"Smartphones surpassed 125 million U.S. consumers and tablets are now owned by more than 50 million." 2012 Mobile Future in Focus, comScore
Facebook’s IPO has stirred up questions about its value for marketing, advertising and PR. This post looks into concerns about using the traditional ROI formula (Net profit in dollars/ Investment in dollars * 100 %) to calculate Facebook’s value for B2B communications. Subsequent posts look at other factors – such as strategic objectives, influence, education and engagement — that make Facebook’s 900,000,000-user ecosystem more valuable than strict ROI metrics can measure.
Facebook® is now worth billions of dollars. So it's weird that marketers who buy advertising on Facebook cannot easily determine if their Return on Investment (ROI) is paying off in dollars.
Measuring ROI for Facebook advertising is a major concern of marketers using social media. The week of Facebook’s IPO, NPR radio aired a report: “Pizza Delicious Bought An Ad On Facebook. How'd It Do?"
A small takeout shop selling New York-style pizza in New Orleans paid $240 for a Facebook ad. They ran two different campaigns targeting 224,000 people and 30,000 respectively. After the larger campaign bombed, they targeted the smaller group. The small campaign got more than twice the click-throughs and 20 times the number of Facebook friends. But over the measured time period, not a single customer bought pizza due to the Facebook ad. One Facebook friend, however, did donate $10.
This report drew over 150 comments, most from Facebook fanatics. They complained: the advertiser should have set their per-click cost at a lower rate. He should have offered a coupon. He should have included a QR code. He should have A/B tested their ad. He should have used different photos.
The most revealing comment, however, was from an avid Facebook user: “I was an early adopter. I've been on Facebook since it was still only at select universities, and in almost eight years NEVER clicked an ad on Facebook.”
Let’s dig into that comment. As mentioned elsewhere, there are repercussions to living in an “always on” digital culture. One of those repercussions is that we appear to be transitioning into one of Marshall McLuhan’s media “flip” or “reversal” moments.
The fastest growing technologies are those helping people to minimize or escape the always-on effects of digital technology.
Think about it: From hardware (smart phones, e-books and digital readers) to software (social media and mobile apps) to the Web (Google’s move to a more humane knowledge map search experience, users are seeking more personal, less commercial spaces to counter the otherwise denatured digital world they inhabit.
Social media guru Gwen Bell is advising marketers to “grow yourself and learn to Reverb” and to “take digital sabbaticals … time away from the web to think, play and grow.” Virtual reality pioneer Jaron Lanier is leading a provocative protest against a digital ecosystem manipulated “to remove the scent of people.”
Once upon a time, Facebook was a corner of the Web garden where you could have a quiet chat among friends without algorithms breathing down your neck.
But now the Facebook garden is caught up in Tulip Mania. Remember Holland, February 1637? Remember a single tulip bulb selling for $750,000 in today’s dollars?
People got confused about the real value of tulips because they lost sight of its basic nature.
A tulip is a flower.
Originally created to cultivate friendships (a.k.a. social networking), Facebook is an electronic garden party.
And just as you can’t squeeze blood out of a turnip, it’s going to be tough squeezing greenbacks out of Facebook’s social experience. Facebook has succeeded in making money for themselves. To make money for you, dear social media advertiser, Facebook will have to evolve. Facebook’s whiz kids will have to learn how to lure a sizeable number of folks interested in cultivating friendships into buying cash crops.
Social media by its nature is a channel of influence, not commerce. That reality will make it very difficult for Facebook to monetize and justify an ROI in terms of dollars. In the days ahead, B2B marketers will need to dig deep into media theory and the digital ecosystem to understand how to grow their business through Facebook.
Regardless of whether there’s an attractive ROI for Facebook advertising in terms of dollars per cash sale, 900,000,000 users hang out in the Facebook ecosystem. Consequently, B2B marketers may see results in terms of customer influence and engagement that are well worth their investment. To maximize your return in those terms, however, requires insight into your communication objectives and what social media can deliver – all subjects worth further exploration.