While it looks like Facebook’s advertising platform will be good for around $4 bn in revenue this year, what’s really evident is that the social networking giant is leaving money on the table. COO Sheryl Sandberg, it seems, is looking to change that. Taking her experience at Google, where she was vice president of global online sales and operations, she is said to be unveiling a small business advertising program that could give Facebook a real revenue shot in the arm.
The plan appears to be straightforward: copy Google. Frankly, I’ve heard worse ideas. In a plan that’s reported to be announced this week, Facebook will pony up $50 advertising credits for as many as 200,000 small businesses. Here’s how it works, according to the Courier Post Online:
“The company plans to offer free $50 advertising credits for up to 200,000 small businesses. When a person clicks on an ad, there’s a set rate predetermined for that click through — 5 cents or 25 cents, for example —the advertiser has to pay. Facebook will pick up the tab for the first $50 of such ads delivered under its offer.”
If this works – and the advertisers get hooked – Facebook will have access to a large market with a likelihood to renew easily if the advertising works. The cost to sell, over time, would shrink to almost nothing. It’s a good plan.
But, it has to deliver ROI to the advertisers.
While much is said about the ability of Facebook to target effectively, the challenge will come in (a) providing sufficient inventory for niches and (b) actually delivering a response. Small businesses won’t continue to spend if they aren’t seeing any returns, and Facebook will have to give them more than just targeting.
So far, Facebook claims to have 9 mn small business users, though they aren’t actually spending money. Many are using Facebook pages, for example, to promote their businesses. According to Sandberg, ‘hundreds of thousands’ of companies are paying for advertising on Facebook. For a platform with 750 mn users, that’s a drop in the bucket. And if they have small budgets, it’s also tiny compared to the forecasted $4 bn in revenue.
For now, therefore, it seems as though small businesses are content to have a Facebook page, which is easier and less expensive than developing a full website from scratch. Over time, this could be a good starting point for Facebook: companies with a presence on the platform will want to see it drive value. That’s extremely unlikely with organic Facebook fan page growth. The free credits offer a great way to try it out and get hooked … as long as the ads work.
Source: Courier Post Online
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