Is Social Media Advertising In Trouble?

As many of you are aware, Facebook recently went public on the stock market (Friday May 18, 2012) and for its first day of trading before the market closed, it was staying put at a respectable $38 and change a share. So when Wall Street opened back up on Monday today (May 21, 2012) and the stock dropped little over $4 a share to $34, a lot of people are wondering why. Is this the start of an unfortunate trend for Facebook? Read on past the jump and I'll cover why its value dropped and what exactly this means for social media advertising.


When Facebook was first announced to go public, I was a bit excited as this was a company who seemed to primarily make the lions share of its money off of selling advertising space. To many traders and Facebook fans I think it was viewed as "the new hotness" if you will. Something brand spanking new, well known, and popular and now it was finally YOUR chance to break off a piece for yourself.

Things where set to go great and I was confident that, especially with Facebooks Reach generator tool (that I wrote about here), the company was making some pretty nice strides into how it handles its business and the business's of others.

The blow to Facebook over such a short time span was that General Motors, apparently one of the largest purchasers of advertising space on Facebook, pulled their 10 Million dollar campaign due to low click-through rates (before the stock even went public). While this isn't the first time a company has pulled their campaign from Facebook for poor results (and won't be the last) it raises some interesting points now that the Facebook stock honeymoon is over:


Namely, was the campaign GM ran on Facebook conductive to the platform and targeted at a logical user base, or are people just not clicking on Facebook ads any more?

According to TheAtlantic.com, on average Facebook users click on 1 out of every 2,000 ads they see. Also according to the article, Facebooks ad click through rate (or CTR) is significantly lower than Google's system or even the general average.

This leads us into the next and most important point; You can't just put regular old banner advertisements up any more. Especially on social community focused websites. You need to directly engage the end user for results. While you might catch a few lackadaisical potential customers who have a passing interest or think the ad looks cool, people tend to only act when it benefits them personally (seriously, think about it) so you need to go after the userbase aggressively.  In this regard, social media advertising is in trouble, because most companies still aren't tapping into its full potential.

Campaigns like Burger Kings Whopper Sacrifice and Dominos Half off Pizza Day are the right way to go about doing things. They directly engage the userbase and reward them for their efforts with real world value, a concept that's very important to make note of in today on-demand society.

Personally I highly doubt this is Facebooks death kneel as many people seem to think, but for a social networking company, it is entering its twilight years. That said, they're going to need something huge to keep their userbase from straying and its stocks from steadily dropping now that there's a little bitterness to its taste.



If you liked the above entry, check out these:
Basic Social Media Tips and Tricks
Facebooks Reach

Posted in: advertising, facebook, social media