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Spotlight on Social: Are Facebook Ads Effective?

spencer
18th May 2012

A Google news search for Facebook presents you with an excessive amount of results, so many in fact that it is easy to forget that Facebook is still only eight years old. In those eight years Facebook has grown from a project started in a university dorm room to one of the hottest businesses on the planet. A little digging through the news stories will lead you to some interesting discoveries, from the first article ever written about Facebook that appeared in the Harvard Crimson back in 2004 celebrating the ‘hundreds’ of users that had registered for the new Facebook website to an article that appeared on the Wall Street Journal blog back in 2009 asking the question: Is Facebook Really Worth $10 Billion? The said article examines how a $200 million investment for a 2% stake in the business at that time valued Facebook at 10 billion dollars and challenged if the site was worthy of such a huge valuation. Asking that question in the context of today would only be answered with a chorus of laughter.  After much debate and anticipation Facebook will today float on the stock with an estimated value of  $104 billion, quite amazing for a business that is less than a decade old and completely free for users.

A valuation of over 100 billion is truly spectacular, although how Facebook makes its money is now well known, with half of all games people play online played through Facebook and ads appearing more frequently throughout the social network. However it may be worth noting that in the same week people flock to buy shares in Facebook, General Motors have decided to halt their $10 million Facebook advertising budget stating that Facebook Ad’s don’t pay off. The move may on the surface appear as a kneejerk reaction by an organisation looking to cut back on expenses at a difficult time, however GM is the third largest advertiser across all media in the U.S with an overall ad spend of $1.6 billion, and the fact that they are willing to turn their back on a social network  which can boast 901 million active users, and the site that accounts for 15% of people’s total time online (in the U.S) points to a more alarming issue surrounding Facebook paid Ads.

Ever since the phenomenon of social networking sites in recent years began to attract huge user figures there has been many different debates and verdicts about social media’s marketing opportunities compared to traditional media. Return on invest, or how investment is tracked on social media has always been a cloud that has loomed large over social networks including Facebook. Brands can of course choose to have a presence on Facebook without paying a penny, something that GM motors has said that it will continue to do through their brand timeline, however this cannot exactly fill shareholders with confidence, especially those who were thinking of buying into the 12 per cent of Facebook’s stock that will float on the stock market today.

Marketing enthusiasts argue that while Facebook is home to the amount of active users it is at the moment then brands including GM are unwise in ignoring the opportunities it provides. Consumer engagement and brand awareness are two buzz words that are quickly attached to social networks in particular Facebook, but both are viable through interaction with consumers through the free brand timelines and brands can be effective on Facebook without paying out for ‘sponsored stories’ or any other advertising streams that the social network implement in the near future.

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