Why GM And Others Fail With Facebook Ads
But the truth is that Facebook ads work better for some businesses than others. GM did what any savvy marketer facing a budget squeeze does—it optimized away from underperforming media channels. Advertising, after all, is an investment. You need to put your funds against what works best.
Most Facebook ads are bought on a cost-per-click basis. This means the front-end cost of getting a potential consumer to respond is low, typically less than $2 per click. Each click on a Facebook ad puts a consumer on your product web site. If you then can get only 1 percent of those consumers who click on ads to “convert” and buy your product, you’ve achieved a $200 cost per sale. In essence, marketers try to buy customers at the lowest cost per sale possible. Paying $200 per new customer isn’t bad for many business models.
The challenge with Facebook, though, is that conversion rates can be very low in some product categories. Social media users are being social, after all. Unlike the pay-per-click ads that Google (GOOG) serves up only after consumers type in the names of products they are hunting, Facebook ads pop up while you’re bragging about your five-mile run. Curious tire-kickers might click on a GM Facebook ad to see the sexy Chevy Volt, but that doesn’t mean they want to buy one. If your conversion rate—the portion of people who eventually buy after clicking on your Facebook ad—falls from 1 percent to 0.1 percent, you’re now talking a $2,000 per-sale cost. That’s an expensive customer acquisition.
In a world where liking is as common as blinking, a like no longer signals that a consumer loves your brand...
I then checked into Facebook 31 times over the next week, each time scrolling back through several hours of friends’ posts, to see which brands would reach out to me. On average, the brands I had liked engaged with me 0.6 times over seven days—an awful performance, given the basic marketing precept that three or four interactions are required per week to trigger consumer response.