Businesses face a Facebook conundrum

The Los Angeles Times ran an article recently entitled “Is Facebook worth it? Film execs confide they may cut movie ads.”  In it, they cite multiple sources who are unable to quantify the value of Facebook activity to sales at the box office.

They also describe a growing frustration for movie studios about the decreased reach that Facebook’s new EdgeRank algorithm is delivering them.  Reach that once only cost fan acquisition (and third party content development) now costs additional budget for reach.

If this sounds familiar, it parallels the Facebook conundrum facing nearly every business (and stand-up comedian):  is this thing on?

Unintended benefit of EdgeRank?

It appears the EdgeRank change (Facebook’s means to determine what content users see) may have caused these studios to take a step back and question whether the dollars spent on Facebook campaigns were well spent.  When their reach was diminished, they looked to see the impact on their sales.  For smaller businesses, this change (or lack thereof) probably will inform their opinion of Facebook even more.

Brian Solis posted an interesting article, “What your business needs to know about Facebook’s EdgeRank,” which describes how EdgeRank works.  His big point of contention is that Facebook didn’t change this algorithm for profit.  I don’t agree with that conclusion, but let’s assume that it’s true.  He goes on to show that the landscape for businesses changed with the EdgeRank change.  Organic reach diminished 40% (according to Solis’ numbers), so regardless of how you look at it the value of status quo diminished.  Whether that means businesses “pay-to-play” or perform “Social Media Optimization,” strategies and budgets will change.  Just as studios are assessing the viability of Facebook for their business, other businesses are doing the same.  And ironically Facebook has its own algorithm to blame.

Facebook says it works…. just do it better!

I found the following passage (from the LA Times piece) quite interesting:

“‘For people who are actually looking at the research and are looking for return on investment, for metrics that indicate specifically what Facebook’s role is in the movie marketing equation, the jury’s still out,’ said Jim Gallagher, a movie marketing consultant who formerly oversaw marketing for Walt Disney Studios.

Fred Leach, Facebook Inc.’s head of entertainment measurement, said the Menlo Park, Calif., company is working more closely than ever with Hollywood studios to help them target the right audience for a film, including giving studios more data showing the connection between ads and movie ticket sales and more tools to track the effectiveness of Facebook campaigns.”

Facebook has an outreach strategy borrowed from the Emperor’s New Clothes: tell businesses that their organic content isn’t anemic while simultaneously trying to sell advertising to bridge the “perceived” gap.  The problem being that businesses aren’t completely stupid.  Optimizing ads to better appease the EdgeRank algorithm costs money and is a risk.  Either an organic or paid campaign on Facebook costs more money today (per impression, click, headnod) than it did before the EdgeRank change.

Facebook or a billboard?

Social media advertising isn’t entirely vetted, and Facebook’s advertising products have been changing mercilessly since their IPO launch.  The LA Times article points out that despite the concerns about Facebook, studios will continue to develop campaigns for their movies:

“‘There are so many people on Facebook, it is a good place to have a presence — as a reminder. We buy the billboards in Westwood too — a lot of traffic drives past those,’ said one marketing executive.”

You wouldn’t think it would be so difficult to differentiate the value of Facebook Pages from a billboard.  Hopefully in the future it won’t be.

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Jim Dougherty

Jim Dougherty

Writer and chief of miscellany at
I'm the guy that wrote the article you just read. Sorry for the typos.
  • Michael Neuendorff

    This post is referring to movie studios and Facebook but I see a thread dating back to when GM decided to pull back on Ads and another one saying FB had little effect on votes. The rough reality for marketers is that when we log on to Facebook we do have purchase intent. Appreciate your time to write this post.

    • Michael Neuendorff

      um, check that. Meant to say “don’t have purchase intent”.

    • jimdougherty

      Thanks Michael – that’s a great observation. I think Mark Cuban was on to something when he equated Facebook to television – I think if marketers start to consider that interruption marketing is a useful tactic for social platforms, th equality and effectiveness of ads will improve. There is also evidence that Facebook performs strongly in retargeting campaigns, so it may be that the best opportunities are near. That said – you’re exactly right – Liking a brand doesn’t not appear to be have the same weight for people as subscribing to an email feed. Thanks so much for this comment!

  • Aaron Biebert

    Yep, it’s an undeniable thing. I’ve personally watched it happen. Not sure where it will lead. Some say they will keep eyeing other opportunities, others say that it’s about time we pay for it.

  • Frederic Gonzalo

    It will be interesting to find out what Facebook has to announce this coming January 15th. Hopefully it will address some of the major irritants that have come up in past months, in particular with EdgeRank changes affecting negatively brand pages, among other things…

    • jimdougherty

      Indeed… though I’ve heard rumors that it is a product of some sort. We’ll see. I would definitely think better of them if they made a customer-focused improvement! Thanks for your comment!