Prediction Check-In: Facebook Will Begin to Show ROI
By Johanna Cox | 30 August 2012
For brands, in the world of social media, whether you’re small and local or big and international, the objectives are to first, build a substantial, engaged community and, ultimately, to leverage that community to drive a financial return. The investments brands make in Facebook are primarily these: (1) paid advertisement, (2) custom tabs, and (3) ongoing agency costs (for strategy, community management, and so forth). Unlike print, TV, or even radio, Facebook provides a relatively even playing field for brands to establish a strong connection with consumers. Whereas a small niche company like Bare Escentuals could likely not afford a primetime commercial on a major network or a September issue print ad, they are able to invest in a Facebook strategy that targets their fan base in an even more effective, interactive way.
But for many years, Facebook has not been a particularly lucrative component of brands’ overall media spend. Some brands, like the Diors and the Burberrys, have poured money into this platform. Has it paid off? Well, when you look at the size of their communities — 13.4 million and 9.1 million, respectively — and the increase in traffic driven to their websites over the past couple of years, it’s hard to argue the investment hasn’t been worth it. This year, however, Facebook has undergone a lot of changes, some of which will go a long way in helping brands see more concrete, more measurable ROI. Much of brands’ frustration with Facebook has had to do with the company’s reluctance — or, some say, outright refusal — to accommodate the network to mobile, the platform of choice for 54 percent of Facebook users.
Just this month, however, Facebook’s updated mobile app offered significant improvement: for the first time, users are now able to access brand pages’ tabs on a mobile device. Not all tabs, not the most creative (and expensive) custom tabs, but now, on tablets and smartphones, you can see and click on the Photos, Events, and Locations tabs. Facebook has implemented other changes that will benefit brands as well, including the switch to Timeline, more refined content targeting, introducing Open Graph for mobile, and expanding eligibility for mobile ads to brands with smaller communities and less money to spend on premium ad packages.
Still, not all brands are so optimistic. The most high-profile example is automaker GM, which opted earlier this year to discontinue spending $10M of its annual $40M Facebook budget on paid advertisements. The reason? According to GM CMO Joel Ewanick, after months of analysis, his team came to the conclusion that the ads’ impact on consumers wasn’t great enough, wasn’t driving offline sales, and didn’t warrant such an expensive investment. In short, Facebook ads result in unacceptable ROI. Similarly, early adopters of F-Commerce like DVF and Tory Burch have scaled back these efforts because the demand simply wasn’t there.
Gauging return in social media investment is no easy task. More than ever, given the mobile-centric lifestyle of not just Americans but users all over the world, the future of social media ROI must place primacy on mobile. Facebook is finally recognizing this fact and has made changes to its platform, guidelines and design to support this shift. And for these reasons, we stand by our prediction that 2012 will be the year that smart, innovative brands finally see ROI in Facebook.
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