You probably heard already, but Facebook went public recently.
Millions of inches of newsprint, and the digital equivalent, have already been written about what happened, but one thing that was mentioned time and time again, is that just prior to the IPO, General Motors decided to pull its ad spend from the social networking giant.
This was backed up by a report from WordStream that seemed to suggest that Facebook isn’t as effective as Google’s Display Network (GDN). Due to the fact that GM is one of the world’s biggest advertisers, and WordStream, well, WordStream had an infographic, many people took this as proof positive that it’s all over bar the wake for Facebook as an ad platform.
But dig a little deeper and a slightly different story starts to emerge.
Firstly, as many pointed out, General Motors were spending just $10 million out of their annual $1.83 billion media budget: that’s two days worth.
Secondly, on top of that, they were spending $30 million to manage the page and, whilst I’m a fan of rebalancing the traditional 80/20 split between media and creative, essentially reversing that ratio seemed a little extreme.
Others have pointed out that they probably weren’t making the best use of that $30 million anyway. Now it seems that the real reason that they pulled their budget is that Facebook refused to allow them to use the types of invasive homepage takeovers that are commonplace on other big sites.
Looking at the WordStream report, Facebook drew criticism because the researchers found click-through rates to be lower than on the GDN, and because they don’t offer as many formats.
Of course, what this ignores is that, as an industry, we really need to get away from using clicks as our ultimate success metric. As far as I know, no one ever clicked on a TV ad, yet advertisers (including GM) are happy to spend billions on them, and they have long been proven to shift product.
What TV does, better than almost anything, is to create brand connections, and emotional reactions that result in us choosing one product over the other. And Facebook is working to prove something similar — that social connections, not hugely flashy banners, can do the same.
So whilst GM & WordStream both seem to think that Facebook is in the wrong for not giving in and allowing huge banner ads, marketers who care about truly creating connections with consumers should probably be thanking them. GM will also likely need to think about how they boost those connections with paid media (or even that $30 million will be going to waste).
And even if you are using Facebook or Google as a direct response tool, where it’s all about conversions, click-through rates really don’t matter. What matters is your CPA, something that WordStream didn’t evaluate (probably because you can’t, without proprietary data). Suffice to say, whilst Facebook is far from perfect, we have plenty of advertisers who find it works very effectively for direct response.
Of course, all of this only covers advertising on Facebook itself. But I, and, increasingly, many others, believe that one of Facebook’s next steps will be to turn the Open Graph into a socially targeted ad network.
And if they do, all those who neglected to turn their Facebook followers into truly engaged audiences, using both paid and owned media, might come to regret their short-sightedness. Though that doesn’t mean that $38 a share wasn’t a tad punchy.
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