Ad trends mixed for Facebook

08 May 2012

NEW YORK: Facebook, the social network, is seeing mixed trends regarding both the prices and perceived effectiveness of its advertising services.

Marin Software, the digital marketing firm, has just revealed that the charges for premium Facebook ads like "sponsored stories" rose by 26% during the last year, when the cost-per-click for more generic formats fell by the same amount.

TBG Digital, which buys Facebook ads for 235 firms, also found the price of reaching 1,000 of the site's users increased by 41% year on year in Q1 2012, but clickthrough levels dropped by 6% in its top five markets.

Data from Facebook showed its overall ad revenues climbed by 37% on an annual basis to $872m in the opening three months of 2012, although this amount constituted a 7.5% dip from the preceding quarter.

"The company's re-orientation around large brands and away from smaller ones may be the driver of the difference," Brian Wieser, an analyst at Pivotal Research, said, the Financial Times reported.

In a bid to enhance its credentials among major brand owners, Facebook – which boasts 900m active members – has allied with comScore and Nielsen, the measurement specialists. Some concerns, however, remain.

"When you have an audience that sticky and big you'll figure it out," said Jed Williams, an analyst at BIA Kelsey. "If you're Facebook, you have to figure it out in a hurry."

Michael Sprague, Kia Motors North America's vice president of marketing, reported that his firm had partnered with Facebook to gain a better grasp of how successful its ads are.

"Being on Facebook sends a message," he said. "Consumers they say 'Facebook is working with Kia, I like Facebook ergo I like Kia.' That's what we are hoping for.

"The question with Facebook and many of the social media sites is, 'What are we getting for our dollars?'" he said. "[It is unclear if] a consumer sees my ad, and does that ultimately lead to a new vehicle sale?"

Ford, another automaker, stated that using Facebook ads for its 2011 Explorer boosted shopper activity by 104%, but believes comparing the value of these efforts to other channels is difficult.

"The number one trusted source of information for consumers is recommendations from friends and family," said Charles Zinkowski, a Ford spokesman. "Facebook provides a reliable platform to leverage that insight at scale."

More broadly, the speed of Facebook's development, in terms of user habits and the services it provides, is posing some problems for marketers attempting to keep up.

"Sometimes it is a bit unsettling the pace at which they are changing things," said Maxime Kouchnir, vice president of marketing at Pernod Ricard USA, responsible for the Absolut vodka brand.

Data sourced from Financial Times/Wall Street Journal; additional content by Warc staff