A few days before Facebook's initial public offering (IPO), General Motors threw a wrench into the celebratory mood by pulling its $10-million advertising account. The paid advertising was a quarter of GM's total Facebook marketing campaign, but the company would continue to post informational content about its brands. GM executives concluded the ads weren't effective and had little impact on potential consumers. Investors seemed to take notice as Facebook stock nosedived from its IPO price of $38 to a near-term low under $18 within several weeks. This article addresses Facebook's viability as a marketing platform by reviewing actual performance results with comparisons to competing platforms.
During the Internet bubble of 1999-2000, the Internet industry was peaking. New companies weren't seriously measured by their revenues and profits. The metric most frequently cited by stock analysts was the eyeball count. In other words, how many visitors clicked on a company's website. The theory was that this was the best indication of growth and that all those eyeballs would eventually be converted into more sales. When the bubble burst, it became obvious that more eyeballs didn't necessarily translate into more customers.
When deciding where to get the most bang for the advertiser's buck, there are a variety of online options. Google AdWords, Facebook Advertising, Google Display Network, LinkedIn Direct Ads and Mobile Advertising are among the best. Facebook is banking on a shift of advertisers away from search ads and towards the social-based ads that it offers. Recent data shows that that premise is flawed because the number of Google ads clicked rose 42% from a year ago. That's significant because that rate is twice the size of Google's revenue growth rate.
In a relatively short period, there is an impressive array of statistical firsts for Facebook.
- 552 million daily active users
- 955 million monthly active users
- 543 million mobile monthly active users
- 81% of monthly active users outside the U.S. and Canada
- 93% of adult U.S. Internet users are on Facebook, and it's the top choice for social sign-in
- Average user spends more than 11 hours per month on the site
- One out of every eight minutes online is spent on the site
- Email and Facebook are the top two ways to share online content
- Average number of "likes" per post on a brand's page is 54
- More than one-third of marketers say Facebook is critical or important to their businesses
- Number of marketers who say Facebook is critical or important to their business has risen 83% in two years
- More than half of small businesses and B2B marketers say Facebook is beneficial to their businesses and an effective marketing tool
- 67% of B2C and 41% of B2B companies that use Facebook for marketing have acquired a customer through this channel
The challenge is to translate Facebook's huge user community into a viable customer community. Facebook maintains a significant user database that includes hometowns, education, interests, likes, marital status and much more. Armed with those demographics, Facebook can easily target ads to groups of any size or makeup. Clicks on the site are effective in driving awareness and traffic to other social media content. Google's pay-per-click model doesn't offer equivalent demographic targeting offered by Facebook. While Google knows what you're searching for, Facebook knows a lot about what you might search for before you even start.
Cost and Performance Comparison
RYP Marketing compiled data that compares Google AdWords to Facebook. This data provides a snapshot of how these two platforms performed head-to-head. Based on RYP's tests, Facebook is delivering better-qualified results with higher return on investment compared to traditional search ads in some sectors.
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- Facebook ads average cost per lead was 17% less than AdWords
- Facebook ads average cost per click was 26% less than AdWords
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- Facebook ads average cost per lead was 37% less than AdWords
- Facebook ads average conversion to leads was 19% higher than AdWords
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- Facebook ads average cost per lead was 11% less than Google AdWords
- Facebook ads average cost per click was 26% less than Google AdWords
- Cost per lead and conversion rate were slightly better with AdWords than with Facebook ads
- Lead quality with Facebook was markedly better, resulting in 2.5 times more revenue from Facebook ads than AdWords
The Bottom Line
Online advertising provides a cost-effective method to deliver powerful brand messages to a very specific audience. That kind of penetration isn't available from other media platforms whose messaging is weakened by the size and composition of diluted demographics. Facebook can slice and dice each segment of its user community. Its users are typically Internet savvy and spend substantial time on the site. With all online advertising growing, direct messaging to this vast audience is a valuable marketing tool that most businesses can't ignore.