Inquiry Project

Facebook Helping Businesses Grow

Michael Minutoli

When Facebook was first developed in Mark Zuckerberg’s dorm room the idea of advertisers using his sight to gain millions would not enter his mind for some time. As the website became well-known amongst other colleges, universities and eventually to other folk nationwide, that is when the site really took off. The number of users grew exponentially from 100 million members in 2008, to 400 million in 2010 (Marshall). As of now the site hosts 1.28 billion users and is the world’s largest advertising site.  One can share photos of family dinners with their “friends”, as well as  “Facebook stalk” anyone in order to see how their vacations are going or what they’re having for lunch. Katherine Roberts, a strategic communications professor at Elon University, states, “Facebook users have claimed the site a necessity, along the lines of oxygen, water, and food. For many people, visiting Facebook has become an integral part of their daily lives, and has even caused some an unhealthy obsession with the site (Roberts)”. With an audience that is as committed to its site as they are to keeping themselves fed, advertisers are guaranteed a large and consistent audience that they will not be able to reach anywhere else. Cell phone companies are taking advantage of this opportunity and have begun to use Facebook for their advertising needs.

So why are Facebook advertisements so successful for the cellphone industry as opposed to other methods? For starters, Facebook can supply these companies with  a large, consistent, and proactive audience, which has proven to be very beneficial. Businesses are able to selectively choose their targeted audience based on statistics and demographics.This helps to make their advertising process much more efficient. Due to this form of advertising, revenue for these companies has risen and customer numbers continue to grow.

In recent years the world of mobile advertising has evolved greatly. In the 1940’s, advertisement was just getting started and being brought to the public through television. We look back at that and laugh because when comparing a still black and white image to the productions we see daily on television, computers, and our phones, it’s almost like comparing a slingshot to an automatic weapon. Derek Thompson, senior editor for the Atlantic, predicts that, “By 2015, a projected 2 billion people worldwide will own smartphones” (Thompson). With the knowledge that a third of the world’s population will be attached to mobile devices, it is no wonder that the industry is doing their best to advertise to see which smart phone company will end up on top. Advertisers have begun to make ads more interactive to grab users’ attention. With just 4 inches of screen to grab a consumer’s attention, the ad better be pretty appealing, otherwise it will just get overlooked. This is why advertising companies such as Facebook are pulling their resources together to figure out how to give their audience the best advertising experience possible.

Without commercials and ads telling the world what to buy,most of us wouldn’t know what we wanted half the time. Cell phones are part of some of the largest giants of the advertising world and play a key role in supplying us, consumers, with ads throughout daily use of social media.  This in turn gives us a constant flow of new products that we deem necessary. Ever since Facebook has gone mobile on our cellphones, we users have been connected to it 24/7. With 1.3 trillion monthly user views that make up its consumer audience (Kim), a group of that caliber is enough to get the attention of any industry wanting to sell products. As the number of Facebook users continues to grow (especially in older generations whose numbers have doubled since 2009 (Curran)), using Facebook as an outlet for advertising becomes more and more enticing to companies who especially want to market products to different generations.

Facebook’s user population is proven to be large and consistent.  Paul Marshall, an American online marketing strategist, entrepreneur, and author, states in one of his bestsellers that, “Facebook reports that 50% of its active users log on to the site on any given day” as well as, “collectively, ‘Facebookers’ create more than 300 billion pieces of new content each and every month (Marshall).” With stats like this, Facebook is able to support these large telecommunication companies with a proactive audience that will be very susceptible to advertisements to better their mobile experience.

The whole premise of Facebook was started for the ability to interact with others. Above everything, even the ads, it is meant to form connections between individuals. Even the founder of Facebook, Mark Zuckerberg has been quoted saying, “Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected … Simply put: we don’t build services to make money; we make money to build better services.” (Larry).  This being said, people have been forming relationships through Facebook ever since its creation; but what about people and businesses? Businesses, as well as people, can create group pages. From these pages,  users simply have to “like” the page and they will be connected to the company from that point on. These companies tend to make posts in a casual matter about the services they offer to connect with their audiences in a more human way.  They’re able to work as advertisements by discussing a feature that the company is promoting and then the user becomes the tool for promoting said feature. What these ads don’t do ,which is the best part, is that they don’t shove advertisements for their products and features in their customers faces. Instead they discretely imply it through an ad about something else making it seem like its the users idea to utilize the companies products.

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Since Facebook has gone mobile, their advertisements have become more advanced. Before, their ads were considered “passive”, which means that the user visually sees the ad as they scroll through their news feed. However there is no interaction with the user and no easy way to trace the activity users have with the ads. To better this process, Facebook has developed interactive ads were users will see a suggested post that will say something along the lines of “click here” or “play now”. What will happen is that the ad will take the user to the app store or retail site so they can purchase the selected app or merchandise. With these ads, Facebook has the ability to see if users clicked on the ad, interacted with the ad, made a purchase, and then see how much they begin to use their new buy.

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When the telecommunication company, known as Samsung, was going to release their newest phone, the Galaxy S III, they turned to Facebook to get the word out. Now there is rumor running around that says Facebook is slowly dying and will soon turn into another MySpace or AIM. However, if that were true then Samsung’s $10 million three week Facebook ad campaign would have failed (Wei). If failure constitutes a 110% profit, then absolutely. Samsung attributed a $129 million profit from the Galaxy S III to Facebook and they are now one of the fastest growing fan bases with over 30 million Facebook followers.

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Facebook as a social media site is continuously growing, becoming a better field for advertisements.  Facebook traffic is up 200% and users are becoming more active, spending more of their time on the site. As a result, 43% of users claim that social networking is the reason they decided to make their purchase (Roberts). Being that social networking is primarily a mobile field now, it is now in the hands of cell phone industries to run advertising campaigns to gain the upper hand in this war of ads. Whichever company comes out on top with the most consumers purchasing their phones, the more money they will make from mobile advertisements.

Almost all of Facebook’s profit comes from its advertising. Based off trafficking data from Facebook, it is found that more and more people are clicking on Facebook ads than ever before. This is probably due to the more advanced targeting Facebook is practicing. As a result, companies are seeing 58% higher returns on their initial advertisement investment (Brustein). Since Facebook is effectively creating ads that are making businesses profit more and more each year, Facebook is able to charge whatever they please. They are now charging 120% more on a “cost-per thousand basis” (Brustein). Due to Facebook’s obvious success, I think it is safe to say that big name companies such as Verizon and AT&T will have no problem keeping up with Facebook’s demands.

Some of Facebook’s top advertisers are cell phone companies. There’s Samsung, ranking at number one with $100 million in advertisements, then comes Microsoft with $35 million, AT&T and Verizon fall just behind with $30 million and Sony trails behind with a “wimpy” $5 million (Edwards). These companies will do anything and pay anything to stay at the top, and they wouldn’t be doing so with Facebook unless it was the best method for advertising in the market. Recently, this past year, Facebook and Microsoft have been able to work together to increase their advertising network to a level that will pull them ahead of Google. Microsoft holds an advertising program, known as Atlas Solutions.  If Facebook purchases this, it will greatly increase their ability to advertise on the market. Microsoft initially purchased this program for $6 billion. Regardless of that fact, Facebook only bid $30 million and Microsoft accepted. Facebook is the only company in the world that has access to “a billion email addresses, home addresses, and phone numbers on file” (Carlson). Facebook will be able to tell marketers exactly how much of an increase in profit they will be getting and will be able to give them more statistics on the effectiveness of their ads to assist them in maximizing their profitable gain. Now with Microsoft basically handing over Atlas, Facebook will be able to track their users across all websites that are affiliated with Facebook already (Carlson). This will in turn make their advertisers much more money and Facebook will be making more of a profit.

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I’d say that what drives these cell phone companies to Facebook as opposed to Google or any other outlet for advertisement is Facebook’s unique ad targeting system and algorithms. Facebook offers advertisers to select certain demographics they want to focus their campaign on. For example, Verizon can select white males between the ages of 13 – 22 living on the west coast for their newest android if they really wanted to. However most of the time what is done is that phone companies will formulate a fan base by reaching out to users and letting them know all the great things they offer. Once they do this they can form the connection that I talked about earlier, where the consumer interacts with the businesses page on Facebook to bring the relationship to a more human level. Once this is done they can target their selected audience for advertisements that will go to consumers loyal to other companies. It can be said however that doing this limits their full advertising potential. I mean shouldn’t companies try to persuade all users, even ones associated with competing companies, to try and convince them to switch over? The only reason I can think of as to why cell phone companies will not put in the effort to persuade their competitor’s loyal customers is that it may take too much advertising to the point where it won’t become profitable.

One of the most difficult things for cell phone companies is to convince customers from other companies to make the switch. Aaron Taube, reporter for Business Insider, states that “Mobile phone manufacturers and wireless service carriers had nine times as much success advertising on Facebook via mobile advertisements than they did via desktop ads” (Taub). Once users are locked into a contract with a cell phone company it becomes difficult to persuade them to switch. In general, only a small amount of customers from AT&T and Verizon make the switch, which also translates to the fact that of the 326 million wireless subscribers in the US, only 19 million will switch companies per year (Taube). Facebook helps these companies out by formulating their advertisement campaigns to increase this number as much as possible. Facebook supplies these companies with data about the numbers of users who have seen their ads and have acted upon them. With this information, companies are able to create groups of potential customers that they can target for advertising. Also, since Facebook’s effectiveness in mobile advertising has increased dramatically, it has caused for these major telecommunication companies to aggressively advertise more (Taube).

Since Facebook’s profit mainly comes from advertisements, it makes sense that there are so many, but how much is too much? How much longer until users will get sick of the immense amount of advertisements they are seeing of cell phones and new deals on family plans that they move to other social media sites? Recently Facebook has reached over one million advertisers that use their sight and this is most likely the reason for the excessive amount of new ads (Tassi). However, I feel that cell phone companies and smaller businesses alike have nothing to fear. Facebook is learning to adapt by incorporating aspects of other social media sites such as the Twitter hashtag in order to hold on to their users. However, Paul Tassi, contributor to Forbes magazine, adds that, “Facebook needs to do some soul searching and figure out whether it needs to be serving the needs of its million advertisers or its billion users first”. What Tassi is saying is that Facebook needs to figure out how to accommodate large industry giants properly on their site while also catering to their users’ interests. Without Facebook’s users, the site is nothing and cell phone industry giants will have to find a new way to advertise their merchandise.

You may log onto your Facebook account and realize that literally half of your screen is advertisements. If they’re not ads that will appeal to you, then that makes for a not so happy camper. You may not be aware of the agreement you made when you clicked on the “terms and agreements” section of Facebook when signing up. However, by doing so you have given up your digital history to Facebook. Facebook has recently gone to greater lengths, and plans on tapping into the users’ browsing history in order to gain a more precise targeting system (Sayer). With this more extensive privacy breach, Facebook is allowing for more control over advertisements from its users. Peter Sayer, bureau chief for IDG News Service in Paris, describes the new Facebook plan, “A screenshot illustrating the function showed that clicking on one corner of the ad will drop down a menu allowing users to select one of four options: “I don’t want to see this,” “Hide all ads from this advertiser,” “Why am I seeing this?” and “This ad is useful.” Asking for more information will show the interest areas identified by Facebook to which the ad is related, allowing users to reject further advertisements associated with that interest”. By allowing for users to now decide whether or not they want to see certain ads, consumers think that they are benefitting when actually they are also helping out Facebook. By letting the sight know which ads you enjoy and don’t enjoy, Facebook will be able to supply users with more ads suited to your interests.

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Facebook is able to target their audience so well that they one is barely aware that their ads are tailored to their browsing habits. Based off surveys, over half of Facebook users claim that they are ok with the ads, and 53.5% claim that they don’t mind them at all (Curran). By making the targeting process simple for advertisers and allowing them to hand pick demographics such as location, age, relationship status, and “likes”, it allows for a more personalized ad experience for users, making almost sure that the ads they see will be ads they enjoy. In addition, the cell phone industry is able to use Facebook to advertise internationally. As Facebook is now available in over 70 languages to date,  this allows businesses to advertise their products on a much wider scale than any other advertisement company could imagine (Curran). To this day over 223 million people in Europe are on Facebook, which exceeds the United States with only 206 million (Meloche).  Facebook’s ability to target foreigners makes it one of the best possible advertisement outlets for not just cell phone companies, but for any business that wishes to take their affairs worldwide.

As technology continues to grow and change at a tremendous rate, the one thing that stays consistent in the eye of the user is accessibility. The consumer wants to be able to access their social networks quickly and easily no matter where they are. Studies show that more and more individuals are accessing their Facebook accounts through their phones rather than their computer (Thompson). Thus cell phone advertising and Facebook are a match made in heaven.

On a more personal level, I attempted to see what the big fuss about Facebook advertising was and gave it a go. I was taken immediately to the advertisement screen by clicking on an ad designed to advocate for creating advertisements with Facebook. I found it remarkably simple to use, which was a big plus. I wanted to advertise my photography page that currently exists on Facebook. When going through the process, I chose the following: users living in the Unites States, ages between 13 – 64, people who are already interested in photography and visual arts as well as some local and famous photographers. Then I set my budget to $10 a day. Facebook allows you to set the budget as high as you want depending on what you can afford, making it accessible for everyone according to their economic status. After all was selected and done, Facebook will give you a statistic for an estimated daily reach. Mine was 2,200 – 5,900 people out of the 64,000,000 total. Honestly, if Facebook can guarantee that two thousand people will see an ad for my page daily, then I think that this is definitely something worth considering.

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So why do these major cell phone companies stick to Facebook as their key source for advertising their products? Facebook boasts one of the largest user audiences with cell phones in the world making it a prime source to find potential customers. What’s more is that most companies that use Facebook will undoubtedly see a rise in their audience population and their sales. I say “most” only to include small businesses that have no chance in competing with these giants of advertising. Facebook also has the capability to specifically target users based off demographics to allow for companies to hand pick the audience they want to advertise for. Companies also receive information from Facebook to inform them about how successful their ads are doing, while allowing them to reevaluate or continue with their current advertising agenda. All in all, there is no better site that cell phone companies should use to advertise their products other than Facebook.

Work Cited

 

Thompson, Derek. “It’s Official: Apple and Facebook Are Phone Companies Now.” The Atlantic. Atlantic Media Company, 24 Apr. 2014. Web. 22 July 2014.

Taube, Aaron. “New Facebook Tool Pits Wireless Carriers Against Each Other In War For Service Switchers.” Business Insider. Business Insider, Inc, 19 Sept. 2013. Web. 24 July 2014.

Marshall, Perry, and Thomas Meloche. “Ultimate Guide to Facebook Advertising: How to Access 600 Million Customers in 10 Minutes.”Google Books. Ryan Shea, n.d. Web. 15 July 2014.

Kim, Larry. “Google Display Network vs. Facebook Advertising.” Web log post. WordStream. The WordStream Blog, 15 May 2012. Web. 15 July 2014.

Sayer, Peter. “Facebook Will Gather More User Information, but Offer More Control Over Ads.”CIO. IDG News Service, 12 June 2014. Web. 11 July 2014

Tassi, Paul. “Facebook’s Advertising Is Starting To Spiral Out Of Control.” Forbes. Forbes Magazine, 01 July 2013. Web. 11 July 2014.

Chan, Christopher. “Using online advertising to increase the impact of a Library Facebook page.” Library Management 32.4/5 (2011): 361-370.

Roberts, Katherine K. “Privacy and Perceptions: How Facebook Advertising Affects Its Users.” 24 — The Elon Journal of Undergraduate Research in Communications • Vol. 1, No. 1 • Winter 2010 Privacy and Perceptions: How Facebook Advertising Affects Its Users 1..1. (2010): 24-32. Web.

Brustein, Joshua. “Facebook Analysts Agree to Disagree on Effectiveness of Its Ads.” Bloomberg Business Week. Bloomberg, 30 Oct. 2013. Web. 08 July 2014.

Albergotti, Reed. “Facebook to Target Ads Based on Web Browsin.” The Wall Street Journal. Dow Jones & Company, 12 June 2012. Web. 03 July 2014.

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