With the recent public sale of Facebook stock at record high values the media has been paying a great deal of attention to the company. Facebook executives told investors the company is worthy of the high value because of the nearly 1 billion dollars Facebook takes in each year from advertising sales, but business owners around the country are asking themselves is it effective?
How it works:
Facebook would appear to be every advertisers dream. With the amount of personal information Facebook collects about its users; companies have the ability to target specific age groups, locations, education levels and even specific interest groups to make sure that the people seeing their advertisements are the ones most likely to be interested. After deciding who they want to target companies set how much they want to spend and whether or not they want to pay on a cost-per click or cost per impression basis. The ad then pops up in the right hand column of the user’s news feed a certain number of times based on the advertising budget.
The Problem:
The problem lies in showing tangible results. Advertisers want to be able to see a return on their investment, but, as with any advertising project, showing how ad dollars translate into sales dollars is not always so simple. Many companies that are putting large amounts of advertising dollars into Facebook are not seeing the tangible results they need to show the worth of the investment.
What will companies do moving forward?
One company who has invested a lot into Facebook advertising is GM; their social media paid advertising budget was close to $10 million a year. That is before they pulled the plug on their paid advertisements just days before Facebook was set to release their IPO. GM has decided that a paid Facebook advertisement was no longer providing a large enough return on investment to make the cost worthwhile. Other companies are also struggling to measure a return on investment and without that return on investment it is difficult to convince company executives that social media dollars are dollars well spent.
On the flip side if Facebook advertising is used effectively it can be a great tool for reaching a specific target market. With the large amounts of personal information contained within Facebook it is very easy for a company to only target their specific market.
Moving forward it will be interesting to see of companies decide the risk is worth the reward.
By: Gabrielle Depoister, Marketing Intern
