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With over one billion users, Facebook is now about three times the size of the US population. But, the social networking site is struggling to prove that it can make money from this huge pool of users.
According to a study by HubSpot, 93 per cent of adults on the internet are on Facebook, yet only one per cent of a brand's Facebook fans make their way to company websites. It was probably the low conversion rates that led General Motors to pull out its ads from Facebook, billing them as "ineffective".
Days before Facebook's IPO (earlier this year), this move from a company that had reportedly spent close to $10 million on Facebook advertisements alone in 2011, forced many to reconsider their social marketing plans on the social platform.
Since its IPO and advertisers like GM pulling out, Facebook has unveiled a variety of new advertising capabilities in recent months, including ads designed to be viewed on smartphones, various formats that advertisers can measure, and the Facebook Exchange where advertisers bid real-time so that ads are delivered quickly and are more relevant to users."This means that in addition to targeting the types of people you want to reach among the Facebook population, you can now also reach segments of specific people based on information you have about your own, offline audiences," Facebook explains on its own site
The new moves to make advertising more relevant and targeted to users on Facebook seem to have gone down well among marketers. Sunny Nagpal, MD & Co-Founder, Httpool India that has executed over 500 online, mobile, search and social media advertising campaigns for brands such as Airtel, Nokia, Cadbury, Tourism Australia, Tata etc, says, "Telecom and autos are two of the most active advertiser categories on digital media in India. Auto marketers seek profiling more than telcos, and options provided by FB in its advertising options to segregate audience can be a real game changer."
But a study by WordStream, a search marketing management company, argues that Facebook comes across to be a less effective ad medium than Google. "Somehow Facebook still hasn't stumbled upon a model that's proven consistently successful for marketers, or that brings in the revenues to match the site's massive user base," Forrester Research analyst Nate Elliott noted in a blog post.
Just as GM realised that people simply weren't looking to purchase cars when they are on Facebook, brands, digital marketers and agencies in India too are beginning to see sense in the argument. But it's not an industry-wide realisation, claim digital marketing agencies. In India, where 25.2 per cent of internet usage is for social networking (comScore data) and over 53 million Indian users have a Facebook account, it's rather difficult to convince brands to shift attention away from Facebook.
Recently Facebook shared data that claimed that 70 per cent of campaigns (on its platform) resulted in a return on ad spend of three times or better, and 49 per cent of campaigns showed a return on ad spend of five times or better.
Zafar Rais of digital media agency, MindShift Interactive, says, "Before Indian brands opt for Facebook ads, it is important to know what type of consumer is on its mind. Further, brands must understand that Facebook ads can be used primarily to drive website traffic, acquire fans for the brand's page on the platform and build sponsored stories that can be shared in a form as ads among friends (such as "ABC" likes this brand," to gain fans socially)." Facebook essentially enables advertisers to place text and image ads on its platform targeting audiences by variables like age, location, birthday, hobbies, etc.
But how does one engage, nurture and monetize those fans and show a return on investment?
Nagpal of Httpool admits that clickthrough rates (CTR) are really low on FB (as like on most social networking sites). "CTR is not the metric you need to check and ROI should not be measured by sales generated but by growth of a page," he reasons.
The CTR of an advertisement is defined as the number of clicks on an ad divided by the number of times the ad is shown, expressed as a percentage. The average CTR of an ad on Google display network is about 0.4 per cent or 10 times higher than Facebook ads, claims a study by Wordstream.
Ads that are tailored for brands' fans on Facebook deliver the best return on investment, underlines Rais. Acquiring fans through ads is the first step on the journey to monetizing marketing efforts, he believes.
"The new advertising and marketing initiatives (introduced by Facebook) in one part make the brand's approach to the advertising easier and will help the advertiser come onto the ad-platform easily. The other part, of generating better reach is a good initiative, but will only work if it is non-intrusive to Facebook user," says N Chandramouli, CEO of Comniscient Group, which has been a communication consultant to several global companies that include brands such as DHL, Henkel, Botox, D&B and J&J.
While users on Facebook do not come looking for services and goods, those on Google (Search) are almost always searching for them. Marketers agree that it is easier to lure a consumer on Google with a sponsored listing or ad versus on Facebook. "Both, Facebook and Google offer paid advertising models in addition to free online marketing tools like Facebook Fan Pages and Google+ Business Pages. These pages don't require the marketer to pay, but are considered great venues for promoting brands and products. The key difference for advertisers to understand between Facebook and Google lies in purpose-is the brand trying to promote knowledge about itself, or sell a specific product?," says Advit Sahdev, CEO of ODigM, an online digital marketing company.