Facebook on ads: ROI can take a year

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Posted 03 July 2012 20:52pm by Patricio Robles with 5 comments

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Following GM's decision to ditch paid Facebook ads prior to the social network's much-anticipated IPO, reports surfaced indicating that the break-up was due to Facebook's refusal to allow the automaker to run bigger, bolder ads.

Although the world's largest social network has been ratcheting up its monetization efforts, it has understandably been cautious about giving advertisers free reign. After all, if advertisers had their way, Facebook would probably be plastered with ads.

But that doesn't mean that Facebook is willing to let brands like GM walk away. As I noted previously, if Facebook is ever to produce the revenue it needs to grow into its currently valuation, it needs brands like GM on side.

So it's no surprise that the Wall Street Journal is reporting that senior executives at Facebook have been reaching out to senior executives at GM in an effort to get the automaker to give Facebook ads another try. In fact, according to the Wall Street Journal's Sharon Terlep and Shayndi Raice, Facebook's COO, Sheryl Sandberg, has spoken with GM CEO Daniel Akerson about the relationship between the two firms.

For all of Facebook's efforts, GM apparently isn't yet committing to a comeback. It wants something first: more evidence that Facebook ads are effective. To which Facebook head of measurement and insight Brad Smallwood has good news: based on Facebook's internal research, a campaign starts to deliver results in approximately one year. Yes, that's right. According to Facebook, brands should be prepared to wait 365 days before a campaign produces something of value.

Will that satisfy GM? Time will tell. But if the Wall Street Journal's report is accurate, the situation doesn't look all that productive for either company. While there are strategic reasons for Facebook to try to lure GM back, despite the fact that the auto manufacturer was only spending $10m on paid ads, asking brands like GM to wait twelve months for any signs of ROI is hardly the type of proposition the social network would seem to need at this time. For GM, the $10m it was spending on Facebook ads is a drop in the advertising bucket, so it's not clear what it stands to gain by giving Facebook ads a second look at this point, particularly if it's going to take a year to see a return.

Smaller companies, however, should take note. If Facebook's official position is that advertisers shouldn't expect a return from their campaigns for a year, Facebook ads just became unviable for a whole lot of businesses.