Is Small Business Marketing On Facebook A Complete Failure? Ross | October 31st, 2013

Earlier this week, Nate Elliot, a vice president and principal analyst at Forrester (a respected research firm), wrote an open letter to Facebook’s CEO Mark Zuckerberg.

Mr. Zuckerberg:

Facebook is failing marketers.

I know this statement sounds remarkable, perhaps even unbelievable. After all, you offer marketers access to the largest audience in media history and you know a remarkable amount about each of your users. As a result nearly every large company now markets on Facebook. Last year your company collected more than $4 billion in advertising revenues.

But while lots of marketers spend lots of money on Facebook today, relatively few find success. In August, Forrester surveyed 395 marketers and eBusiness executives at large companies across the US, Canada and the UK — and these executives told us that Facebook creates less business value than any other digital marketing opportunity.

According to Forrester, Facebook came in last out of 13  online marketing strategies and sites.

facebook-failure

Elliot’s criticisms were met with a strong response from Facebook and other media outlets. Facebook replied:

the conclusions in this report are at times illogical and at others irresponsible. The reality is that Facebook advertising works. That’s why we have more than a million active advertisers including all of the Ad Age100.

Facebook is right to question the survey methodology in the Forrester report. Too much for what is passed-off as “research” today is poorly developed, poorly defined, and poorly executed.

The Forrester report is materially flawed. Among other things, Forrester surveyed a small group and used a screened sample that although presented as random, was not random at all. In fact, Forrester admitted this when it accompanied its report with the following statement:

This data is not guaranteed to be representative of the population, and, unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes.

Other media outlets reacted quickly. For example, Business Insider argued that:

In the unfortunate all-too-common-lately style of high-level broad spurious insights without any detailed methodology, most of the actual ‘data’ is only available behind a paywall, but there was enough publicly available to see some of the major issues with it and then the benefit of reading the report compelled me to speak out here.

There are 13 types of marketing Forrester compares in the chart BI shared and, unfortunately, with a spread in marketer satisfaction of just 8 percent from lowest to highest, the differences are likely not statistically significant. I can’t actually tell for sure since the sample is at most 395 “executives” for the question but likely is lower per response, since not all of these executives have likely tried all 13 of the marketing types (Google+ marketing anyone? Hello, who are you?!). From data in the same report it appears less than 50% of the sample utilizes Facebook paid advertising, for example, calling the significance of an 8 percent difference even further into question. Having a separate category for “mobile marketing” too, ignores the fact that Facebook is the world’s most popular mobile application /advertising platform by some margin.

Ben Kunz, Vice President of Strategic Planning at Mediassociates commented:

I respect Nate Elliott but think he’s hyperventilating a bit here. The study he sites scored marketer satisfaction on a scale of 1 to 5. Facebook got a 3.54 vs. 3.83 for paid search, just above moderately satisfied. Put another way, marketers like Facebook 7.6% less than Google. The real headline should be “Marketers Moderately Happy with Facebook Ads, But Just a Bit Less Than Google.” I wouldn’t extrapolate too much from that, Nate.

People were right to question the efficacy of Forrester’s research, but they missed the forest from the trees.

Whether marketers like Facebook significantly less than other marketing channels and sites, or insignificantly less, begs the question. When you look past the link-bait and sloppy research, beyond the anger in Facebook’s response, and beyond the noise from the talking heads, the question Forrester should have asked is:

Does Facebook marketing actually work (particularly for small businesses)? 

Sure, people will offer data on increased clicks, visits, impressions, etc. But those are all soft metrics. You can get a 13 year-old to click on any ad just by varying the image on that ad. It’s not enough to know that Facebook creates less value than other marketing channels. Does it create ANY meaningful value?

Businesses are spending billions of dollars marketing products and services on Facebook. Marketers are making tons of money. Facebook is making tons of money. It’s a win-win – except for the vast majority of the million advertisers burning through their budgets on ineffective Facebook ads.

Marketers and analysts are fiddling while marketing budgets burn. Advertising is broken.

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  • benkunz

    Yes, Facebook can work for small businesses, based on the structure of your business model. Anyone can buy ads on FB at a $2 cost per click. If respondents then convert at a low rate of say 2%, you get a $100 cost per sale. If you are selling pencils for $1 each, that won’t work at all. But if you are selling decks, roofing, hot tubs, consulting services, physical therapy, lawn services, dental tooth whitening, or a million other products where a $100 cost per sale is acceptable given on your margins above that, Facebook works just fine. The same goes for all advertising. For those who have difficulty making advertising work, perhaps the solution is to find a product or service where your margins can justify the necessary expense of educating potential prospects about your service. You may not have an ad problem; you may have a broken pricing model.

  • Diego LLaneza

    Why did you title the article like this? This is clearly a mishap from Forrester. Guess you were needing the kind of traffic only FB generates? Cheeky

  • Ross Kimbarovsky

    Diego – that’s a fair question. A I wrote, the uproar about the Forrester report is warranted, but is largely a red herring because the bigger issue – whether Facebook marketing actually works – is being ignored. In my experience, and in the experience of many businesses owners with whom I’ve spoken, Facebook marketing does not work (and definitely doesn’t work on an ROI positive basis). Hence the title.

  • Ross Kimbarovsky

    Ben, I can always count on you to bring a sharper perspective to the conversation. This is a really good reminder – especially for business owners who are selling a more expensive product or service – that they should test for themselves – with their own products and services – before concluding that any marketing channel is pointless.

    Having said that, you and I disagree about the overall efficacy of advertising. While you’re right that higher margins provide more room for error, the extremely low conversion rates most businesses see from their ad spend make it more and more difficult for businesses to justify increasing ad spending. It surely works for some, especially when they work with smart agencies (like yours) that understand the market and the limitations. But when looking at the millions of businesses (especially small businesses) that are spending money on adwords, banners, and other forms of advertising, I cannot help but wonder when the gravy train for the publishers will stop. A large portion of the profits earned by publishers come from the budgets of small businesses selling relatively inexpensive products and services. Let’s not beat around the bush: for Facebook (and other publishers) to become uber profitable, millions of those small businesses will have to spend lots of money on ads that we know can’t ever work given their margins.

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