The past two months have been very interesting for Facebook. With the IPO ups and down and another lawsuit on the way Facebook has seen better days. GM recently closed their advertising account with Facebook and that made people wonder. Does advertising work on Facebook? Well they are looking to hush the critics of their site, check out the story below.
Facebook Inc. (FB)’s marketing and advertising encourages users to buy products in stores and online, the social-networking company said in a joint report with researcher ComScore Inc. (SCOR), countering criticism and research that questioned the impact of promotions on the site.
Users who saw unpaid marketing messages on the social network about Starbucks Corp. (SBUX) bought an item at the coffee chain within four weeks 38 percent more often than those who didn’t, said Andrew Lipsman, vice president of industry analysis at ComScore. The Facebook members included those who “liked†Starbucks and their friends.
Users who saw paid ads for another U.S. retailer, which the report didn’t identify, bought something from the stores’ physical locations 16 percent more often, and made an online purchase 56 percent more frequently, the report found.
“This provides some strong evidence that Facebook can be an effective marketing channel,†Lipsman said in an interview. “These are strong results.â€
Menlo Park, California-based Facebook, owner of the world’s most popular social-networking service, is trying to woo advertisers and show that its service is effective as it works to boost revenue from the site, which has more than 900 million members.
Last month, just before Facebook held its initial public offering, General Motors Co. (GM) said it no longer intended to advertise on Facebook. And last week, a Reuters/Ipsos poll showed a minority of users being influenced by ads. Just 1 in 5 people on Facebook have bought products because of advertising or comments they saw on the site, that poll found.
Advertiser ‘Confidence’
Still, Facebook says its advertising provides strong results for customers. Its own research shows companies saw a return of $3 for every $1 they spent in 70 percent of advertising campaigns, according to Brad Smallwood, head of measurement and insights at Facebook. For almost half of campaigns, it was $5 for every $1, he said.
“They have a lot of confidence that it’s working,†Smallwood said.
The research includes more than 60 advertising campaigns over the past couple of years, he said. The ads in these campaigns were for desktop — not mobile — users, he said. The company, which rolled out its mobile-ad service earlier this year, said last month that growth in advertising revenue is failing to keep up with user gains as more people access the site through mobile devices.
Target’s Results
ComScore’s research also looked at Target Corp. (TGT)’s results, Lipsman said. The research showed that Facebook members who “like†the retailer, along with their friends, bought at Target 21 percent more frequently, including both in-store and online purchases.
Marketing on Facebook by setting up a brand page is free to companies, though it depends on users clicking to “like†the page, which then lets the business post messages on members’ News Feeds. With other Facebook advertising, companies pay for their spots to be highlighted or placed on pages throughout the service.
Facebook shares rose 1.5 percent to $27.40 at the close. The stock has dropped 28 percent since the shares began trading at $38 on May 18.
