I know, I know, you might be reading the title wondering what the heck I’m talking about, but just humor me here. Yes, I know Facebook is not Myspace. I really doubt people are going to stop using Facebook anytime soon. I use Facebook a ton myself. So where’s the substance in my provocative title you ask?
Let me sum it up. Facebook’s advertisers are not making money. And make no mistake about it, Facebook is in the advertising business.
And I’m not the only one who’s seeing red flags. Below is a quote from Veronica Stecker, a media manager from retailer Gordmans Inc, in Wall Street Journal story:
“We still don’t have a huge correlation between Facebook fans and return on investment in an actual sales in store. Until that metric becomes a lot more solid, I don’t think our company or other brands are going to be full-fledged into Facebook advertising.”
There’s a monstrous difference between Google and Facebook. Google is a destination. When people are looking for something, they go to Google. Advertisers make money because of that and Google is thus successful.
The past couple years, businesses, big and small, have been spending money on Facebook as an experiment and/or because everybody else is doing it. But we’re reaching a point where the economy continues to tighten and people are starting to ask each other, is this advertising even doing anything?
Facebook may have the biggest tech IPO ever shortly, but I think their biggest challenge lies ahead. Unless they figure out a way to help advertisers make money, which they’ve been trying and failing for the past 5 years, their revenue will dry up. Investors will question the business. And Facebook will be in all sorts of trouble.