Facebook Advertising and Business Model Flawed
August 2, 2012
It seems there is more bad news for social networking king, Facebook. In addition to new lows in its share price and rough second-quarter earnings, a newly released study suggests that Facebook’s business model may be broken.
EyeTrackShop, a firm that measures audience attention, released a study that tracked user attention to ads on Facebook’s website and apps. Users had a particularly bad recall for ads that had been seen on the iPhone and generally neglected the ads overall. The article on ReadWriteWeb, “Facebook’s Mobile Strategy is Flawed, Eye-Tracking Study Indicates,” shares more on the study’s results:
“During yesterday’s call, Facebook executives revealed that more than half of its users regularly access Facebook through mobile sites. That raised concerns among analysts and investors, as nearly 85% of Facebook revenue comes from advertising, which the company has been struggling to implement on mobile platforms. The executives stressed that while their mobile strategy is in its early stages, early tests suggest that the limited number of mobile ads that have rolled out have performed well and delivered a return on investment to advertisers.”
For a company that relies so heavily upon paid advertising, this is certainly bad, as well as surprising, news. We think that a problem of this magnitude could have been noted earlier on and are left to wonder: Perhaps Facebook has other flaws as well?
Andrea Hayden, August 2, 2012
Sponsored by ArnoldIT.com, developer of Augmentext
Bad News: Online Advertising Declines in Value
August 1, 2012
Is there trouble ahead for Google revenue? Slate prompts that question with its post, “The Decline of Google’s (and Everybody’s) Ad Business.” Writer Hugh Pickens notes that, unlike print ads, online advertising loses value over time. Google’s reported cost-per-click revenue has been dropping more each quarter—by 16% most recently, 12% last quarter, and 8% the quarter before that. The write up observes:
“The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency, writes Michael Wolff. ‘The nature of people’s behavior on the Web and of how they interact with advertising, as well as the character of those ads themselves and their inability to command attention, has meant a marked decline in advertising’s impact.’ This isn’t just Google’s problem. Overall, Internet advertising has decreased in value over the years as online advertising continues its race to the bottom.”
Google is actually in a good position to weather this storm, since it has widened its revenue stream well beyond AdWords. Many other companies, however, must be scrambling for another way to keep the coffers full.
Cynthia Murrell, July 31, 2012
Sponsored by ArnoldIT.com, developer of Augmentext
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