Built on participant immersion and increasingly fueled by brand advertiser dollars, Facebookmust continue to answer to both its 900 million participants and the growing number of advertisers as it approaches its IPO and beyond.
Advertising currently makes up 80 percent of Facebook’s revenue, and many brands plan to invest and continue to invest in ad spending on the site. However, a recent Wall Street Journalarticle suggests that some brands, like Kia, question the worth of social media marketing – especially on Facebook. In fact, a Wall Street Journalarticle reported yesterday that GM is stopping all paid Facebook advertising.
In the wake of this news and with the impending IPO, Facebook must reassure advertisers that advertising on the social media platform is good for brands and a savvy and sound investment. Facebook moved early, partnering with Nielson, to demonstrate its value for brand awareness. The larger challenge, of course, is to provide measured results and proven return beyond brand advertising. Delivering ROI is a challenge not unique to Facebook, but with a staggering $100 billion valuation, never has it been more necessary to convince bankers and investors that such a high price tag is deserved.
As standardized measurement for social media marketing evolves, additional considerations and insight into participant actions helps Facebook prove its value as a necessary channel for advertisers. According to a recent Performics study of active Facebook participants:
- 45 percent (nearly 450 million people) say they link to advertisements they want to share with their network
- 38 percent (nearly 380 million people) visit company or product pages every week
- 30 percent (nearly 300 million people) say they have clicked on an ad on Facebook at least once a week
Facebook participants span generations – from teens to grandparents – and they increasingly make purchase decisions based on social interactions with friends, family members, fellow social networkers and brands themselves.
More than 50 percent of active social networkers say they have learned about a new product, service, or brand through a social site. This is nearly the same percentage of users who say they have used a search engine to get additional information about a product because of a social advertisement. Brands may better understand their customer base through Facebook activity analysis and subsequent application of those insights to other marketing channels. Social media provides unique data and unveils characteristics about and motivations of users causing marketers to rethink their entire approach to marketing.
Marketing through social channels, like Facebook, can be efficient not only because of the participant insights, but because it can be more cost effective than other marketing channels – digital or otherwise. Many Performics clients find significantly higher return on investment (ROI) from Facebook advertising efforts. A global health and beauty company used Facebook engagement ads and maintained a low cost per fan of around $1 month over month. And Facebook can be used as more than just a vehicle to form relationships with fans; it can demonstrate more tangible marketing value. For example, a Performics online retailer saw a 3:1 ROI for a Facebook t-shirt promotion.
Brands big or small are increasing budgets, testing new social programs, and moving beyond simple fan “collection” into strategic, multi-dimensional relationships with their customers on Facebook. An important next step for Facebook is to create a more open data environment, one in which advertisers can sync their internal CRM and other data with Facebook analytics in order to track true end-to-end ROI.
One significant implication of Facebook’s pending IPO is the impact of mobile on the marketplace. A staggering 44 percent of Facebook users access the social networking site via a mobile device. While Facebook leverages advertising opportunities for brands through mobile, there is significant opportunity for growth in this channel. Notably, the $1 billion dollar purchase of Instagram affirms Facebook’s conviction that a more connected, visually-charged mobile experience is the wave of the future and an opportunity for monetization. Mobile capability expansion will certainly enlighten participant experience but should also add value for potential advertisers, assuming Facebook can maintain participant value and crack the mobile monetization challenge. Recently, Google has experienced the impact of mobile on its revenue strategy. While overall volume of search queries is growing dramatically, largely due to shift in volume of mobile search, Google’s revenues are down year over year because mobile search still costs less in the marketplace. According to Performics data from April 2012:
- Overall (desktop + mobile) Google cost per clicks dropped in Q4 ’11 and Q1 ‘12, causing concern for Google investors; but the better indicator of Google’s health is actually mobile click volume, which hit an all-time high of 24.6 percent of all clicks in March ’12.
- Simultaneously, March 2012 showed mobile spend volume was close to 5X higher year over year; advertisers are now spending 15.8 percent of total paid search budgets on mobile devices.
Finally, it’s important to remember the value of Facebook is based on the fact that it has 900 million global participants who use the site not because its’ valuable to marketers or shareholders. Facebook has been steadfast in focusing on participant value versus advertising value as a top priority. This will be more challenging with shareholders demanding revenue growth. It will require Facebook to guide advertisers on how to market effectively in the Participation Age. This is a core way of thinking we provide to our clients at Performics.
In the early stages of the Facebook IPO, there will be heightened focus on investor relations, proven revenue streams, new advertising opportunities and, as we’ve already seen, controversial topics like the makeup of its board of directors. The public and shareholder scrutiny may be uncharted territory for the social media maven, but Facebook has committed to meet the challenge of balancing participant wants with advertiser needs.
A pioneer in the digital marketing space and marketing professional with more than 20 years in the industry, Daina Middleton is the Global CEO of Performics, the performance marketing division of Publicis Groupe. As one of the largest and oldest search and performance media agencies, Performics delivers performance marketing solutions and solid results for a list of blue chip clients through smart innovation and solving complex challenges.
Daina has a Bachelor of Science in technical journalism, and a minor in fisheries and wildlife sciences, from the College of Liberal Arts at Oregon State University. She lives on a horse ranch outside of Boise, Idaho where she raises Andalusian and Lusitano horses. Follow Daina on Twitter @DainaMiddleton or find out more at www.dainamiddleton.com.