all fairness, usually accurate matches of the user’s interests. The ads are also touted as interests or liked by one or more of the user’s contacts, thereby adding credence to its presence in the user’s newsfeed. By associating an ad with a known friend, the user may be tempted to click on the post without realizing that it is in fact an ad.

Ironically, another study conducted by performance marketing company Nanigans shows that ads on the right column in fact generate higher ROI than ads in news feeds.

These statistics force advertisers prioritize one thing over another: high CTR or high ROI. Depending on the goals of the advertisers, this tidbit may or may not matter; but if it does, therein lay the problem for Facebook. Why spend a lot in this area if you can get both CTR and ROI in other venues?

So Why is Facebook’s Ad Revenue Continuing to Rise?

It’s safe to say that the saving grace of Facebook is the huge number of users that log in on a daily basis. Expert marketers always say that the population in this social media site is too significant to ignore. Facebook officials second that statement. According to them, if executed just right, strategically placed ads on the site can truly generate conversions and sales.

Although no one is outright dismissing the effectiveness of Facebook ads, advertisers share a common opinion on the matter: advertising on the social network is still on its early stages, and there is definitely room for more improvement. Facebook needs to balance the high demand for advertising space with the versus user experience. At the end of the day, users have to be kept happy for FB advertising to continue generating conversions.

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