It was Graham Phillips, the former CEO of Ogilvy and Mather who said “Too much of today’s advertising is irrelevant and a waste of money.”
He wasn’t talking about Facebook’s lack of success with advertising, but the sentiment is quite fitting. After the world’s most popular social network went public with a near-$100 billion valuation, then saw its stocks promptly slide downwards, questions are coming to bear about its ability to turn a profit.
New developments are bringing attention to Facebook’s advertising platform and its effectiveness, or rather, ineffectiveness. A new Reuters/Ipsos poll shows 80 per cent of Facebook users have never bought a product or service as a result of Facebook ads. An independent analysis released by Webtrends in January estimates Facebook’s average click-through rate at a paltry 0.051 per cent for the year 2010.
Big brands are openly doubting the social network’s ability to influence purchasing decisions, with General Motors announcing that it will no longer be advertising on Facebook. So maybe advertising isn’t being proven to work on Facebook. But when has advertising ever been proven to work?
The first obvious point of comparison is Google’s AdWords. Rather than targeting Web surfers by their likes and demographic information, Google simply delivers text-based ads based on what you typed into its search box. According to WordStream, which sells services for use with Google AdWords, Google’s 2010 click-through rate averaged 0.4 per cent in the first half of 2011. While eight times
higher than Facebook’s rate, it’s still hardly a resounding endorsement of the effectiveness of advertising.
Before online tracking, marketers had little to go on to know just how effective their advertisements were. The purchase of a bill board above a highway or a full-page ad in a daily newspaper has no feedback mechanism. You can track sales and correlate it with when and where an ad was run, but that’s not the same as showing the ad caused those sales.
Even an advertisement on TV or radio is pretty much a shot in the dark. Benchmarks like Nielson ratings provide an estimate at the audience reach based on a statistical sample, but the effectiveness of the ad after that is all guess work.
It used to be that advertising was just accepted as something that a business had to do to compete. If the consumer wasn’t aware of your company’s existence, and what your product or service did, then what hope did you have to make sales?
We live in a world over-saturated with advertising. It’s plastered to the buses we ride, it interrupts the TV programs we watch, its delivered to our smartphones, it clutters the borders of the Web sites we visit, it’s on the clothing we wear and adorns the packaging of products we buy, it blares at us from TV screens in mall food courts, and it beckons to us on Facebook. When people are overwhelmed by information, they just tune it out and that’s exactly what we do with advertising. We’ve all become experts at ignoring ad content and looking only at what we want to see.
Now that advertisers can plainly see the effectiveness of their calls to action on Facebook and elsewhere, they are now learning what Graham Phillips already knew.