Los Angeles businesses that have been wanting and waiting to be able to put out more ads on Facebook might soon get their wish fulfilled as Wall Street continues to persuade the company to sell more ads on the website.
Since its inception from a Harvard dorm room in 2004 by founder Mark Zuckerberg, Facebook has been able to do things their way as a privately held company, but now that the social networking giant with 845 million users worldwide is facing pressure from brands for more advertising on the site now that it’s a publicly traded company.
Zuckerberg only began accepting ads as a way to cover the cost of servers, but now he’s got a find a way to make people pay more attention to the ads that are on the website as opposed to just their family and friends.
“Historically there haven’t been a lot of advertising opportunities on Facebook,” said Michael Hayes, president of digital at advertising firm Initiative. “Fast forward to today and Facebook doesn’t have a choice. They have to get money in the door.”
Many companies are building fan pages and getting users to “like” them for free such as CBS Los Angeles, modenook.com Los Angeles, Downtown Los Angeles Notary and Canter’s Deli. However, those fan pages don’t net Facebook any revenue and that’s starting to make people wonder if it was even a good idea for the social networking giant to become a public company if it’s not going to bring in the cash flow as other public companies do.
“You have to wonder if Facebook is going to turn on the revenue engines and fulfill the expectations of the investor community, which is putting such a high valuation on the company,” said Debra Williamson, EMarketer analyst.
Television advertising has always been a big business for advertisers as the cost for a 30–second commercial during last night’s Academy Awards was $1.7 million for each ad and an average of $3.5 million for a 30–second spot during this year’s Super Bowl.
However, the Web is right behind television advertising as it’s the second–largest ad market. Radio advertising is much cheaper than television because it depends on the number of stations and frequency the ad is played over the air.
As more people continue to surf the Internet from their laptops, desktop computers, tablets and mobile devices such as a smartphone or just a regular cell phone with Internet access, eventually it’s possible for online advertising to surpass television as roughly 425 million Facebook users currently access the site from a smartphone or tablet.
But it will only work if Facebook can find a happy medium with advertisers and not lose users.
“There has been no question for the past year, at least from a marketing perspective, that Facebook is a place they need to be,” said Greg Kahn, executive vice president and business development director at Optimedia International.
“The hurdle Facebook is still facing is getting brands to commit to spending advertising dollars.”
Although investors want to see more ads show up on the social media website, they need to consider whether the 845 million users worldwide want to see ads – or more of them on the site.
Many Facebook users are still upset that they had to comply – whether they wanted to or not – with the new redesigned Timeline Profile Layout that was released last year.
Currently the Timeline layout is only available for individuals who have a personal account with the website, and it’s unavailable for businesses which is why many of them still have a fan book page in the old layout yet also another possible reason for the push to do more advertising on the site.
There has been no discussion as to whether businesses will be converted into the Timeline layout, which could be the reason why the company is getting pressured to push advertising on the site so heavily.
Right now the 845 million users spend an average of seven hours a month on the social networking website, but brands are still buying more ads even though their spending only adds up to a tiny fraction of their total advertising budget.
If Wall Street and investors do get their way and continue to push Facebook into doing more advertising, the question remains whether the surge of ads will also push users – right off the website and back into the arms of Myspace as its still alive and growing in numbers.