Facebook's advertising capabilities questioned

According to global public relations company Burson-Marsteller, 61 percent of the world's 100 largest companies have a Facebook presence - up from 54 percent in 2010. In addition, 96 of AdAge's top 100 U.S. advertisers bought ads on the social network in the past year.

However, due to an early decision by site creator Mark Zuckerberg to keep his website uncluttered, many large advertisers use only a "fraction" of their total budgets to advertise on the site, The Wall Street Journal reports.

Facebook's ad revenue has increased year-over-year, rising from $800 million in 2010 to $1.6 billion this year. Yet that total equals just one-fifth of the ad revenues per user that Google rakes in. The news source cites a comScore statistic that predicts Google will earn $12.8 billion in internet marketing revenue this year from nearly 185 million unique U.S. users. Contrast that to Facebook's predicted $2 billion in earnings from 162 million unique users, and it's clear the social network isn't leveraging its advertising ability as much as it probably could.

The main draw with internet marketing on Facebook is the ability to increase brand awareness and create a more personal relationship with customers. But because Facebook's fan pages and the "Like" button are free to use, many companies are able to build their brands without spending a dime.

The news source cites comScore data that shows larger online ad buyers - such as Ford, Verizon and Progressive - ran less than 15 percent of their digital ads on Facebook in August and September. Furthermore, eMarketer predicts the social network will capture just 6.4 percent of total online ad spending this year.

While some companies are beginning to increase ad spending on Facebook - Sony recently announced that it is using 30 percent of its ad budget on social sites to promote its PlayStation console, and Smirnoff and Guinness maker Diageo recently committed to spend more than $10 million on Facebook ads - some are skeptical as to how well the social network can incorporate conventional adverting.

Companies that use traditional advertising "are invading a social space," said Martin Sorrell, CEO of ad holding company WPP, as quoted by the media outlet. "You have to be extremely careful."
 

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