Why You Should Not Advertise on Facebook

By Rakesh Raman

When General Motors (GM) decided to discontinue its advertising on Facebook in May, the leading automaker reinforced the point that Facebook is not yet ripe for any serious advertising – a fact that savvy digital market analysts already knew. The GM move also warned the advertisers of the gloom looming large over Facebook’s fate.

It was immediately manifested by the Facebook’s depressing debacle in the stock market, as its share price after its May 18 IPO has been plunging in a free fall. In less than 2 months, its share price tumbled by almost 20%.

So far, Facebook has been successful in enticing advertisers through its claims of having over 900 million active users. But few know that it’s a concealed lie. Actually, not even a fraction of this number is active on Facebook. There are a number of ways to test this harsh reality.

Let’s test this with an example. Suppose, you’ve 2,000 Facebook Friends. You can see it daily that not even 2% of these Friends are available on Facebook at any point of time during day or night. This you can clearly see in the Chat boxes.

There are two Chat boxes on Facebook – one vertically rectangular on the extreme right of your page and one square with 20 Friends displayed on the left of the page. The Friends’ photos with green mark on or in front of them means these are available for chat.

Agreed, some may have selected “Go Offline” option in Chat; their number will be extremely small as compared to the total number of Friends available in Chat.

Facebook is not transparent on the number of people available at any given point of time. It deliberately hides this number and keeps showing some static faces dubiously in Chat boxes.

But even if you assume that all of those – with or without green marks – are available and some are in the Offline mode, you get less than 5% of the total number of Friends that you have.

People just become members of Facebook and then disappear. They’re not using Facebook actively. Some may have even died. But Facebook keeps counting them as its active users.

If Facebook is so sure about its 900-million claim, why can’t it display the number of online users prominently – saying “Currently online users… with number” always on its main page? These numbers should be open for auditing by an independent group of online media experts. Although there are some automated web analytic services available, they’re not reliable.

The very fact that Facebook is not showing you these numbers transparently means it’s hiding something from the advertisers. There are many other user experience flaws on Facebook that advertisers must know before making any decision.

If you go by the Chat example stated above, the total number of active users on Facebook is not more than some 45 million or so (with 5% availability inference). Then how and why Facebook claims over 900 million? Even if you count users’ dogs, cats or rats (whose photos they keep posting regularly), the number of users can’t be that high.

Who are these 45 million or so users and what do they do on Facebook? Should advertisers be interested in them? Can they become consumers of brands advertised on Facebook? Let’s see.

According to estimates, 20% (9 million) of these users are idle housewives who come to Facebook to either post useless photos in which others are not interested or they come for some virtual hijinks including online social games, apps, etc, available freely on Facebook.

And another 20% (9 million) are jobless or retired people who find it convenient to kill their time on this free hangout with occasional chat with others or they keep posting some lifted pictures, clips, quotes, etc.

You’re left with 60% of 45 million. Here, about 25% (nearly 11 million) are shirkers who use Facebook from their offices. Even if they’re not doing anything noticeable on it, they just keep lurking there from morning to evening or keep playing Facebook games. Basically, they cheat their employers by not doing office work and wasting time on Facebook.

About 15% (nearly 7 million) are estimated to be amateur professionals, who show their work including paintings, photos, video clips, etc. to woo others. If they’re lucky enough, they get about 6 Likes and 3 Comments or something on their posts even if they have thousands of Friends. If they don’t have any of their work to show, they suddenly keep updating their cover photos on Facebook.

Strangely, there’s a significant American population on Facebook that keeps posting some news stories, photos, etc. shared from other sites about American politics, It’s estimated that such users are about 15% (nearly 7 million). These people come, post something, and go away.

The remaining 5% (nearly 2 million) belong to the “Others” category. Only God knows who they are. By this empirical estimation, Facebook doesn’t have any significant number of users that advertisers want to target.

Moreover, almost all the Facebook users are not interested in any advertisements on the site. In an ongoing poll by The Wall Street Journal (WSJ), 85.6% of respondents said they have Never been influenced by an ad on Facebook while 10% said Rarely, and just 3.1% said Occasionally and merely 1.3% said Frequently. (Data as on July 6, 2012).

It’s not only about the individual users; the situation is equally bad on corporate and Group pages on Facebook. There are hardly any brand-related conversations on Facebook pages.

On a page created by an auto company, for example, you’ll find discussion on movies or clothes or politics. Plus, such users use slangy, wrong, and broken language. It’s difficult to get any useful feedback for the brand from such conversations.

As most companies don’t understand the concepts of consumer engagement or community management, they don’t deploy any professional anchoring or moderation support that could give the right direction to the random conversations on their Facebook pages.

In general, there’s no professionally created content on Facebook that could attract serious consumers. It’s only user-generated content (UGC) – that is nothing but junk, which has made Facebook a well-known information junkyard. And lack of content is among the biggest bottlenecks in the acceptance of social networking concept.

Today, only some deep-pocketed large companies are experimenting with Facebook ads by spending just a fraction of their total ad budgets. The site is not yet ready for most other advertisers and it can’t make enough money to satisfy its investors. That’s one of the reasons that Facebook share price has been falling.

Perhaps, Facebook’s heavyweight investors including Goldman Sachs, venture capitalist Peter Thiel, Accel Partners, Microsoft, Digital Sky Technologies, knew that it will be difficult for Facebook to stand on its own feet. The Facebook IPO was presumably floated to give a safe passage to such investors, allowing them to take out their money in the most lucrative way.

But what about individual investors? During the eight years of its existence before its IPO, Facebook has been tight-lipped about its processes and performance. As now it’s a public company, investors should ask it to work in a totally transparent manner.

As stated above, all its claims about its numbers, etc. should get audited by an independent group of experts and made public. If possible, the auditing should be done under the supervision of Federal Trade Commission (FTC).

It’s possible that major advertisers like GM may come back by arm-twisting Facebook in many ways (like private data sharing, etc.), but others should not spend even a single penny on Facebook advertising till the time they’re convinced that they can generate sufficient business through Facebook ads.

They must know that the old pay-per-click (PPC) online advertising is fast getting obsolete. Today, they can demand CPA (cost per acquisition) option from Facebook – which means they’ll pay for ads only if they get business from those ads. Data privacy, information security, site architecture are among the other areas on Facebook that need refinement.

If Facebook doesn’t make all these corrections in its business models and operations, you can hope to see it headed for the graveyard of those tech services that couldn’t live up to their hype.

By Rakesh Raman, the managing editor of RMN Digital.

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