Is Facebook becoming too expensive?

In this guest post, Justin Kabbani argues that the early adopter days are over for brands on Facebook 

Over the past few months, Facebook has evolved in a way that sees brands paying more to achieve what they were previously doing for less.

Historically, the lion’s share of money brands spent on Facebook was for ‘acquisition’ ads, designed specifically for attracting new Likes (or fans). The assumption was that once the fans had ‘opted in’ (been acquired), brands could converse with them on a regular basis, building affinity, community, and ultimately sales. Many companies invested heavily in stimulating these conversations, employing internal staff, outside agencies or a combination of the two.

Eighteen months ago, between 15 and 25% of a brand’s posts would appear in their fans’ News Feed (think ‘reach’), though if asked, I’m sure many would have believed it to be significantly more than this.

The massive influx of brands joining Facebook, together with the introduction of promoted posts, mobile ads, paid personal posts and sponsored stories have pushed the organic (unpaid) reach of these posts closer to 10-15%. Sure, brands can still hit 25% of their fans or more – but now it comes with a cost.

No one can be upset with a business for trying to make money, especially one with millions of shareholders and a billion customers who’ve never paid a cent. But many are calling this the ‘Facebook double-dip’. Charge us once to get fans, then again to converse with them.

Understandably, marketing teams are asking why they’re getting a diminishing return on their social spend. The answer is a simple product of supply and demand.

There are far more active brands (and people) on Facebook now than there were six months, 12 months and 18 months ago – and there’s only so much room in people’s News Feeds. If Brand A is willing to pay more to appear in a fan’s News Feed than Brand B, why shouldn’t Facebook attach a dollar value to that?

Being the first to recognise the potential of a new medium, then the first to throw money behind it, should come with rewards. But only for as long as it’s considered new, innovative and ‘risky’. When everyone else turns up, we expect things to ‘normalise’, creating lower perceived risks, and therefore lower rewards. The soap companies, among other early adopters of TV advertising, would have enjoyed similar windfalls in their day, pumping out messages to millions of housewives for a pittance by today’s standards.

The innovator and early adopter days appear to be over for brands on Facebook. We’re now at the status-quo, the ‘normal value’ compared to the previous ‘excellent value’ that the brave few enjoyed.

Will brands stop spending on Facebook because it’s more expensive? Some will. Most won’t. Have brands stopped advertising on TV where costs are, in many cases, still increasing, but viewership is declining and our gut tells us that people just shut the ads out anyway? Same answer.

Justin Kabbani is co-founder and managing director of Hardhat Digital.

Comments


  1. AK
    29 Jan 13
    10:19 am

  2. Maybe brands will get back to investing in content and digital experiences again? That would be great…

  3. BB
    29 Jan 13
    11:56 am

  4. TV is where you need to start a brand story and then use supporting media to build the campaign. Think AAMI and Rhonda. That translated to print media and to social media executions. Multi channel approaches to spend is what is needed.

    Facebook users have become used to advertising and cues to “like” and “share” and most no longer do so. This means that more money must be invested in Aps to engage users on social media sites and that can be costly.

  5. TGTBT
    29 Jan 13
    11:56 am

  6. I set up an ad the other day and saw how many people I would reach and for the cost. I thought to myself: “Wow that is so much cheaper than popping an advert on a third parties email newsletter, which gets opened by a 1/4 of who it is sent too and then only generates a small rate of clicks.

    It depends how you weigh it up? The free days are gone, however that is not a surprise.Quality will shine through regardless of whether your post is sponsored.

    Quality, original, unique content is and always has been king.

  7. TGTBT
    29 Jan 13
    12:38 pm

  8. @BB

    That is your opinion sir. I transact with plenty of brands that I have never seen on television.

    Although I am not writing off TV. I feel that for your money, you can be far smarter and create great ROI / Branding etc without excessive scatter gun marketing these days.

  9. Good Moron
    29 Jan 13
    1:10 pm

  10. It’s so painful to have Facebook friends who Like brands these days – their Like means that your feed is full of paid ads.

    If I wasn’t in advertising, I’d say do your friends a massive favour and don’t like any brands at all.

  11. Client
    29 Jan 13
    1:53 pm

  12. @ Good Moron…….dont worry ,there is karma payback.Those friends that liked a brand are then magically targeted as catagory participants and “fed” competive advertising

  13. EJ
    29 Jan 13
    2:36 pm

  14. @good moron I run facebook pages for brands and I still don’t understand why people would want to be a fan of the page.

    Personally, I fan pages of bars I like so i can find out who the band is that night or what the chef specials are at restaurants. But what is the motivation for people being a fan of a brand of water bottles or deodorant?

  15. Damo
    29 Jan 13
    3:37 pm

  16. What does more expensive mean? Does it cost more? Sure, but if that came with better targeting, insight and results, it would also be better value. Does it? Who knows.

    In the past when reach was considered, with TV for example, it was within a message that always focused on the brand or product however with Facebook, when more likes mean greater reach, many brands post content so far removed from anything to do with the brand (I’m sure we’ve all seen Condescending Corporate Brand Page) the value and reach attached to that communication is entirely different.

    Facebook is probably great for some small local businesses, like a yoga centre, and for big brands who have the budget to do something innovative and engaging. I’m unsure about everyone else; but I suspect the time spent just monitoring the Facebook page alone is probably not worth the barrage of negative comments and trolling increased likes and exposure create.

  17. TGTBT
    29 Jan 13
    7:26 pm

  18. @ Damo,

    How much time, effort and cost goes into TV production, let alone buying air time?

    As for negative comments on social media; generally businesses who are not rorting their customers recieve primarily positive comments. Any negative comments for these good businesses, can be resolved, in the open for all to see. Companies can also engage their target markets directly and gain feedback from the horses mouths, (not a third party market research company (more expense)).

    In the today’s business environment, companies who are great, seem to do very well out of social media. (Great word of mouth about their great products and services.)

    The companies who do not seem to be able to harness social media to their advantage, seem to be the companies who do not offer a great experience to their customers.

    As stated above, I am not having a go at TV. I am suggesting that social media can be extremely beneficial and cost effective for businesses who treat their customers well.

    If a company has a great product or offers an awesome service, their customers will advertise for them.

  19. Junior
    31 Jan 13
    8:54 am

  20. If you don’t like all the sponsored ads in your Facebook feed, use a god damn ad filter. It makes Facebook much more enjoyable. Trust me.

  21. Téa
    31 Jan 13
    3:00 pm

  22. Depends also on how you define ‘expensive’.

    Managing a social media presence, even without the costs of advertising, promoted posts, etc… cost time and resources.

    Social Media, done right has always been ‘expensive’ — creation of content, having staff, etc. The promoted posts etc somewhat shortcut the need to create compelling organic communities.

    It’s just that Facebook now get a bigger slice of the pie… you can still *earn* a community by managing it well and not paying for ads. But again, every company needs to consider whether Facebook (or any other platform) RETURNS on the investment as part of their initial planning. I would argue that most brands, without something compelling to offer their communities… should not be on Facebook in the first place.