May 18, 2012
Does Facebook Advertising Actually Work? New Research From WordStream on Facebook Ad Performance Offers Clues as to Why General Motors Stopped Advertising on Facebook — And Finds Google Has More To Offer Right Now
On the eve of Facebook's initial public offering, the markets are contemplating why auto manufacturer General Motors decided abruptly yesterday to terminate advertising on Facebook. WordStream, a provider of search engine marketing software and services, has released new research comparing the value of Facebook advertising to Google's Display Network — the portion of Google's advertising business that allows advertisers to place display ads on Google sites such as YouTube, Gmail, Blogger and over 2 million other websites, including popular news sites, blogs and other niche sites across the Internet, rather than alongside search results. The research, which offers possible clues as to why GM may have dropped all Facebook advertising, evaluates Facebook's display advertising business versus the Google Display Network on criteria including advertising reach, ad performance, revenues and growth, ad formats and targeting options. The comparison suggests that Google currently offers advertisers more value in terms of both options and results for advertisers, and that Facebook has a lot of catching up to do to provide advertisers with the best possible advertising solutions. "So far, Facebook's advertising platform hasn't kept pace with the explosive growth of its social network, and it remains to be seen if CEO Mark Zuckerberg even wants to focus on advertising as a source of revenue. In his 2,500+ word letter to shareholders this month, he mentioned advertising just once," said Larry Kim, founder and CTO of WordStream, in a news release.
Results of the study include:
- The average click-through rate (CTR) of an ad on the Google Display Network is 0.4% — almost 10 times as high as the typical Facebook ad. Average CTR on Facebook is under 0.05%, about half the industry average for online banner ads. At the same time, costs per thousand impressions on Facebook are climbing.
- The Google Display Network offers twice as many ad formats as Facebook, including in-video ads, mobile-game ads, support for industry-standard image ads, and more.
- Facebook does not yet support mobile advertising and has more limited targeting options than Google.