Facebook users not buying and using the site less
The online poll from Reuters/Ipsos found that one in three of Facebook’s 900 million users surveyed were spending less time on the website than six months ago, whereas only one in five were spending more.
The findings underscore investors’ worries about Facebook’s money-making abilities that have pushed the stock down around 30 per cent since its initial public offering last month, reducing its market value by $30 billion to roughly $74 billion.
About 44% of respondents said the market debut, seen by investors as troubled, has made them less favourable toward Facebook, according to the survey. In the May 31-June 4 poll of 1 032 Americans, 21% said they had no Facebook account.
Facebook’s 900 million users make it among the most popular online destinations, challenging entrenched Internet players such as Google Inc and Yahoo Inc. Not everyone is convinced the company has figured out how to translate that popularity into a business that can justify its lofty valuation.
While the survey did not ask how other forms of advertising affected purchasing behaviour, a February study by research firm eMarketer suggested Facebook fared worse than email or direct-mail marketing in terms of influencing consumers’ decisions.
“It shows that Facebook has work to do in terms of making its advertising more effective and more relevant to people,” eMarketer analyst Debra Williamson said. Those concerns were exacerbated last month when General Motors Co, the third largest advertiser in the United States, said it would stop paid advertising on Facebook.
Facebook declined to comment in detail on the survey, but referred to case studies of companies such as Nutella, which found that a 15% increase in sales was attributable to Facebook, and restaurant chain Applebee’s, whose Facebook ads delivered a threefold return on investment.
Measuring the effectiveness of advertising can be tricky, particularly for brand marketing in which the goal is to influence future purchases rather than generate immediate sales.
About two out of five people polled by Reuters and Ipsos public affairs said they used Facebook every day. Nearly half of the Facebook users polled spent about the same amount of time on the social network as six months ago.
Keeping users coming back is crucial for all social media services, said Gartner analyst Ray Valdes. “Facebook continuously has the challenge of Facebook fatigue, of the novelty factor wearing off, and therefore they have to introduce new kinds of interaction,” said Valdes, citing new features such as the “Timeline” interface and the planned $1 billion acquisition of mobile photo-sharing app Instagram.
Forty-six percent of survey respondents said the Facebook IPO had made them less favourable towards investing in the stock market in general. While Facebook generated $3.7 billion in revenue last year, mostly from ads on its website, sales growth is slowing.
Consumers’ increasing use of smartphones to access Facebook has been a drag on the company’s revenue. It offers only limited advertising on the mobile version of its site and analysts say the company has yet to figure out the ideal way to make money from mobile users.
Facebook competes for online ads with Google, the world’s No 1 web search engine, which generated roughly $38 billion in revenue last year. Google’s search ads, which appear alongside the company’s search results, are considered among the most effective means of marketing.
Facebook is still perfecting the effectiveness of its ads, said Gartner’s Valdes. But he said he was surprised that the comments posted on the website from Facebook users’ friends were also only responsible for 20% of users making a purchase.