Advertisers and Facebook face an uphill battle. But it could be worth it.
With its initial public offering, Facebook has gotten flak for its advertising scheme, which critics say is 鈥渋mmature.鈥� Although some say General Motor鈥檚 decision to stop advertising on the social network won鈥檛 have an enormous impact on Facebook鈥檚 IPO, the motor company has sparked more debate about Mark Zuckerberg鈥檚 company.
Facebook rakes in most of its money through advertisers, the company鈥檚听 confirmed. Last year, 85 percent of its revenue 鈥� about $3.15 billion, some from big-name advertisers including Nike, Ford, and Wal-Mart. But reports say GM wants out after spending about $10 million on the site, not including the $30 million it regularly spends soliciting advertising agencies to create and manage content destined for Facebook.
Some say GM鈥檚 decision is indicative of a combination of Facebook鈥檚 fad factor, as well as its primitive advertising scheme and fluctuating revenue. The social media giant听 of its ad revenue in 2012鈥檚 first-quarter, and half of Americans听think the website is a passing fad. But Zuckerberg and his team have said they are more concerned with staying relevant and connecting users than welcoming advertisers 鈥� a business ethic that so far has had positive ramifications.
鈥淲e believe that if we build a product where people can connect and can express all the things that they want about themselves, that over the very long term we鈥檒l have a lot of people doing that,鈥� Zuckerberg听. 鈥淎nd they鈥檒l be very active, and we鈥檒l have opportunities to sell advertising and do all these things and build a great business. But none of that is the leading thing that we鈥檙e pushing for.鈥�
Facebook鈥檚 push to meet the user鈥檚 wants and needs first, rather than build a website primarily designed to attract advertisers, could be its saving grace. Advertisers might be wary as a result of GM鈥檚 decision to cut ties with the social network, but its cultural prowess makes it hard to ignore, even if investing is a gamble.
鈥淸GM] will make people rethink how well their investments are working on Facebook but I can鈥檛 see a bunch of people following suit,鈥� Peter Kim, chief strategy officer of the marketing firm Dachis Group,听.
Because they can鈥檛 afford to. Although 鈥渋t is very hard to understand the efficacy of what a Facebook like, or fan, or follow is worth,鈥� as Media Kitchen chief digital media officer Darren Herman听, they mean something thanks to Zuckerberg鈥檚 creative team. Unfortunately for advertisers, something听isn鈥檛 hard currency.
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鈥淭here鈥檚 a lot of potential but it鈥檚 not a slam-dunk,鈥� Martin Sorrell, chief executive of WPP Plc, the world鈥檚 largest advertising agency,听.
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Whereas advertisers have a solid understanding of avenues like television, where there are definite guidelines in the realm of product placements and 30-second spots, delivering information to social media users is more difficult. But it鈥檚 possible that GM and other companies who have reigned in their investments could come crawling back 鈥� if anyone discovers the magic equation.
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