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More on why marketers fail with Facebook ads

May 23, 2012 | Online Marketing

Making social-media communications work requires heavier lift than many organizations can muster. Brands struggle to reap real value from its social interactions, which often start with paid advertising.

Most Facebook ads are bought on a cost-per-click basis. This means the front-end cost of getting a potential consumer to respond is low, typically less than $2 per click. Each click on a Facebook ad puts a consumer on your product web site. If you then can get only 1 percent of those consumers who click on ads to “convert” and buy your product, you’ve achieved a $200 cost per sale. In essence, marketers try to buy customers at the lowest cost per sale possible. Paying $200 per new customer isn’t bad for many business models.

The challenge with Facebook, though, is that conversion rates can be very low in some product categories. Social media users are being social, after all. Unlike the pay-per-click ads that Google (GOOG) serves up only after consumers type in the names of products they are hunting, Facebook ads pop up while you’re bragging about your five-mile run. Curious tire-kickers might click on a GM Facebook ad to see the sexy Chevy Volt, but that doesn’t mean they want to buy one. If your conversion rate—the portion of people who eventually buy after clicking on your Facebook ad—falls from 1 percent to 0.1 percent, you’re now talking a $2,000 per-sale cost. That’s an expensive customer acquisition.

The second challenge with Facebook is that brands struggle to reap real value from its social interactions, which often start with paid advertising. Facebook is famous for its “likes,” which supposedly open the door to a wonderful engagement between brands and consumers. If a consumer sees your Facebook ad, she might “like” your brand, allowing its content to pop up again later in her Facebook stream. The idea is that you move from being an old-fashioned, interruptive advertiser to become a real “friend” of the consumer, sharing brand stories in the middle of her Facebook page, right next to her college roommate’s cat photos.

Get the full story at Bloomberg Businessweek

Read also "Why Google ads work and Facebook ads don’t"

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