Facebook: Waste of Time for Most Advertisers

J.C. Kendall
J.C. Kendall CEO, TekPersona Corporation

Posted on December 2nd 2012

Facebook: Waste of Time for Most Advertisers

Mark Cuban said it best...

Commercial Intent | TekPersonaA few weeks ago, Mark Cuban caught dissension from all over the Internet for calling Facebook a “Time Waster”.  The purpose of this article is to point out the simple fact that for Businesses, he could not have been more correct.  If you run a business, and you are looking to make money through driving people from Facebook to your products or services, Facebook is very likely not in any way worth the amount of time or expense required.

IBM has released a couple of reports that are positively devastating to the notion of Social Media as a platform for driving commerce. The IBM Digital Analytics Benchmarks Social Summary metrics for “Black Friday” and “Cyber Monday” should be enough to put to bed the misguided idea that advertising on Social Media platforms is an effective strategy for driving sales.

The Numbers Nobody wants to talk about

On this recent 2012 Black Friday, Online Sales grew 20.7% from last year.  Online Sales on Cyber Monday grew by 30.3%.  Those numbers represents HUGE growth in the Online space.  Within those numbers however, Social Media overall was responsible for 0.34% of Online sales on Black Friday.  Allow me rephrase this in case your glasses fogged over? Social Media was responsible for one third of 1% of Online sales on Black Friday. Do not despair however, because on the following Cyber Monday, Social Media represented a whopping 0.41% of Online sales, or less than half of 1% of overall Online sales.

Okay, so you say Social Media has not been around for a while and it will take time for Social Media to grow into a viable selling platform. Well, guess what, Bunkie? Those numbers I quoted above? For Black Friday, they represent a more than 35% DECREASE from last year. For Cyber Monday, the news is not as bad, but those numbers represent a more than 26% DECREASE from last year as well.  It is an undeniable conclusion that sales via Social Media are in declinefrom already infinitesimal numbers, compared to other Online sales options.

UPDATE: Because of the overwhelming response to this article, we at TekPersona decided to conduct a discussion of this topic in a Google+ Hangout. If you have not read the article, please do, then watch the video, where we drill down on this topic with some of our TekPersona partners.

Commercial Intent almost never exists on Social Media

In 2011, Google, through its AdWords advertising service represented 9% of all Online ads on the Internet. CTR (Click Through Rates) on ads on Google resulted in sales revenue to the tune of 36.4 Billion Dollars.  In 2011, Facebook represented 17.1% of Online Advertising.  Facebook Ad revenue in 2011 returned 3.7 Billion dollars.  Again, allow me to summarize. Facebook advertisements almost doubled those of Google in 2011. Facebook revenue from advertisements was barely one tenth that of Google.

So, why did Google make 10 times as much as Facebook last year on just over half as many advertisements? The answer is “Commercial Intent”.  When people are shopping, they have what is called Commercial Intent, which means they are looking for something they want to  purchase. It is no different from back in the days of searching through the Yellow Pages for a business that is selling what you are interested in buying. Your Commercial Intent is to find those who provide what you are looking for.  

Commercial Intent does not exist on Social Media, because the overwhelming percentage of its users is not there for shopping. They are there for the purpose of conversation and interaction with others.   Bradley Horowitz, the Google VP in charge of Google+ recently likened an advertisement on Facebook to a man wearing a Sandwich sign walking up to a couple of people having a conversation on a sidewalk.  The advertisement is an unwelcome interruption.

Only on rare occasions will someone welcome something that interrupts him or her to the point of interest. It is usually an accidental reminder of Commercial Intent, not initiated by the potential buyer.  Facebook and its advertisements have the burden of convincing, or reminding a viewer to the point of interest. When someone performs a search for an item on Google, the commercial intent  already exists.  Hence, ads placed next to high ranking sites which offer what the searcher is looking for have a much  higher likelihood of influencing conversion of the searcher into a customer.

Facebook claims 500M active users per month out of a total user base of over 1 Billion people.  These numbers are the reason that so many businesses are attracted to place ads on Facebook.  The potential for reaching this size of an audience rarely exists.  By comparison, in 2011 Google averaged 4.7 Billion search queries…PER DAY. (math is hard)
The largest potential audience for persons with Commercial Intent is obviously resident at Google. So, why are more ads purchased on Facebook, than on Google? One reason: the so-called “Social Media Expert”.

There are very few of these persons willing to discuss the efficacy of an ad placed on Facebook, and the likelihood of a customer conversion resulting from same. Make no mistake, there are many businesses making money from their Facebook presence, through a systematic approach of advertising to a curated audience of relevant Facebook friends. 

The drawback to this approach, is that Facebook is now charging (some say penalizing) businesses to communicate with the very audiences they worked hard to build. Unless a business is willing to pay a fee based upon the number of followers, it is limited to communicating with between only 5 to 15% of their curated audience. Not only that, the members of that limited group are selected not by the business, but by Facebook. The algorithm for this determination is called “Edge Rank”.   That’s right, businesses cannot relay customized messages to targeted segments they define themselves.

In my opinion, this practice represents a total “Bait and Switch” approach to Social Media, in addition to a conflict of Interest.  A business on Facebook is no longer working only for their interests, but Facebook’s, in that the more users a business attracts, the more they must pay Facebook to communicate with that audience in full.

Social Media is for Branding, not Selling

What the IBM report suggests, is what many of the so-called Social Media Experts claim (as opposed to actual Sales and Marketing professionals) about the efficacy for driving sales via Social Media is at best a misnomer, and at worst an excursion through a field of Bovine Excrement.

The true value of Social Media is in that it provides a very effective forum for both Corporate (business) and Personal Branding.  Through a presence on forums like Facebook, Google+, Twitter and others, the opportunity exists to build trust, subject authority and a reputation for problem solving. This trusted reputation is the essence of a Brand.  A positive review of a business posted on Social Media is more valuable than 100 advertisements.  A posted endorsement from other trusted authorities is near priceless, for it cannot be purchased, but only earned.

One of the things we remind our clients at TekPersona, is that nobody buys anything of true value from a stranger, except for gasoline and gummi bears.  Social Media serves the invaluable purpose of turning strangers into acquaintances, acquaintances into an audience and only THEN, an audience into potential customers.  It takes time, it weeds out the phonies, and the fly by night hucksters, because audiences are perceptive enough over time to understand who are true SME’s (subject matter experts) are and who are not.

Facebook, be very afraid...

Almost every day, I hear from my own audiences on Social Media, of their growing frustration with maintaining a profitable presence on Facebook. Their audiences are unable to hear from them, unless they pay for what they used to be able to do at no cost. Not only that, the CTR from Facebook paid advertisements are dismal.
A WordStream Report published on Business Insider in May of 2012 reported that advertisements on Google have proven to be  almost eight times more likely to result in a click-through than an advertisement on Facebook. The numbers do not lie. This year, the CRT for an advertisement on Facebook in Q1 averaged 0.051%.  Did I stutter?  Is there a planet in the universe where that number does NOT suck?

The first question to ask any so-called Social Media Expert advising a business to advertise on Facebook, is whether they are aware of the current CTR, and what benefit to their business is to be gained for paying for that level of performance.  Make no mistake; we believe that most businesses can benefit from a presence on Facebook, but not for the purpose of conversion to sale advertisements. We believe that Facebook ads are a colossal waste of time and money, which would be better spent on a well-thought-out Google Adwords campaign.

Google+: Social Media that “gets it” for Business

At TekPersona, we believe that Google+ represents the best Branding opportunity for both businesses and individuals within the Social Media space. This is because every potential Branding benefit resident on Facebook is also on Google+, but Google+ provides value add for Branding that Facebook could never match.  The #1 value proposition is that every public thread is indexed for the Google search engine in about 30 seconds.  This provides an opportunity to provide valuable and relevant content to a potential audience inside and outside the forum. With the exception of limited Brand Page functionality, we love Google+.

Google+ is structured around an idea called “Circles” where people and businesses create interest groups related to particular subject matter. Businesses are not allowed to circle individuals from their Brand Pages, unless an individual or another business has circled them first.  This provides a form of built-in screening and analytics of persons who through a circling, provide tacit permission to a business to communicate with them.   Marketers, while Facebook makes it near impossible to direct customized messages to target segments, Google+ circles  are not only a powerful means of defining and developing target segments but Google+ capability to engage with individual circles separately provides complete freedom to customize interactions with each group.

Google+ provides another advantage through “Authorship”, where authors of information relevant to their particular audience, can create content that connects  back to their unique identity, with the author’s Google+ avatar image displayed alongside in SERPs (search engine results pages).   

How often have you read an article that you might have already seen elsewhere under a different name? Google+ is taking steps to prevent plagiarists and screen scraper websites from taking credit for the work of others.  The SEO (Search Engine Optimization) benefits to a Google+ user are too extensive to detail in this article, except to point out that they do not exist on Facebook.

When combined with the Social Media Killer App called Hangouts, where up to 15 people can hold an Online video conference from their desktops, laptops or wireless phone, from most anywhere in the world, for business meetings, presentations, training classes, or town hall meetings, you have a box of branding tools unmatched anywhere else on the Internet.   Note:  you can also include telephone-only participants with others who have video access.

In an interview conducted a couple of days ago, Bradley Horowitz of Google stopped just short of saying that advertisements would never exist upon the pages of Google+, pretty much for the reasons stated in this article.

Summary

If you are an advertiser of products or services from your business, it is my professional opinion that to place advertisements on Facebook, rather than Google Adwords is a waste of both time and money. Social Media Consultants are making a killing advising businesses to do just that. Some businesses make money, even enough for the fees attached to reaching their audiences are figured in. We believe this to be an unnecessary burden, when Google has proved to be more effective to a larger audience through search conducted from within a state of Commercial Intent.

Because it is 100% free for business to build and communicate with their audiences on Google+, while using tools better able to help a business establish and communicate information to a targeted audience under their own control, we believe that Facebook advertisements are a practice of the past, while the future of Google Adwords appears unlimited.

 

 

 J.C. Kendall is the CEO of TekPersona Corporation

J.C. Kendall

J.C. Kendall

CEO, TekPersona Corporation

J.C. Kendall is the CEO of the Tekpersona Corporation. 22 years as a Corporate Executive, Manager, Developer, Trainer & Marketer of Technology Solutions, and Technology Marketing & Sales. Application Developer, specializing in Microsoft & Google products and services. Direct & Current Experience in Social Media, SEO, and Distributed Services. Professional Coaching - Corporate Network\Data Security, Business and Web Analytics and Corporate Branding\Marketing\Outreach. Voted one the Best Google+ Users in 2011 by the Google+ User Community. My company's mission is the Optimization of Businesses. We teach Organizations how to make the most of Social Media, their Web Presence and Search Engine Optimization. We teach Businesses how to maximize their marketing, and develop strong and memorable brands. Specialties Corporate Branding, Social Media, Data Security, Software Development, Web Development, Online Marketing, Reputation Management, Media Training Services.

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Comments

organichat
Posted on December 2nd 2012 at 11:06AM

Oh people talk about the numbers, they talk about them in dark corners when no one else is around or they talk about the numbers while they're in the shower far ways from their clients.

Don't get me wrong I love Social Media and all its possibilities but for most small businesses the amount of time and money needed to be spent is huge compared to results. In time things will clear and the fog will lift from the path so everyone will see the way.

Nice post J,C,  Thanks

J.C. Kendall
Posted on December 2nd 2012 at 11:58AM

Thanks Organichat. 

My experience is that Facebook's value is in helping Businesses to establish their brand and connect with their currated audience. Facebook has now seen fit to cut that audience by 80% unless you pay them, which is just plain wrong, because that was not part of the original agreement when Businesses signed up. Had they considered another way, like a percentage on clickthrough or something that was a charge for results, rather than a charge for opportunity, that would have been much more fair. Businesses do not mind paying for actual results, but Facebook is no different than a lottery in charging business only for the attempt. 

Peter Visser
Posted on December 2nd 2012 at 2:05PM

This makes absolute sense. I have been waiting for an article like this. 

So if Facebook is not a good investment for driving sales, how about for developing a community website for a particular niche? I.e dating, Forex, car enthusiasts etc. would Facebook ads be worth it or is Google + still a better bet?

J.C. Kendall
Posted on December 2nd 2012 at 2:24PM

Peter, that is exactly the value in a place like Facebook. Niche sites filter like-minded users into potential customers, BUT.... Facebook makes you pay to speak to them. My Fiancee and I run a site on Google+ for Dog Lovers called "The G+ Dog Park", a place for members to discuss and share pictures and stories about their animals. The cost to us? Not a dime, while we have thousands of followers, and a bunch of venders dying to get at our member list. Pet lovers buy stuff, baby..

Beyond the obvious cost differential, Google+ provides a massive SEO advantage for finding an audience off site of your Social Media presence. Not to mention that any time we want, we can have a worldwide video-teleconference with our audiences, again at NO cost. I dont believe that for Branding one's business, in addition to the "Circles" feature and all the other value-proposition at G+, Facebook will ever be in a position to match them. 

Ask yourself why Facebook, after stupidly rejecting Bing when they could have had the engine cheap, is now going nuts investigating how to build a Search engine. I rest my case. Thanks for your comments. 

Dave Warawa - PROSALESGUY
Posted on December 2nd 2012 at 2:50PM

Great article. For some reason, I was reluctant to establish a Facebook Fan page, despite what the general consensus appeared to be.  As a self-employed Sales Trainer, LinkedIn, Twitter and Google+ simply made sense.  I drive traffic to my website through my BLOG, which I spend considerable time putting in quality content weekly.  My next initiative is to use You Tube and video on my website.  Social Media allows me the opportunity to interact and engage customers.  I don't expect it to make sales for me.  That's my job.  It's part of my media efforts.

J.C. Kendall
Posted on December 2nd 2012 at 8:55PM

Great idea, Dave. Actually, <shameless plug> we are beginning in two weeks a full YouTube set of videos from Google+ Hangouts, on how to use G+ for social media marketing. We've used Hangouts since the begining, which you can see if you follow the link in the article about "The Social Media Killer App" near the bottom of the piece. Video is HUGE, and like public speaking, kinda sets apart the pros from the amateurs. If you need any help or tips with that, dont hesitate to look us up at TekPersona, as we provide training for businesses looking to leverage video and teleconferencing. </shameless plug> 

Dave Warawa - PROSALESGUY
Posted on December 3rd 2012 at 12:31AM

I will take you up on your offer JC.  Will you making a post when it's available?

J.C. Kendall
Posted on December 3rd 2012 at 5:01PM

Absolutely, Dave. Feel free to shoot us a message also at info@tekpersona.com

Mikey Kilun
Posted on December 2nd 2012 at 4:38PM
Great article! Our company is in the process of large scale social and SEM advertising tests. We are hitting key demos across a wide number Of geo targets. So far we are seeing significantly higher ROI from Google than Facebook, and have spent 5x less on AdWords in comparison. However, for our Facebook testing, we are only placing Sponsored Stories and fully omitting traditional ad units pointing users outside of Facebook. Im presuming the Q1 stat for Facebook CTRs in the article only reflects the traditional ad unit. What we are seeing with Sponsored Stories is an average CTR of 0.5% with certain buys as high as 7%. We are also seeing a 22% increase in email opt ins and a 26% upswing in Facebook page engagement. Hence, is there additional value to certain businesses for Facebook which is missing in the article? Per our results I would have to say yes, though ultimately agree that as a direct digital revenue driver, Google hits it out of the park. Would love thoughts and thanks again for all the insights!
J.C. Kendall
Posted on December 2nd 2012 at 8:50PM

Mikey, I would guess by your description, that your organization has the budget that allows for sponsored stories to your carefully cultivated audience. That you are getting much better CTR than most is a reflection on your value proposition, and likely not any assistance tools-wise from Facebook. Many organizations like yours will do quite well with the wherewithall and budgets to make it happen. 

My guess is that you folks have your branding hats on straight. Most businesses will need a better and cheaper option to perform at your level, and those folks are my targets. I would actually bet that there is nothing you are doing on Facebook that would not work just as well if not better on Google+. 

I would also point out that the article CTR mentioned was for both standard ads AND sponsored stories, so take a bow, for being the exception. Glad you liked the piece. 

Samuel Chan
Posted on December 3rd 2012 at 12:51AM

Thank you Kendall for the well-referenced, neatly written article.
I cannot agree more on the notion of commercial intent and its existence or lack thereof in social media.
In fact, I have just written a blogpost on the whole intent-based advertising model advertisers have to deal with over the past weekend:
Intent-based targeting and the evolving model

The largest source of intent (purchasing intent / commercial intent etc) is still the search engine. That's where consumers most immediately thought of, or most intuitively go after, every time the intent radar is at its strongest. So intuitively it's immense potential is underrated.

J.C. Kendall
Posted on December 3rd 2012 at 1:53AM

Thank you, Samuel. Also, that is a very nice post you have written. I intend to give it another going over in the morning, but I am way late for bed time this evening. Thanks again! 

Paul Chaney
Posted on December 3rd 2012 at 5:30PM

I hate to play devil's advocate, but I see a couple of points worth making. First, IBM's numbers reflected sales that came directly from social media, not those that were influenced by it. Also, IBM's report included numbers from 500 large retailers, not SMBs. 

Until a method for better downstream tracking is devised, it will be difficult to determine precisely how much social media influences sales. For example, if I go to Facebook, Twitter or other social network and make an inquiry about a product I'm considering and ask for input, that will likely impact my purchase decision. But, because I don't directly from Facebook or purchase through an onboard shopping cart like Payvment, for example, but instead perform a Google search and visit other sites before making my purchase, it's easy to assume social media had no bearing on the sale, when, in fact, it had great bearing. 

To my second point, shopping cart provider Ecwid, which primarily serves SMB retailers, found that, on CyberMonday, sales referred by social networks rose 70% from the previous Monday. It has long been my contention, and Ecwid shares it, that SMBs are able to leverage the power of social media much more so than large retailers. 

In my view, when you factor in the downstream impact of social media coupled with SMBs ability to leverage it more successfully, IBM's report is misleading. Perhaps not intentionally so, but at the very least its numbers don't tell the entire story. 

J.C. Kendall
Posted on December 3rd 2012 at 6:20PM

Paul, sure sales rose 70 during those two Mondays, but only from one infinitesimal percentage to another. Those sales never broke one half of one percent either week. Those are ridiculously bad numbers no matter how you slice it. We also disagree on the the breath of the IBM report, but the primary point, is the overall CTR number for facebook this year, which rests as 0.051%. This number cannot be defended. Email does a better job than that. 

Paul Chaney
Posted on December 3rd 2012 at 5:30PM

I hate to play devil's advocate, but I see a couple of points worth making. First, IBM's numbers reflected sales that came directly from social media, not those that were influenced by it. Also, IBM's report included numbers from 500 large retailers, not SMBs. 

Until a method for better downstream tracking is devised, it will be difficult to determine precisely how much social media influences sales. For example, if I go to Facebook, Twitter or other social network and make an inquiry about a product I'm considering and ask for input, that will likely impact my purchase decision. But, because I don't directly from Facebook or purchase through an onboard shopping cart like Payvment, for example, but instead perform a Google search and visit other sites before making my purchase, it's easy to assume social media had no bearing on the sale, when, in fact, it had great bearing. 

To my second point, shopping cart provider Ecwid, which primarily serves SMB retailers, found that, on CyberMonday, sales referred by social networks rose 70% from the previous Monday. It has long been my contention, and Ecwid shares it, that SMBs are able to leverage the power of social media much more so than large retailers. 

In my view, when you factor in the downstream impact of social media coupled with SMBs ability to leverage it more successfully, IBM's report is misleading. Perhaps not intentionally so, but at the very least its numbers don't tell the entire story. 

ianbrodie
Posted on December 4th 2012 at 2:59PM

Agree with the general thrust of your argument JC - but Facebook's low CTR for ads isn't your strongest weapon.

Of course Facebook ads have a very low CTR - just like google's display network ads have a low CTR (though not as low as facebook). But since it's pure PPC, the CTR is only important if there's a high fixed cost associated with the ad which is usually not the case. What's much more important is the absolute level of clicks, sales and the ROI.

The low CTR is a reflection - as you rightly say - of low commercial intent. But on the other hand, what's the commercial intent of people who watch TV, read magazines or listen to radio? Pretty much zero too. But are you saying that advertisers should give up on those media too?

The overall issue is simply that search advertising is far more effective than display advertising (whether it's facebook or magazine ads). But that doesn't mean that display advertising is worthless. And in particular, display ads reach people who aren't searching.

And to be fair to "social media experts" - it hasn't really been them pushing facebook ads. They've tended to stick to their mantra of "you've got to build relationships on social media". Facebook ads have been pushed as the next big thing mainly by internet marketers. Probably 'cos they need a new product to sell or maybe because google has banned them from adwords.

At the end of the article you say "If you are an advertiser of products or services from your business, it is my professional opinion that to place advertisements on Facebook, rather than Google Adwords is a waste of both time and money".

True. But really, is anyone really doing this? Surely most people are advertising on Facebook in addition to adwords, not instead of.


Ian

Paul Chaney
Posted on December 5th 2012 at 12:08PM

Point well made Ian. In my view, one of the the best ways retailers can leverage the power and influence of social media is to ensure their e-commerce websites (especially product detail pages) are easily shareable, for it's there where the shopping intent is foremost in the mind of the consumer. The real value of social comes when consumers themselves share information about a product they like, want or have purchased rather than the brand inserting itself into the mix. 

ianbrodie
Posted on December 5th 2012 at 12:27PM

Very true. I'd guess your ROI would be higher from investments in making your stuff super easy to share rather than facebook advertising.

Ian

J.C. Kendall
Posted on December 5th 2012 at 3:35PM

I agree with you on this too, Paul. However, that shared information from consumers is much better distributed via Search, along with a Brand Page and Local Page driving relevant audiences to one's website, which is one of the reasons I strongly support the G+ approach. 

J.C. Kendall
Posted on December 5th 2012 at 3:33PM

Ian, I dont know that we have much disagreement here. I do feel however, that (at least in mine and my partner agencies) many businesses have invested in a Facebook only presence for advertisements, if only because they are more comfortable in that space selecting a demographic, rather than competing on a keyword. For reasons we are still exploring, there is a large class of people afraid of the Keyword concept. 

I also feel that a professional class of Facebook touting "Social Media Experts" are working to herd and contain users in that space, rather then let them explore more efficient/effective options. I anger a lot of these folks, because many of them have no clue with respect to Social Media SEO benefits. These are not actually unique to Google+, I also love what LinkedIn is doing these days. 

In your example of Print Media, you are working largely with a pre-analysed user base, where you can better tailor advertisements to the subject matter targets than a pure demographics play. But, I do agree that Facebook CTR is not the strongest of arguements for why I believe Facebook to be a waste of time, its only that there are so many less expensive and more effective options, which include a much better options for connecting with one's audience. 

Our business is in no way a Google+ Fan Boy, just ask Vic Gundotra, who simply cannot stand me anymore after all my griping. :-) We simply feel that for businesses today, in the face of all the uniformed noise in the Tech Media, that Google+ represents an overwhelming Social Media value proposition. 

ianbrodie
Posted on December 5th 2012 at 3:57PM

JC - you could be right about print media audiences being better understood - but that wasn't your original argument - that was abou tlack of commercial intent ;)

I think we must work in different worlds. With my clients (professional service businesses) there really isn't a bias for Facebook at all. Linkedin is the preferred social media, followed by Twitter. Facebook is viewed with hiuge skepticism.


But here's a bigger point: there's no need to make these grand "google+ good, facebook bad" pronouncements. Sweeping generalisations like this are almost as bad as sweeping generalisations saying businesses should all rush to Facebook.

The joy of online marketing is the ease of testing and measuring. Facebook works for some businesses, not so well for others. Same with other social media. Rather than trying to tell all businesses that they should be doing X or that Y is a waste of time, we should be showing them how to quickly test whether it will be useful for them. Then they can see for themselves and we don't have to make generalisations.


Ian

J.C. Kendall
Posted on December 5th 2012 at 6:27PM

Ian, I was careful to point out that many businesses do quite well with their Facebook presence. I am simply pointing out that Facebook offers (for free) no value that cannot be bettered elsewhere in the presence of Edge Rank. I believe that Edge Rank destroys Facebook's user number's advantage. If you or others can explain how (again, for free) Facebook better allows a business to connect with its users than Google+, I am willing to listen.