Forget General Motors; Facebook's ads really do bring a significant return on investment, says the world's biggest social media network .
After quieting down during its initial pubic offering on Wall Street and a turbulent few weeks after, which saw the $38 stock take a nosedive, Facebook on Tuesday released a report with the research firm comScore suggesting that 70 percent of campaigns on the Mark Zuckerberg-founded site ring up three times their return on investment.
That's based on a study of more than 60 campaigns of top brands by comScore's researchers. The report, The Power of Like 2, says campaigns achieve a monthly Amplification Ratio of "between 0.5 and 2.0, extending media exposure of Fans to Friends of Fans by between 50 percent and 200 percent."
The report follows a similar study last year and refers to the trademark process of users linking to people, groups and companies through clicking "Like" on Facebook.
"Social media continues to emerge as an important marketing channel and major brand marketers are devoting more time and attention to understanding its impact on consumers," said Andrew Lipsman, comScore VP of Industry Analysis, in the report's press release. "The Power of Like research sheds new light on how brands are able to deliver earned and paid media at scale, amplify its effects from Fans to Friends of Fans, and understand how exposure to these media can drive the desired consumer behaviors, including online and in-store purchase."
The question of how cost-effective Facebook's paid ads are came to the fore just before the IPO in mid-May, when General Motors confirmed to the media that it was suspending its $10 million annual campaign while continuing to utilize free pages.
Rebecca Lieb, a digital marketing, advertising and media analyst with the Altimeter Group, told us the attachment of Facebook users to a product or company through the Like button places the network's ads in a unique category.
"This really solid level of ROI from social advertising is proof that advertising in social channels such as Facebook will not work unless carefully integrated with paid and earned media channels," Lieb said.
"Ads on Facebook aren't 'stand-alone,' as ads tend to be in other channels. Rather, their content must resonate with fans and followers in order to be 'liked' and shared -- thus amplifying their messages."
'Jury Is Still Out'
But another analyst was skeptical.
"Facebook is trying so hard to make the world believe it is a great place to advertise," said consultant and commentator Jeff Kagan. "Apparently they are working with people and companies who can help them tell that story.
"While I do believe that there is a strong possibility Facebook could indeed create this new advertising model, it does not really exist yet today."
Kagan said that just as Google blazed its own trail with AdWords, its online advertising business and primary revenue source, Facebook will have to forge its own model.
"It must be affordable and targeted and effective," he said. "So far I would say the jury is still out on Facebook in this area."