The advertising firm Interpublic Group invested $5 million in Facebook five years ago and now has roughly $250 million to show for it, at least on paper. The question is whether Interpublic's clients, or the rest of the companies throwing money at marketing efforts on the site, have the same rosy glow.
About $10 million of Interpublic's (IPG) client advertising dollars was plugged into Facebook's advertising network as part of the 2006 deal. While Facebook's stock has proven to be a jackpot for early investors, marketers have found that reaching a new audience on the site has been a decidedly more challenging occupation.
A World Federation of Advertisers' survey released in March notes that, while marketers plan on spending ever more money on social media in the next twelve months, less than a quarter are happy with the return on their investment. According to comScore's analysis of online advertising, while Facebook and MySpace accounted for about 20% of all advertising traffic, they also carried an average cost per thousand impressions of 56 cents, almost $2 less than the Internet at large. Meanwhile, a recent report by Webtrends shows the average click-through rate declining to about half the industry standard.
It all makes one wonder if many companies might be better off just targeting customers searching Google (GOOG). And maybe they would, were these firms not daydreaming of being crowd-surfed across the Facebook empire by thousands of rapaciously eager young fans. Unfortunately, the fans aren't all that rapacious.
Razorfish's recent 2011 Liminal study points out that consumers prize a few things when engaging with a company. They want a modicum of trust, a feeling of being valued, a sense of control, and they want the experience to be efficient, consistent and relevant to their lives. So, where do consumers choose to go when they want to "engage" with a brand?
The Razorfish survey found that despite the gobs of time people spend on places like Facebook (1 out of every 8 minutes online), they don't use Facebook when they want to connect with a company. Overwhelmingly, consumers were inclined to go to company websites, seek out people they feel are "in the know," or talk to a company representative.
Companies' emails made consumers feel more valued than companies' Facebook pages, and the study says that in terms of engaging with brands, "Twitter and Facebook didn't even make it into the top nine in terms of importance or frequency of use. Gasp." In fact, Facebook ranked lower than the print ad, customer service instant messaging and the email newsletter, whether the demographic surveyed was 25-34, 35-44, or 45-plus. Gasp again.
Of course you can't blame it all on Facebook, which appears to work wonderfully in its natural state as a social networking device that can help organize mass protests in Egypt while also allowing Sam to keep track of Sue, Madeleine to show the world her cats, and James to explain why he's eating fried worms for lunch.
And some companies, like Virgin America, Sony (SNE), Gap (GPS), Red Bull, and, err, Playboy, seem to hit the marketing mark. "We've definitely seen marketers have a lot of success using Facebook Ads, Facebook Pages and social plugins for marketing campaigns, says Cyndi Schott Reseburg, a Facebook spokesperson. She notes that Facebook referral traffic to Amazon (AMZN) has been increasing and that there is plenty of evidence that marketers and companies plan to keep spending on Facebook in the years to come.
The problem is that insinuating yourself in that relationship can be delicate for a corporation. Consumers are a fickle bunch. They like discounts and promotions, but become annoyed with the constant messages informing them of what's new. When the authors of the 2011 ExactTarget and CoTweet report say "[c]ompanies have a considerable challenge when it comes to maintaining relationships on Facebook," they are putting it mildly.
More than half of Facebook users say they seldom visit a brand's page once they tell the rest of the world it's a keeper, while 55% of Facebook users have "liked" a company one minute, then decided they don't the next. "[M]ore than half the time, the company receives no direct feedback about the consumer's desire to stop seeing their posts," says the report. "Kind of like a long-distance relationship where your beloved forgets to tell you they've moved on."
Companies can be their own worst enemies. For every Diet Coke page there is another corporate presence sitting static and orphaned (even some Facebook investors apparently don't see the value). Others post so frequently that users become irritated. Facebook users also complain about brand pages that look cluttered, lack polish or are repetitive. A few corporate pages have seemed combative. "We suspect … that one reason Twitter and Facebook don't deliver for most customers right now is that brands aren't using them to provide the experience that people want," note the authors of the Liminal study.
Why? Many companies jump onto social media sites like Facebook without looking at why they should be there or what they hope to accomplish. Their lackluster and ham-handed presence on Facebook is an extension of their lack of presentation closer to home.
Company websites are "ground zero," says Professor Nora Ganim Barnes, who heads the University of Massachusetts Dartmouth Center for Marketing Research. HP (HPQ) has a snazzy, navigable website with blogs about new products and Twitter feeds that sell refurbished items. On the other hand, Verizon (VZN) has been accused of hiding its social links while Exxon (XOM), at first, spent a good deal of time blogging in the wilderness -- Barnes says that in 2010 the massive multi-national originally failed to link its own blog to its corporate website.
"You wouldn't run around your house with a screwdriver and say what can I fix with this?" Barnes says. "These are tools too." This leads us to Facebook's fluid but ever-expanding valuation -- maybe if companies figure out how to use Facebook, we'll finally get an idea of how much that $50 billion tool is actually worth.
