Facebook is getting ready for what may be history’s largest initial public offering for a tech company on Friday. But is it really a good business?
Maybe not, say an increasing number of critics, who point to how Facebook ads don’t work as well as marketers might hope. As a result, General Motors unfriended the social network, and now, says Larry Kim of internet marketing software firm Wordstream, Facebook ads aren’t converting surfers into customers effectively.
We’ve known for some time that Facebook ads have poor engagement. In fact, they have an average click-through rate of .05 percent, which is almost 10 times worse than Google’s display ad network. That means that for every thousand viewers, precisely half a person will click on your Facebook ad.
For the full, ugly details, see Kim’s infographic at the bottom of this post.
Even for an increasingly ad-blind internet, that’s not just bad, it’s horrific. So VentureBeat talked to Kim and asked: What is it about Facebook ads that makes click-through rates so low?
“There are two factors, primarily,” said Kim. “The first has to do with ad formats. On Facebook, you have very vanilla, very basic ads only. They’re not very compelling, and not very engaging.” In contrast, ad units on other sites or apps are richer, more media-centric, and more interactive. And, there’s simply more choice in style, size, and positioning.
“The second problem is ad targeting,” Kim said. “Facebook is really, really good at identifying demographics and interests, but not very good at deciphering intent.” In other words: Facebook knows who you are, but it doesn’t know very much about what you want right now. As Kim says, “Just because you like cars doesn’t mean you’re ready to buy a car today.”
The result is predictable: irrelevant ads. “We define relevancy as the right message to the right people at the right time,” says Kim. If a message isn’t relevant, you’d expect it to be ignored, and that’s what’s actually happening on Facebook, he says.
This, of course, compares poorly with Google, where intent is much clearer, particularly on searches. If someone is Googling for a specific keyword right now, it’s a pretty good indication of their intent — much better than the fact they “liked” Car & Driver‘s Facebook brand page some time ago.
So what’s causing the issue? Kim blamed lack of innovation. Sponsored ads were Facebook’s most recent ad format update, but Kim is not impressed. “I applaud Facebook for trying to be more engaging and relevant, but this is their second ad effort in six to seven years.”
“I wish Mr. Zuckerberg could be open to the possibility that ads would not ruin Facebook, and delivering the right ads could deliver value to both advertisers and users,” Kim said. “I think it would be really profound if they could get a clue.”
Photo credit: Luc Legay on Flickr