Are Facebook Ads Worthless?
A recent survey has found that not many Facebook (NASDAQ:FB) users found value in advertisements they encountered on the social network and hardly ever clicked on links within them. Facebook is being valued at over a $100 billion a day before its initial public offering, but experts say the company’s big challenge lies in using better targeted advertising and monetizing the data it has on its almost 100 million users for business without attracting privacy concerns.
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Earlier this week, despite all the excitement about Facebook going public, General Motors (NYSE:GM) announced it was taking its paid ads off the social network because they were having little impact on consumers’ car purchases.
The automaker may be right in its estimation, after digital-marketing agency Greenlight found that 44 percent of those surveyed said they “never” clicked on an advertisement or sponsored listing on the social network. Another 31 percent said they “rarely” clicked on ads, while just 13 percent said they either “often” or “regularly” clicked.
GM had reportedly spent $10 million to place its advertisements on Facebook last year. The automaker said it would continue to promote its products using the social network, just not pay the latter. The survey found that Facebook’s Sponsored Stories delivered increased clickthrough rates at a lower cost per sale.
Facebook earned $3.7 billion in revenue in 2011, most of which was through advertising sales. Last month it announced its first-quarter ad revenue was down 7.5 percent from the previous three months, though it said “seasonal trends” were responsible for the decline. According to Greenlight, retail companies were most likely to see clickthrough with their Facebook ads, though the social network only had an overall positive clickthrough rate between 0.5 percent and 0.8 percent.
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