Perhaps money can't buy you love, but it's been known to buy you friends on Facebook. Webtrends's
white paper analysis of Facebook ad campaigns found that the cost of
advertising on the social network that attracts users to fan pages now
costs $1.07. However out of 11,200 ad campaigns which totaled 4.5
billion impressions the average click-through rate dropped from 0.063
percent last year to 0.051 percent in 2010.
Last March, Webtrends produced the following video to indicate why they measure Facebook trends.
And while this 30-second promo is very upbeat and positive, it's dated and doesn't account for why Facebook's ad effectiveness has declined, making their latest report even more telling.
Due to the click-through rate decline, Facebook has compensated for a potential revenue dip by actually increasing their CPMs from 17 cents in 2009 to 25 cents last year. In comparison, Facebook's rates are still markedly below other Web sites. The Wall Street Journal notes that display ads can range from $2 to $8 per thousand dependent on the site and type of advertisers.
So why the decline? Justin Kistner, Webtrends' senior manager of product marketing believes that today's ads are becoming ineffective because they are becoming repetitively boring where Facebook users are learning to ignore them entirely. This is similar to Google ads during the last decade. Over time, when searching the Web, we tended to avoid ad links in favor of organic links that ranked high on the first page of one of Google's search result.
A solid fan base is important for messages to resonate on any social network. Those that purchase fans and friends on Facebook and Twitter normally end up with a greater quantity, but not necessarily a greater quality of followers.
So advertisements directed to those folks are going to have less impact than perhaps a smaller number of fans who feel really passionate about a certain brand - and were attracted to that brand based on that passion. Kistner agreed that the campaigns that actually drive return on investment ads are those that are usually built on top of "a good fan base."
According to an AdWeek report, the only ad categories that were able to crack 0.1 percent click-throughs were "tabloids and blogs" (0.165 percent) and "media and entertainment" (0.154 percent). The category with the poorest results was "healthcare" which only generated 0.011 percent click-through rats with aver cost-per-click of $1.27.
Webtrends' analysis of social ads indicates that even the most successful campaigns are only effective for a short period of time. Out of the ads they measured, they found that interest-targeted ads began to burn out after three to five days. “Eventually the rotting CTR leads to Facebook deactivating the ad, and it’s back to the drawing board,” noted Kistner.
"Fan nurturing" defines marketers who prioritize nurturing relationships with their prospects and customers on social networks. These brands are the ones that succeed versus others that continually "push" out their message. The MarketingProfessor categorizes the evolutionary process from customer "acquisition" to "retention," as follows.
Customer Acquisition to Retention
If we've learned anything from the Web 2.0 environment that's been proven time and time again - it's that people buy from those they know, like and trust. These type of relationships produce a vetting process that aids in converting prospects to customers. While this paradigm is as much an art as a science, it is cautionary tale that Facebook and other social networks need to be cognizant of, less they continue to face a drop in CTRs going forward.