May 2, 2012
As Facebook pitches investors ahead of its planned initial public offering of stock, some advertisers are wondering whether their money is well spent on the social network’s new forms of advertising that are designed to build buzz around their brands. As The Wall Street Journal reports, Facebook will seek a $100 billion valuation, but advertisers worry about the difficulties of measuring the results of nascent forms of social-media advertising that have yet to be fully tested.
Facebook’s “Sponsored Stories” feature, for example, which it launched last year, lets advertisers rebroadcast people’s positive posts, and advertisers pay a rate based on the views those posts receive. But while advertisers can directly track their return from ads on Google and Yahoo, Facebook for the most part doesn’t permit third-party surveys or allow ads to be tagged with software cookies that track what people do online after seeing an ad.
To justify a $100 billion valuation, Facebook would have to grow its revenue by 41 percent annually for the next five years, says Jed Williams, an analyst at BIA Kelsey. By comparison, Google’s revenue grew by 24 percent in 2010 and 29 percent in 2011. As the Journal reports, Facebook has alienated some advertisers with what they perceive as a highhanded attitude that implies they have nowhere else to turn. — Greg Beaubien