Here’s the deal. Remember yesterday when I said that it seems rather strange that a company that produces absolutely nothing may beat out General Motors with their upcoming IPO? General Motors, a company that has produced some of the most profoundly beautiful vehicles known to man, may have their $18.1 billion IPO beaten by Facebook, an innovator, of that there is no doubt, but not a producer of tangible goods.
Well, first off, it seems as though GM read that blog, because today, it was announced that GM had pulled all of their paid ads from Facebook because “no one clicks on them.” Come to find out, a huge majority of Facebook users barely acknowledge paid ads, let alone click on them.
As marketing space really is Facebook’s claim to fame and their only real, tangible piece of revenue generation, this development begs the question “why in the world is this company worth $100 billion?”
Simple answer, because, right now, people are willing to believe that. Facebook released more stock today, bumping their soon to be available stock number up about 100 million more units. They’re hoping that the market agrees with them when they say that their stock is worth $38-$42 per share. If this be the case, their IPO will raise almost $20 billion.
But, again, Facebook’s lack of an actual product continues to haunt them. The vast majority of their $3.7 billion revenue in 2011 was from advertising. It is no secret that sites like this make the majority of their bank from brands hoping to cash in on all of the eyes that frequent the spot.
There is an inherent danger to this thinking, though.
I could go out, score a couple of deals with some of the interweb’s most popular porn sites and sell ad space. Yeah, I could guarantee that every month, your ad will be in front of millions of pairs of eyes. But, I couldn’t guarantee a single sale. Why? Because when folks type in “One Night In Paris”, they aren’t exactly in the mood to be clicking on an ad for business cards.
True, that is a rather extreme example, but you get my point, yes? It doesn’t matter how big your audience is, what matters is what your audience is doing on a certain site and whether or not it makes sense for you to be there at all. For GM, the answer was obvious. No one wanted to click on an ad for a $30,000 automobile while late night trolling for their ex’s new Facebook page. Makes sense, yeah? Yes, yes it does. So, obvious….or was it?
Does this little realization spell trouble for Facebook? Yes. Will they have to do some damage control? Yes. But does this little realization spell doom for Facebook? No. Why? Well, to answer that question, I, as ever and always, turned to Oneupweb’s Maven of All Things PPC And Facebook, Kate Shapkaroff.
“Because Facebook PPC is a great way to grow your fan base. It’s low entry engagement to ‘Like’ a company. The more you grow your fan base, the more opportunities your brand has to engage your adopters. With this engagement, you can help create brand adorers – people who purchase and/or use your services (if they haven’t already). More importantly, your adorers can help recruit more adopters, keeping the circle flowing and growing.”
It is no surprise that Ms. Shapkaroff, once again, hits the nail on the head here. Facebook marketing isn’t about selling a $30,000 car by way of a one click PPC ad. Facebook marketing’s value rests within its ability to BUILD UP to that purchase, or, as Kate said, create brand adorers and adopters. If GM were to have some real interaction with its Facebook community, i.e. building up a fan base, having a fun, interactive voice, running a few challenges and/or competitions, maintaining an awesome working contact with current GM owners, building fans, giveaways, events, etc., that would translate into some amazing brand loyalty and word of mouth marketing (both being the holy grail of marketing, by the way). This brand rep building through Facebook would come into play big time the next time any fan of GM’s Facebook page needs to make a car purchase. GM currently has over 387,000 Likes on their page. That means that if they were to utilize Facebook properly, it is completely logical to say that because of their Facebook brand building at least 2 Facebook fans per day were buying a GM vehicle. Completely plausible. By those conservative numbers, only 730 of the more than 387,000 fans would need to buy a GM vehicle to make that statement true. I’d say revenue generated at about $50,000-$60,000 per day (conservatively) is a pretty damn good investment!
See what I’m getting at here? No, PPC ads focused on one click, one sell will not work for most brands on Facebook. But, if you utilize Facebook for what it is, a community wherein your brand can become an integral member of your consumer’s circle of friends, then you will reap the rewards that Facebook has to offer.
“What’s most important with Facebook PPC is to determine what you would like your fan base to ultimately do – purchase more, remain loyal adorers, etc. You can amass a fair amount of fans to your page, but what good does that do you if you don’t engage them and keep happy?” asks Kate. Very true. Facebook’s worth is in the fact that it has the capability to place your brand in your consumer’s comfort zone and create a mouthpiece for your brand through that consumer. There is unlimited potential on Facebook for a brand, but only if you utilize it correctly, and that begins with engagement. And that’s what’s worth $100 billion.
