Are Facebook Pulling A Fast One On Us All With Their Advertising Platform?

I’m a huge fan of Facebook and have made that very clear over the last few years here on the blog. I think all the IPO stuff has been blown out of all proportion over the last couple of weeks and to highlight just how smart I think the company are I’ve explained below 3 of the ways in which they are extracting money from people. One thing that I do agree with the whole fuss on the IPO is that advertising alone is probably not going to help Facebook grow towards the lofty valuations that many have on the stock price. To truly unlock their huge potential they are going to have to find multiple revenue streams because as the examples below show they are probably milking just about as much as they already can out of advertising as it is. What will be interesting to see is just how much value advertisers get out of the platform on a long term basis and also how Facebook can take these formats over to mobile. It’s also a well known fact that ads to lead to 3rd party sites have a very poor click through rate meaning that most campaigns stay within the confines of Facebook’s walled garden. To understand Facebook’s magic trick when it comes to advertising have a look at these three simple steps…

Step 1 – Charge People To Go From One Part Of Site To Another

I still can’t believe to this day that Facebook have been able to generate billions of dollars in revenue for essentially driving people from one part of the site to another. Brands, business and organizations have spent billions driving people to their own Facebook pages with the quickest and most cost effective way of doing that being through Facebook advertising. Imagine having a revenue model where advertisers paid for people to click on pages within your own website? You really do have to take your hat off to Facebook though for convincing so many people that paying to do this is something worth doing. All of the brands with millions of followers have mostly acquired them through advertising and that is all money that has gone straight in to Facebook’s pocket.

Step 2 – Charge People To Like Your Page

When Facebook introduced the like button there is no way they could have realized just what an arms race it would have started among brands. One simple button has led to league tables being set up and every brand in the world using it as a barometer of their success on the platform. The incredible part of what they have done is that few brands have a clue what a like actually means or how few people see their content in the long run.

Step 3 – Charge Pages Again To Have Content Seen

This is the part that is the real swindle as far as I can see. So having “bought” your likes through targeted advertising Facebook then only shows a tiny amount of those likes (about 10%) your actual updates. Most people don’t know this but 90% of people never see your updates because of a thing Facebook calls Edgerank. So after buying the likes Facebook are now introducing a new ad tool which lets you pay for people who already liked your page to see your content. You are effectively paying twice to reach the same group of people. You are actually paying far more than twice if you start using this new tool on a regular basis to have your content seen.

 

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