Is Facebook Charging for the Wrong Things in Bid for Dollars?

Network Is Giving Away Its Most Powerful Tools, Even as Marketers Question Paid Ads

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Facebook long has given away brand pages on the notion that marketers will buy ads to build their fan counts.

But as the number of brands with millions of followers grows, experience suggests the advertising opportunities for which Facebook doesn't charge, such as wall posts, may have as much or more value as the ones it sells, begging the question: Is Facebook charging for the right things?

Jeff Widman, co-founder of PageLever, which provides analytics around fan pages, and BrandGlue, which helps brands optimize readership of their brand wall posts, has worked with brands that collectively have more than 40 million Facebook fans, including YouTube, Nike and the Washington Redskins. And he's found some of those marketers have built big followings while spending almost nothing on Facebook ads.

"We have some clients who have millions of fans and who've spent only $2,000 or $3,000 here or there" on Facebook, he said. In other words, just because you have a massive Facebook presence, doesn't mean you're spending a massive amount of money on it. He did add that most clients have spent "in the hundreds of thousands" and, he believes, some "in the millions" on the social network. Another person who has handled Facebook marketing for several consumer brands said he's seen "no correlation" between what brands spend on Facebook ads and how many fans they have.

While not revealing any specific spending, Stan Stanunathan, global head of marketing strategies and insights at Coca-Cola Co., said during a panel at the Advertising Research Foundation's Re:Think conference in March in New York that Coke has made little effort to build a Facebook fan base for its flagship brand, which holds the record for brand pages at 25.8 million fans.

Realistically, people rarely return to a Facebook brand page they've "liked," said Mr. Widman. But they do often see the brand's wall posts.

Mr. Widman said a brand's wall posts are seen typically by about 20% of fans, even without efforts to optimize viewership under Facebook's EdgeRank algorithm. Brands can improve chances their wall posts are seen, he said, essentially by creating posts that provoke engagement (e.g. clicks or "likes"), which in turn moves wall posts higher in the "top news" rankings of news feeds, the default mode for web viewing.

Even that pre-optimized 20% is similar to what Epsilon has found to be the average 22 % open rate for email marketing messages in recent years. For Coca-Cola, with nearly 26 million fans, that 20% would yield more than 5 million views per message. Even at a relatively modest cost per thousand of $7, that 's $35,000 worth of online advertising with each message. If Coke were to put out two wall posts a week, or a 100 a year, that would be $3.5 million worth of impressions.

The news feed can bring great impact even for a brand with a more modest million fans -- and there are now 91 packaged-goods and retail brands with at least that many, according to database-marketing-tracking firm DBM/Scan.

What's more, appearances in Facebook news feeds aren't just general, untargeted CPMs, but impressions among people who've already indicated an affinity for the brand by liking a page, and they appear as a sort of Facebook version of advertorial, amid posts from friends rather than in ordinary advertising display space.

One problem is that the value of fan bases tends to erode over time, Mr. Widman said, because most people don't interact with brand messages, which ultimately drives them lower in algorithm determining "top news" and makes them less likely to be seen. But that effect can be mitigated if brands get their fans to respond to their posts.

Facebook spokesman Brandon McCormick said marketers do see the link between advertising on the network and building their fan bases. The "Sponsored Stories" model the network launched earlier this year, in which brand fans' essentially become endorsers of the brand among their friends, helps make that link clearer by leveraging the value of brand fans in ads directed at the fans' friends.

"It will bridge the gap between people who aren't seeing [brand messages] in their news feeds or on your page," he said. "A conversation can happen on a page or in your news feed, and the best way to spark a conversation is through advertising. We think if brands see the value they get from the conversation that 's happening on the page, they'll be willing to buy the ads to drive that conversation further."

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