Ever since joining the big leagues in May, however, public perception of Facebook’s value has taken a hit. Share values that peaked at $45 slid below $27 just two weeks later. While smaller (and private) companies like Tumblr can toy around with their monetization options without major repercussions, Facebook’s decisions are highly scrutinized.
In the wake of declining value, they’re moving fast to restore faith in their long-term business plan.
Dollar Signs on the Wall
Back in February, blog platform Tumblr began offering users the chance to pay an extra $1 for a ‘Highlighted Post.’ The cash earned the post a special sticker in the margins to call attention to it, as well as added ‘stickiness’ on other users’ walls.
Facebook followed suit with a pilot program in New Zealand. For between 40 cents and $2, users could ensure that their status updates remained higher on their friends’ walls for a longer period of time. If you’re in need of a kidney (or just looking for a job or a pet-sitter), the ability to improve on the 16 percent of friends that see an average post is welcome.
But who will really take advantage of this?
A New Age of Advertising
It’s no secret that traditional marketing doesn’t work like it used to, and that’s not just a reference to television, magazine, and newspaper ads. Just because people are turning to digital mediums doesn’t mean that a traditional ad on a website’s banner or sidebar will be effective.
No matter the medium, most consumers train their eyes to overlook direct marketing. That goes for the ads on the sidebar of Facebook as well, a realization that became especially poignant just a few days before the company’s IPO, when General Motors made a stink about pulling their $10 million ad campaign from the site due to poor results.
A ‘successful’ ad on Facebook garners a 0.5 percent click-through rate. With those dismal figures as the benchmark, it’s no wonder that Wall Street is reconsidering its investment.
For a social media platform like Facebook to turn a profit, marketing and content have to become one-and-the-same. That’s a difficult task, considering that Facebook grew to nearly a billion users partially due to its lack of in-your-face advertising.
The Game-Changer: Paid Promotions
Two weeks after their IPO, on May 31, Facebook announced a new means of earning revenue that allows businesses with a Page (not a typical user ‘profile’) to shell out extra cash for the ability to reach more potential customers with a status update.
Most of the people a business’s posts reach are those that have already ‘Liked’ their page, keeping in line with modern understandings of ‘permission marketing’ and its effectiveness. If people have already opted to let you send them content, they are more likely to read it and respond. Still, if only a fraction of those users that ‘Like’ you are seeing your bakery’s post about 2-for-1 cupcakes, you’re not going to have a rush on your store.
Now, when the bakery posts their deal on their page, there’s an added button that says ‘Promote.’ If they have 1,000 Likes, they might be offered the chance to pay $5 to make their update last for three days on their followers’ news feeds.
It’s a step Facebook needed to take to appease investors and try to turn around their sliding share value, but its effect on the average user experience remains to be seen.
If your Facebook news feed becomes filled with paid promoted posts, will you use the site less often? Would you pay to promote your own status updates?
Christopher Wallace is Vice President of Sales and Marketing for Amsterdam Printing, one of the nation’s largest providers of promotional products for businesses large and small. Amsterdam specializes in custom pens and other promotional items such as calendars, laptop bags and T-shirts. Christopher regularly contributes to Promo & Marketing Wall blog.