Is Facebook Advertising Effective?
Posted by Nick O'Neill on November 16th, 2007 10:07 AMFred Wilson has been updating the world about his venture in Facebook advertising over the past week. Today, Fred posted and updated screenshot of his ad campaign’s performance and it doesn’t appear to be too stellar. For one of his campaigns, out of 10,080 impressions there were only 8 clicks. The average cost-per-click for Fred was $0.08 and the average CPM was $0.06. This is a less than stellar performance. This is nothing new though.
Facebook has continuously produced less than stellar results for advertisers. With historically high CPMs and historically low click-thrus, Facebook is facing a challenge. Their new ad system has significantly reduced the CPM for those that opt for the cost-per-click (CPC) model. The only problem is that there are no clicks. While the targeting is phenomenal, Facebook users are more engaged by the content within the site rather than the advertisements. Perhaps Facebook is a little too engaging.
This is going to be a significant problem for Facebook over the next few months. With a valuation of $15 billion thanks to Microsoft’s investment, Facebook will have to start producing numbers that validates its astronomical valuation. The only solution I see for Facebook is to extend their advertising platform outside of Facebook as I previously suggested they would soon start to do. Aside from that, I’m not sure what else Facebook can do to improve the performance of their ads.
Have you had any good experiences with Facebook’s new ad system?
November 16th, 2007 at 10:44 am
Facebook should add web search into their search capabilities and display related Facebook’s advertisers adds in there. Facebook’s users are so “engaged” to Facebook that I believe they would be more than happy to search the web inside Facebook instead of have to go other site. An for Facebook’s advertisers is a new opportunity to capture people’s attention.
Search adds is a great business model, just ask Google :o)
November 16th, 2007 at 11:17 am
[…] allfacebook - the unofficial facebook blog « Is Facebook Advertising Effective? […]
November 16th, 2007 at 12:30 pm
[…] Henry Blodget’s article yesterday raises some pretty interesting points about Facebook’s current financial state when coupled with the effectiveness of Facebook’s advertising model. […]
November 16th, 2007 at 12:46 pm
I would be interested in seeing the ad itself, as the ads I’ve run have converted much better than this. Perhaps it’s the layout/wording of his ad, or perhaps even the niche vs. the average Facebook user. More info would be handy for making an educated decision here.
November 16th, 2007 at 1:17 pm
Yes, I have had fine advertising success with Facebook, as I have already stated. If your max CPC is $0.10 because you are an affiliate market (i.e. web spammer), you will not generate any impressions (or clicks) because your bid is ridiculously low. It’s not rocket science people: set a realistic bid and you will get your clicks.
November 17th, 2007 at 2:54 am
[…] (source) […]
November 17th, 2007 at 1:02 pm
>>>affiliate market (i.e. web spammer)
Wow, now there is an uneducated and assumptive statement. For the record, not all affiliates are spammers any more than all teenagers with their underwear showing on street corners are drug dealers.
November 18th, 2007 at 12:31 am
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November 18th, 2007 at 2:31 am
Why “Facebook will have to start producing numbers that validates its astronomical valuation”?
They don’t need money. We don’t have their share. Users need good experience. Best strategy for FaceBook is forgetting about money, continue to provide better user experience, killing all other social network (including funny Google social)and dominate the world. Then the money will come.
FB seems very smart not so hastily to monetize.
November 18th, 2007 at 2:40 am
Your article is right on. Social Networks focus the user on the content. Usually the advertising gets in the way, and users are more interested in the content and don’t click on ads, so the CTR and eCPMs are poor. Facebook is trying to make the ads as attractive as the content.
As to Facebook’s valuation, I made a few rough calculations: http://fishtrain.com/2007/11/07/facebook-valuation/
November 18th, 2007 at 2:43 am
I’ve gotten 100 “fans” on my fan page, so I’d say it’s effective for brand enhancement, at the least.
http://www.facebook.com/profile.php?id=8431870131&ref=mf
November 18th, 2007 at 4:32 am
Chris Kennedy - it’s not as simple at that. Obviously, if you don’t bid to get impressions you won’t get clicks. But Fred (and me) get the impressions, just no clicks to speak of. I’ve had a campaign running for a couple of weeks. It is wildly variable in how many impressions it gets, but I’ve only had eight clicks out of a a huge number of impressions. Utter rubbish. I guess it then boils down to the advert content - what do you advertise that works and what sort of rate do you get?
November 18th, 2007 at 7:18 am
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November 18th, 2007 at 9:15 am
There are people out there that wonder why a VC doesn’t get higher click-through-rates?! Omg, you should get out again with friends that are NOT entrepreneurs. There are millions of them out there. And they don’t give a shit about a Union Square Ventures-ad on Facebook!
November 18th, 2007 at 1:42 pm
As I wrote in my post way back in August (in Facebook time, that’s like a year) - I predicted that demographic & 3rd party site advertising would be the only way to really justify the valuation.
http://www.vinnylingham.com/why-is-facebook-worth-10bn.html
November 18th, 2007 at 10:37 pm
Chris Kennedy , you are missing the point.
People are getting impressions with low CPCs. but they are getting very low click through rate.
8 clicks / 10,080 impressions = 0.08% click through rate.
that’s pathetic. and how many of these 8 clicks actually get converted?
November 19th, 2007 at 9:22 am
It’s about where users want to be - within Facebook. I’m curious as to what the numbers would be if you were advertising a FB Page or App with FB advertising options rather than something off-site. I think this is where the rub lies.
November 19th, 2007 at 11:47 am
[…] ads we put up last week aren’t performing well yet. But I still think they can make sense. Nick at AllFacebook.com isn’t so […]
November 19th, 2007 at 2:58 pm
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November 19th, 2007 at 4:38 pm
Click-through rate hardly matters with CPC advertising on a site where users spend an average of 30 minutes a day and 50% login in daily. That is a ridiculous number of impressions per user and understandably will generate low click-through rates when there is no user intent driving the ad placement, but when you can get a million uber targeted impressions in a day, 800 clicks is pretty solid. Add in the new social referral system available through beacons and CTRs will no doubt improve.
Facebook is a social web application, not a search engine, so you need to accept low CTRs in exchange for insane targeting to users who have expressed no intent, and a correspondingly huge number of impressions. If you’re so worried about CTR just do search advertising and get exactly the users who have self-selected an interest.
November 21st, 2007 at 6:38 am
[…] that Fred Wilson has been experimenting with Facebook advertising and having limited success. In this one example they provided they had 8 click throughs for a bundle of 1000 ad inventory. I still have had my dashboard properly populated by Facebook for my $20 […]
November 21st, 2007 at 11:49 am
[…] at allfacebook.com raises some interesting issues about the poor click-through rates for Facebook’s new advertising system. I subscribe to […]
November 22nd, 2007 at 9:01 am
[…] because Facebook provides real value to users doesn’t mean that value is easily monetized (through advertising, for example). Maybe Jason Calacanis was right when he said, “Social networking is second […]
November 29th, 2007 at 11:36 pm
[…] While the users who are left will clearly be “happier”, and a better representation of users who want to actually share their purchases, and therefore, hopefully a better “quality” of traffic that ultimately converts for these advertisers as the percentage of people clicking on any ads in the past has been utterly abysmal. […]
December 4th, 2007 at 3:09 pm
It’s not true that a maximum bid of .10 on CPC will result in no impressions. That was my maximum bid and I had 1000 impressions within 24 hours. I do agree though that the click through rate is not great but at least I’m not paying for the impressions (which is an option).
December 5th, 2007 at 12:41 am
[…] have been various people talking about the value of advertising on Facebook.com recently. Most coming to the conclusion that putting an ad up on […]
December 27th, 2007 at 9:42 am
Facebook advertising, or most of web advertisement will never be trully effective for the ‘users’ who have even a tiny bit of knowledge about PC’s. For example right now, I don’t even see any add’s when browsing digg.com or facebook.com - I simply block them automatically with Firefox adblock.
February 18th, 2008 at 2:33 pm
we advertise on facebook - not good 16000 impression and only 5 clicks - how sad is that?
April 12th, 2008 at 4:52 pm
I was considering advertising on Facebook, but things seem kind of grim after reading this article. Are there any good sites for advertising your websites?
May 12th, 2008 at 2:25 am
I think they are not 100% ready as an advertising platform