Advertising industry battles to prove it is useful to Facebook

Facebook faces financial conundrum

Facebook faces financial conundrum

Most Facebook users simply don’t see the advertising the site serves up to them. That’s a conclusion you can draw from a new study on “social advertising” – the fancy name given to placing an advert on a website…! Indeed, anyone running even the smallest business could work out that Facebook is a financial failure. Valued at over $10bn the company is only breaking even – in spite of being the busiest, most populated website in the world. If you ran the busiest, most populated website in your sector and you only broke even, wouldn’t you question your tactics?

According to Quantcast, Facebook is getting around 250m users each day from the USA alone. Alexa tells us that Facebook is reaching one in every three Internet users worldwide. And Compete shows that Facebook is getting 3bn visits each month. Yet, in spite of all that usage, Facebook is not making a profit; it is deriving a handsome income, of course, but only enough to finance its operations. The only source of that money is the advertising, but most of us don’t see it.

The latest study form Nielsen and Facebook themselves shows us why. And once again, the study confirms something which the advertising industry does not like to hear. So, let’s say this quietly….sshhh….”People don’t like adverts”. There, it’s been said; advertising – particularly online – is something we screen out. Google makes a handsome ($24bn) income from advertising, yet 75% of us ignore it. The new Facebook study shows that around 90% of us ignore the ads shown on the social site.

Google is currently getting very similar visitor numbers as Facebook; yet it makes money from adverts which are seen and used only by the minority, whereas Facebook doesn’t achieve the same. Here’s why; Facebook doesn’t have enough advertising.

For Facebook advertising to be noticed as much as Google’s and for the number of people to engage with it to increase, there is only one option for the company – more adverts. When you log into Facebook you’ll see only a couple of ads; when you search on Google you’ll see up to 13 at any one time. The more ads there are, the more we see them.

The only option for Facebook is to increase its number of adverts. But they face a problem; people dislike advertising. In spite of the advertising industry producing data on the number of click throughs, the numbers who intend to purchase following an advert and other fancy bits of information, the truth is most of us ignore it – more so online than in print or on TV, for instance.

On social networks there is another issue – at the moment we accept the low level of advertising on Facebook because it does not intrude on our networking with our friends. We don’t mind the intrusion in search at Google because we only look at the page for a few seconds; on Facebook the average time we are there is 34 minutes. Any increase in advertising will be viewed negatively. No matter how hard the advertising industry tries to tell their clients advertising works, it will not solve the problem facing Facebook.

The new research is also a signal to website owners. If you advertise your products and services you are only reaching a minority of users on the web. You could well have more cost-effective methods of getting to your audience than adverts. After all, if you advertise on Facebook, 90% of the users of that site won’t even know your advert is there. Does that seem worth it?

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Graham Jones
Graham Jones is an Internet Psychologist who studies the way people use the online world, in particular how people engage with businesses. He uses this knowledge to help companies improve their online connections to their customers and potential customers and offers consultancy, workshops, masterclasses and webinars. He also speaks regularly at conferences and business events. Graham is an award-winning writer and the author of 32 books, several of which are about various aspects of the Internet. For more information connect with me on Google+
Graham Jones

@grahamjones

Graham Jones is an Internet Psychologist, professional speaker and author of 32 books who helps businesses understand the online behaviour of their customers
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