Is Facebook Advertising Effective?

Fred Wilson has been updating the world about his venture in Facebook advertising over the past week. Today, Fred posted and updated screenshot of his ad campaign’s performance and it doesn’t appear to be too stellar. For one of his campaigns, out of 10,080 impressions there were only 8 clicks. The average cost-per-click for Fred was $0.08 and the average CPM was $0.06. This is a less than stellar performance. This is nothing new though.

Facebook has continuously produced less than stellar results for advertisers. With historically high CPMs and historically low click-thrus, Facebook is facing a challenge. Their new ad system has significantly reduced the CPM for those that opt for the cost-per-click (CPC) model. The only problem is that there are no clicks. While the targeting is phenomenal, Facebook users are more engaged by the content within the site rather than the advertisements. Perhaps Facebook is a little too engaging.

This is going to be a significant problem for Facebook over the next few months. With a valuation of $15 billion thanks to Microsoft’s investment, Facebook will have to start producing numbers that validates its astronomical valuation. The only solution I see for Facebook is to extend their advertising platform outside of Facebook as I previously suggested they would soon start to do. Aside from that, I’m not sure what else Facebook can do to improve the performance of their ads.

Have you had any good experiences with Facebook’s new ad system?