It may look as though I have a fixation about Facebook and I have to admit I probably do. But I really should be more annoyed by the advertisers who appear to be allowing themselves to be bullied by the company. The ridiculous notion that I might want to ‘join us on Facebook’ which mow is the tagline on ads for everything from chewing gum to garden hoses irritates the viewer and demeans the advertiser. Like some anxious, needy nerd elbowing him or herself into a conversation that he or she has nothing to contribute. The dynamics are a complete contradiction to how normal relationships operate. You will read more of this in Michael Bayler’s article in the June issue of Market Leader, but for the moment, this is my rant, pleasingly accompanied by some data.
A recent article in the Wall St Journal laid out some facts that should make advertisers pause in their apparently headlong rush to throw money at Facebook.
The $3 billion that Facebook has accumulated is one thing but , as the WSJ, points out, there are serious questions being raised by bankers and prospective investors who have to decide how to value Facebook for an initial public offering on May 18. A Facebook roadshow starts Monday the 9th. Facebook is seeking a $100billion valuation but there are many doubts. That figure sounds like hubris: it would be 33 times its advertising revenue compared with 5.5 times for Google.
An analyst was quoted as saying that in order to justify that valuation, Facebook’s revenue would have to grow 41% annually for the next 5 years. And although Facebook is a young company that is a much steeper climb than Google’s revenue growth of 24% in 2010 and 29% in 2011. . Furthermore, the advertising revenue doesn’t always go up. Although the company reported its first quarter ad revenue rose 37% from a year ago, it was down 7.5% from the previous three months.
Bu what are the facts so far? The key required fact, of course, is what are advertisers getting for their money? Is this a model that will last? Do ‘likes’ translate into anything at all? Sales or even brand favourability? The jury is clearly out although both advertisers and research companies are experimenting with ways of measuring return.
But unlike Google or Yahoo, measuring the effectiveness of ads on Facebook is made particularly difficult because the company doesn’t permit third-party surveys or allow ads to be tagged by ‘cookies’My own prejudice is that social media advertising is currently fashionable and like all fashionable things will eventually peter out – or at least slow down. The main finding that we are seeing glimpses of now in market research studies is that the only reason consumers pay any attention to advertising or brands on social media is the promise of free stuff. The longer term damage is a distraction from the more important role of communication which is brand building and maintaining. There’s no evidence that social media are any good at this at all.