Social media ROI: Facebook and Forrester in war of words over value of ads

05/11/2013

Facebook has hit back against Forrester, after a report from the research firm claimed the social network has ‘failed marketers’ by neglecting brand pages in favour of paid ad tools.

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Last week, Forrester Research released the results of a UK study of 395 marketers in the UK, US and Canada.

It concluded that Facebook "no longer supports social marketing" and now follows a traditional ad selling model it once disparaged.

The report quickly drew strong reactions from analysts, marketing executives and Facebook itself, which called the study “illogical” and “irresponsible.”

Forrester claims Facebook has failed to live up to a claim made in November 2007 by its chief executive Mark Zuckerberg in a speech on Madison Avenue, in which he predicted his company would lead a revolution in marketing.

Zuckerberg said: "Once every hundred years media changes. The last hundred years have been defined by the mass media. The way to advertise was to get into the mass media and push out your content.

"In the next hundred years information won’t be just pushed out to people, it will be shared among the millions of connections people have. The next hundred years will be different for advertising, and it starts today."

The Forrester report claims Facebook no longer disagrees with the "push" model of advertising because it delivers tens of billions of display ad impressions every day, which accounts for as many as one-third of all display impressions delivered online.

Facebook also no longer supports "social marketing" because Facebook only shows each brand’s posts to 16% of people who have volunteered to sign up to that brand’s messages, according to Forrester.

The report also criticises Facebook for upgrading its paid advertising tools every month, but doing "little" in the past 18 months to improve its "unloved" branded page format.

The 395 executives surveyed ranked Facebook as offering the least business value than any other digital marketing opportunity, while 51% said they were satisfied with Facebook as a partner, placing it behind Google, Yahoo and Microsoft.

'Illogical conclusions'

In its response, a Facebook spokesman said: "While we agree that the promise of social media is still in process, the conclusions in this report are at times illogical and at others irresponsible.

"The reality is that Facebook advertising works. That's why we have more than a million active advertisers. And countless studies have demonstrated the significant return on investment marketers see from Facebook."

Facebook is questioning the survey because it believes a group of 395 marketers from an unknown group is not indicative of its business, which has more than a million active advertisers.

Read the full open letter here:

AN OPEN LETTER TO MARK ZUCKERBERG
Mr. Zuckerberg:
Facebook is failing marketers.
I know this statement sounds remarkable, perhaps even unbelievable. After all, you offer marketers access to the largest audience in media history and you know a remarkable amount about each of your users. As a result nearly every large company now markets on Facebook. Last year your company collected more than $4 billion in advertising revenues. But while lots of marketers spend lots of money on Facebook today, relatively few find success. In August, Forrester surveyed 395 marketers and eBusiness executives at large companies across the US, Canada and the UK — and these executives told us that Facebook creates less business value than any other digital marketing opportunity.
Why are business leaders less satisfied with Facebook than with any other digital tool? We believe there are two reasons.
First, your company focuses too little on the thing marketers want most: driving genuine engagement between companies and their customers. Your sales materials tease marketers with the promise that you’ll help them create such connections. But in reality, you rarely do. Everyone who clicks the like button on a brand’s Facebook page volunteers to receive that brand’s messages — but on average, you only show each brand’s posts to 16% of its fans. And while your company upgrades its advertising tools and offerings monthly or more, you’ve done little in the past 18 months to improve your unloved branded page format or the tools that marketers use to manage and measure those pages.
Second, your company isn’t good enough at the pure advertising business onto which you’ve shifted your focus. We estimate your site now delivers tens of billions of display ads every day. But fewer than 15% of those ads leverage your ever-growing cache of social data to target relevant audiences. And your site’s static-image ad units offer marketers less impact per impression than they could achieve with the ad units other sites offer. The result? The executives we surveyed said Facebook’s display ads were significantly less effective than the display ads they buy elsewhere online. They also reported that Facebook ads were less valuable than any other marketing tactic they could use on your site.
I believe there’s still time for Facebook to refocus its efforts and realize its enormous potential. To do that, you’ll need to once again build bridges between companies and their customers, you'll need to fully leverage social affinity data within your ad targeting products, and you'll need to better listen to the marketers who drive your company’s financial success. But you must act quickly, before more marketers act on their growing dissatisfaction and start earmarking an increasingly smaller budget share to your company. I hope our research convinces you and your team to change course.
Nate Elliott, Vice President and Principal Analyst, Forrester

Read Forester’s follow up blog (where it answers some of the criticisms) here

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