When a company like Facebook goes IPO, there is a lot of discussion about future potential for income. One area where Facebook may increase revenue is through advertising. Facebook took a big hit this week when GM killed a $10 million advertising campaign deal. GM claimed that Facebook ads were ineffective. DailyFinance.com reported, “Click-through rates are much lower on Facebook than they are on the internet generally, or on Google (Facebook: 0.051%, Google: 0.4%, Average: 0.1%)”
One way for an ad to be effective is for it to reach the target audience. Understanding a company’s target demographic is important. The following chart demonstrates the age of Facebook users:
According to Statista, “This statistic shows the age distribution of Facebook users in the United States as of April 2012. During that period of time, the majority of local Facebook users were between 18 and 24 years old. Furthermore, the most popular Facebook activities of U.S. users were posting on walls and checking the internal newsfeed.”
According to Facebook’s advertising Q&A area, there are some limitations regarding how advertisers may reach a specific demographic. Other than age and birthday-specific advertising, Facebook targets based on location, interest, education and connection advertising. This differs from Google that allows targeting by interest, keywords, remarketing, location and demographics.
BusinessInsider explained the difference between advertising on Facebook vs. Google in terms of reach and revenue. “Total reach for Facebook is 51% of all internet users. Total reach for Google is 90% of all internet users. First quarter revenue for Facebook is $1.06 billion, down 6.5 percent year on year and down 32 percent sequentially. First quarter revenue for Google is $2.09 billion, up 1 percent year on year and up 0.7 percent sequentially.”
Facebook is hoping to use friendships to sell products and brands. Check out the following video to find out more about this and the importance of geofencing. According to Amos Content Group, “A geofence is a virtual perimeter around a real area as in within a block of a restaurant. Marketers can use this location-based service to target a passersby who has opted in to send deals or information to smartphones.” Facebook’s friendship-based approach could influence geofencing.