Are Facebook Advertisers Wasting Millions of Dollars?

At $1.74 per click and $0.75 CPM, is the social networking giant screwing advertisers? Facebook loves to brag about its success, even at the risk of putting us to sleep. There's no denying that the site is popular; at 750 million users, the social networking entity has become an enormous enterprise. Even if 10% of those accounts were fakes and/or duplicates (many users have more than one), Facebook would still be the most popular social network in the world. But after years of impressive growth, both in terms of users and its bottom line, Facebook has yet to show any significant proof that its silly advertising scheme works. Consequently, the cost per click and cost per thousand do not add up. While $0.75 might sound like a small price to pay for 1,000 impressions (especially when you consider that each individual impression amounts to no more than $0.00075), that money is wasted if none of those people click on the link. And if they do click on the link but fail to spend any money, the advertiser has just wasted another $1.74 – not for every 1,000 Facebook users but for every single click! I personally have been a member of the site for more than three years and I have never clicked on a single ad, whether it says “sponsored” or not. Frankly, the “Recommended Pages” could be construed as advertising as well, even though Facebook does not openly charge for them. This year, the sponsored ads seem to be more relevant (in relation to my “Likes,” at least). But I have yet to click on one. Am I the only user? In 2007, one study indicated that the click-through rate was as low as 0.04%. Today, that rate has dropped to 0.0005% (roughly one click for every 2,000 impressions). There are, however, two areas of advertising that do pretty well on Facebook: Recommended Pages and wall postings. The latter is a no-brainer: if you like a company, product, service, or item enough to publicly “Like” it on Facebook, you are bound to visit that company's page at least once. Even if you don't, you are still going to see one or more of their wall posts in your feed, and may eventually be inspired to click on one of their links. Coupons are especially effective in this regard; I haven't bothered to “Like” Dave & Buster's, but I've used its Facebook page to score a discount. The interesting thing about the Recommended Pages feature is that, because they are less intrusive (no pop-ups, no commitments), and because they are partially influenced by what your friends “Like,” people are more eager to click on them. Sponsored pages do not seem to do nearly as well. Just take a look at some of the sponsors and recommendations I've seen lately: (Note: the following image is a compilation of ads, not a single screen capture.) See how many “Likes” the sponsored pages have? Each one has less than 100,000. But click on The Simpsons and you'll see that the 20-year-old cartoon sitcom has more than 33 million supporters. Its weekly viewership is in the toilet, but that didn't stop people from “Liking” it. Next we have the TV series House, which is on its way out the door. With fewer viewers tuning in and lead actors leaving the show, House is no longer a top-rated drama. The coming season will be its final season. Still, 24 million people have “Liked” the series. Is this a coincidence? Maybe. But even the page for the ill-fated Detroit 187 received more “Likes” than the aforementioned sponsors, indicating that maybe, just maybe, a recommended page gets more attention than one that Facebook is paid to promote. Follow me @LouisBedigian