Another Tech Startup Decides It Can't Make Facebook Ads Pay

Rob jewellSpruce MediaRob Jewell

Spruce Media, one of Facebook’s more prominent advertising partners, has cut a number of jobs and is changing business strategies to focus mainly on one specific part of the social media marketing business: Selling software that helps marketers manage their Facebook campaigns.

CEO Rob Jewell tells Business Insider that Spruce now has just 12 employees, down from a high of at least 55 people back in January.

Originally, Spruce focused on buying Facebook ads for marketers. Its clients have included Procter & Gamble, Samsung and University of Phoenix. The company once handled $US150 million in Facebook media spending.

However, moderately sophisticated companies can buy their own ads on Facebook’s system, so Spruce this year moved toward selling licenses to its Facebook marketing system, on a software-as-a-service basis. That business model requires far fewer people.

Spruce is one of a few Facebook “preferred marketing developers” (PMDs) that have found the Facebook ads business tougher than they hoped it would be. Compass Labs got out of the Facebook ads business in September, complaining that the margins weren’t there. Syncapse went bankrupt in the summer, with the loss of 100 jobs.

There are about 300 PMDs, many offering identical services. In February, Facebook moved to sharpen the focus of its PMD community by discriminating in favour of those companies who were bringing real ad dollars into the system, and not merely charging customers to handle analytics and data coming out of the Facebook platform. Some welcomed the move, because they felt that there were too many companies chasing the same clients.

Spruce is concentrating on Facebook’s “custom audiences” business. That business allows companies to use their own customer phone number or email lists, and target ads on Facebook against them. Advertisers like it because it shows them exactly how valuable their databases are when used for campaigns on Facebook. Spruce will licence a software system to help companies run and manage custom audience campaigns.

Spruce got a $US15 million debt facility this time last year, and Jewell tells us he still has millions in the bank. He sounded bullish on the phone: “We’re in a capital position to do that [make a strategy shift]. We’ve got millions in the bank and it’s [the custom audiences software] already built.”

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