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For: Marketing Leadership Professionals

Why Facebook Is Failing Marketers


by Nate Elliott, October 28, 2013 KEY TAkEAWAYS Facebook Has The Potential To Redene Marketing Why do marketers spend billions on Facebook every quarter? Because it claims a larger audience than marketers have ever seen; it knows a remarkable amount about people and their preferences; and it offers the potential for genuine interaction between companies and customers. But Facebook Has Abandoned Its Promise Despite its potential, Facebook hasnt revolutionized marketing. In fact, Facebook no longer supports social marketing. It has become a Web 1.0-style ad seller, focused almost exclusively on the advertising models that marketers once hoped Facebook would replace. The Result: Facebook Is Failing Marketers By abandoning its promise, Facebook has failed to realize its potential and has disappointed marketers. Our surveys show that Facebook creates less business value than any other digital marketing opportunity, both because its marketing opportunities dont stack up to competitors and because Facebook offers marketers too little guidance and support.

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OcTObER 28, 2013

Why Facebook Is Failing Marketers


The Leading Social Network Has Abandoned Social Marketing
by Nate Elliott with Shar VanBoskirk, Josh Bernoff, James L. McQuivey, Ph.D., and Sarah Takvorian

WhY READ ThiS REpOrt For years, Facebook has teased marketers with its potential to redefine their industry. And considering Facebooks enormous audience, its ever-growing cache of affinity data, and its potential to offer genuine interactions between companies and their customers, marketers cant help but believe in its promise. But Facebook hasnt revolutionized marketing; in fact, it now does little to support social experiences between brands and customers. Instead, it has quietly become almost entirely reliant upon Web 1.0-style display ads and simplistic targeting and marketers say those display ads just arent working. This report examines how Facebooks change in focus has failed marketers.

Table Of Contents
2 Facebook Has The Potential To Redene Marketing But Facebook Has Abandoned Its Promise 4 The Result: Facebook Is Failing Marketers Marketers: Treat Facebook As Just Another Ad Buy
REcOmmENDATIONS

Notes & Resources


Forrester surveyed 395 marketers in the US, Canada, and the UK.

Related Research Documents


Integrate Social Into Your Marketing RaDaR August 7, 2013 How To Exploit The Database Of Affinity April 15, 2013

6 Dont Take Facebook Back Until It Mends Its Ways


WHAT IT MEANS

7 When Facebook Fails, Other Social Sites Will Prosper 8 Supplemental Material

2013, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com.

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Why Facebook Is Failing Marketers

fACEbOOk hAS thE pOtENtiAL tO rEDEfiNE mArkEtiNG In a November 2007 speech on Madison Avenue, Facebook CEO Mark Zuckerberg predicted his company would lead a once-in-a-lifetime revolution in marketing: Once every hundred years media changes. The last hundred years have been defined by the mass media. The way to advertise was to get into the mass media and push out your content. [. . .] In the next hundred years information wont be just pushed out to people, it will be shared among the millions of connections people have. [. . .] The next hundred years will be different for advertising, and it starts today. (Mark Zuckerberg, CEO, Facebook)1 Six years later, 79% of companies market on Facebook, all of them waiting for the site to live up to Zuckerbergs promise (see Figure 1). Why are marketers betting billions on Facebooks potential?2

It claims a larger audience than marketers have ever seen. When Zuckerberg made his

speech, Facebook boasted just 50 million users.3 But today, more than 1.1 billion people use the site an audience size larger than marketers have likely ever contemplated.4 The best-rated show on American TV gets fewer than 10% of adults to tune in.5 By comparison, nearly 30% of the people on this planet who can use Facebook do so every single month.6

It knows a remarkable amount about people and their preferences. Every day, people

tell Facebook about their affinities by liking images and videos, by ranting or raving in their status updates, and by listing favorite bands and films in their user profiles. All this information adds up to a database of affinity a catalog of peoples tastes and preferences that, properly leveraged, could be the Holy Grail of more-accurate brand advertising.7

It offers the potential for genuine interaction between companies and customers. Pre-

Facebook, marketers had to use billboards, TV spots, or online ads to get messages in front of customers. And they relied on surveys or focus groups to gather customer feedback. But Facebook offers (and occasionally delivers on) the promise of real two-way communication. In theory, companies can both share with, and receive messages from, customers through Facebook.8

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Why Facebook Is Failing Marketers

Figure 1 More Than Three-Quarters Of Companies Market On Facebook


Which of the following Facebook marketing tactics does your company use? Currently use Post updates to our branded page Respond to customer questions and comments Promote our branded posts Buy paid ads Create custom tabs or applications 34% 49% 64% 61% Plan to use in next 12 months 72% 12%

15% 16%

21% 30%

Base: 395 marketers in US, UK, and Canada Source: Q3 2013 North America And UK Digital Maturity Online Survey
104441 Source: Forrester Research, Inc.

But Facebook Has Abandoned Its Promise Despite Zuckerbergs manifesto, Facebook hasnt revolutionized marketing. Instead, it has quietly become almost entirely reliant upon the traditional advertising models it once lampooned:

Facebook no longer supports social marketing. Yes, you heard us right. Sure, the company

still teases marketers with the promise that it will better connect them to their customers.9 But in reality, it rarely creates such connections. Everyone who clicks the like button on a brands Facebook page volunteers to receive that brands messages but on average, Facebook only shows each brands posts to 16% of its fans.10 And while Facebook upgrades its paid advertising tools and offerings monthly or more, its done little in the past 18 months to improve its unloved branded page format or the tools that marketers use to manage and measure those pages.11

It has instead become a traditional ad seller. Apparently, Facebook no longer disagrees with
the push model of mass media advertising that Zuckerberg disparaged. In fact, it delivers tens of billions of display ad impressions every day as many as one-third of all display impressions online.12 But fewer than 15% of Facebook ads leverage social data to reach morerelevant audiences.13 And Facebooks static-image ad units offer marketers less impact per impression than marketers could achieve with the ad units other sites offer.14

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Why Facebook Is Failing Marketers

thE rESuLt: fACEbOOk iS fAiLiNG mArkEtErS By abandoning its promise, Facebook has failed to realize its potential and has disappointed marketers:

Facebook creates less business value than any other digital marketing opportunity. We

asked 395 executives from the US, the UK, and Canada how satisfied they were with the business value they get from 13 different online marketing sites and tactics. Youd expect a site boasting the largest audience and the biggest collection of data to fare well. But we found that Facebook offered less value than anything else on our list (see Figure 2). The least valuable tactic within Facebook? Those paid ads onto which Facebook has shifted focus.

Facebook does less than other large sites to help marketers. We also asked executives

how satisfied they were with six large online and social properties as marketing partners considering the guidance, education, service, and support they receive from each property and how much each contributes to their marketing success. Once again, Facebook fared poorly. Just 51% said they were satisfied with Facebook as a partner, placing it behind Google, LinkedIn, and Yahoo (see Figure 3).15

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Why Facebook Is Failing Marketers

Figure 2 Facebook Creates Less Business Value Than Any Other Digital Marketing Opportunity
How satisfied are you with the business value your company has achieved by using each of the following marketing channels? (Responses on a scale of 1 [very dissatisfied] to 5 [very satisfied]) On-site ratings and reviews Search marketing Email marketing Branded community Word-of-mouth marketing Branded blog Online display advertising LinkedIn marketing Mobile marketing YouTube marketing Google Plus marketing Twitter marketing Facebook marketing 1.0 Base: 395 marketers in US, UK, and Canada Note: Average responses are shown. Source: Q3 2013 North America And UK Digital Maturity Online Survey
104441 Source: Forrester Research, Inc.

3.84 3.83 3.79 3.74 3.74 3.73 3.72 3.70 3.69 3.65 3.62 3.57 3.54 5.0

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Why Facebook Is Failing Marketers

Figure 3 Facebook Lags Other Major Sites As A Marketing Partner


How satisfied are you with each of the following companies as marketing partners? Consider the guidance, education, service, and support you receive from each company and how much each company contributes to your own marketing success. (Responses on a scale of 1 [very dissatisfied] to 5 [very satisfied]) Google LinkedIn Yahoo Facebook Twitter MSN 1.0 Base: 395 marketers in US, UK, and Canada Note: Average responses are shown. Source: Q3 2013 North America And UK Digital Maturity Online Survey
104441 Source: Forrester Research, Inc.

3.84 3.81 3.54 3.52 3.48 3.28 5.0

Marketers: Treat Facebook As Just Another Ad Buy Because Facebook has abandoned social marketing, marketers must treat Facebook as just another display ad site:

If you want to buy ads on Facebook, rely on facts rather than faith. Weve no doubt that for

some marketers targeting some audiences, Facebook advertising can work. If the site really performs well compared with your other media buys, go ahead and spend money there. But marketers tell us Facebook ads generate less business value than display ads on other sites. 16 Its time to make decisions based on facts, not on faith or fascination. Youre just buying display ads! Dont dedicate a paid ad budget for Facebook. Make it compete with other media buys based on performance, just as you would any other site.

If you want genuine social interaction, add social tools to your own site. Marketers often

tell us they want to fish where the fish are that they hope to engage audiences on Facebook because Facebook is where audiences spend their time. But because Facebook fails to connect brands with the vast majority of their fans, its time to look elsewhere. The good news? Theres another place where your customers and prospects spend time when they want to learn about your products: your own website.17 Marketers tell us that adding social tools to their sites such as branded communities, blogs, and customer ratings and reviews remains a powerful way to engage users through relevant interactions.18

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Why Facebook Is Failing Marketers

R E C O M M E N D AT I O N S

DONt tAkE fACEbOOk bACk uNtiL it mENDS itS WAYS For years, marketers have invested both their hopes and their resources in Facebook and too few have found a return on either investment. In fact, if the site doesnt start offering more value soon, marketers attention will wander to the next digital opportunity. What can Facebook do to earn back marketers confidence? Under what circumstances should marketers give Facebook a second chance?

If Facebook starts building bridges between companies and customers. Rather than

disconnecting brands from their fans in the hope of driving ad buys, Facebook needs to prove that its entire ecosystem can help marketers succeed. Wed start with the basics: Instead of littering the right side of its pages with dating site or malpractice lawyer ads, Facebook should let users choose which of their favorite brands deliver them regular updates there. In the long term, wed build the Facebook Home mobile app which already distributes photos and status updates to users mobile home screens into an intelligent agent that promotes media and product recommendations as well. This type of trusted agent would give brands the ideal channel through which to encourage existing fans to try new products and offerings.19

If Facebook cracks the code on affinity-based ad targeting. Lets be honest: If Facebook is

going to focus on ads, it needs to do better. The good news: The company owns so much of the worlds social data that turning this data into a valuable targeting tool for its own and other sites ads should be simple. The bad news: even though Facebook has created an eightperson artificial intelligence team to learn how to better create meaning from its stockpiles of affinity data, it is far behind Google, which understands how to process affinity data and is already offering relatively sophisticated affinity targeting to marketers.20

W H AT I T M E A N S

WhEN fACEbOOk fAiLS, OthEr SOCiAL SitES WiLL prOSpEr We dont believe that Facebook will make the changes needed to win back marketers hearts. In fact, we dont believe the company even sees the need to change: Its enormous revenues have blinded it to marketers growing dissatisfaction. But if it doesnt change, the results will be dire:

The smart money will leave Facebook. A handful of notable brands have drawn first blood,
announcing theyre leaving Facebook entirely.21 But this story wont end with a single fatal blow: Facebook should be more concerned about death by a thousand cuts. Smart brands will realize, campaign by campaign, that there are better ways to spend their money. Only a few will put out splashy press releases announcing theyve quit Facebook altogether, but many will earmark an increasingly smaller budget share for Facebook.

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Why Facebook Is Failing Marketers

Facebook will drop marketplace ads entirely in favor of news feed ads and a network.

As big brands walk away, Facebook will begin to feel more like MySpace circa late 2000s: a home for poorly targeted, low-CPM direct marketing. We predict that the user experience will become so poor especially in the right-hand rail of the sites home page that Facebook will abandon its marketplace ads entirely. It will instead focus on further improving the ads it delivers into its news feed and on building an ad network or exchange where direct marketers can run high volumes of low-budget ads without degrading Facebooks own user experience.22

Twitter and other social networks will benefit if they can do better than Facebook

did. Google Plus, LinkedIn, Twitter, and other social sites should be reveling in the market opportunity that Facebook is leaving behind: millions of marketers, ready to spend billions of dollars to interact with their customers. But there is much work to do. While these social sites deliver marketers more value than Facebook does, they still dont compare with the business value offered by on-site social tools such as customer reviews and branded communities. And marketers are running out of patience. Twitter and the rest must move quickly to improve the tools that marketers can use to manage and measure their interactions with customers to prove not just that they can deliver the genuine social engagement that Facebook wont but that such engagement drives business value.

SuppLEmENtAL MAtEriAL Methodology Forresters Q3 2013 North America And UK Digital Maturity Online Survey was fielded in August 2013 to 395 interactive marketers and eBusiness professionals. For quality assurance, we screened respondents to ensure they met minimum standards in terms of content knowledge, job responsibilities, budget insight, and company size and revenues. Exact sample sizes are provided in this report on a question-by-question basis. The sample was drawn from members of Research Nows online panel, and respondents were motivated by receiving credits that could be redeemed for a reward. The sample provided by Research Now is not a random sample. While individuals have been randomly sampled from Research Nows panel for this particular survey, they have previously chosen to take part in the Research Now online panel. This data is not guaranteed to be representative of the population, and, unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes. While nonrandom, the survey is still a valuable tool for understanding where users are today and where the industry is headed.

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Why Facebook Is Failing Marketers

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Source: Erick Schonfeld, Liveblogging Facebook Advertising Announcement (Social Ads + Beacon + Insights), TechCrunch, November 6, 2007 (http://techcrunch.com/2007/11/06/liveblogging-facebookadvertising-announcement/). How much, exactly, are marketers betting on that potential? In the second quarter of 2013, Facebook collected $1.6 billion in advertising revenue. Source: Facebook Q2 Earnings Beat Street, Shares Soar On Growth, Mobile, Forbes, July 24, 2013 (http://www.forbes.com/sites/tomiogeron/2013/07/24/facebook-q2earnings-beat-street-shares-rise/).

Source: Jon Davis, Facebook: Changing Advertising Forever, Capture Commerce, (http://www. capturecommerce.com/facebook-advertising.php).

Source: Facebook (http://newsroom.fb.com/Key-Facts). The US Census reports there are more than 240 million adults in the US. And believe it or not, the most popular TV show during the 2012 to 2013 season was NCIS: It averaged 21.6 million viewers per week. Source: US Census Bureau (http://quickfacts.census.gov/qfd/states/00000.html) and Michael Schneider, Americas Most Watched: The Top 25 Shows of the 2012-2013 TV Season, TV Guide, June 10, 2013 (http:// www.tvguide.com/news/most-watched-tv-shows-top-25-2012-2013-1066503.aspx). Forrester estimates there are 5.3 billion persons over the age of 15 worldwide but at least 1.17 billion of them live in countries where people arent allowed to use Facebook, like China and Iran. Of the approximately 4.12 billion people on earth who are able to use Facebook, the company reports that 1.15 billion do per month. Source: Estimates for world and country populations over the age of 15 were based on population data from the Forrester Research World Online Population Forecast, 2012 To 2017 (Global) and age demographic data from the UN Department of Economic and Social Affairs. Additional data from Facebook (http://newsroom.fb.com/Key-Facts).

The database of affinity featuring data thats usually expressed after a purchase and that lasts for years is perfectly suited to supporting brand advertising campaigns, as it reveals what sorts of products and messages will appeal to which sorts of people. See the April 15, 2013, How To Exploit The Database Of Affinity report. Its no accident that the two Facebook-related tactics marketers use most are posting updates for their fans to see, and responding to the questions and comments those fans are posting. And make no mistake: Those fans also think of a companys Facebook page as way to hear from and talk to their favorite companies. In fact, people mostly visit and like branded Facebook pages after theyre already satisfied customers of those brands; customers think of liking a Facebook page as an alternative to joining a brands mailing list. See the August 7, 2013, Planning That Successfully Mixes Art And Science report.

Zuckerbergs speech was far from the last time Facebook enticed companies with the potential of a new type of marketing success. For instance, the companys new Facebook for Business site launched just months ago promises: Over one billion people like and comment an average of 3.2 billion times every day. When you have a strong presence on Facebook, your business is part of these conversations and has access to the most powerful kind of word-of-mouth marketing recommendations between friends. Source: Facebook (https://www.facebook.com/business/overview).

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By comparison, the average marketing email another channel a brands customers might sign up for when they want to receive that brands messages is delivered to more than 90% of the people who agreed to hear from the brand again. Its safe to say that if your email service provider was only delivering messages to 16% of your mailing list, you wouldnt think twice before firing them. Source: Facebook (https://www. facebook.com/note.php?note_id=10150675727637217). How do we know the Timeline branded page format is unloved and that Facebook does too little to help marketers make these pages successful? Well, we hear that from marketers on a regular basis. But our data supports this assertion as well: While maintaining a branded page is companies favorite Facebook tactic in terms of adoption, its their second-least-favorite in terms of the business value it creates. Source: Q3 2013 North America And UK Digital Maturity Online Survey. ComScore reported in early 2011 that Facebook was delivering 3.8 billion ad impressions per day and that was just in the US. Facebook reports that the number of ads it delivered grew 42% during 2011, another 32% during 2012, and another 39% so far in 2013. Based on this rate of growth, we estimate that Facebook now delivers nearly 10 billion ads per day in the US. And with half of Facebooks revenues coming from outside the US and its ad rates higher in the US than elsewhere we expect that Facebook now delivers approximately 20 billion ads per day worldwide. Source: US Online Display Advertising Market Delivers 1.1 Trillion Impressions In Q1 2011, comScore press release, May 4, 2011 (http://www. comscore.com/Insights/Press_Releases/2011/5/U.S._Online_Display_Advertising_Market_Delivers_1.1_ Trillion_Impressions_in_Q1_2011); Tim Peterson, Facebook Served 39 Percent More Ad Impressions in Q1, Adweek, May 1, 2013 (http://www.adweek.com/news/technology/facebook-served-39-percent-moread-impressions-q1-149081); and Facebook Annual Reports (http://investor.fb.com/annuals.cfm). In the past 24 months, Facebook has primarily focused on offering the same ad targeting options that every other website and online ad network can offer. Marketers can now retarget Facebook users who have previously visited their websites; they can target users based on detailed transactional records provided by Datalogix and Epsilon; and they can use ad exchanges to dynamically target users likely to respond to their ads. But the richest form of targeting Facebook could offer targeting based on the affinity data thats created when people like and share content on site goes almost entirely unleveraged. Facebook confirmed to Forrester that only approximately 10% to 15% of the ad impressions delivered on its site use social connections as a form of targeting and admitted it does little to encourage marketers to target based on social data and cues. Source: Facebook executive interview, September 17, 2013. Nearly every study weve seen over the past 15 years on the effectiveness of online display ads tells the same story: The larger and richer the ad format, the more effective the ad. (Video ad units perform especially well in such studies.) But Facebooks most common ad unit the marketplace ads that dominate the right-hand side of many of their pages is only about half the size of the most common online ad units and doesnt allow marketers to use animation or rich media technology. In fact, non-animated formats like those Facebook offers have historically performed so poorly, and as a result are so rare online today, that few ad effectiveness studies even collect data on them. Source: Better Brand Engagement With Display Formats, DoubleClick and Dynamic Logic report, February 2012 (http://www.dynamiclogic.com/docs/articlepdfs/2012/02/23/Better-Brand-Engagement-with-Display-Formats-Feb-2012.pdf).

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When researching this report, we told Facebook that our data showed its marketers werent terribly happy. In response, Facebook said it hopes a new blog and online resources site will better educate marketers and that its working to give personalized attention to more clients. Just 51% of the companies that buy paid ads on Facebook are somewhat satisfied or very satisfied with the business value those ads deliver. By comparison, 62% of the companies that buy online display ads overall are somewhat satisfied or very satisfied with the business value those ads deliver. Source: Q3 2013 North America And UK Digital Maturity Online Survey. People say that marketers own websites are among the top channels to which they turn both when exploring a companys products and services and when engaging with a company from which theyve already purchased. Source: North American Technographics Customer Life Cycle Survey, Q2 2013. Source: Q3 2013 North America And UK Digital Maturity Online Survey. There are few brands that would be able to usurp the mobile phone home screen experience from mobile operating systems such as iOS and Android but Facebook has the user leverage to do so. The challenge: to move beyond simple likes and fine-tune the algorithms that decide which content gets delivered to each user. Once Facebook does this, it would be in a position of great power further mediating the relationship between users and the content and messages they consume. See the February 19, 2013, Emerging Touchpoints Require A Marketing Mind Shift report. In June 2013, Google launched Affinity Segments, a tool that allows marketers to target audiences based on the products and categories for which theyve expressed preferences. We think Google has room to add more and broader affinity data to these segments and to do richer analysis on that data. But Affinity Segments blends multiple signals into a single targeting tool which makes this an important step forward from the exceedingly simplistic affinity targeting that social sites like Facebook now offer. Source: Ginny Marvin, Google Launches Affinity Segments To Align AdWords And YouTube Targeting With TV Ad Buys, Marketing Land, June 27, 2013 (http://marketingland.com/google-launches-affinity-segments-toalign-adwords-and-youtube-targeting-with-tv-ad-buys-49888). MIT Technology Review reports that this team was formed in 2013, and is initially focused on leveraging user data to better select relevant stories to appear in each users News Feed. Source: Tom Simonite, Facebook Launches Advanced AI Effort to Find Meaning in Your Posts, MIT Technology Review, September 20, 2013 (http://www.technologyreview.com/news/519411/facebook-launches-advanced-aieffort-to-find-meaning-in-your-posts/).

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In May 2012, General Motors announced it would no longer buy Facebook ads. And in November 2012, Dallas Mavericks owner Mark Cuban said he was pulling the team (and the other 70 companies he owned) off Facebook. (Both have come back to Facebook in 2013, but only with limited resources: GM announced it was testing Facebooks mobile ads, while Cubans companies now focus their social efforts on Twitter and use Facebook as a secondary channel.) Source: Alain Sherter, GM To Pull Facebook Ads, CBS News, May 15, 2012 (http://www.cbsnews.com/8301-505123_162-57434938/gm-to-pull-facebook-ads/); Dan Lyons, Mark Cuban: Facebook Is Driving Away Brands - Starting With Mine, Readwrite, November

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13, 2012 (http://readwrite.com/2012/11/13/mark-cuban-facebooks-sponsored-posts-are-driving-awaybrands#awesm=~oiVLqCaTefVl9R); and Dan Lyons, Hell Freezes Over: Mark Cuban Says Hes Liking Facebook Again, Hubspot, June 6, 2013 (http://blog.hubspot.com/mark-cuban-likes-facebook-again).
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Yes, Facebook made $4 billion last year running ads on its site but the real marketing value in social media isnt in trying to market to people on social sites; its in using data from social sites to power better marketing everywhere else. As Facebook slowly learns to leverage its affinity data for ad targeting, and as it partners with media outlets that can offer its marketers branding opportunities, the ads on its own site will be seen less as a revenue stream and more as a nuisance. Facebook will cut its own ads to keep members happy and will use the resulting data to generate more profit from ads on other sites. See the April 15, 2013, How To Exploit The Database Of Affinity report.

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Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 13 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 29 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com. 104441