Facebook Ad Issues: Weak Execution, Or Faulty Product?

By Julie D. Andrews 

To the executive class, Facebook looks an awful lot like an old-school media company. That’s because its business model is built on earning revenue through, you guessed it, selling ads. In order for people to buy the ads, they have to prove effective and get people to buy things. But this return on investment has historically been difficult, no matter the medium.

And generating profits through ads may be even harder than it seems for Facebook, GigaOM pointed out.

Unlike traditional media companies, Facebook does not need to test out paywalls or subscription models because its content is still user-generated and comprised mostly around socializing, and not news and/or information. Plus, Co-Founder and Chief Executive Officer Mark Zuckerberg would be breaking his repeated promise to keep Facebook free.

Ad dollars comprised a hefty 80 percent-plus of the revenue Facebook reported for the first quarter of 2012, according to the company’s S-1 securities filing.

Primarily, this is from display and banner ads — yes, just like those found in newspapers, magazines, websites, and blogs–with only some of the revenue coming from innovative social-advertising techniques such as sponsored stories.

One VentureBeat study cited by GigaOM found click-through rates to be even lower on Facebook than they are for typical Web ads.

In light of General Motors’ announcement that it was yanking its $10 million advertising campaign from Facebook, Ford Motor seems pleased with its results, having this to say on Twitter:

It’s all about the execution. Our Facebook ads are effective when strategically combined with engaging content & innovation.

Facebook still has 900 million-plus eyeballs glued to it.

Readers: Do you agree that the poor performance that prompted GM’s pullout was the fault of the execution of the automaker’s paid-for ads on Facebook, or did GM decide not to pay when other marketing strategies can be carried out via Facebook pages free of charge?

Image courtesy of Shutterstock.