Tuesday, May 31, 2011

Facebook: Does it pay?

    I recently recieved a text that simply stated: Do you want to make a lot of money? It piqued my attention and I opened the message to read the secret pearl of wisdom. The answer was a three step process: 1) Log on to Facebook. 2) Click on the deactivate button in settings. 3) Get to work. I chuckled at the simplicity and the truth in the message. Today, as Professor Kagan mentioned in class. many of us spend most of our time on Facebook. We are constantly updating our status and checking the pages of our friends. The size of Facebook's audience is simply huge with Facebook heading to their 700 millionth user level. Yet, for many businesses, advertising on facebook has not been profitable.
    I myself have had the same experience when I attempted to promote on Facebook. I even spoke to Professor Netzer to understand why Facebook with its huge audience reach is not delivering the returns that businesses expect. Almost all major companies are on Facebook. The pull of social media is extremely seductive and everyone seems to jump on the bandwagon with trying to understand their audience. According to Professor Netzer, the reason why facebook fails for many advertisers is the fact that when people are on facebook, they are there to socialize and to have fun. Making a purchase is considered a hindrance and ads are therefore seen as a nuisance. Second, many of the products that are advertised consists of items that are not fun or impulsive purchases. Recently, I came across an ad for a toolkit. It targeted the wrong audience at the wrong time.
     Therefore, while there is huge potential in Facebook as a marketing tool, currently the return on advertising dollars have been disappointing for many businesses.

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