By 24/7 Wall St.
One of the most significant pieces of Facebook (FB) news ahead of its massive IPO was that GM (GM) would stop advertising on the world's largest social media site. On its face, the decision was not important to the huge social network. Facebook had over $4 billion in revenue last year, and GM's advertising expenditure on Facebook was only $10 million in 2011.
While the amount was relatively tiny, Wall Street voiced concern that the GM decision may be only the tip of the iceberg. If a large number of the nation's biggest advertisers view Facebook the same way GM does, Facebook's future as an advertising platform for marketers who spend tens of millions of dollars on TV, print and online advertising could be limited. That's important given that over 80% of Facebook's $1 billion for the most recent quarter comes from ads.
Meanwhile, several large national advertisers, including Ford (F), voiced support for Facebook in the wake of the GM announcement, a move that may have helped Facebook save face in the lead-up to the IPO.
National brands have three reasons to worry about Facebook as an advertising medium -- all of which work against Facebook's opportunities for revenue growth. The first is that click-through rates on social network ads, according to several studies, are lower than other online properties, including portals, search and traditional news sites. The second is that there are ways to market goods and services on Facebook via free fan pages. The third is that Facebook has been unsuccessful at securing a large number of multi-million dollar advertising campaigns from major U.S. advertisers. These companies still spend most of their money on traditional media.
Advertisers are not lemmings, but they do consider what other large marketers do. GM's decision can't be viewed in a vacuum. Facebook's viability as a medium for big advertisers will not be known for a long time. Still, Wall Street expects Facebook to continue its high double-digit revenue growth, as evidenced by the $100 billion-plus initial valuation. It can't, however, keep that valuation without the support of a big portion of the largest marketers in the U.S.
Relying on data from Comscore and published by The Wall Street Journal, 24/7 Wall St. reviewed companies that are among the 50 largest online advertisers as of September 2011, the most recent publicly-available analysis of the subject according to Comscore. Of that list, we identified highly visible companies that spend less than 10% of their total online advertising on Facebook.
These are America's biggest brands ignoring Facebook.
-Share of online ads on Facebook: 8.1%
-Total Impressions (September 2011): 837,500
-Facebook impressions (September 2011): 67,700
-Number of Fans: n/a
Leading health insurance company Aetna (AET) doesn't do much direct marketing through Facebook. Only 8% of its online ad impressions appeared on the social network site. Unlike most companies on our list, Aetna isn't utilizing Facebook for viral, word-of-mouth marketing either. In fact, Aetna is the only company on the list with no official Facebook fan page, but with an informational page and a student health page (with less than 2,000 likes). It's unclear exactly why, but insurance companies have a particularly paltry representation on Facebook. None of the other industry giants like Blue Cross Blue Shield, Cigna, and Unitedhealth Group, boast more than 10,000 fans on any one page. Whatever the reason may be, it's clear that Aetna feels that Facebook ads aren't worth the ad dollars.
-Share of online ads on Facebook: 8.1%
-Total Impressions (September 2011): 1.37 million
-Facebook impressions (September 2011): 111,100
-Number of Fans: 1,502,787
Of Ford's 1.37 million online ad impressions in September, just 111,000, or 8.1%, were on the social media site. While Ford isn't advertising directly on Facebook, it is using the site in other ways. In 2011, the car manufacturer launched a multimillion-dollar viral video campaign for the 2012 Focus, advertising on a variety of sites and directing users to the Focus' Facebook site. This campaign earned the company an estimated 43,000 likes on its Facebook Focus page, only a small amount of which was generated by on-site display ads. The company has, however, announced its intention to gradually increase its ad spending on the site. It is unclear whether this will become a trend with automakers, or whether more will opt to follow GM's route and abandon traditional advertising on the site.
-Share of online ads on Facebook: 6.8%
-Total Impressions (September 2011): 1.1 million
-Facebook impressions (September 2011): 74,600
-Number of Fans: 351,235
Of the top 50 online advertisers, CBS (CBS) ranked 40th in percentage of online impressions that appeared on Facebook -- just under 7%. While low, it was also the only network station among the top 50 biggest online advertisers. If CBS' approach to last fall's lineup is any indication, they too have opted to use Facebook as a free forum to generate interest. The network introduced its fall shows with a week-long interactive social media campaign, which included real-time Facebook chats with producers and cast members, as the shows were airing. It would appear that CBS believes that interactive and cost-free Facebook marketing is a more effective way to promote their brand.
-Share of online ads on Facebook: 6.1%
-Total Impressions (September 2011): 3.03 million
-Facebook impressions (September 2011): 184,000
-Number of Fans: 45,707
Progressive Auto Insurance (PGR) is another company that's choosing to advertise sparingly on Facebook. Only 6% of Progressive's online impressions appeared on Facebook. Progressive's page has only 45,000 likes, a number that pales in comparison to competitors like Geico (250,000) and State Farm (1.4 million). The company's fans are also far short of the Facebook spokesperson, super saleswoman Flo; she has more than 5 million. So why isn't Progressive doing more direct marketing on Facebook? According to chief marketing officer Jeff Charney, "Consumers are less likely to have a conversation with a logo or a PR guy on social media." Essentially, Flo is Progressive's Facebook strategy, and she's less expensive than direct marketing.
-Share of online ads on Facebook: 5.5%
-Total Impressions (September 2011): 1.2 million
-Facebook impressions (September 2011): 66,700
-Number of Fans: 870,346
While several automakers, notably Ford, have begun ramping up Facebook ads, most are still underrepresented on the social media site, relative to the size of all of their online advertising. Among the largest online advertisers, Japanese automaker Nissan (NSANY.PK) has the smallest representation of carmakers now that GM has left. The company is the 30th largest online advertiser, but is only 46th largest on Facebook. Just 5.5% of the auto company's total ad impressions are on the social media site. However, the automaker has roughly 870,000 likes on its fan page, well more than competitors GM (380,000 likes) and Chrysler (300,000 likes).
-Share of online ads on Facebook: 2.8%
-Total Impressions (September 2011): 1.2 million
-Facebook impressions (September): 33,732
-Number of Fans: 560,000 monthly users (App)
Mylife.com, formerly reunion.com, is one of the largest social networking conglomerates on the Internet. It owns several sites that connect individuals with their former classmates. According to Comscore, the company had 1.2 million impressions in September 2011. Just 33,000 of those, about 2.8%, were from Facebook. The site's fan page barely has any users, but the Mylife.com app, which allows users to manage their updates from Facebook as well as other social media sites, has approximately 560,000 monthly visitors.
-Share of online ads on Facebook: 0.1%
-Total Impressions (September 2011): 3.46 million
-Facebook impressions (September 2011): 112,100
-Number of Fans: 26,624
Scottrade Inc., the company behind online stock-trading site Scottrade.com, tops the list of inactive Facebook advertisers.
Scottrade allocates one-tenth of 1% of its overall ad spending to buying ad space on the social media giant. The most likely reason for Scottrade's indifference is that its demographic isn't particularly active on Facebook. According to a recent study conducted by Scivantage, an independent financial technology firm, the average age of an online brokerage client was 49. The Facebook pages of Scottrade and the other top online brokerage firms have less than a half million likes between them. Meanwhile, Bank of America alone has 540,007.
Scottrade clearly prefers to promote its brand for free through its Facebook pages and in the past has used strategies like offering free trades to users who promoted Scottrade on their wall. Scottrade's Facebook frugality is even more noteworthy when considering that its overall online ad spending ranks among the top five online advertisers in the U.S.