Has Facebook’s Bubble Burst?

Has Facebook’s Bubble Burst?

And no I’m not talking about the embarrassing IPO for the company and their zuckers, ahem I mean investors. Just to recap, it’s been a pretty bad week:

  • Eduardo Saverin, one of 4 co-founders is dropping US citizenship to avoid taxes.
  • General Motors announcing they have dropped their paid Facebook advertising because “it doesn’t work.”
  • The share price has taken a beating, down nearly 20% in 2 days.
  • Three investors sued Facebook and Zuckerberg, along with lead underwriter Morgan Stanley and others, accusing them of withholding negative information.

Regardless of what happens with the shares, I’m going to say that “GM dropping their paid Facebook advertising” is what stands out the most for me here.

I’m all for advertising in new and creative formats, but…

is Facebook new and creative anymore? Is it just another annoying form of advertising or does it actually work?

It’s hard to find a single negative thing said about Facebook advertising, even on the internet and if you speak out about it in an ad circle your likely to get shot at. I suspect because it pulls in quite a few dollars for most agencies.

In any form of media there is an early innovators advantage (which expired in about 2009) and now companies are still racing to “invade” social media platforms believing that it will give them some strategic advantage. The thing about Facebook advertising is that you can’t just throw money and time into creating a page and expect ROI.

There are thousands of companies who are spending on Facebook pages updates and content, specifically to target Gen Y. And it’s just not working.

You have to remember that Gen Y is so difficult to target because they are so adverse to commercial breaches of their personal space. So how do you think they feel about interacting with a faceless company on a “social network.” The population is also more impatient than ever and this is not limited to online.

A lot of ad heads would probably say to this that once someone has liked your site you’re free to post status updates as one of their friends; a connection between brand and individual. They think that Facebook is set and forget. However this isn’t the case, the problem here lies in the pattern of Facebook users and the Facebook EdgeRank Algorithm.

EdgeRank is designed to ensure that you get relevant or interesting information from the friends you interact with most. That is the likes, comments, tags etc that consumers provide to your Facebook page improve your chance of being seen on their news feed. The problem is, if your fans ignore or don’t react to any content you post then the EdgeRank Algorithm will decide not to show them any of your content in the future.

At least 90% of all fans of a Facebook fan page visit that page once when they like it and never ever return again, so in reality less than 2% of the updates and expensive interactive content you create on your fan page actually gets seen because of the EdgeRank Algorithm!!

According to studies, even when users switch their profile to “Most Recent” content they still are affected by the algorithm.

What does this mean for companies? Unless you can beat the 90% trend you’re going to spend a lot of time generating content that’s not even making it to your fans news feed.

If you want your content to be seen you need a clear strategy on how you are going to get your users to interact with your content regularly.

If you’re using Facebook as an advertising medium take a close look at your page and decide if people are really liking it. I’ve see hundreds of companies and franchises on Facebook that are only liked by their own employees. And I often wonder how much time or money they have invested.

A Facebook page can be made to suit most companies or campaigns, but you need to offer consumers regular viral entertainment or a phenomenal deals. When making a company Facebook page, your return is only as good as what you offer. If you’re not offering something to consumers that can go viral, it’s probably going to be a wasted effort. Maintaining a Facebook page might appeal to pizza companies who might update with a slow Tuesday deal, or maybe those hoping to benefit from an online marketing stunt.

Now what GM pulled was paid status updates – the ability to overcome normal news feed items with paid ads… At least with these you get what you pay for – a guaranteed number of impressions or clicks. But if GM has even pulled these updates, what does it say about “organic” results. I have a fundamental problem with advertising which is not seeing return on investment.

Are you not achieving your goals in social media? Do you need advice on strategies that work?


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