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Msg  299 of 394  at  6/14/2012 11:16:56 PM  by

RCMac98

The following message was updated on 6/14/2012 11:16:56 PM.

FB fires back

The post-IPO quiet period expires, and Facebook responds to its critics, as reported in the WSJ:

>> Facebook Combats Criticism Over Ads 

        

By SHAYNDI RAICE

Facebook Inc. launched a public-relations blitz Tuesday to hit back at criticism from the past few weeks that advertising on the social network isn't effective.

Since filing for an initial public offering in February, the company had been prohibited from making public comments under securities rules. That "quiet period" lifted on Tuesday, permitting executives to go on the offensive to justify the social network's business model after the stock debut backfired last month.

Facebook started the day with research firm comScore Inc. releasing a study commissioned by the social network that attempts to show the value of marketing on Facebook's site. The report concluded that being a fan of a brand on Facebook causes people to purchase that brand more frequently.

In tandem with the study, Facebook's executives talked up comScore's results. "It's a myth that Facebook advertising doesn't work," said Brad Smallwood, head of measurement and insight at Facebook, in an interview.

Facebook's coordinated efforts to defend its ad business comes after some big brands and advertising agencies have come out and said there is no evidence that advertising on Facebook leads to consumers spending more money. A few days before Facebook's IPO, General Motors Co. said it would pull $10 million of ads from the social network because they don't work.

Facebook's Mr. Smallwood acknowledged the company has been told by some of its biggest clients that it wasn't doing a good enough job of showing the value of advertising on the site.

"We heard we have to do a better job of demonstrating" returns on investment, he said.

Mr. Smallwood said the biggest question now from advertisers is how to take the fan base that brands have accumulated and get the most for their money. "We're in the early days of helping advertisers on this journey," he said.

Critics of Facebook have also blasted the company for its lagging efforts to make money off its mobile site, where it has only recently begun to offer opportunities to advertise. More than half of Facebook's 900 million users access the site via mobile.

The company last week offered marketers the ability to pay for ads on the its mobile site separately from a premium package, a move that was meant to increase ad revenue from mobile.

Carolyn Everson, vice president of global marketing solutions at Facebook, said in an emailthat there is a challenge to sell ads on mobile phones, where there is a smaller screen and a bigger chance of disrupting a users' experience.

But with "sponsored stories"—which lets advertisers pay to repost positive user messages to those users' friends—Ms. Everson said the company doesn't face that challenge because those ads appear in "the natural place where people get information on Facebook whether they are on desktop or mobile."

Facebook also released its own internal research of more than 60 ad campaigns on its site, though the company wouldn't release the names of the companies or the full results. Facebook said 70% of campaigns showed a return on ad spend of three times or more, while 49% of campaigns showed a return on ad spend of five times or more.

There were still topics that were off limits for Facebook, however—a spokesman declined to answer questions about the company's IPO.

In the wake of criticism, Facebook's stock—which debuted at $38 a share—has fallen about 27%, undercutting expectations that the company could keep up its valuation at the more than $100 billion at which it went public. Facebook, which generated $3.1 billion in ad revenue last year, will need to substantially grow that revenue to fill out its market capitalization, which now stands at about $74 billion.

On Tuesday, Facebook's efforts didn't much impress investors. The company's stock rose 1.5% to end 4 p.m. trading at $27.40, on a day when the broader market was up.

In comScore's study, the research firm tracked people who were fans of Starbucks Corp. on Facebook against a control group of people who weren't exposed to those messages. ComScore found that over a four-week period, fans and their friends bought 38% more frequently at Starbucks than people who weren't exposed to the Facebook messaging.

Similarly, comScore tracked Target Corp. fans and their friends on Facebook and found that those people bought at Target 21% more frequently than those who weren't Facebook fans of the retailer.

Comscore analyst Andrew Lipsman said the firm targeted users' purchase habits prior to being exposed to the ads so that brand affinity—or the fact that they were already fans of the company—was removed as a variable that swayed them toward buying more of that product.

Not all brands had similar results. Amazon.com Inc., for example, saw that fans of its Facebook page spent twice as much as the average Internet user on the e-commerce site, but their friends only spent about 8% more, according to comScore.

That study was conducted over the holiday season and Amazon didn't have in-store sales, which lowered the results, said comScore.

Amazon and Starbucks declined to comment. Target didn't have immediate comment. <<

 
 
 
 


 
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