Facebook IPOInvestors were surprised when Facebook’s IPO fizzled. Indeed, fizzling may be too mild a word: only the deep pockets of Morgan Stanley and Goldman Sachs kept the issuance from dropping below its initial price on opening day.

But as both a user and advertiser with Facebook, I’m not surprised. Facebook has an unusual combination of arrogance and incompetence that constantly undermines its ability to build trust and deliver value to its users.  I need not go into all the user privacy and public relations disasters that have plagued the company for years.  But even as an advertiser, I find Facebook highly suspect, because Facebook’s advertising platform is an unusable mess.

A common example: if your ad doesn’t have a click-through rate of at least 1 percent, your ad campaign simply starts disappearing from rotation.  To give you some perspective, a 1 percent click-through rate is unimaginably high in display advertising, and even pretty rare in search advertising. As a result of this strange policy, within one to two days even a well-performing advertisement will simply stop running.

From a marketing perspective, this is hell.  This policy means you must physically edit every single ad you have every two days, just to stay alive.  A third party app may streamline the process, but manual intervention is always required.

Since no marketer wants to edit ads from scratch every day, most of us cheat: we just edit some element of the targeting and resubmit the exact same ad.   It’s ideal to do something insignificant, like change your target age range from 25 to 44 to 26 to 45.  Of course, if that stops working, you have to rebuild your campaign from scratch.

What marketer wants to edit every single ad every 2 or 3 days?  Nobody. This is why Facebook is populated with the same crappy advertisers you see everywhere else promising to solve all your problems with “one weird trick” — because only bottom-feeder lead generation advertisers have the time and energy to make Facebook advertising work.

This is just one problem with its advertising platform. I can go on: account management is weak; there are no desktop apps with which to manage ads; and the company routinely makes changes that break its system without notifying advertisers. The list goes on and on — frankly, the company feels like Yahoo! all over again.

No wonder General Motors decided to pull $10 million in advertising  spend from Facebook: it’s really hard to make it worth it.  And more importantly, why pay for what you can get for free?  For most brand advertisers, the best and cheapest use of Facebook is a free or nearly-free company page.   With a free page, one social marketing manager can make scads of customers happy with a lively and customer-centric social networking presence, and manage Twitter to boot.

Until Facebook is able to set aside its arrogance and ask users (both networkers and advertisers) what they really want, it’s hard to imagine that the company will ever be worth its IPO price in the long run.

(Update 9/6/2012: Facebook has dropped to less than half its IPO value.  Told ya so.)

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