May 21, 2012

A Closer Look At Facebook's Problematic Advertising Model: In Wake Of GM Quitting Facebook, 44% of People Say They Would "Never" Click on Social Giant's Sponsored Ads, New Greenlight Survey Reveals — So Should Brands Keep Spending?

A global survey undertaken by independent digital marketing agency Greenlight reveals that 30% of people "strongly distrust" Facebook with their personal data, while 44% say they would "never" click on Facebook sponsored ads — all of which indicates Facebook's advertising program has a big challenge ahead. Greenlight's global Search & Social Survey (2011-2012) asked 500 people — from students, law enforcement professionals, medical staff, accountants, lawyers to the unemployed — how they engage with online advertising, search engines and social networks, in order to glean insight into how consumers engage with marketers today, and to formulate views on what the future might hold. As expected, 50% of respondents said they use Facebook for social engagement, sharing photos and catching up with friends and family. Facebook ranked as the third most popular website (after Google and YouTube) when asked "How regularly do you use the following websites/services?" It ranked second when asked "Which of the following do you use on your mobile phone?," with roughly 30% of those surveyed saying they use Facebook on their mobiles and tablets. "Facebook's popularity doesn't come as a surprise. However, with over 30% of respondents saying they 'strongly distrust' Facebook with their personal data, Facebook's advertising program has an upward struggle," said Hannah Kimuyu, director of paid media at Greenlight, in a news release. "Facebook's advertising program allows brands to connect with more than 800 million potential customers, through targeting their age, gender, location and interests — in other words, personal data." When asked "Do you click on advertisements or sponsored listings in Facebook," just 3% of respondents answered "'regularly" and 10% "often." The alarming response was the 44% that answered "never." But does this reflect an advertiser's point of view? "For Greenlight and many other agencies and brands, advertising on Facebook has become part of the 'usual mix,'" said Kimuyu. "We specifically saw our Facebook investment (client media spend) overtake both Yahoo and Bing collectively at the start of 2011 — hinting that the channel has constant growth and is delivering a strong enough return to invest more."

Kimuyu points out that similarly to Google's Display Network (GDN), Facebook has spent the last 12 months developing its advertising program, slowly moving from offering just branded advertising (Fan Acquisitions) to becoming a serious direct acquisition channel. "Many of the developments are appealing to retail brands, especially with retail being the most active in the space. Most recently we have seen one high street retailer achieve a 15% higher average basket value and a 20% increase in conversion rates on Facebook, when compared to its Search activity."

So when is Facebook most effective? The most popular and effective ad format is the Sponsored Story. The format delivers, on average, a 32% decrease in cost per acquisitions (sales) and an increase in CTR (engagement). "When running both the traditional ad format alongside a sponsored story format, we tend to see at least a 30% increase in conversion rates, again with retail leading across the sectors," said Kimuyu.

"Although 44% say they would 'never' click on advertisements or sponsored listings in Facebook, it is interesting to see that those who do so find the targeting effective and engaging," Kimuyu added. "Moreover, given the positive growth figures, we at Greenlight predict that more of us will be advertising and hopefully 'clicking' on an advertisement or a sponsored listing on Facebook this year."