Study: Facebook not a silver bullet for e-commerce

Facebook’s user numbers are in the hundreds of millions, and businesses have followed, flocking to the social networking site for brand exposure, customer engagement and more. But what marketers once thought would be a powerful marketing tool is proving to be elusive, as “likes” don’t necessarily translate to revenue, a report by Forrester Research, out Thursday, has found.

In fact, presence on a social network was less effective than paid search and e-mail marketing for customer acquisition and retention, the Wall Street Journal reported. Average Facebook metrics for click-throughs was only 1 percent, and its conversion rate was 2 percent, the study noted. Comparatively, e-mail marketing has a click-through rate of 11 percent, and a conversion rate of 4 percent.

“eBusiness professionals in retail collectively report little direct or indirect benefit from Facebook, and social networks overall trail far behind other customer acquisition and retention tactics like paid search and email in generating a return on investment. For some companies and brands, Facebook promises to support branding and awareness (i.e., “top of the (marketing) funnel”) efforts, but for most eBusiness companies in retail, Facebook is unlikely to correlate directly to near-term sales. A few pockets of success, however, have surfaced, and a cottage industry of vendors who can support these programs will inevitably burgeon,” the report’s executive summary explains.

Facebook executives point out that the site is “word of mouth at scale,” with users being more than 60 percent more likely to remember an ad if they see their friends’ names in the ad – a function Facebook has created when users “like” a brand, Dan Rose, vice president of partnerships and platform marketing at Facebook, said Wednesday at a social ads event in Austin, Texas.

Rose said 18 of the top 25 e-commerce sites are using Facebook features like Facebook Connect or the “Like” button, The New York Times reported. He said that American Eagle clothing stores, for example, found that users referred by Facebook spend an average of 57 percent more than average on its website.

However, Forrester Research analyst Sucharita Mulpuru told the WSJ that most people “like” companies only in exchange for a discount.

A separate survey by the World Federation of Advertisers, released in March, found that although marketers plan on spending more money on social media in the next 12 months, less than 25 percent are happy with the return they’re seeing on their investment, Fortune reported Wednesday.

Meanwhile, an analysis of online traffic by comScore found that Facebook and MySpace combined account for about 20 percent of all advertising traffic. However, they carry an average cost per thousand impressions of 56 cents – nearly $2 less than the Internet overall, according to Fortune.

One problem could be that Facebook treats brands much like it treats people, Gawker’s Adrian Chen opined. This means that when a user “likes” a brand on the site, his newsfeed “fills up with corporate adspeak.”

Although social networking sites do make brands available to a huge audience, users don’t go to Facebook to shop, Mulpuru explained to the WSJ. “You go to Facebook to find other people, not to find a product.”

Image: reallynatural.com

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